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. )
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[x] Preliminary proxy statement. [ ] Confidential, for use of
the Commission only
(as permitted
by Rule 14a-6(e)(2)).
[ ] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
Allstate Financial Corporation
(Name of the Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (check the appropriate box):
[x] No fee required.
<PAGE>
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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
--------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 12, 1998
--------------------------------------
To the Shareholders of
Allstate Financial Corporation
The Annual Meeting of Shareholders of Allstate Financial Corporation will
be held at the Sheraton National Hotel, 900 South Orme Street, Arlington,
Virginia 22204 on Tuesday, May 12, 1998 at 11:00 a.m. Eastern Time, for the
following purposes:
(1) To elect five Directors, each to serve until the Annual Meeting of
Shareholders in 1999 or until his successor is elected and qualified.
(2) To transact such other business as may properly come before the meeting, or
any adjournment or postponement thereof, according to the proxies' discretion,
and in their discretion.
The foregoing items of business are more fully described in the Company's
Proxy Statement accompanying this notice.
Only shareholders of record at the close of business on April 7, 1998 are
entitled to notice of and to vote at the meeting. A shareholder who sells shares
subsequent to such record date may still vote such shares at the Annual Meeting,
or grant a proxy to vote such shares. A list of shareholders of the Company at
the close of business on April 7, 1998 will be available for inspection during
normal business hours during the ten days prior to the meeting at the offices of
the Company at 2700 South Quincy Street, Arlington, Virginia 22206 and will also
be available at the meeting.
By Order of the Board of Directors,
-----------------------------------------
Lawrence M. Winkler
Chief Financial Officer, Secretary
And Treasurer
Arlington, Virginia
April , 1998
<PAGE>
- --------------------------------------------------------------------------------
Please fill out, date and sign the enclosed GOLD form of proxy and return it in
the accompanying postage paid envelope, even if you plan to attend the meeting.
You may revoke your proxy in writing, or at the annual meeting if you wish to
vote in person.
- --------------------------------------------------------------------------------
<PAGE>
ALLSTATE FINANCIAL CORPORATION
2700 South Quincy Street
Arlington, Virginia 22206
--------------------------------------
PROXY STATEMENT
--------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 12, 1998
--------------------------------------
INTRODUCTION
The enclosed proxy is solicited by the Board of Directors of Allstate
Financial Corporation (the "Company") for use at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at 11:00 a.m. Eastern Time,
Tuesday, May 12, 1998, or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the Sheraton National Hotel,
900 South Orme Street, Arlington, Virginia 22204. The proxy is revocable at any
time prior to its exercise by delivery to the Company of a written notice of
revocation or a duly executed proxy bearing a later date or by attending the
Annual Meeting and voting in person.
According to a report on Schedule 13D, as amended through March 13, 1998
(the "Ewing Schedule 13D"), filed under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") by Timothy G. Ewing, Value Partners, Ltd., Ewing &
Partners, David W. Campbell, Edward A. McNally and William H. Savage (the "Ewing
Group"), the reported members of such group, in the aggregate, beneficially
owned 707,335 shares of the Company's common stock, no par value ("Common
Stock") (representing approximately 28.0% of the Company's Common Stock
outstanding as of March 13, 1998). The address of Timothy G. Ewing, Value
Partners, Ltd. and Ewing & Partners was reported to be Suite 4660 West, 2200
Ross Avenue, Dallas, Texas 75201. The address of David W. Campbell was reported
to be 6410 Nobel Rock Court, Clifton, Virginia 22024; the address of Edward A.
McNally was reported to be 120-41 Prospect Street, Ridgefield, Connecticut
06837; and the address of William H. Savage was reported to be 314 Franklin
Street, Alexandria, Virginia 22314. The Ewing Schedule 13D reported that the
Ewing Group "presently expect to run a full slate of directors, although no
decision has been made yet as to whom such directors (other than Messrs.
Campbell, McNally and Savage)
<PAGE>
will be." On March 27, 1998, a self-styled "Allstate Financial Corporation
Independent Shareholders/Directors Committee" consisting of members of the Ewing
Group, Malcolm M.B. Sterrett and Lindsay B. Trittipoe (the "Dissident Group")
filed preliminary proxy materials with the Securities and Exchange Commission
seeking to solicit proxies for the election of five members of the Dissident
Group to the Board of Directors of the Company. As set forth below, a
substantial number of shares beneficially owned by certain members of the Ewing
Group are not entitled to vote at the Annual Meeting. See "Virginia Control
Share Acquisitions." For information concerning certain litigation initiated by
the Ewing Group against the Company as well as certain litigation commenced by
the Company against certain members of the Ewing Group, see "Recent
Developments."
Management and a majority of the Board of Directors believe that the
Dissident Group's effort to seize control of the Board is contrary to the
interests of the Company and all of its shareholders for the following reasons:
. First, significant steps have been implemented by the Company
since Craig Fishman's appointment as President and Chief
Executive Officer in July 1996 to diversify the Company's
business, manage risk better, reduce overhead and improve
profitability. A disruption in these strategic initiatives
which would accompany the election of the Dissident Group
nominees would adversely affect the Company's business and
results of operations.
. Second, while seizure of control of the Board by the Ewing
Group may personally benefit members of the Dissident Group,
it could have other significant adverse consequences to the
Company and all other shareholders because (i) it will result
in an event of default under the Company's credit facilities
which, in turn, could seriously damage the Company's financial
position, and (ii) it could lead to the departure of key
executives necessary to the conduct of the Company's business.
. Finally, despite having had representatives on the Board of
Directors for more than two years, the Ewing Group has failed
to advance any substantive proposals designed to enhance the
Company's profitability.
For more information concerning the Company's position, see "The Election
Contest - The Company's Position."
2
<PAGE>
Accordingly, the Board of Directors recommends that you vote for the Company's
nominees on the enclosed GOLD proxy card and reject the Dissident Group's
efforts to seize control.
The proxy material is first being sent to shareholders on or about April ,
1998.
OUTSTANDING SHARES AND VOTING RIGHTS
Shareholders of record at the close of business on Wednesday, April 7, 1998
are entitled to notice of and to vote at the Annual Meeting. As of the close of
business on that date, there were outstanding 2,319,451 shares of Common Stock.
Of such shares, 2,001,401 shares are presently expected to be entitled to vote
at the Annual Meeting. For information concerning shares not entitled to vote at
the Annual Meeting, including certain additional shares which may not be
entitled to vote at the Annual Meeting, see "Virginia Control Share
Acquisitions" and "Recent Developments." No cumulative voting rights exist under
the Company's Articles of Incorporation, as amended. For information regarding
the ownership of the Company's Common Stock by holders of more than five percent
of the outstanding shares and by the management of the Company, see "Security
Ownership of Certain Beneficial Owners and Management."
A quorum for the Annual Meeting will consist of the presence, in person or
by proxy, of a majority of the outstanding shares entitled to vote at the Annual
Meeting. Under Virginia law and the Company's Amended By-laws, as amended, the
election of directors at the Annual Meeting will be determined on the basis of a
percentage of votes cast at the Annual Meeting and requires the affirmative vote
of the holders of a plurality of the Company's Common Stock represented and
voting at the Annual Meeting for approval. All other matters expected to be
submitted for consideration at the Annual Meeting require the affirmative vote
of the holders of a majority of the Company's Common Stock represented and
voting at the Annual Meeting for approval. At the present time, the Company does
not expect any other matters to be submitted to shareholders for approval at the
Annual Meeting other than matters incident to the conduct of the meeting.
