<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Allstate Financial Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Allstate Financial Corporation Independent Shareholders/Directors Committee
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
-----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
-----------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
--------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------
(5) Total fee paid:
-------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
-----------------------------------------------
(2) Form, schedule or registration statement no.:
-------------------------
(3) Filing party:
---------------------------------------------------------
(4) Date filed:
-----------------------------------------------------------
<PAGE>
ALLSTATE FINANCIAL CORPORATION
INDEPENDENT SHAREHOLDERS/DIRECTORS COMMITTEE
April __, 1998
Dear Fellow Shareholder:
The Allstate Financial Corporation Independent Shareholders/Directors
Committee (the "Committee") is soliciting your support to elect a Board of
Directors that is independent of management and that has not been selected by
management. The market price of the common stock of Allstate Financial
Corporation ("Allstate" or the "Company") has declined significantly since the
beginning of 1993, while market indexes have increased dramatically. The
Committee believes that Allstate's stock price is a result of Allstate's poor
financial performance, as evidenced by its average annual return on equity of
only 0.80% for the past five fiscal years. At the same time, executive
compensation has increased or remained high.
WHO IS THE COMMITTEE?
The Committee consists of Value Partners, Ltd ("Value Partners"), which
owns 21.1% of Allstate's outstanding common stock and is the single largest
stockholder of the Company, plus C. Scott Bartlett, Jr., David W. Campbell,
Edward A. McNally, William H. Savage and Lindsay B. Trittipoe. Messrs. Campbell,
McNally, Savage and Trittipoe currently serve as independent directors of
Allstate, and Mr. Bartlett was previously an independent director of Allstate
from December 1993 to February 1995, when he resigned due to his concerns
regarding Allstate in general and its level of reserves in particular.
WHAT DOES THE COMMITTEE WANT TO DO?
The members of the Committee who currently serve as independent directors
of Allstate have attempted to implement corporate governance reforms designed to
increase the accountability of Allstate's management. The current independent
directors have solicited and received the support of the Company's largest
shareholder, as well as a previous independent director of the Company.
If elected, the Committee's nominees would seek to --
- provide quality leadership and consistent focus;
- conduct a thorough review of all the assets, operations, management and
litigation matters;
- ensure that competent management is in place with appropriate performance
based incentives;
- engage in prudent underwriting of loans in niche businesses; and
- eliminate future affiliated transactions between Allstate and its
officers and directors except normal course employment relationships.
<PAGE>
ALLSTATE'S STOCK PRICE HAS FALLEN OVER THE LAST FIVE YEARS
The following graph compares the cumulative loss on the Company's common
stock with the cumulative total returns for the Nasdaq Composite Index and the
Nasdaq Other Financial Index over the last five years. The Nasdaq indexes do not
reflect the reinvestment of dividends.
[insert graph]
<TABLE>
<CAPTION>
Allstate Nasdaq Nasdaq Other
Period Ending Common Stock Composite Index Financial Index
------------- ------------ --------------- ---------------
<S> <C> <C> <C>
12/31/92 100.00 100.00 100.00
6/30/93 80.65 103.99 105.85
12/31/93 45.97 114.75 113.17
6/30/94 38.31 104.28 117.68
12/30/94 40.73 111.08 109.46
6/30/95 46.77 137.89 130.91
12/29/95 35.08 155.42 157.31
6/28/96 37.10 175.05 164.67
12/31/96 41.13 190.71 202.22
6/30/97 37.10 213.02 242.06
12/31/97 37.10 231.97 317.40
CUMULATIVE RETURN (62.90)% 131.97% 217.40%
</TABLE>
Over the past five fiscal years, the common stock of Allstate has declined
by 62.9% while both of the Nasdaq indexes shown above have increased materially.
<PAGE>
THE COMPANY'S FINANCIAL PERFORMANCE HAS BEEN POOR
The Committee believes that the following table clearly demonstrates
Allstate's poor financial performance over the last five years.
<TABLE>
<CAPTION>
Five-Year
1993 1994 1995 1996 1997 Total
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Net income $457,000 $148,000 $500,000 $(1,041,144) $1,033,513 $1,097,369
</TABLE>
<TABLE>
<CAPTION>
Five-Year
Average
-----
<S> <C> <C> <C> <C> <C> <C>
Return on
average equity 1.65% 0.53% 1.94% (4.62)% 4.48% 0.80%
</TABLE>
Over the last five years, Allstate's stockholders would have earned a
higher rate of return than the Company's average return on equity if they had
instead invested their money in a federally insured savings account at a bank.
While the Company's return on average equity has been dismal, its management has
substantially benefited by its high compensation.
EXECUTIVE COMPENSATION HAS BEEN HIGH
The following table shows the cash compensation of the Fishman family over
the last five years. Leon Fishman is the father of Craig Fishman and the
brother-in-law of Lawrence Winkler. The table includes salary and bonus but
excludes contributions by the Company to its 401(k) plan on behalf of the
executives and the granting of stock options.
<TABLE>
<CAPTION>
Five-Year
1993 1994 1995 1996 1997 Total
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Fishman Family
Compensation:
Leon Fishman $423,442 $375,000 $377,885 $295,009 $228,713 $1,700,049
Craig Fishman 131,201 128,905 161,177 170,330 228,060 819,673
Lawrence Winkler 146,786 146,033 154,732 169,450 186,948 803,949
----------
$3,323,671
-----------
-----------
</TABLE>
The total cash compensation of $3.3 million for the Fishman family for the
last five years substantially exceeds the Company's total net income of $1.1
million over the same period. In addition, various officers and directors have
engaged in affiliated transactions with the Company. See "Problems with the
Company - Affiliated Transactions Continue with the Management Directors."
<PAGE>
YOUR VOTE IS IMPORTANT!
We need your help to implement the reforms to Allstate's Board necessary to
improve its corporate performance. If you agree with us that (i) the Company's
common stock has substantially underperformed the market, (ii) the Company's
financial performance is poor, and (iii) executive compensation is therefor too
high, then we urge you to vote FOR the Committee's nominees on the enclosed
WHITE proxy card.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. We urge you to mark, sign and date your WHITE proxy card
today and return it in the envelope provided, even if you plan to attend the
Annual Meeting. Please do not sign any proxy card sent to you by the Company.
We need your support to enable us to provide effective leadership and
oversight on behalf of all the Company's stockholders.
Timothy G. Ewing David W. Campbell William H. Savage
Value Partners, Ltd. Independent Director Independent Director
C. Scott Bartlett, Jr. Edward A. McNally Lindsay B. Trittipoe
Former Independent Director Independent Director Independent Director
<PAGE>
1998 ANNUAL MEETING OF STOCKHOLDERS
OF
ALLSTATE FINANCIAL CORPORATION
2700 S. Quincy Street
Arlington, Virginia 22206
To Be Held on May 12, 1998
PROXY STATEMENT
OF THE
ALLSTATE FINANCIAL CORPORATION
INDEPENDENT SHAREHOLDERS/DIRECTORS COMMITTEE
This Proxy Statement and the accompanying WHITE proxy card are being
furnished in connection with the solicitation of proxies by the Allstate
Financial Corporation Independent Shareholders/Directors Committee (the
"Committee") to be used at the 1998 Annual Meeting of Stockholders of Allstate
Financial Corporation, a Virginia corporation ("Allstate" or the "Company"), to
be held at the Sheraton National Hotel, 900 South Orme Street, Arlington,
Virginia 22204 on May 12, 1998 at 11:00 a.m. and at any adjournments or
postponements thereof (the "Annual Meeting"). This Proxy Statement and the
accompanying WHITE proxy card are first being mailed to Allstate stockholders on
or about April ______, 1998.
