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 [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
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(Name of the Registrant as Specified In Its Charter)
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(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:
................................................
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ALLSTATE FINANCIAL CORPORATION
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 12, 1998
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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>
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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.
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<PAGE>
ALLSTATE FINANCIAL CORPORATION
2700 South Quincy Street
Arlington, Virginia 22206
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PROXY STATEMENT
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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 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) 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 filed preliminary proxy materials with the Securities and Exchange
Commission (the "Commission") seeking to solicit proxies for the election of
five persons to the Board
<PAGE>
of Directors of the Company. On April 6, 1998, the Ewing Group filed an
amendment to the Ewing Schedule 13D to include Lindsay B. Trittipoe and C. Scott
Bartlett, Jr. and disclosed that Messrs. Trittipoe and Bartlett beneficially
owned an aggregate of 73,764 shares of Common Stock (representing approximately
3.1% of the Company's Common Stock outstanding as of such date). In addition, on
April 6, 1998, members of the Ewing Group and Messrs. Trittopoe and Bartlett
(the "Dissident Group") filed revised preliminary proxy materials with the
Commission seeking to solicit proxies for the election of Messrs. Campbell,
McNally, Savage, Trittipoe and Bartlett, each a member of the Dissident Group,
to the Board of Directors of the Company. As set forth below, the Company
believes that 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. The Company believes that 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, the
Company believes that it could have other significant adverse
consequences to the Company and all other shareholders because
(i) it could 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. For additional information concerning the
Company's credit facilities, see "The Election Contest - The
Company's Position."
2
<PAGE>
. Finally, despite having had representatives on the Board of
Directors for more than two years, in the opinion of Management,
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."
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, the Company believes that 2,001,401 shares will be entitled to
vote at the Annual Meeting, less any additional shares ultimately determined to
be ineligible to vote. For information concerning shares the Company believes
are 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.
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<PAGE>
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 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.
As of April 7, 1998, the Company had approximately 550 shareholders. 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,
the Company believes that 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.
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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.
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 1995
Company
Alan L. Freeman 56 Managing Partner, Freeman, Buczyner and Gero 1995
Wayne M. Lee 51 Chairman, Ryan Lee & Co. ___
John V. Pollock 59 Executive Vice President and Chief Loan
Officer, Sequoia National Bank ___
David P. Bindeman 54 President, Landmark Realty, Inc. ___
Current Directors (Term Expiring at the Annual Meeting)
Name of Director Age Principal Occupation Director Since
David W. Campbell 51 Private Investor and Financial Consultant 1995
Craig Fishman (1) 37 President and Chief Executive Officer of the 1995
Company
5
<PAGE>
Leon Fishman (1) 66 Sales and Marketing Adviser to the Company 1982 (2)
Alan L. Freeman 56 Managing Partner, Freeman, Buczyner and Gero 1995
Eugene Haskin 68 Chairman of the Board of Directors of the Company 1982
Edward A. McNally 54 Managing Director, Windham Partners, LLC; 1996
President, McNally and Co.
William A. Savage 65 Co-Chairman, Island Preservation Partnership 1995
James C. Spector 64 Executive Vice President, Bank Atlantic 1989
Lindsay B. Trittipoe 40 President, Commonwealth Acceptance, Inc. 1997
Lawrence Vecker 68 Executive Vice President, North American Capital 1996
Corp.
</TABLE>
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(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) 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.
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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.
Wayne M. Lee has served as Chairman of Ryan, Lee & Co., a McLean,
Virginia-based investment banking and brokerage firm since 1990. From 1986 to
1990, Mr. Lee was a Managing Director at Bankers Trust Company and its BT
Securities Corp. subsidiary in New York. Prior to that, Mr. Lee was engaged in
private law practice in Washington, D.C. as a partner at Andrews & Kurth. He
previously practiced at Corcoran, Hardesty, Whyte, Hemphill & Ligon, P.C.,
Bracewell & Patterson, and Morgan, Lewis & Bockius. Mr. Lee has served as
director of Micro-Integration Corp., a designer of computer and networking
products, since September 1994.
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 the Washington Capitals, a professional
hockey franchise, as well as a director of various charitable organizations.