VIRGINIA CONTROL SHARE ACQUISITIONS
The Virginia Control Share Acquisitions statute (the "VCSA") is designed to
afford shareholders of a public company incorporated in Virginia with 300 or
more shareholders protection against certain types of non-negotiated
acquisitions. With certain enumerated exceptions, the VCSA applies to any direct
or indirect acquisition of beneficial ownership of shares generally entitled to
vote in the election of directors by a person, entity or group (the "Acquiring
Person") that, when combined with shares already owned, would increase the
Acquiring Person's ownership to at least 20%, one third, or a majority of the
voting stock of the corporation (a "Control Share Acquisition"). When shares are
acquired which causes the Acquiring Person to cross any of the thresholds, the
Acquiring Person automatically loses the right to vote such shares, as well as
any shares acquired within the
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90 days before and 90 days after crossing the threshold and any shares acquired
pursuant to a plan to make a Control Share Acquisition ("Control Shares") unless
a majority of the shares held by all shareholders, except the Acquiring Person
and the officers and inside directors of the corporation, vote at an annual or
special meeting of shareholders to grant the Acquiring Person voting rights.
The VCSA permits a Virginia corporation to elect not to be governed by
these provisions by including such an election in its articles of incorporation
or bylaws. The Company has not elected to opt-out of the VCSA.
On January 24, 1996, Value Partners, Ltd., a member of the Ewing Group,
first exceeded the 20% threshold contemplated by the statute. Value Partners,
Ltd. has not requested approval of, and the shareholders of the Company have not
approved the grant of, voting rights to the shares acquired by Value Partners in
connection with such Control Share Acquisition. As a result of such acquisition,
an aggregate of 318,050 shares of Common Stock purchased on such date and within
90 days before and 90 days after such date are ineligible to be voted at the
Annual Meeting. In addition, any other shares acquired by Value Partners, Ltd.
or persons acting in concert for the purposes of making a Control Share
Acquisition are also not entitled to vote. See "Recent Developments."
ELECTION OF DIRECTORS
The Company's Articles of Incorporation, as amended, provide that the
number of directors shall be ten (10) or such lesser number as the Board of
Directors shall fix. The Board of Directors has fixed that number at five (5)
for the Annual Meeting and a majority of the Board has nominated the individuals
set forth below for election at the Annual Meeting, to serve until the 1999
Annual Meeting of Shareholders and until their successors are elected and
qualified.
The persons named in the enclosed proxy will vote for the election of the
nominees set forth below unless authority to vote is withheld. All nominees have
consented to serve if elected. In the event that any of the nominees should be
unable to serve, the persons named in the proxy will vote for such substitute
nominee or nominees as they, in their discretion, shall determine. The Board of
Directors has no reason to believe that any nominee named herein will be unable
to serve.
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The Board of Directors recommends voting "FOR" each of the nominees named
below.
The following material contains information concerning the nominees for
election as directors as well as the current directors whose term will expire at
the Annual Meeting.
<TABLE>
<CAPTION>
Nominees for Directors
<S> <C> <C> <C>
Name of Nominee Age Principal Occupation Director Since
Craig Fishman (1) 37 President and Chief Executive Officer of
the Company 1995
Alan L. Freeman 56 Managing Partner, Freeman, Buczyner and Gero 1995
Jack C. Troia 51 Chief Financial Officer, Intervise ___
Consultants, Inc.
John V. Pollock 59 Executive Vice President and Chief Loan Officer, ___
Sequoia National Bank
David P. Bindeman 54 President, Landmark Realty, Inc. ___
</TABLE>
<TABLE>
<CAPTION>
Current Directors (Term Expiring at the Annual Meeting)
<S> <C> <C> <C>
Name of Director Age Principal Occupation Director Since
David W. Campbell (2) 51 Unemployed 1995
Craig Fishman (1) 37 President and Chief Executive Officer of the 1995
Company
Leon Fishman (1) 66 Sales and Marketing Adviser to the Company 1982 (3)
Alan L. Freeman 56 Managing Partner, Freeman, Buczyner and Gero 1995
Eugene Haskin 68 Chairman of the Board of Directors of the Company 1982
5
<PAGE>
Edward A. McNally(2) 54 Managing Director, Windham Partners, LLC; 1996
President, McNally and Co.
William A. Savage (2) 65 Chairman, Island Preservation Partnership 1995
James C. Spector 64 Executive Vice President, Bank Atlantic 1989
Lindsay B. Trittipoe(2) 40 President, Commonwealth Acceptance, Inc. 1997
Lawrence Vecker 68 Executive Vice President, North American Capital 1996
Corp.
</TABLE>
- ------------------
(1) Craig Fishman is the son of Leon Fishman and nephew of Lawrence Winkler.
Lawrence Winkler is the brother-in-law of Leon Fishman. See "Executive
Officers."
(2) This director has not responded to a request by the Company to provide
information required to be presented in this Proxy Statement. The information
set forth herein is based primarily on information provided in the Dissident
Group's preliminary proxy statement filed with the Securities and Exchange
Commission on March 27, 1998 and the Company disclaims any responsibility for
the accuracy or completeness of such information.
(3) Mr. Fishman did not serve as a member of the Board of Directors from
November 1995 to June 1996.
Except as set forth below, each of the nominees and the other directors
whose terms expire at the Annual Meeting have been engaged in his principal
occupation during the past five years.
Craig Fishman has been the President and Chief Executive Officer of the
Company since July 1, 1996. He joined the Company in 1991 as a Vice President
and in February 1993, was appointed General Counsel. In September 1995, Mr.
Fishman was elected Senior Vice President of the Company. From 1987 to April
1991, Mr. Fishman was an attorney associated with the law firm of White & Case
in New York, New York.
Alan L. Freeman is currently Managing Partner of Freeman, Buczyner & Gero,
an accounting firm with whom he has been associated since 1991. Prior to that,
Mr. Freeman was a partner with Deloitte & Touche LLP from 1989 to 1991 and a
partner with the accounting firm Shapiro, Fleischmann & Co. from 1966 to 1989.
Jack C. Troia has been the Chief Financial Officer of Intervise
Consultants, Inc. since January 1998. Mr. Troia was a consultant and certified
public accountant from June 1997 to December 1997 and an adjunct professor of
accounting at Georgetown
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University, Washington, DC, from January 1997 to May 1997. Prior to that, Mr.
Troia was an audit partner (commencing September 1982) with Deloitte & Touche
LLP, and was located in its Washington, DC office from April 1988 to December
1996 and its Milwaukee, Wisconsin office from June 1971 to March 1988. As a
partner of Deloitte & Touche LLP, Mr. Troia served as the partner responsible
for the audit of the Company's financial statements for the fiscal year ending
December 31, 1995 and several years prior thereto.
John V. Pollock has served as Executive Vice President of Sequoia National
Bank in Bethesda, Maryland since February 1994 and its Chief Lending Officer
since December 1997. Prior to that, Mr. Pollock served as President of
Nastech-Basil International, Inc., a joint venture created to market and license
certain intellectual property of Nastech Pharmaceutical Company Inc., and as a
consultant to the partners of Basil Properties. From 1975 to 1991, Mr. Pollock
was a senior banking executive in the Washington, D.C. area, serving as
President and Chief Executive Officer of Dominion Bank of Washington and the
John Hanson Savings Bank. Mr. Pollock currently serves as a director of Nastech
Pharmaceutical Company Inc., Frank E. Basil, Inc., a worldwide provider of
facilities maintenance, engineering and operations management services, and
Interbank of New York.
David P. Bindeman has served as President of Landmark Realty, Inc., a
developer and management specialist of restored properties, in Rockville,
Maryland since 1969. Mr. Bindeman currently serves as a director of Washington
Sports and Entertainment Limited Partnership, owner of the Washington Wizards, a
professional basketball franchise and Washington Capitals, a professional hockey
franchise, as well as a director of various charitable organizations.