The Committee consists of Value Partners, Ltd ("Value Partners"), which
owns 21.1% of Allstate's outstanding common stock and is the single largest
stockholder of the Company, plus C. Scott Bartlett, Jr., David W. Campbell,
Edward A. McNally, William H. Savage and Lindsay B. Trittipoe. Messrs.
Campbell, McNally, Savage and Trittipoe currently serve as independent directors
of Allstate, and Mr. Bartlett was previously an independent director of Allstate
from December 1993 to February 1995, when he resigned because of his concerns
regarding Allstate in general and its level of reserves in particular. For a
description of a complaint recently filed by the Company seeking to prevent
Value Partners from voting all of its shares at the Annual Meeting, see "Recent
Litigation."
The Committee is soliciting your proxy in support of the election of
Messrs. Bartlett, Campbell, McNally, Savage and Trittipoe (the "Committee
Nominees") as the Directors of Allstate. Four of the Committee Nominees
currently serve as independent directors of Allstate on a 10-person Board, and
these independent directors have been unable to implement the reforms which they
believe are necessary at Allstate because they represent only a minority of the
current Board. The size of the Board has been reduced to five as of the date of
the Annual Meeting, and all five directors will be elected at that time. THE
COMMITTEE BELIEVES THAT OBTAINING MAJORITY REPRESENTATION ON THE BOARD OF
DIRECTORS WILL ENABLE THE COMMITTEE NOMINEES TO IMPLEMENT THE REFORMS THEY
BELIEVE ARE NECESSARY.
<PAGE>
As discussed below, the Committee believes that the Company's financial
performance has been poor, that executive salaries have increased or remained
high, and that the price of Allstate's common stock declined significantly in
1993 and then remained flat for more than four years until just recently. On
March 16, 1998, certain members of the Committee filed an amended Schedule 13D
announcing their intent to seek majority representation on the Board of
Directors at the meeting to be held on May 12, 1998 pursuant to a court order.
See "Problems with the Company - Court-Ordered Meeting."
Allstate's management directors and officers continue to engage in
affiliated transactions with the Company and have blocked most initiatives by
the independent directors to implement corporate governance reforms designed to
increase the accountability of Allstate's management. The Committee believes
that the Board of Directors of Allstate needs to be selected by persons other
than management in order to provide effective oversight and leadership on behalf
of the Company's stockholders.
PROBLEMS WITH THE COMPANY
BACKGROUND
In 1993, Premium Sales Corporation ("Premium Sales") filed for Chapter 11
bankruptcy. Allstate and its wholly owned subsidiary Premium Sales Northeast,
Inc. ("PSN") had previously provided financing to Premium Sales. After Premium
Sales filed for bankruptcy, Allstate and PSN initially filed claims aggregating
$1.5 million. However, according to Allstate's Form 10-KSB for 1994, the
bankruptcy trustee sought recovery from Allstate and PSN of alleged preferences
and certain fraudulent transfers. In the first quarter of 1995, Allstate and its
subsidiary agreed to waive their $1.5 million claim and to instead make a $1.4
million cash payment. In addition, Eugene Haskin and Leon Fishman, the Chairman
and the then President/CEO of Allstate, respectively, each agreed to personally
pay $280,000 as part of the settlement.
In 1995, one of Allstate's then largest stockholders, Scoggin Capital
Management, L.P., began pressing for changes in Allstate's management and
management-dominated Board, particularly in light of Allstate's poor financial
performance. In response, Allstate's management agreed to the election of
Messrs. Campbell and Savage to the Board as independent, outside directors at
the November 1995 annual meeting.
Certain outside directors subsequently urged Allstate management to agree
to, among other changes, the establishment of an Executive Committee "to build
and maintain the confidence of major investors, analysts, and market makers" and
"dispel the perception that Allstate is being run primarily for the benefit of
Lee Fishman, Gene Haskin and management," as stated in a memorandum from Mr.
Savage to Craig Fishman, dated January 9, 1996. As a result, Allstate's
management, including the management directors, agreed at a special Board
meeting on May 16, 1996 to the addition of two new, independent
2
<PAGE>
outside directors, Messrs. Edward A. McNally and Lawrence Vecker. Value Partners
agreed at that time that it would not challenge the membership of the Board as
restructured prior to the 1997 annual meeting.
Allstate subsequently reported a loss of over $1.0 million for 1996, rather
than a profit as had been projected. Dissatisfaction with management's
performance continued to increase, and Value Partners made it known that it was
considering whether to oppose the re-election of the management directors with a
separate slate of directors at the annual stockholders meeting in November 1997.
In August and early-September 1997, Board members discussed potential
changes in Allstate's management structure with the goal of improving poor
stockholder value. During those discussions, Messrs. Campbell, McNally and
Savage advised the Board that they would not stand for re-election to the Board
on a management-endorsed slate of directors unless the Board agreed to a
proposed plan of reorganization that these independent directors considered the
minimum organizational reform necessary to allow them to address fundamental
issues of corporate governance.
At the September 24, 1997 Board meeting, the outside directors and the
management directors agreed on specific changes in Allstate's organization and
corporate governance that the directors "hope[d] and expect[ed]...will enhance
the value of [Allstate] for the benefit of all shareholders." Memorandum from
Craig Fishman, President and Chief Executive Officer of Allstate, to Messrs.
Campbell, McNally and Savage, dated September 15, 1997. At the September 24,
1997 meeting, the Board unanimously approved a plan of reorganization under
which, among other things: (1) Allstate's Board was expanded from nine to ten
directors; (2) Messrs. Campbell, McNally and Savage consented to stand for
re-election as part of a management-endorsed slate with the management
directors; (3) Craig Fishman's employment contract was extended through July
1999; and (4) the newly elected Board would, immediately after the 1997 Annual
Meeting: (a) elect Mr. Campbell as Chairman of the Board; and (b) create an
Executive Committee that would consist of three of Allstate's independent
directors (Messrs. Campbell, McNally and Savage) and Craig Fishman (the
"Agreement"). Solely as a result of this agreement, Messrs. Campbell, McNally
and Savage agreed to stand for re-election with the management directors.
BREACH OF AGREEMENT BY MANAGEMENT DIRECTORS
At the 1997 Annual Meeting held on November 18, 1997, the Board-nominated
slate of ten directors was elected without a competing slate. Immediately
thereafter, the newly- elected Board convened to transact business, including
the implementation of the balance of the Agreement that the newly-elected Board
members had agreed to and which Allstate's Proxy Statement dated October 17,
1997 represented would be carried out by the new Board. All members of the Board
were present, with the exception of director Vecker. Having by then obtained
their benefits under the Agreement, Messrs. Craig Fishman, Leon Fishman,
Freeman, Haskin and Spector (the "Management Directors") immediately and for
3
<PAGE>
the first time disavowed the balance of the Agreement. All five Management
Directors formally voted against carrying out the remaining provisions of the
Agreement, including the election of a new Chairman and a new Executive
Committee. As a result, the Board failed to implement the balance of the
Agreement by a vote of five to four.
Had Messrs. Campbell, McNally and Savage known that the Management
Directors' would not abide by the Agreement once re-elected, they would have
withdrawn their names as nominees prior to the casting of votes at the 1997
Annual Meeting and would have demanded an adjournment of the 1997 Annual Meeting
until corrective action could have been taken.
Had Value Partners known that the Management Directors did not intend to
elect a new Chairman and a new Executive Committee as disclosed in the proxy
statement for the 1997 Annual Meeting once the Management Directors were
re-elected, Value Partners would have demanded an adjournment of the 1997
Annual Meeting to afford it an opportunity to nominate an opposing slate and to
cause the distribution of a corrected proxy statement.
By letter dated December 4, 1997 to Eugene R. Haskin as Board Chairman and
Craig Fishman as Allstate's President, Messrs. Campbell, McNally, Savage and
Trittipoe gave notice to Allstate and the Management Directors that they
contested the election of the Management Directors and demanded a new election
of directors and the calling of a special stockholders meeting for that purpose,
as authorized by Virginia law. By letter dated December 12, 1997 to Messrs.
Campbell, McNally, Savage and Trittipoe, Chairman Haskin and President Craig
Fishman refused to call a special stockholders meeting as they were authorized
to do pursuant to the By-Laws and Virginia law.
On December 18, 1997, the Board met, at which time it considered the demand
of Messrs. Campbell, McNally and Savage for a special stockholders meeting. The
Board, under the control of the Management Directors, rejected that demand by a
vote of 5 to 4, with director Vecker being absent.
In the view of the Committee, the Management Directors' refusal to carry
out the Agreement that had secured their election and other benefits rendered
both inaccurate and misleading the representations of Allstate in its 1997 Proxy
Statement concerning the intentions and promises of the management-endorsed
slate. As a result, Messrs. Campbell, McNally and Savage and Value Partners
believed that the resulting election of the Management Directors was tainted,
inequitable and unfair and should be set aside.
Following the 1997 Annual Meeting, Messrs. Campbell, McNally and Savage
informed Mr. Ewing of Value Partners that the Management Directors had
determined not to honor the terms of the Agreement reached by the Board of
Directors on September 24, 1997, as described in Allstate's 1997 Proxy
Statement. Various discussions were then held, which resulted in Mr. Ewing
deciding to join Messrs. Campbell, McNally and Savage in
4
<PAGE>
filing a lawsuit against the Company following the December 18, 1997 meeting of
the Company's Board of Directors.
On December 29, 1997, Value Partners and Messrs. Campbell, McNally and
Savage jointly filed in the Circuit Court of Arlington County, Virginia a
Petition to Set Aside Election of Directors. The petition requested the Court to
(i) proceed forthwith in a summary way to hear and decide the issues presented;
(ii) set aside the election of directors held at the 1997 Annual Meeting; (iii)
order that there be held as soon as possible a new election of directors of
Allstate; (iv) enjoin and restrain the Management Directors from exercising
without court approval any powers as directors pending a new election; and (v)
grant such other relief as the Court may deem just and equitable.
COURT-ORDERED MEETING
A hearing was held in the Circuit Court of Arlington County on February 2,
1998, and closing arguments were presented on February 18, 1998. Since all of
Allstate's directors are elected at each annual meeting, the Committee's
litigation counsel proposed that the 1998 election of directors take place in
May 1998 in accordance with Allstate's By-Laws, as the effect would be the same
as setting aside the 1997 election in terms of providing the stockholders with a
fair opportunity to elect directors. This proposal by the Committee also had the
benefit of avoiding the cost and expense of re-doing the 1997 election.
On February 18, 1998, in commenting on the 1997 election, the Circuit Court
judge stated that the vote was not fair and that "... the best thing to do would
be to have another election. I DON'T THINK THIS WAS FAIR AND I THINK THE ONLY
WAY ON BALANCE TO CORRECT IT IS TO HAVE ANOTHER ELECTION." (emphasis added) On
March 4, 1998, the Circuit Court judge entered a decree indicating that it had
granted the Committee's motion for Summary Relief and then ordered that an
election of directors of Allstate be held on Tuesday, May 12, 1998. This was the
date that had been suggested by the Committee's counsel.
As Allstate's counsel unsuccessfully argued to the Circuit Court with
respect to having another meeting in May, "(t)o have two elections in one year
SENDS A MESSAGE LOUD AND CLEAR TO THE INVESTING COMMUNITY SOMETHING IS WRONG
WITH THIS COMPANY." (emphasis added) The Committee agrees that a loud and clear
message has been sent to Allstate's stockholders. The Committee believes that
the Management Directors are not running the Company on an arm's-length basis
for the benefit of all stockholders and that the insider deals, high salaries
and poorly conceived business plan have resulted in low earnings and a stock
price that has substantially declined since the beginning of 1993. The Committee
believes that the Company's problems can only be solved if a completely
independent Board of Directors is elected.
5
<PAGE>
ALLSTATE'S POOR FINANCIAL PERFORMANCE
In 1993, 1994 and 1995, Allstate had net income of $0.15 per share,
$0.05 per share and $0.16 per share, respectively, representing a return on
average equity of less than 2% in each of 1993, 1994 and 1995. In 1996,
Allstate suffered a net loss of $.45 per share as total income declined and
each expense category increased. During these years, the return on average
equity was less than the interest rate that stockholders could have earned if
their money had instead been invested in a savings account at a bank with
insured deposits!
Allstate had net income of $0.45 per share in 1997, which still
represents a return on average equity of less than 5%. Craig Fishman,
Allstate's President, testified in the recent litigation that this
"demonstrated a substantial turnaround." The Committee believes that the
earnings remain poor and that no substantial turnaround has occurred. In
fact, Allstate's net income for the September 30, 1997 and December 31, 1997
quarters has declined from both the immediately preceding quarters and the
comparable quarters in 1996, as shown below.
<TABLE>
<CAPTION>
Allstate's Net Income
Quarter Ended 1996 1997
- ------------- ---- -----
<S> <C> <C>
March 31 $224,000 $257,872
June 30 (1,980,242)(1) 273,124
September 30 339,606 252,394
December 31 375,304 250,126
</TABLE>
- ----------------
(1) Reflects a $3.9 million provision for credit losses. Without this
provision, net income for the June 30, 1997 quarter also would have
declined from the comparable 1996 quarter.
The Committee believes that Allstate has entered and exited new lines of
business (i.e., Lifetime Options) with little to show for its efforts. In
addition, in the past the Company has engaged in high risk lending, which has
resulted in large provisions for credit losses. For 1994, 1995 and 1996,
provisions for credit losses aggregated $16.2 million. Since total shareholders'
equity was only $22.5 million at December 31, 1996, the Committee believes that
these provisions for credit losses were unacceptably high. At December 31, 1997,
total nonperforming assets were $8.5 million or 36% of total stockholders'
equity.