David W. Campbell has been unemployed since July 1997. From April 1996 to
June 1997, Mr. Campbell was the President and Chief Operating Officer and a
Director of Southern Financial Bancorp, Inc. and Southern Financial Bank,
Warrenton, Virginia. Mr. Campbell was formerly President and Chief Executive
Officer of Ameribanc Savings Bank in Annandale, Virginia from June 1990 to March
1995.
Leon Fishman, a co-founder of the Company, currently serves as a director
and employee of the Company with responsibilities for advising the Company with
respect to selected aspects of sales and marketing, including maintenance of
relationships with key referral sources for loan originations. He was the former
President and Chief Executive Officer of the Company from July 1989 to June
1996. Prior to that, Mr. Fishman served as Secretary and Treasurer of the
Company and held other management positions with the Company.
Eugene Haskin, a co-founder of the Company, is currently Chairman of the
Board of the Company. Mr. Haskin served as President of the Company from 1982 to
1989. Prior to co-founding the company, Mr. Haskin was an executive with and a
major
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investor in, companies involved in factoring, real estate development and
heating oil distribution.
Edward A. McNally has served as Managing Director, Windham Partners, LLC
since August 1996 and as President of McNally and Co. since August 1995. Prior
to that, he was an independent management consultant since 1991. Prior to 1991,
Mr. McNally was Senior Vice President, National Westminster Bank USA from 1983
through 1992.
William H. Savage has served as Chairman of Island Preservation
Partnership, Isle of Palms, South Carolina, developer of a 1,200 acre private
ocean-front retreat near Charleston, South Carolina since 1991. He is also
President and Director of Richards United Corporation, a real estate investment
company located in Alexandria, Virginia and Chairman of Arbec Orchids
Dominicana, S.A., in Santa Domingo, Dominican Republic, which propagates and
cultivates orchid plants for the United States market.
James C. Spector has been Executive Vice President of Bank Atlantic, Ft.
Lauderdale, Florida since 1996. He served as a consultant to the Company from
November 1993 to July 1996 and as Executive Vice President of the Company from
February 1991 to October 1993. Prior to that, Mr. Spector served as Senior
Executive Vice President with Heller Financial, Inc. and certain of its related
companies, specializing in asset-based and real estate lending.
Lindsay B. Trittipoe has served as President of Commonwealth Acceptance,
Inc., a commercial finance company, since January 1998. From 1995 to 1997, he
served as a Vice President in the Capital Markets Division of Wheat First
Butcher Singer Securities, a Richmond, Virginia-based investment banking and
brokerage firm. Prior to that, he was a Vice President at Craigie Incorporated
from November 1989 to August 1995, a Richmond, Virginia-based investment banking
and bond trading firm.
Lawrence Vecker has served as Executive Vice President of North American
Capital Corp., a New York-based private merchant bank since 1995. Formerly, Mr.
Vecker was Executive Vice President of Congress Financial Corp., a subsidiary of
CoreStates Financial Corp. from 1974 to 1995.
Board Meetings - Committees of the Board
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Board does not maintain a nominating committee. The
functions of such committee are discharged by the Board of Directors as a whole.
The Audit Committee currently consists of Messrs. C. Fishman, Campbell,
Freeman, Vecker and Trittipoe. The Committee met five times during the year
ended December 31, 1997. The Audit Committee reviewed the audited results of
operations for
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1996, the unaudited results of operations for 1997 and the status of certain
specific accounts.
The Compensation Committee currently consists of Messrs. Haskin, Spector,
Savage, McNally and L. Fishman. The Compensation Committee met three times in
1997. The Committee reviewed executive compensation, employment contracts, other
related compensation costs and made recommendations to the Board based on its
reviews.
During 1997, there were nine meetings of the Board of Directors. Each of
the directors of the Company, except for Lawrence Vecker, attended at least 75%
of the meetings of the Board of Directors and the meetings of any committees
upon which such director serves.
RECENT DEVELOPMENTS
On December 29, 1997, the Ewing Group filed a petition in the Circuit Court
for Arlington County, Virginia against the Company and certain members of the
Board seeking to (i) invalidate the election of directors held at the annual
meeting of shareholders on November 18, 1997, (ii) order a new election of
directors and (iii) enjoin the Board of Directors of the Company from acting as
such pending a new election. After discovery and evidentiary and other hearings
before the court, the Ewing Group and the Company agreed to the entry of a
decree by the court ordering a meeting of shareholders on May 12, 1998, the date
otherwise specified in the Company's Amended By-Laws, as amended, as the date
for the 1998 annual meeting of shareholders.
On March 31, 1998, the Company filed a complaint in the United States
District Court for the Eastern District of Virginia against Value Partners,
Ltd., Ewing & Partners and Timothy G. Ewing (the "Defendants") seeking
declaratory and injunctive relief (the "Complaint"). The Complaint alleges,
among other things, that the Defendants violated the federal securities laws in
that the Defendants' Preliminary Proxy Statement on Schedule 14A filed with the
Securities and Exchange Commission (the "Commission") on March 27, 1998 and
Amendment No. 10 to Schedule 13D filed on March 16, 1998 contained material
misstatements and omissions with respect to the number of shares that Value
Partners will be entitled to vote at the Annual Meeting as well as certain other
matters described in the Preliminary Proxy Statement. The Complaint also seeks,
among other things, a declaratory judgment that the Defendants are not entitled
to vote at least 318,050 shares of Common Stock owned by the Defendants and
enjoining them from seeking to vote such shares, as well as any other shares
acquired as part of a plan to effect a Control Share Acquisition. See "Virginia
Control Share Acquisitions."
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<PAGE>
THE ELECTION CONTEST
Background
According to the Ewing Schedule 13D, Timothy G. Ewing and his affiliates
began to accumulate the Company's Common Stock in 1993, and by October 1995, Mr.
Ewing disclosed that he beneficially owned approximately 14.1% of the Company's
Common Stock. In September 1995, Scoggin Capital Management, LP and Selig
Partners, LP (collectively "Scoggin"), then the holders of approximately 14.4%
of the Company's outstanding Common Stock, negotiated an agreement with the
Company to exchange all of such shares for an aggregate of $2,838,000 in
principal amount of convertible subordinated notes bearing interest at rates
fluctuating between 8% and 10% per annum and maturing on September 30, 2000 (the
"Convertible Notes"). In connection with such exchange, Scoggin received the
right to designate two individuals to serve as members of the Board of Directors
of the Company. At Mr. Ewing's instance (but unknown to the Company at the
time), Scoggin designated Messrs. Campbell and Savage to serve as members of the
Company's Board of Directors. Messrs. Campbell and Savage were duly nominated by
the Board and elected by shareholders at the Company's annual meeting of
shareholders in November 1995.
In July 1996, the Company's Board of Directors expanded the Board of
Directors from seven to nine and elected two additional directors, Edward A.
McNally and Lawrence Vecker, to fill the newly-created positions. These actions
were taken on an assurance by Ewing that Value Partners, Ltd. would not
challenge the membership of the reconstituted Board prior to the 1997 annual
meeting of shareholders. After taking these actions, the Company announced that
a six-member majority of the Board consisted of directors who were independent
of the Company's Management and other insiders.
Throughout 1997, and notwithstanding the Company's sustained improvement in
virtually all aspects of its operations, the Ewing Group continued to criticize
the Company's performance, but failed to suggest what other or additional steps
that Management and the Board of Directors might consider to enhance shareholder
value more rapidly. In September 1997, the Ewing Group threatened to wage an
election contest unless the Board capitulated to their demands. In an effort to
preserve shareholder value and avoid the costly and disruptive consequences of
an election contest, the Board of Directors agreed to expand the size of the
Board to ten members and nominate another Ewing Group nominee, Lindsay B.