6
<PAGE>
THE PRICE OF THE COMMON STOCK DECLINED SIGNIFICANTLY AND THEN REMAINED FLAT
The following table sets forth the high and low bid prices for the
Company's Common Stock on the Nasdaq National Market System for the periods
shown, as furnished by the National Association of Securities Dealers, Inc.
These bids represent prices among dealers, do not include retail markups,
markdowns or commissions, and may not represent actual transactions.
<TABLE>
<CAPTION>
Low High
------------------- --------------------
<S> <C> <C>
1993 $4.875 $19.250
1994 4.625 7.125
1995 5.375 8.000
1996 5.500 6.875
1997 5.125 7.000
1998 (through March 18) 5.688 6.188
</TABLE>
In the first quarter of 1993, the price of Allstate's Common Stock declined
from a high of $19.25 to $11.50, representing a decline of over 40%. The stock
then declined substantially further to $5.375 in the third quarter of 1993,
representing a decline of over 50% from the $11.50 low in the first quarter of
1993. The Committee believes that a major reason for the decline in the stock
price in 1993 was the Premium Sales' bankruptcy filing. See "Problems with the
Company - Background." On January 4, 1993, the closing price of the Company's
Common Stock was $15.25, as compared to $5.875 on March 18, 1998. Based on the
above prices, the price of the Company's Common Stock has declined by over 60%
over the past five years, which was a time when most stock market indexes
experienced substantial appreciation.
The Circuit Court judge, after hearing testimony regarding the poor
financial performance of Allstate and its stock performance, stated that "IT'S
REALLY EXTRAORDINARY TO SEE WHAT THIS COMPANY IS WORTH IN LIGHT OF THE MARKET
THAT'S DOUBLED IN THE LAST FEW YEARS." THE COMMITTEE AGREES WITH THE COURT AND
BELIEVES THAT IT IS TIME FOR A CHANGE IN THE WAY THE MANAGEMENT DIRECTORS HAVE
RUN THE COMPANY.
On March 16, 1998, certain members of the Committee filed an amended
Schedule 13D announcing their intent to seek majority representation on the
Board of Directors at the Annual Meeting to be held on May 12, 1998 pursuant to
a court order. The price of the Common Stock subsequently reached a high of
$9.00 per share in late March 1998 and closed at $7.75 on April 1, 1998.
7
<PAGE>
EXECUTIVE COMPENSATION HAS INCREASED OR REMAINED HIGH
The following table shows the cash compensation of the members of the
Fishman family for the periods shown. Such amounts exclude contributions on
behalf of the executives by the Company to its 401(k) plan, and the granting of
stock options.
<TABLE>
<CAPTION>
Leon Fishman Lawrence Winkler
Director/Vice Craig Fishman Secretary/Treasurer/
Chairman(1) President/CEO(2) CFO
----------- ---------------- --------------------
<S> <C> <C> <C>
1993 $ 423,442 $131,201 $146,786
1994 375,000 126,405 $146,033
1995 377,885 163,677 154,732
1996 295,009 170,330 169,450
1997 228,713 228,060 186,948
------- ------- -------
FIVE-YEAR TOTAL $1,700,000 $819,673 $803,949
------- ------- -------
------- ------- -------
</TABLE>
- ----------------------
(1) Leon Fishman became Vice Chairman of the Board on July 1, 1996 and was
previously President and Chief Executive Office of Allstate. Mr. Leon
Fishman only worked part-time in 1997.
(2) Craig Fishman became President and Chief Executive Officer on July 1,
1996 and was previously Senior Vice President and General Counsel of
Allstate.
AFFILIATED TRANSACTIONS CONTINUE WITH THE MANAGEMENT DIRECTORS
In the view of the Committee, the Management Directors have run your public
company as if it was their own private company. Leon Fishman is the father of
Craig Fishman, and Lawrence Winkler is the uncle of Craig Fishman and the
brother-in-law of Leon Fishman. In addition, Eugene Haskin, the Chairman of the
Board, and members of his family have engaged in various transactions with the
Company over a number of years.
The following is a list of some of the affiliated transactions disclosed in
Allstate's public filings:
In January 1989, a corporation wholly owned by Mr. Winkler, his wife and a
son of Mr. Haskin (the "Winkler/Haskin Corporation") purchased an apartment
building from the
8
<PAGE>
Company for consideration in the form of a $100,000 interest-free demand note.
The Winkler/Haskin Corporation paid to Allstate all rental payments received
from the property, and then sold the building in 1995 to an unaffiliated third
party for $20,000 cash and a $70,000 note secured by the building. The cash was
paid to the Company and the $70,000 note was assigned to a subsidiary of the
Company in exchange for the cancellation of the original note to the
Winkler/Haskin Corporation, which note had a balance of $68,784 at December 31,
1995.
In May 1994, the Company reduced the exercise price on stock options
granted to Messrs. Craig Fishman and Winkler (and three other employees) from
$14.00 per share to $6.50 per share. This was done at a time when the
Company's stockholders had suffered a significant decline in the market value of
their investment compared to early 1993, yet the Company's officers were
rewarded with a lower exercise price on their options.
Certain members of the immediate families of Messrs. Haskin and Leon
Fishman, directly or through trusts, provided financing in the past to Lifetime
Options, Inc., a wholly owned subsidiary of the Company, through unsecured loans
with interest payable monthly at an annual interest rate of 1% over the prime
rate. At December 31, 1993, Lifetime Options' total indebtedness to members of
Mr. Haskin's immediate family was $460,553, of which $445,407 was repaid in 1994
at the request of members of Mr. Haskin's family. By the end of 1996, the
Company had decided to curtail the primary business of Lifetime Options, which
was the purchase of discounted life insurance policies from individuals with
AIDS.
In February 1994, the Company loaned $1,000,000 to Mr. Haskin and his wife,
which was subsequently repaid in March 1994. The loan had an interest rate of
2% per month and was collateralized by Allstate's Common Stock. This loan was
made to Mr. Haskin and his wife during the same time period that Lifetime
Options was being required to make substantial payments to members of Mr.
Haskin's immediate family as set forth in the preceding paragraph. The Committee
believes that the Company should not be in the business of helping the Chairman
of the Board and his family meet their personal cash flow needs.
A subsidiary of the Company maintains a condominium in Georgetown in
Washington, D.C. for the personal use of Mr. Leon Fishman. The amount paid by
Mr. Leon Fishman to the Company for such personal use has not increased since at
least 1993. The Committee believes that it is unlikely that the market rate for
"rent" would not have increased in five years, and the Committee believes that
the condominium should be sold for its fair market value.
The members of the Committee who are independent directors of the Company
discovered for the first time in connection with the recent litigation that Mr.
Haskins, Chairman of the Board, receives a consulting fee of $25,000 per year in
addition to his Board fees. This consulting fee had not been previously
disclosed to the full Board of
9
<PAGE>
Directors because management had deemed it to be immaterial. While the amount
may be immaterial, the Committee believes that all affiliated transactions
should receive the prior approval of the Board of Directors.
In its complaint filed on March 31, 1998 against Value Partners (see
"Recent Litigation"), the Company believed that the Committee should disclose
that certain of the affiliated transactions originally commenced when the
Company was still private. The Committee notes that the apartment building was
sold to the corporation controlled by Mr. Winkler, his wife and a son of Mr.
Haskin several months before the Company went public and that the financing to
Lifetime Options commenced when Allstate was still privately held. However,
these affiliated transactions continued for a number of years after the Company
went public in 1989, and the Committee does not believe that these affiliated
transactions should be deemed acceptable for a public company simply because
they were initially started when the Company was still privately held.
THE COMMITTEE'S PROGRAM
ALL COMMITTEE NOMINEES ARE COMMITTED TO IMPROVING THE EARNINGS OF THE
COMPANY, REDUCING THE COMPENSATION OF CERTAIN MEMBERS OF MANAGEMENT , AND
ELIMINATING ALL FUTURE AFFILIATED TRANSACTIONS (SUCH AS LOANS, LEASES AND SALES
OR PURCHASES OF ASSETS) BETWEEN ALLSTATE AND ITS OFFICERS AND DIRECTORS.
If elected, the Committee Nominees would seek to --
- provide quality leadership and consistent focus;
- conduct a thorough review of all of the assets, operations, management
and litigation matters;
- ensure that competent management is in place with appropriate
performance-based incentives;
- engage in prudent underwriting of loans in niche businesses where
Allstate can compete effectively against larger, better capitalized competitors;
and
- eliminate future affiliated transactions (such as loans, leases or sales
or purchases of assets) between Allstate and its officers and directors except
normal course employment relationships.
The Committee believes that the Company is at a crossroads. It needs, but
currently lacks, the type of leadership and guidance that can be provided by a
completely independent Board of Directors.
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A vote for the Committee Nominees is a vote for directors who are
independent of management and who are committed to providing the proper
leadership and oversight which the Company desperately needs.
IMPORTANT
The record date for determining stockholders entitled to notice of and to
vote at the Annual Meeting is April 7, 1998 (the "Voting Record Date").
Stockholders of record at the close of business on the Voting Record Date will
be entitled to one vote at the Annual Meeting for each share of Allstate common
stock, no par value per share (the "Common Stock"), held on the Voting Record
Date. As of March 20, 1998, based on the Company's Form 10-KSB for the year
ended December 31, 1997, there were 2,319,451 shares of Common Stock issued
and outstanding.
At the Annual Meeting, the Committee will seek to elect the Committee
Nominees as the Directors of Allstate. The election of the Committee Nominees
requires the affirmative vote of a plurality of the votes cast, assuming a
quorum is present or otherwise represented at the Annual Meeting.
THE COMMITTEE URGES YOU NOT TO SIGN ANY PROXY CARD SENT TO YOU BY ALLSTATE.
IF YOU HAVE ALREADY DONE SO, YOU MAY REVOKE YOUR PROXY BY SIGNING, DATING AND
RETURNING THE ENCLOSED WHITE PROXY CARD TODAY, AS ONLY YOUR LATEST DATED PROXY
WILL COUNT. SEE "PROXY PROCEDURES" BELOW.
If, like us, you believe that the Board of Directors of Allstate needs to
be independent of management in order to implement the necessary reforms, the
Committee urges you to mark, sign, date and return the enclosed WHITE proxy card
to vote FOR the election of each of the Committee Nominees.
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<PAGE>
SECURITY OWNERSHIP OF THE MEMBERS OF THE COMMITTEE
The following table sets forth, as of April 7, 1998, the amount of Common
Stock of the Company beneficially owned by each member of the Committee.
<TABLE>
<CAPTION>
Shares of Common Stock
Name and Address Beneficially Owned(1)(2) Percent of Class
---------------- ------------------------ ----------------
<S> <C> <C>
Value Partners, Ltd.(3) 661,835(4) 26.5%
2200 Ross Avenue
Dallas, TX 75201
*
C. Scott Bartlett, Jr. 475(5)
64 Melrose Place
Montclair, NJ 07042
David W. Campbell 13,500(6) .6%
6410 Nobel Rock Court
Clifton, VA 22024
Edward A. McNally 13,000 .6%
120-41 Prospect Street
Ridgefield, CT 06877
William H. Savage 19,000(7) .8%
314 Franklin Street
Alexandria, VA 22314
Lindsay B. Trittipoe 73,289 3.2%
4208 W. Franklin Street
Richmond, VA 23221
</TABLE>
- ---------------------
* Less than .1%.
(1) Based on information furnished by the respective individuals or entity.
Under applicable regulations, shares are deemed to be beneficially
owned by a person if he directly or indirectly has or shares the power
to vote or dispose of the shares, whether or not he has any economic
interest in the shares. Unless otherwise indicated, the named
beneficial owner has sole voting and dispositive power with respect to
the shares.
(Footnotes on next page)
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<PAGE>
(2) Under applicable regulations, a person is deemed to have beneficial
ownership of any shares of Common Stock which may be acquired within 60
days of the Voting Record Date pursuant to the exercise of outstanding
stock options or convertible notes. Shares of Common Stock which are
subject to stock options or convertible notes are deemed to be
outstanding for the purpose of computing the percentage of outstanding
Common Stock owned by such person or group but not deemed outstanding
for the purpose of computing the percentage of Common Stock owned by
any other person or group. The amounts set forth in the table include
shares which may be received upon the exercise of stock options within
60 days of the Voting Record Date as follows: Mr. Campbell, 11,000
shares; Mr. McNally, 12,000 shares; Mr. Savage, 12,000 shares; and Mr.
Trittipoe, 2,000 shares.
(3) Ewing & Partners, a Texas general partnership, is the general partner
of Value Partners. Timothy G. Ewing is the general partner and the
Managing Partner of Ewing & Partners. In addition, Ewing Asset
Management, L.L.C., a Texas limited liability company ("EAM"), holds a
1% general partnership interest in Ewing & Partners. Mr. Ewing is the
Manager and 100% owner of EAM. The principal place of business for
Ewing & Partners, EAM and Mr. Ewing is the same as for Value Partners.
(4) Value Partners owns $1,301,000 of Allstate's Convertible, Subordinated
Notes due September 30, 2000 (the "Notes"), which are currently
convertible into 173,467 shares of Common Stock and are included in the
table. Excluding such shares, Value Partners owns 488,368 shares or
21.1% of the issued and outstanding Common Stock. See "Recent
Litigation" for a description of a complaint filed by the Company
seeking to prevent Value Partners from voting all of its shares at the
Annual Meeting.
(5) Mr. Bartlett owns $1,000 of Notes, which are currently convertible into
133 shares of Common Stock.
(6) Includes 2,500 shares which are owned jointly with Mr. Campbell's
spouse.
(7) Includes 1,000 shares which are owned by Mr. Savage's spouse.
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide that the number of
directors shall be ten or such lesser number as the Board of Directors shall
fix. The Board of Directors has fixed that number at five for purposes of the
Annual Meeting. There is only one class of directors and they will all be
candidates for election at the Annual Meeting. Directors of the Company are
elected to serve until the next annual meeting of the stockholders of the
Company and until their respective successors are elected and qualified.