Trittipoe, for election to the Board. In addition, the Board agreed in September
1997 that following the annual meeting to be held in November 1997 it would
establish an executive committee controlled by members of the Ewing Group, elect
David W. Campbell, a member of the Ewing Group, as Chairman of the Board and
retain Elias Matz Tiernan & Herrick, LLP, Ewing's counsel, as corporate
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counsel for the Company. At the September 1997 Board meeting, the Board of
Directors also extended the term of the employment agreement between the Company
and Craig Fishman, President and Chief Executive Officer, through July 30, 1999.
In exchange for these agreements, Management and a majority of the Board
understood that the Ewing Group had agreed to vote for the election of all ten
nominees for election at the 1997 annual meeting and had further agreed that the
1998 annual meeting would be held in November 1998. In reliance on the foregoing
understandings, Mr. Campbell was allowed to act as provisional Chairman of the
Board and Mr. Trittipoe was nominated, and subsequently elected, to the Board at
the November 1997 annual meeting.
At the annual meeting of shareholders held on November 17, 1997, and
despite the understandings reached in September 1997, Ewing caused Value
Partners, Ltd to vote to withhold authority for the election of substantially
all of the non-Ewing Group designees. Thereafter, at the Board meeting held
following the 1997 annual meeting, the Ewing Group designees on the Board of
Directors, including for this purpose, Lindsay Trittipoe, announced their
intention to attempt to cause the Company to hold another annual meeting of
shareholders in less than six months. In the judgment of a majority of the
Board, these actions, together with the disappointing performance of Campbell as
provisional Chairman of the Board from October to November 1997 caused a
majority of the Board, acting in what they believed to be the best interests of
the Company and all of its shareholders, not to elect Campbell Chairman of the
Board and to reject the proposals to appoint an executive committee comprised of
a majority of Ewing Group designees and retain Ewing's counsel as corporate
counsel to the Company.
After unsuccessfully demanding in December 1997 that the Board of Directors
convene a new meeting of shareholders, the Ewing Group commenced litigation
against the Company. For information concerning such litigation, see "Recent
Developments."
At a meeting of the Board of Directors held on March 12, 1998, the Board
unanimously agreed to reduce the number of directors from ten to five for the
upcoming Annual Meeting. On March 17, 1998, Craig Fishman delivered a proposal
to Mr. Ewing outlining a proposed compromise prepared by Management to avoid a
costly and time consuming election contest. The compromise was rejected by the
Ewing Group.
At a meeting of the Board of Directors held on March 27, 1997, members of
the Ewing Group proposed that the Board nominate Messrs. Campbell, C. Fishman,
Freeman, McNally and Savage for election at the Annual Meeting. After Messrs. C.
Fishman and Freeman indicated that they were unwilling to serve on the proposed
slate, a majority of the Board nominated Messrs. Bindeman, C. Fishman, Freeman,
Troia and Pollock and recommended that shareholders vote for each of such
nominees at the Annual Meeting. All but one of such nominees is independent of
Management or other significant shareholders of the Company.
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The Company's Position
The Dissident Group's preliminary proxy statement filed with the Securities
and Exchange Commission on March 27, 1998 indicates that the Dissident Group
will seek to elect their five nominees to the Board at the Annual Meeting.
Management and a majority of the Board of Directors believe that the Dissident
Group's effort to seize control of the Board is contrary to the interests of the
Company and all of its shareholders for the following reasons.
First, significant steps have been implemented by the Company since Craig
Fishman's appointment as President and Chief Executive Officer in July 1996 to
diversify the Company's business, manage risk better, reduce overhead and
improve profitability.
These efforts include:
. reducing the Company's operating and borrowing costs;
. improving the Company's loan underwriting, asset valuation and risk
management policies, which have resulted in
-- a significant reduction in write-offs experienced with
respect to loans originated since July 1, 1996 as
compared to the Company's historical experience prior
to such date;
-- a significant decline in the percentage of non-performing
assets as a percentage of the Company's total assets;
. recruiting from outside the Company key members of the Company's new
management team, including
-- a Chief Operating Officer with more than 20 years of lending
experience;
-- a nationwide director of Sales and Marketing with more
than 30 years of corporate banking, asset-based lending
and leasing experience with prominent commercial banks
located in New York, New York;
. significantly increasing the size of the Company's national sales
force;
. opening a sales and marketing office in New York City, which
is the world-wide hub of commercial lending activity, in order
to increase the Company's earning assets;
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. increasing by more than 50% the Company's active
customer/borrower base, thus enabling the Company to spread
its lending risk over a larger customer base;
. implementing a new customer retention policy through which
the Company aggressively seeks to retain the business of
borrowers whose credit quality has improved and who would
ordinarily turn to more traditional lending sources; and
. diversifying the Company's mix of business lines to include
asset-based lending and traditional factoring, thereby
enhancing the quality of the Company's loan portfolio.
As a result of these efforts, the Company returned to profitability in
1997, with net income of $1.0 million, or $0.43 per diluted share. A disruption
in these strategic initiatives which would accompany the election of the
Dissident Group nominees would adversely affect the Company's business and
results of operations.
Second, while seizure of control of the Board by the Ewing Group may
personally benefit members of the Dissident Group, it could have significant
adverse consequences to the Company and all other shareholders because (i) it
will result in an event of default under the Company's credit facilities which,
in turn, could seriously damage the Company's financial position and (ii) it
could lead to the departure of key executives necessary to the conduct of the
Company's business. Finally, despite having had representatives on the Board of
Directors for more than two years, the Ewing Group has failed to advance any
substantive proposals designed to enhance the Company's profitability.
Accordingly, the Board of Directors recommends that you vote for the
Company's nominees on the enclosed GOLD proxy card and reject the Dissident
Group's efforts to seize control.
PARTICIPANTS IN THE SOLICITATION
Under applicable regulations of the Securities and Exchange Commission (the
"Commission'), each of the directors (other than members of the Dissident
Group), director nominees and executive officers of the Company may be deemed to
be a "participant" in the Company's solicitation of proxies, as well as the
Company. Information about the principal occupations of directors, director
nominees and executive officers is set forth under the sections entitled
"Election of Directors" and "Executive Officers." Information about the present
ownership of the Company's Common Stock by directors, director nominees and
executive officers is provided in the section entitled "Security Ownership of
Certain Beneficial Owners and Management." The business address for each
participant is c/o Allstate Financial Corporation, 2700 South Quincy
13
<PAGE>
Street, Arlington, VA 22206. The following sets forth certain additional
information regarding the Company's directors (other than members of the
Dissident Group), director nominees and executive officers.
Transactions in the Company's Securities in the Last Two Years
Listed below are the only purchases and sales of Common Stock within the
last two years by the Company, the Company's directors (other than members of
the Dissident Group), director nominees and executive officers and certain
information regarding such transactions. This table does not include information
with respect to stock option grants made under the Company's Stock Option Plan
(the "Stock Option Plan") or Non-Qualified Stock Option Plan (the "Non-Qualified
Plan").
Purchases and Sales of Common Stock
Number of Shares
Name Purchased (Sold) Date of Transaction(s)
Craig Fishman 1,100(1) March 15, 1996
800 May 9, 1996
850 August 15, 1996
800 March 7, 1997
1,000 March 10, 1998
Wade Hotsenpiller 2,000 March 11, 1997
1,300 September 24, 1997
Peter Matthy 2,000 March 20, 1996
5,000 August 20, 1996
Lawrence M. Winkler 25 March 19, 1996
25(1) March 19, 1996
(1) Represents purchases by the participant's spouse.
Certain Information
Except as disclosed elsewhere in this Proxy Statement, to the knowledge of
the Company none of the Company's directors (other than members of the Dissident
Group), director nominees or executive officers: (i) owns of record any
securities of the Company that are not also beneficially owned by them; (ii) is,
or was within the past year, a party to any contract, arrangement or
understanding with any person with respect to the securities of the Company,
including, but not limited to, joint ventures, loan or option
14
<PAGE>
arrangements, puts or calls, guarantees against loss or guarantees of profit,
division of losses or profits, or the giving or withholding of proxies; (iii)
has any substantial interest, direct or indirect, by security holdings or
otherwise, in any matter to be acted upon at the Annual Meeting; (iv)
beneficially owns any securities of any parent or subsidiary of the Company; or
(v) borrowed any funds to purchase any securities set forth under "Participants
in the Solicitation." Except as disclosed elsewhere in this Proxy Statement, to
the knowledge of the Company, none of the Company's directors (other than
members of the Dissident Group), director nominees or executive officers nor any
of their associates has any arrangement or understanding with any person with
respect to future employment by the Company or its affiliates or with respect to
any future transactions to which the Company or any of its affiliates will or
may be a party, nor any material interest, direct or indirect, in any
transaction which has occurred since April 1, 1997 or any currently proposed
transaction, or series of similar transactions, to which the Company or any of
its affiliates was or is to be a party and in which the amount involved exceeds
$60,000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Holders of More Than Five Percent Beneficial Ownership
The following table sets forth information regarding all persons known to
the Company to be the beneficial owners of more than five percent of the
Company's Common Stock as of April 7, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Percent of Number of Shares Percentage of
Name and Address of Beneficial Shares Owned Outstanding Entitled to Shares Entitled
Owners Beneficially Shares(1) Vote(2) to Vote
Value Partners, Ltd. (3) 661,835 26.55% 170,318 8.51%
2200 Ross Avenue
Suite 4660
Dallas, Texas 75201
Scoggin Capital Management, LP (4) 343,200 12.89% - -
660 Madison Avenue
New York, New York 10021
Leon Fishman (5) 253,750 10.90% 246,250 12.30%
20191 E. Country Club Drive
N. Miami Beach, Florida 33180
Eugene Haskin (6) 240,500 10.37% 240,500 12.02%
4000 Island Boulevard
N. Miami Beach, Florida 33160
15
<PAGE>
Percent of Number of Shares Percentage of
Name and Address of Beneficial Shares Owned Outstanding Entitled to Shares Entitled
Owners Beneficially Shares(1) Vote(2) to Vote
Franklin Resources, Inc. (7) 209,000 9.01% 209,000 10.44%
777 Mariners Island Boulevard
San Mateo, California 94403
Tweedy, Browne Company L.L.C. (8) 165,150 7.12% 165,150 8.25%
52 Vanderbilt Avenue
New York, New York 10017
</TABLE>
- ----------------------
(1) Based upon the number of outstanding shares as of April 7, 1998, the record
date for the Annual Meeting, as adjusted for the number of shares such person
has the right to acquire within 60 days of such date upon conversion of
Convertible Notes and/or exercise of stock options beneficially owned by such
person.
(2) Numbers based upon shares owned as of April 7, 1998, as adjusted to
eliminate those shares not entitled to vote because of the provisions of the
VCSA, see "Virginia Control Share Acquisitions," as well as shares issuable upon
options not exercised and Convertible Notes not converted prior to April 7,
1998, the record date for the Annual Meeting.
(3) Information obtained from Amendment No. 10 to Schedule 13D, which was filed
with the Securities and Exchange Commission on or about March 16, 1998 by Value
Partners, Ltd. Includes 173,467 shares issuable upon the conversion of an
aggregate of $1,301,000 Convertible Notes. Excludes an aggregate of 45,500
shares beneficially owned by David W. Campbell, Edward A. McNally and William H.
Savage, members of the Ewing Group. If these such shares were to be included in
the number of shares beneficially owned by Value Partners, Ltd., Value Partners,
Ltd. would beneficially own 707,335 shares of Company Common Stock or 28.0% of
the outstanding shares of Company Common Stock. Of the shares beneficially owned
by Value Partners, Ltd., 170,318 shares are entitled to be voted at the Annual
Meeting, less any additional shares acquired by Value Partners, Ltd. and persons
acting in concert therewith in connection with the making of a Control Share
Acquisition. See "Virginia Control Share Acquisitions" and "Recent
Developments."
(4) Information obtained from Amendment No. 9 to Schedule 13D, which was filed
with the Securities and Exchange Commission on or about September 13, 1995, as
supplemented by information subsequently obtained by the Company. All such
shares are issuable upon conversion of an aggregate of $2,574,000 in principal
amount of Convertible Notes.
(5) Information obtained from Schedule 13D, which was filed with the Securities
and Exchange Commission on or about March 30, 1998 by the named individual. All
such shares are held by the named individual and his wife as tenants by the
entirety except for 7,500 shares issuable pursuant to currently exercisable
stock options granted under the Company's Stock Option Plan.
(6) Information obtained from Schedule 13D, which was filed with the Securities
and Exchange Commission on or about March 27, 1998 by the named individual.
(7) Information obtained from Amendment No. 1 to Schedule 13G, which was filed
with the Securities and Exchange Commission on or about January 16, 1998 by
Franklin Resources, Inc., as the parent holding company of several entities
which beneficially own the Company's Common Stock.
(8) Information obtained from Amendment No. 2 to Schedule 13D, which was filed
with the Securities and Exchange Commission on or about November 4, 1997 by
Tweedy, Browne Company L.L.C.
16
<PAGE>
Beneficial Ownership of Directors, Director Nominees and Management
The following table sets forth information regarding the beneficial
ownership of Common Stock of the Company for each director, each director
nominee, each executive officer named in the Summary Compensation Table and all
directors, director nominees and executive officers as a group as of April 7,
1998.
Percent of
Shares Owned Outstanding
Name of Beneficial Owners Beneficially Shares*
David P. Bindeman - -
Richard A. Brasch (1) 4,177 *
David W. Campbell (2) 13,500 *
Craig Fishman (3) 17,300 *
Leon Fishman (4) 253,750 10.90%
Alan L. Freeman (5) 12,000 *
Eugene Haskin 240,500 10.37%
Wade Hotsenpiller (6) 8,300 *
Peter Matthy (7) 13,667 *
Edward A. McNally (8) 13,000 *
John V. Pollock -
William H Savage (9) 19,000 *
James C. Spector (10) 11,100 *
Lindsay B. Trittipoe (11) 73,289 3.16%
Jack C. Troia - -
Lawrence Vecker (12) 7,000 *
Lawrence M. Winkler (13) 11,717 *
- ----------------- ------ ------
All directors, director nominees 698,300 28.69%
and executive officers as a group
(17 persons)
- -------------------------
*Less than 1.0%
(1) Represents 10 shares owned by Mr. Brasch and 4,167 shares issuable pursuant
to options exercisable within 60 days of the date hereof pursuant to the terms
of the Stock
17
<PAGE>
Option Plan. Excludes an aggregate of 8,333 shares issuable pursuant to options
granted under the Stock Option Plan which are not currently exercisable.
(2) Represents 2,500 shares owned by Mr. Campbell jointly with his spouse and
11,000 shares issuable pursuant to options exercisable within 60 days of the
date hereof pursuant to the terms of the Non-Qualified Plan.
(3) Represents 4,700 shares owned by Mr. Fishman, 1,100 shares owned by Mr.
Fishman's spouse and 11,500 shares issuable pursuant to options exercisable
within 60 days of the date hereof pursuant to the terms of the Stock Option
Plan. Excludes an aggregate of 20,000 shares issuable pursuant to options
granted under the Stock Option Plan which are not currently exercisable.