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<PAGE>
The Committee recommends that Allstate stockholders elect the Committee
Nominees as the Directors of Allstate at the Annual Meeting. If all Committee
Nominees are elected, the Committee Nominees would constitute the entire Board
of Directors of Allstate and would be able to implement the reforms which they
believe are necessary. The Committee Nominees and their business qualifications
are listed below.
MR. BARTLETT. Mr. Bartlett was Executive Vice President, Senior Lending
Officer and Chairman of the Credit Policy Committee at National Westminster Bank
USA from 1984 to 1990, where he managed all of the credit functions of the bank
and was responsible for an approximately $11 billion portfolio. During this
period, the bank's loan portfolio more than doubled with successful
participation in a number of complex credits, including leveraged transactions
and specialized industry lending. Mr. Bartlett served in various other
capacities with National Westminster from 1973 to 1984. Prior thereto, he was
associated with several small New York investment banks raising equity capital
for middle market and some larger companies. Mr. Bartlett currently serves as a
director of Harvard Industries, Inc. (Chairman of Audit Committee and member of
Compensation Committee); NVR, Inc. (Audit and Nominating Committees); Data
Services and Solutions, Inc.; MTB Bank (Director's Loan Committee and the Audit
Committee); and Janus American Group, Inc. (Audit Committee). Since 1994, Mr.
Bartlett has generally served as a director of various companies and, to a
lesser extent, performed arbitration and limited consulting services. From 1992
to 1994, Mr. Bartlett served as Senior Vice President and Chief Credit Officer
of MTB Bank. Mr. Bartlett is 64 years old.
MR. CAMPBELL. Mr. Campbell has been a director of Allstate since November
1995. He was formerly President and Chief Operating Officer and Director of
Southern Financial Bancorp, Inc. and Southern Financial Bank in Warrenton,
Virginia from April 1996 to June 1997. He was also formerly President and Chief
Executive Officer of Ameribanc Savings Bank ("ASB") in Annandale, Virginia (June
1990 through March 1995); prior thereto, Executive Vice President and Chief
Operating Officer of ASB (1984 through June 1990); also, a director of ASB (1988
through March 1995); served as a Trustee of the Ameribanc Investors Group, a
savings and loan holding company headquartered in Annandale, Virginia, from 1992
to March 1995. In addition, Mr. Campbell was a Vice President and Branch Officer
of The National Bank of Fairfax in Fairfax, Virginia from 1972 to 1977.
Mr. Campbell is 51 years old.
MR. MCNALLY. Mr. McNally has been a director of Allstate since August 1996.
He is the Managing Director of Windham Partners, LLC (commencing August 1996)
and the President of McNally and Co. (commencing August 1995). The principal
business of each company is management consulting for the financial services
industry, and each company is headquartered in Ridgefield, Connecticut. Since
1991, Mr. McNally has served as a management consultant specializing in
financial services companies. Prior to 1991, he was Senior Vice President of
National Westminster Bank, specializing in loans to equipment leasing,
commercial finance, media, and textile and apparel companies. Mr. McNally is 54
years old.
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<PAGE>
MR. SAVAGE. Mr. Savage has been a director of Allstate since November 1995.
He is currently Chairman of Island Preservation Partnership, Isle of Palms,
South Carolina, developer of a 1,200 acre private, oceanfront retreat near
Charleston, South Carolina; President and Director of Richards United
Corporation, a real estate investment company located in Alexandria, Virginia;
and Chairman of Arbec Orchids Dominicana, S.A., Santo Domingo, D.R., which
propagates and cultivates orchid plants for the United States market. From 1994
to 1995, Mr. Savage was a Director of Jefferson Federal Savings Bank in
Warrenton, Virginia. Since 1990, Mr. Savage has also been engaged in a variety
of other investment ventures in real estate development and banking. Prior to
1990, Mr. Savage was the Chief Executive Officer and Trustee of Ameribanc
Investors Group, a savings and loan holding company headquartered in Annandale,
Virginia, and its predecessor, Mortgage Investors of Washington, a real estate
investment trust. Mr. Savage is 65 years old.
LINDSAY B. TRITTIPOE. Mr. Trittipoe has been a director of Allstate
since November 1997. Since January 1998, he has been President of
Commonwealth Acceptance, Inc., a commercial finance company. Mr. Trittipoe
was Vice President/Capital Markets of Wheat First Butcher Singer, a Richmond,
Virginia based investment bank and brokerage firm, from September 1995 to
October 1997. Prior thereto, he was Vice President of Craigie Incorporated, a
Richmond, Virginia based investment bank and bond trading firm, from 1989 to
September 1995. Mr. Trittipoe is 40 years old.
Each Committee Nominee, if elected, would hold office until the 1999 Annual
Meeting of Stockholders and until a successor has been elected and qualified or
until his earlier death, resignation or removal. Although the Committee has no
reason to believe that any of the Committee Nominees will be unable to serve as
a director, if any one or more of the Committee Nominees is not available for
election, the persons named on the WHITE proxy card will vote for the election
of such other nominees as may be proposed by the Committee. Should Allstate
increase the number of directors to be elected at the Annual Meeting, it is the
current intention of the Committee to propose additional nominees for such
directorships.
ADDITIONAL INFORMATION WITH RESPECT TO THE MEMBERS OF THE COMMITTEE
The following table sets forth information with respect to those members of
the Committee who have purchased Common Stock of the Company in the two years
preceding the date of this Proxy Statement. The table below does not include
information with respect to stock option grants made under the Company's stock
option plan.
<TABLE>
<CAPTION>
Name Date Purchased Amount Purchased
----------- -------------- ----------------
<S> <C> <C>
Value Partners, Ltd. 10/4/96 20,000
C. Scott Bartlett, Jr. 10/20/97 500
David W. Campbell 12/8/97 1,500
Edward A. McNally 7/19/96 1,000
</TABLE>
15
<PAGE>
None of the holdings of the members of the Committee set forth herein are
held of record but not beneficially, nor are any of such securities owned
beneficially by associates of such persons, except as set forth herein. As of
the date of this Proxy Statement, no member of the Committee has purchased the
Common Stock with funds that were borrowed or otherwise obtained for the purpose
of acquiring such shares of Common Stock, except that Mr. Campbell holds his
shares in two separate brokerage accounts which had an aggregate outstanding
margin balance of $350,000 as of March 24, 1998. As of the date hereof, no
member of the Committee has sold any shares of the Common Stock in the two years
preceding the date of this Proxy Statement, except that Value Partners sold
20,000 shares on September 16, 1996, Mr. Bartlett sold 500 shares on March 25,
1998, and Mr. Trittipoe sold 5,000 shares on September 30, 1996 and 5,000 shares
on October 3, 1996.