(4) Represents 246,250 shares owned by Mr. Fishman and his wife as tenants by
the entirety and 7,500 shares issuable pursuant to options exercisable within 60
days of the date hereof pursuant to the terms of the Stock Option Plan.
(5) Represents 12,000 shares issuable pursuant to options exercisable within 60
days of the date hereof pursuant to the terms of the Non-Qualified Plan.
(6) Represents 3,300 shares owned by Mr. Hotsenpiller and 5,000 shares issuable
pursuant to options exercisable within 60 days of the date hereof pursuant to
the terms of the Stock Option Plan. Excludes an aggregate of 10,000 shares
issuable pursuant to options granted under the Stock Option Plan which are not
currently exercisable.
(7) Represents 7,000 shares owned by Mr. Matthy and 6,667 shares issuable
pursuant to options exercisable within 60 days of the date hereof pursuant to
the terms of the Stock Option Plan. Excludes an aggregate of 13,333 shares
issuable pursuant to options granted under the Stock Option Plan which are not
currently exercisable.
(8) Represents 1,000 shares owned by Mr. McNally and 12,000 shares issuable
pursuant to options exercisable within 60 days of the date hereof pursuant to
the terms of the Non-Qualified Plan.
(9) Represents 6,000 shares owned by Mr. Savage, 1,000 shares owned by Mr.
Savage's spouse and 12,000 shares issuable pursuant to options exercisable
within 60 days of the date hereof pursuant to the terms of the Non-Qualified
Plan.
(10) Represents 100 shares owned by Mr. Spector and 11,000 shares issuable
pursuant to options exercisable within 60 days of the date hereof pursuant to
the terms of the Non-Qualified Plan.
(11) Represents 71,289 shares owned by Mr. Trittipoe and 2,000 shares issuable
pursuant to options exercisable within 60 days of the date hereof pursuant to
the terms of the Non-Qualified Plan.
(12) Represents 7,000 shares issuable pursuant to options exercisable within 60
days of the date hereof pursuant to the terms of the Non-Qualified Plan.
(13) Represents 25 shares owned by Mr. Winkler, 25 shares owned by Mr. Winkler's
spouse and 11,667 shares issuable pursuant to options exercisable within 60 days
of the date hereof pursuant to the terms of the Stock Option Plan. Excludes an
aggregate of 13,333 shares issuable pursuant to options granted under the Stock
Option Plan which are not currently exercisable.
18
<PAGE>
EXECUTIVE OFFICERS
The following table provides certain information regarding the executive
officers of the Company as of April 7, 1998 who are appointed by and serve at
the pleasure of the Board of Directors.
Name Age Position(s)
Craig Fishman (1) 37 President and Chief Executive Officer
Wade Hotsenpiller (2) 56 Senior Vice President and Chief
Operating Officer
Lawrence M. Winkler (3) 62 Chief Financial Officer, Secretary
and Treasurer
Peter Matthy (4) 52 Executive Vice President
Richard A. Brasch (5) 41 General Counsel
(1) See information under the heading "Election of Directors."
(2) Wade Hotsenpiller has been the Company's Senior Vice President and Chief
Operating Officer since December 19, 1996. Prior to that he served as President
and Director of Washington Federal Savings Bank, Herndon, VA from June 1986
until July 1996.
(3) Lawrence M. Winkler has been the Company's Chief Financial Officer since
1990 and Secretary and Treasurer since 1989. Mr. Winkler served as Second Vice
President of the Company from 1983 to 1989. He served as a Director of the
Company from 1983 until July 1996. Mr. Winkler is the brother-in-law of Leon
Fishman and the uncle of Craig Fishman.
(4) Peter Matthy joined the Company in April 1996 as Executive Vice President
and Chief Operating Officer. Mr. Matthy remains the Company's Executive Vice
President and also assumed the functional responsibilities of nationwide
Director of Sales and Marketing in December 1996. Prior to joining the Company,
Mr. Matthy was employed by IBJ Schroder Bank & Trust Company for 15 years, as an
executive Vice President with responsibilities as Director of Corporate Banking,
a Member of the Management Committee, and Chairman and Chief Executive Officer
of its leasing subsidiary.
(5) Richard A. Brasch has been General Counsel of the Company since January
1996. He joined the Company in 1993 as Associate General Counsel. Prior to that,
Mr. Brasch was a partner/shareholder in the law firm of Stearns Weaver Weissler
Alhadeff & Sitterson, P.A. in Miami, Florida where he worked from 1985 to 1993,
with a concentration on representing financial institutions.
19
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE COMPENSATION
<S> <C> <C> <C> <C> <C>
Awards/
Securities
Name and Underlying All Other
Principal Position Year Salary Bonus Options Compensation (1)
- ------------------ ---- ------ ----- ----------- ------------
Craig Fishman 1997 $207,060 $21,000(2) - $3,632
President and Chief 1996 $170,330 $ -0- 30,000 $3,219
Executive Officer 1995 $161,177 $ 2,500 - $3,067
Lawrence M. Winkler 1997 $163,373 $23,575(2) - $3,580
Secy/Treasurer 1996 $169,450 $ -0- 20,000 $3,219
Chief Financial Officer 1995 $154,732 $ -0- - $3,067
Peter Matthy 1997 $148,957 $15,000(2) - $3,274
Executive Vice President/ 1996 $105,435 $ -0- 20,000 -
Director of Sales and -
Marketing
Richard A. Brasch 1997 $126,115 $ 6,250(2) - $2,980
General Counsel 1996 $109,328 $ 4,000 12,500 $2,786
1995 $132,023 $ 3,000 - $2,707
Wade Hotsenpiller 1997 $122,831 $12,500(2) - $2,263
Senior Vice President and 1996 - - 15,000 -
Chief Operating Officer
</TABLE>
(1) Represents contributions made by the Company to the Company's 401(k)
Retirement Plan and premiums paid on a term life insurance policy.
(2) Except for Mr. Winkler, all such amounts represent payments made pursuant to
the Company's 1997 Incentive-Based Cash Compensation Plan, unanimously approved
by the Board of Directors, which plan provides for the payment of bonuses based
upon the achievement of pre-determined performance goals. The amount set forth
for Mr. Winkler includes an additional bonus of $7,500 unanimously approved by
the Board of Directors.
20
<PAGE>
Options
No options were granted during the fiscal year ended December 31, 1997 to
the Named Executive Officers; however, options to acquire 2,500 and 5,000 shares
of Common Stock, which were scheduled to expire on December 15, 1997, were
extended by the Board of Directors to May 15, 1998 for Messrs. C. Fishman and
Winkler, respectively.
The following table sets forth information concerning option exercises and
the value of unexercised options held by the Named Executive Officers as of
December 31, 1997.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises In
Last Fiscal Year and F/Y End Option/SAR Value
<S> <C> <C> <C> <C>
Shares Value of Unexercised
Acquired on Value Number of Unexercised In-the-Money Options/
Exercise Realized Options at F/Y End (#) SARS at F/Y End ($)
Name (#) ($) (Exercisable/Unexercisable) (Exercisable/Unexercisable)
- ---- ------------ ----------- --------------------------- ---------------------------
Craig Fishman - - 12,500/20,000 57,500/115,000
Peter Matthy - - 6,667/13,333 38,335/76,665
Lawrence - - 11,667/13,333 38,335/76,665
Winkler
Richard - - 4,167/8,333 23,960/47,914
Brasch
Wade - - 5,000/10,000 -/-
Hotsenpiller
- --------------
</TABLE>
The Company maintains two stock option plans, the Stock Option Plan
and the Non-Qualified Plan. All options granted and reported in the foregoing
table were made pursuant to the Stock Option Plan.
The Stock Option Plan provides for the granting of options to the
Company's executives and other key employees for up to 275,000 shares of Common
Stock (subject to adjustment in the event of reorganization, merger,
consolidation, recapitalization, reclassification, stock split-up, combination
of shares or dividend payable in capital stock). The Non-Qualified Plan provides
for the granting of options to the Company's directors, executives and other key
employees for up to 100,000 shares of Common Stock (subject to adjustment in the
event of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares or dividend payable in
capital stock).
21
<PAGE>
For a description of the terms of the grants made pursuant to the Non-Qualified
Plan, see "Executive Compensation--Compensation of Directors."
Options granted pursuant to the Stock Option Plan are intended to be
"incentive stock options" under Section 422 of the Internal Revenue Code of
1986. The per share exercise price of the Common Stock subject to an incentive
stock option may not be less than the fair market value of the Common Stock on
the date the option is granted. The aggregate fair market value (determined as
of the date the option is granted) of the Common Stock that first becomes
exercisable by any employee in any one calendar year pursuant to the exercise of
incentive stock options may not exceed $100,000. No person who owns, directly or
indirectly, at the time of the granting of an incentive stock option to him, 10%
or more of the total combined voting power of all classes of stock of the
Company (a "10% Shareholder") is eligible to receive any incentive stock options
under the Stock Option Plan unless the option price is at least 110% of the fair
market value of the Common Stock, subject to the option, determined on the date
of the grant.
Incentive stock options granted under the Stock Option Plan cannot be
exercised more than ten years from the date of grant except that incentive stock
options issued to a 10% Shareholder are limited to five-year terms.
Employment Agreements
The Company is party to employment or severance agreements with its
executive officers and certain other officers and key employees. The following
sets forth the principal terms of such agreements with the Named Executive
Officers.
The Company is party to an employment agreement with Craig Fishman, the
Company's President and Chief Executive Officer. Mr. Fishman's current base
salary is $210,000. Any increases in his salary are to be determined at the
discretion of the Board of Directors. The agreement contains confidentiality and
non-competition provisions and obligates the Company to provide Mr. Fishman with
the use of an automobile and requires the Company to include Mr. Fishman in any
benefit and compensation plans generally made available to employees of the
Company. The agreement was originally scheduled to expire by its terms on June
30, 1998, but has been extended to June 30, 1999. Under certain circumstances
following a Business Combination or Change of Control (each as defined in the
agreement), or if Mr. Fishman dies or his employment is terminated (other than
for cause) during the term of the agreement, the Company is obligated to pay him
an amount equal to the lesser of (x) one year's compensation and (y) the
compensation due for the then remainder of the agreement (but in no event less
than six months' compensation) plus benefits (except in the event of death) for
such period.
The Company is party to an employment agreement with Lawrence M. Winkler,
the Company's Secretary/Treasurer and Chief Financial Officer. Mr. Winkler's
current base
22
<PAGE>
salary is $160,750 with subsequent salary increases to be determined at the
discretion of the Board of Directors. The agreement contains confidentiality and
non-competition provisions, obligates the Company to provide Mr. Winkler with
the use of an automobile and requires the Company to include Mr. Winkler in any
benefit plans generally made available to employees of the Company. The
agreement was originally scheduled to expire by its terms on June 30, 1998, but
has been extended to March 31, 1999. Under certain circumstances following a
Business Combination or Change of Control (each as defined in the Agreement), or
if Mr. Winkler dies or his employment is terminated (other than for cause)
during the term of the agreement, the Company is obligated to pay him an amount
equal to the lesser of (x) one year's compensation and (y) the compensation due
for the then remainder term of the agreement (but in no event less than six
months' compensation) plus benefits (except in the event of death) for such
period.
The Company is party to an employment agreement with Peter Matthy, the
Company's Executive Vice President. Mr. Matthy's current base salary is $157,000
per year. The agreement contains confidentiality and non-competition provisions,
obligates the Company to provide Mr. Matthy with the use of an automobile and
requires the Company to include Mr. Matthy in any benefit plans generally made
available to employees of the Company. The agreement was originally scheduled to
expire by its terms on June 30, 1998, but has been extended to March 31, 1999.
Under certain circumstances following a Business Combination or Change of
Control (each as defined in the agreement), or if Mr. Matthy dies or his
employment is terminated (other than for cause) during the term of the
agreement, the Company is obligated to pay him an amount equal to one year's
compensation plus benefits (except in the event of death) during such period.
The Company is party to a severance agreement with Richard A. Brasch, the
Company's General Counsel. The agreement provides that under certain
circumstances following a Business Combination or a Change of Control (each as
defined in the agreement), or if Mr. Brasch dies or his employment is terminated
(other than for cause) during the term of the agreement, the Company is
obligated to pay him an amount equal to six months' compensation plus benefits
(except in the event of death) during such period. The agreement was originally
scheduled to expire by its terms on June 30, 1998, but has been extended to
March 31, 1999.
The Company is party to an employment agreement with Wade Hotsenpiller, the
Company's Senior Vice President and Chief Operating Officer. Mr. Hotsenpiller's
current base salary is $125,000 with subsequent salary increases to be
determined at the discretion of the Board of Directors. The agreement contains
confidentiality and non-competition provisions, obligates the Company to provide
Mr. Hotsenpiller with the use of an automobile and requires the Company to
include Mr. Hotsenpiller in any benefit plans generally made available to
employees of the Company. The agreement was originally scheduled to expire by
its terms on June 30, 1998, but has been extended to March 31, 1999. Under
certain circumstances following a Business Combination or Change of Control
(each as defined in the agreement), or if Mr. Hotsenpiller dies or his
employment
23
<PAGE>
is terminated (other than for cause) during the term of the agreement, the
Company is obligated to pay him an amount equal to six month's compensation plus
benefits (except in the event of death) during such period.
Compensation of Directors
Directors who are not officers of the Company receive a fee of $2,000 per
board meeting attended in person, plus reimbursement for their expenses
associated with attending those meetings. Directors who are not officers of the
Company receive a fee of $500 per board or committee meeting conducted by
conference telephone call. In addition, commencing August 1995 and continuing
through December 31, 1997, directors who are not officers of the Company were
granted 1,000 stock options pursuant to the Non-Qualified Plan for each meeting
attended in person at an exercise price equal to the greater of (i) $7.00 per
share and (ii) 110% of the fair market value per share of the Company's Common
Stock on the date of grant. The options are exercisable until December 31, 1999.
Directors who are officers of the Company receive no compensation or stock
options for serving as directors, but are reimbursed for out-of-pocket expenses
related to attending board or committee meetings.
The Company has paid Mr. Haskin, Chairman of the Board, $25,000 per year
for various consulting services and has provided certain health benefits to Mr.
Haskin since his retirement as a full-time employee of the Company in 1989. In
addition, Mr. Haskin is provided with the use of an automobile.
CERTAIN TRANSACTIONS
The Company is currently party to an employment arrangement with Leon
Fishman under which Mr. Fishman is to work Monday through Friday for 13 weeks
during the six months ending June 30, 1998. His base salary is $75,000 and the
Company is obligated to reimburse Mr. Fishman for travel and living expenses
incurred by him in performing Company business. In addition to his base salary,
Mr. Fishman is entitled to incentive-based compensation equal to 2% of the
Company's consolidated total income for the first six months of 1998 (excluding
certain subsidiaries) in excess of $5,903,000. During the fiscal years ended
December 31, 1997, 1996 and 1995, the Company paid Mr. Fishman $228,713,
$295,009 and $377,885, respectively. The agreement obligates the Company to
provide Mr. Fishman with the use of an automobile and requires the Company to
include Mr. Fishman in any benefit plans generally made available to employees.