In addition, no member of the Committee is or was during the past year a
party to any contracts, arrangements or understandings with any person with
respect to the Common Stock other than in connection with Allstate's stock
benefit plans, and no member of the Committee beneficially owns, directly or
indirectly, any securities of any of the Company's subsidiaries. Other than as
set forth herein, no member of the Committee or any associates thereof has any
arrangement or understanding with any person: (i) with respect to any future
employment by the Company or its affiliates; or (ii) with respect to any future
transactions to which the Company or any of its affiliates will or may be a
party. Finally, no member of the Committee has, during the past 10 years, been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
RECENT LITIGATION
On March 31, 1998, the Company filed a complaint against Value Partners,
Ltd, its general partner Ewing & Partners, and Timothy G. Ewing, the general
partner of Ewing & Partners (collectively, "Value Partners"). The complaint
alleges that Value Partners should not be permitted to vote all of its shares of
Allstate Common Stock at the Annual Meeting, because purchases made by Value
Partners more than two years ago constituted a "control share acquisition" under
Virginia law. The complaint further alleges that the Schedule 13D filed by Value
Partners and the preliminary proxy statement filed by the Committee should
disclose that Value Partners is unable to vote at least 318,050 of its shares of
Allstate Common Stock, and the complaint further objected to various statements
made in the Committee's preliminary proxy statement.
Based upon discussions with counsel, Value Partners has reason to believe
that the provisions of the Virginia Control Share Acquisitions statute (the
"Act") are not applicable to the shares held by Value Partners. Value Partners
further believes that Allstate had a similar belief in the past, as Allstate
permitted Value Partners to vote all of its shares of Common Stock at both the
1996 and 1997 annual stockholders' meetings. Value Partners believes that the
only thing that has changed in this regard from the last two annual meetings is
that management is now fearful of losing its control of the Company. Value
Partners intends to vigorously defend against the Company's complaint, and Value
Partners is dismayed that management is using the Company's assets to resort to
litigation against a
16
<PAGE>
major shareholder for the sole purpose of attempting to reduce the voting rights
of a shareholder that management now characterizes as "dissident".
The Company alleges that of the 488,368 shares of Common Stock held by
Value Partners, Value Partners is unable to vote 318,050 of such shares because
they were acquired within 90 days of the date Allstate made a public filing
announcing completion of its issuer tender offer. The purchases by Value
Partners in early 1996 and the tender offer by Allstate in January 1996 resulted
in Value Partners' ownership of the issued and outstanding Common Stock
exceeding 20%. If the Act was applicable to these purchases by Value Partners,
then Value Partners would be unable to vote the shares acquired by it during the
period 90 days before and 90 days after the date its ownership exceeded 20%.
While Value Partners purchased 318,050 shares during this period, Value Partners
believes that the 204,882 shares of Common Stock disposed of during this period
should be subtracted from the purchases if the Act was deemed to be applicable.
Value Partners also disputes that its purchases which began in August 1993
were "pursuant to a plan to make a control share acquisition" and also intends
to vigorously defend against this charge.
POSSIBLE CHANGE IN CONTROL
Based upon publicly available information concerning Allstate, there are
various change of control provisions in the Company's financing arrangements,
Notes and employment agreements that may possibly be triggered by the election
of the Committee Nominees to a majority of the Board of Directors of Allstate (a
"Change of Control"), as discussed below.
FINANCING ARRANGEMENTS
Allstate has entered into a $25 million secured credit facility (the "Loan
Agreement"), of which up to $5 million is available as a letter of credit
sub-facility, up to $5 million is available as a sub-facility the proceeds of
which may be used to make advances to clients secured by machinery and
equipment, and up to $2.5 million is available as a sub-facility the proceeds of
which may be used to make advances to clients secured by inventory. Under the
terms of the Loan Agreement, the lenders would have the option to terminate
their commitments and declare the outstanding loans thereunder due and payable
upon the occurrence of a Change of Control. According to Allstate's Annual
Report on Form 10- KSB for the year ended December 31, 1997, as of December
31, 1997, approximately $14.2 million principal amount of loans were
outstanding under the Loan Agreement. The maturity date on this credit facility
is May 27, 2000.
The Committee intends to work with the Company's current lenders in an
attempt to keep their credit facilities in place if the Committee Nominees are
elected. However, in the event that it becomes necessary, Value Partners
believes that it can arrange alternative sources of financing on short notice.
17
<PAGE>
NOTES
At December 31, 1997, the Company had outstanding approximately $5.0
million in aggregate principal amount of Convertible Subordinated Notes which
were issued in exchange for shares of Common Stock. The Notes (i) mature on
September 30, 2000, (ii) bear interest at a rate of 9.5% per annum as of
December 31, 1997, which rate of interest may fluctuate with the prime rate, but
may not fall below 8% nor rise above 10% per annum, (iii) are convertible into
Common Stock of the Company at $7.50 per share, (iv) are subordinated in right
of payment to the Company's obligations under the Loan Agreement, and (v) were
issued pursuant to an indenture which contains certain covenants which are less
restrictive than those contained in the Loan Agreement. Upon the occurrence of
certain change of control events, the holders of the Notes have the right to
have their Notes redeemed at par. Since four of the five Committee Nominees
currently serve as directors of the Company and were originally elected to the
Board after being nominated by the Board of Directors of the Company, the
Committee believes that the election of the Committee Nominees may not trigger
such redemption rights. However, even if such redemption rights were triggered,
Value Partners currently does not intend to seek to have its $1.3 million of
Notes redeemed, although other Note holders may elect to do so. In addition, the
Company currently has the right to elect to redeem the Notes at par in whole or
in part at any time or from time to time.
EMPLOYMENT AGREEMENTS
Based on Allstate's public filings, the Committee believes that the Company
currently has employment agreements with Craig Fishman, Lawrence M. Winkler,
Peter Matthy, Richard A. Brasch, Francis Madden and Wade Hotsenpiller, which
expire June 30, 1999, March 31, 1999, March 31, 1999, March 31, 1999, May 4,
2000 and March 31, 1999, respectively. These agreements provide that if the
officer's employment is terminated due to a Change of Control, then the Company
shall (a) pay to the officer a lump sum payment equal to the officer's base
salary for a specified period of time (one year for Messrs. Madden and Matthy,
six months for Messrs. Brasch and Hotsenpiller, and the lesser of (i) one year
and (ii) the remaining term of the agreement, but not less than six months for
Messrs. Fishman and Winkler) and (b) provide various fringe benefits to the
officer for the same period of time.
The Committee currently has no intention of terminating these employment
agreements prior to their respective termination dates, with the possible
exception of the agreement with Craig Fishman. If elected, however, the
Committee Nominees will review the appropriateness of renewing such agreements
on the same terms. The Committee supports employment agreements with appropriate
performance-based incentives, and certain members of the Committee voted in
favor of the above agreements, including Craig Fishman's as part of the
September 24, 1997 agreement. According to Allstate's public filings, Craig
Fishman's current base salary is $210,000, which the Committee as a whole
believes is too high.
18
<PAGE>
PROXY PROCEDURES
Stockholders are urged to mark, sign and date the enclosed WHITE proxy card
and return it today in the enclosed postage-paid envelope in time to be voted at
the Annual Meeting.