The arrangement is subject to review by the Board of Directors no later than
June 30, 1998. Mr. Fishman is not entitled to a severance benefit upon his death
or termination of employment. During 1997, options to acquire 7,500 shares
previously granted to Mr. Fishman, which were scheduled to expire on December
15, 1997, were extended by the Board of Directors to May 15, 1998. The exercise
price for all such options, which was not adjusted in 1997, is $14.00 per share.
24
<PAGE>
Rental payments of $24,000 were received by the Company in each of 1997,
1996 and 1995, from Leon Fishman, a director and employee and former President
of the Company, for the business and personal use of a condominium owned by a
subsidiary of the Company. The amount of such rental payments was calculated to
approximate the cost to the Company of purchasing and maintaining such
condominium.
Certain members of the immediate families of Eugene Haskin and Leon
Fishman, co-founders of the Company, directly or through trusts, currently and
in the past provided financing to the Company and Lifetime Options, Inc., a
wholly-owned subsidiary of the Company, through unsecured loans with interest
payable monthly. The current rate of interest is one-quarter of 1% (.25%) over
the prime rate, the same rate paid by the Company to its unaffiliated secured
bank lender.
In connection with the issuance in 1995 of Convertible Subordinated Notes
to Scoggin Capital Management, LP and its affiliates ("Scoggin"), Scoggin was
given the right to nominate up to two members of the Company's Board of
Directors (depending on Scoggin's level of ownership of Company securities).
Scoggin currently has the right to nominate two members of the Company's Board
of Directors, but has waived that right for this Annual Meeting.
During the fiscal year ended December 31, 1996, the Company paid Deloitte &
Touche LLP ("D&T") $88,716 for services rendered in connection with the annual
audit of the Company and certain of its subsidiaries and for other professional
services rendered. Jack C. Troia, a nominee for director, was an audit partner
with D&T until he retired in December 1996.
The Company believes that each of the related-party transactions described
herein were on terms at least as favorable to the Company as could have been
obtained from unaffiliated third parties.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
its Common Stock, to file reports of ownership and changes in ownership with the
Commission. Officers, directors and greater than ten percent stockholders are
required by the Commission to furnish the Company with copies of all Section
16(a) forms that they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no reports on Form 5
were required for those persons, the Company believes that during 1997 all
filing requirements applicable to its officers, directors and greater than ten
percent stockholders were complied with except as follows: (i) Edward A.
McNally, William L. Savage and David W. Campbell, members of the Dissident
Group, each failed to file eight reports; (ii) James C. Spector failed to file
25
<PAGE>
seven reports reporting option grants; (iii) Lawrence Vecker failed to file one
report reporting an option grant; (iv) Alan L. Freeman late filed seven reports
reporting option grants, and (v) Wade Hotsenpiller late filed one report
reporting one purchase transaction.
INDEPENDENT AUDITORS
The Company has selected the firm of Deloitte & Touche LLP to serve as the
independent auditors for the Company for the current fiscal year. That firm has
served in this capacity for the Company since 1988. Representatives of Deloitte
& Touche LLP are expected to be present at the Annual Meeting to respond to
appropriate questions and will have an opportunity to make a statement if they
desire to do so.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, proxies may be solicited by officers and directors of the
Company personally or by telephone or facsimile for no additional compensation.
Arrangements will be made with brokerage houses and other custodians, nominees
and fiduciaries to forward solicitation materials to beneficial owners of the
Common Stock held of record by such person, and the Company will reimburse such
persons for reasonable out-of-pocket expenses incurred by them in so doing.
The Company has retained MacKenzie Partners, Inc. ("MacKenzie") to assist
in the solicitation of proxies. Pursuant to the Company's agreement with
MacKenzie, it will provide various proxy advisory and solicitation services for
the Company at a cost of approximately $ , plus reasonable out-of-pocket
expenses and indemnification against certain liabilities. It is expected that
MacKenzie will use up to approximately 30 persons in such solicitation.
Although no precise estimate can be made at this time, the Company
anticipates that the aggregate amount to be spent by the Company in connection
with the solicitation of proxies by the Company will be approximately $ , of
which approximately $ has been incurred to date. This amount includes legal
fees, printing costs and the fees payable to MacKenzie, but excludes (i) the
salaries and fees of officers, directors, and employees of the Company and (ii)
the normal expenses of an uncontested election. The aggregate amount to be spent
will vary depending on, among other things, any developments that may occur in
the election contest discussed herein.
26
<PAGE>
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
The rules of the Commission currently provide that stockholder proposals
for the 1999 Annual Meeting must be received at the Company's principal
executive offices no later than December 14, 1998 to be considered by the
Company for possible inclusion in the proxy materials for the 1999 Annual
Meeting.
FINANCIAL INFORMATION
The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997 has been mailed to the shareholders on or before the date of
mailing this Proxy Statement. The Company will provide, without charge, to any
record or beneficial stockholder as of December 31, 1997, who so requests in
writing, a copy of such Annual Report on Form 10-KSB (without exhibits),
including the financial statements and the financial statement schedules, filed
with the Commission. Any such request should be directed to Allstate Financial
Corporation, 2700 South Quincy Street, Arlington, Virginia 22206, Attention:
Lawrence M. Winkler.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters to
come before the meeting. If any other matters should come before the meeting,
the persons named in the enclosed proxy intend to vote the proxy according to
their best judgment.
You are urged to complete, sign, date and return your GOLD proxy to make
certain your shares of Common Stock will be voted at the Annual Meeting. For
your convenience in returning the proxy, an addressed envelope is enclosed,
requiring no additional postage if mailed in the United States.
By Order of the Board of Directors
------------------------------------
Lawrence M. Winkler
Chief Financial Officer, Secretary
and Treasurer
April , 1998
27
<PAGE>
FORM OF PROXY
ALLSTATE FINANCIAL CORPORATION
Annual Meeting of Shareholders-May 12, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF THE COMPANY
The undersigned shareholder of Allstate Financial Corporation (the
"Company") hereby (i) acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement of the Company, each dated April , 1998, and
the Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997,
(ii) revokes any and all prior proxies or revocations thereof in connection with
or related to the following matters, and (iii) appoints Richard A. Brasch and
Lawrence M. Winkler, or either of them, as the proxies and attorneys-in-fact,
with full power to each of substitution on behalf and in the name of the
undersigned to vote and otherwise represent all of the shares registered in the
name of the undersigned and entitled to vote at the 1998 Annual Meeting of
Shareholders of the Company to be held on May 12, 1998 at 11:00 a.m., Eastern
Time, at the Sheraton National Hotel, 900 South Orme Street, Arlington, Virginia
22204 and any adjournments or postponements thereof with the same effect as if
the undersigned were present and voting such shares on the following matters and
in the following manner:
1. To elect the following persons as directors of the Company to serve for
a term of one year or until their successors are elected and qualified:
___ FOR all nominees listed below ___ WITHHOLD AUTHORITY
(except as marked to the contrary) to vote the nominees
listed below
Craig Fishman
Alan L. Freeman
Jack C. Troia
John V. Pollock
David P. Bindeman
2. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof, according to the proxies'
discretion, and in their discretion.
<PAGE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATION MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED "FOR" ALL NOMINEES LISTED IN PROPOSAL 1 AND IN THE
DISCRETION OF THE PROXIES ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING.
Date:_______________________, 1998
__________________________________
Name typed or printed
__________________________________
Signature
__________________________________
Capacity (Title or Authority, i.e.,
Executor, Trustee)
Please date and sign exactly
as your name(s) appears on the
stock certificate. If shares are
held by joint tenants, both should
sign. When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title as such. If a corporation,
please sign in full corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person. This proxy votes all shares
held in all capacities unless
otherwise specified.
IMPORTANT:
PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. IN ADDITION, PLEASE MARK THE FOLLOWING BOX IF YOU PLAN TO ATTEND THE
MEETING.
______