Only holders of record as of the close of business on the Voting Record
Date will be entitled to vote. If you were a stockholder of record on the Voting
Record Date, you may vote your shares at the Annual Meeting even if you have
since sold your shares. Accordingly, please vote the shares held by you on the
Voting Record Date, or grant a proxy to vote such shares, on the WHITE proxy
card, even if you sold your shares after the Voting Record Date.
If any of your shares are held in the name of a brokerage firm, bank, bank
nominee or other institution on the Voting Record Date, only it can vote such
shares and only upon receipt of your specific instructions. Accordingly, please
contact the person responsible for your account and instruct that person to
execute on your behalf the WHITE proxy card.
The WHITE proxy solicited hereby, if properly signed and returned to the
Committee and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted FOR the Committee Nominees for director described
herein and, upon the transaction of such other business as may properly come
before the meeting, in accordance with the best judgment of the persons
appointed as proxies. Any stockholder giving a proxy has the power to revoke it
at any time before it is exercised by (i) submitting a duly executed proxy
bearing a later date; or (ii) appearing at the Annual Meeting and giving the
Secretary notice of his or her intention to vote in person. Proxies solicited
hereby may be exercised only at the Annual Meeting and any adjournment thereof
and will not be used for any other meeting.
Each share of Common Stock is entitled to one vote at the Annual Meeting on
all matters properly presented at the meeting. Directors are elected by a
plurality of the votes cast with a quorum present. A quorum consists of
stockholders representing, either in person or by proxy, a majority of the
outstanding Common Stock entitled to vote at the meeting. Abstentions are
considered in determining the presence of a quorum but will not affect the
plurality vote required for the election of directors.
Under rules applicable to broker-dealers, the proposal for the election of
the Committee Nominees is considered a "non-discretionary" item upon which
broker-dealers may not vote on behalf of their clients unless such clients have
furnished voting instructions. As a result, there may be broker non-votes at the
meeting. However, broker non-votes will have no effect on the election of
directors by a plurality vote.
THE INDEPENDENT SHAREHOLDERS/DIRECTORS COMMITTEE STRONGLY RECOMMENDS A VOTE
FOR THE ELECTION OF THE COMMITTEE NOMINEES.
19
<PAGE>
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the
Independent Shareholders/Directors Committee to vote the proxy with respect to
the approval of the minutes of the last meeting of stockholders, the election of
any person as a director if a Committee Nominee is unable to serve or for good
cause will not serve, matters incident to the conduct of the meeting, and upon
such other matters as may properly come before the Annual Meeting. The Committee
is not aware of any business that may properly come before the Annual Meeting
other than the matters described above in this Proxy Statement. However, if any
other matters should properly come before the meeting, it is intended that the
proxies solicited hereby will be voted with respect to those other matters in
accordance with the judgment of the persons voting the proxies.
The Committee may solicit proxies by mail, advertisement, telephone,
facsimile, telegraph and personal solicitation. Members of the Committee may
solicit proxies personally or by telephone without additional compensation. The
Committee will reimburse banks, brokerage firms and other custodians, nominees
and fiduciaries for reasonable expenses incurred by them in sending proxy
solicitation materials to the beneficial owners of the Common Stock.
The Committee has retained D.F. King & Co., Inc., 77 Water Street, New
York, New York 10005, a professional proxy solicitation firm, to assist in the
solicitation of proxies and for related services. The Committee will pay D.F.
King & Co., Inc. a fee of $20,000 and has agreed to reimburse it for its
reasonable out-of-pocket expenses. The Committee has agreed to indemnify D.F.
King & Co., Inc. and its controlling persons, officers, directors, employees and
agents from and against any and all losses, claims, damages, liabilities and
expenses relating to its engagement, including liabilities and expenses under
the federal securities laws, but excluding matters relating to the indemnified
person's negligence, bad faith or willful misconduct. Approximately __ persons
will be used by D.F. King & Co., Inc. in its solicitation efforts.
The members of the Committee will initially bear the cost of soliciting
proxies in connection with the Annual Meeting pro rata based on their ownership
of the shares of Common Stock. The cost of such solicitation, which includes the
fees of the Committee's attorneys, solicitors, advertising, printing and mailing
and other costs incidental to the solicitation, including litigation fees and
expenses, cannot be stated with precision at this time. However, the Committee
estimates that the total expenditures relating to this proxy solicitation will
be approximately $_______, of which approximately $________ has been incurred as
of March 31, 1998. Of the total estimate, approximately $_______ relates to fees
and expenses incurred in connection with litigation necessitated by the refusal
of the Management Directors to honor the terms of the agreement previously
reached on September 24, 1997, which litigation resulted in a court order that
the Annual Meeting be held on May 12, 1998. See "Problems With the Company -
Court-Ordered Meeting." If the Committee Nominees are elected to the Board of
Directors, the Committee intends to seek
20
<PAGE>
reimbursement from the Company for the costs incurred by the Committee, but does
not intend to submit the question of such reimbursement to a vote of the
stockholders.
In reliance upon Rule 14a-5(c)(1) of the Securities Exchange Act of 1934,
as amended, reference is made to the Company's proxy statement which will be
sent by the Company to each stockholder for information regarding the beneficial
ownership of the Common Stock, the directors and executive officers of the
Company (including compensation), and the date by which stockholders must submit
proposals for inclusion in the Company's proxy statement for the 1999 annual
meeting of stockholders.
The Committee assumes no responsibility for the accuracy or completeness of
any information contained herein which is based on, or incorporated by reference
to, Allstate's 1998 proxy statement or other public filings.
YOUR VOTE IS IMPORTANT! WE URGE YOU TO SIGN AND DATE THE ENCLOSED WHITE
PROXY CARD AND RETURN IT TODAY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
21
<PAGE>
IMPORTANT
Your vote is important. Regardless of the number of shares of Allstate
common stock you own, please vote as recommended by the Independent
Shareholders/Directors Committee by taking these two simple steps:
1. PLEASE SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED WHITE PROXY CARD IN
THE POSTAGE-PAID ENVELOPE PROVIDED.
2. PLEASE DO NOT RETURN ANY PROXY CARDS SENT TO YOU BY ALLSTATE FINANCIAL
CORPORATION.
IF YOU VOTED ALLSTATE'S PROXY CARD BEFORE RECEIVING THE COMMITTEE'S WHITE
PROXY CARD, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE SIMPLY BY SIGNING, DATING
AND MAILING THE ENCLOSED WHITE PROXY CARD. THIS WILL CANCEL YOUR EARLIER VOTE
SINCE ONLY YOUR LATEST DATED PROXY CARD WILL COUNT AT THE ANNUAL MEETING.
If you own shares in the name of a brokerage firm, only your broker can
vote your shares on your behalf and only after receiving your specific
instructions. Please call your broker and instruct him/her to execute a WHITE
card on your behalf. You should also promptly sign, date and mail your WHITE
card when you receive it from your broker. Please do so for each separate
account you maintain.
You should return your WHITE proxy card at once to ensure that your vote is
counted. This will not prevent you from voting in person at the meeting should
you attend.
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE IN VOTING YOUR SHARES, PLEASE
CALL D.F. KING & CO., INC., WHICH IS ASSISTING US, TOLL-FREE AT 1-800-
859-8509.
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