David W. Campbell is currently a private investor and financial
consultant. From April 1996 to June 1997, Mr. Campbell was the President and a
Director of Southern Financial Bancorp, Inc. Mr. Campbell was formerly President
and Chief Executive Officer and a Director of Ameribanc Savings Bank
("Ameribanc") in Annandale, Virginia from June 1990 to March 1995. From 1977 to
1990, Mr. Campbell served in various other positions with Ameribanc.
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
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<PAGE>
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 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 Company, Inc. since August
1995, each a management consulting firm specializing in financial services
companies. 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 1974 through 1991.
William H. Savage has served as Co-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
Managing Partner of Calvert Associates, owner of a high-rise apartment complex
and shopping center in Alexandria, Virginia, President and Director of Richards
United Corporation, a real estate investment company located in Alexandria,
Virginia and President and Director of Knights Hill Plantation, Inc., which owns
and manages timber land in Kershaw County, South Carolina.
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.
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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 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
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
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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."
The Company intends to file an amended Complaint asserting further
claims under Sections 13(d) and 14(a) of the Exchange Act concerning material
misstatements and omissions contained in subsequent filings made by the
Defendants with the Commission.
Counsel to each of the Company and the Defendants have reached an
agreement to, among other things, file cross-motions for summary judgment
concerning the applicability and application of the VCSA. The Company intends to
seek a hearing and a decision on such matters prior to the Annual Meeting.
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, L.P. 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. Scoggin thereafter 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
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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 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 June 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 (as evidenced by
Management's perception of an inability to communicate effectively and a lack of
strategic focus) 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.
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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 because, in the opinion of Management, a smaller-sized
Board could more effectively function than a larger-sized Board. 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. In particular, Management offered the Ewing Group the right to
designate one person to stand for election to a five-member Board and the right,
in conjunction with Management, to designate two additional individuals to stand
for election to such Board. The compromise was rejected by the Ewing Group.
At a meeting of the Board of Directors held on March 27, 1998, 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, Jack C. Troia and Pollock and recommended that shareholders
vote for each of such nominees at the Annual Meeting.
Following the March 27, 1998 meeting, the Company learned that Mr. Troia
would be unable to serve on the Board. Thereafter, a majority of the Board
nominated Wayne M. Lee to stand for election in lieu of Mr.Troia.
Except for Craig Fishman, the Company's President and Chief Executive
Officer, all of the Company's nominees are independent of Management or other
significant shareholders of the Company.
The Company's Position
The Dissident Group's preliminary proxy statement filed with the
Commission on March 27, 1998, as amended through April 8, 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.
12
<PAGE>
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 gross finance receivables, other
receivables and other 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 25
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;
. increasing by more than 30% 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.
13
<PAGE>
As a result of these efforts, the Company returned to profitability in
1997, with net income of $1.0 million, or $0.44 per diluted share and these
efforts have likewise been reflected in the Company's closing stock price which
increased from 5 7/8 on July 1, 1996 to 8 1/4 on April 9, 1998, a 40% increase.
Management believes that the election of the Dissident Group nominees would
disrupt these strategic initiatives and would thereby adversely affect the
Company's business and results of operations.
Second, while seizure of control of the Board by the Dissident Group may
personally benefit members of the Dissident Group, the Company believes that it
could have significant adverse consequences to the Company and all other
shareholders because it could result in an event of default under the Company's
credit facilities which, in turn, could seriously damage the Company's financial
position.
The Company has a $25 million senior secured credit facility. The
Company believes that the election of the Dissident Group nominees would
constitute a Change of Control under such facility. A Change of Control is an
event of default under the senior credit facility and could permit the Company's
senior lenders to terminate their commitments to the Company and to accelerate
the loans outstanding to the Company.
In addition, the Company has been notified by the holder of the majority
in principal amount of the Company's outstanding Convertible Notes that it
believes that the election of the Dissident Group nominees would constitute a
"fundamental change" under the Indenture pursuant to which the Convertible Notes
were issued. Pursuant to the Indenture, upon a "fundamental change", holders of
the Convertible Notes have the right to require the Company to repurchase the
Convertible Notes at a price equal to the principal amount of the Convertible
Notes plus accrued and unpaid interest to the date of repayment. Such repayment
would require the consent of the Company's senior lenders and an event of
default would arise under the Indenture if the Company could not obtain such
consent. In addition, an event of default under the Indenture is itself an event
of default under the Company's senior credit facility. The Company has been
notified by the holder of the majority in principal amount of outstanding
Convertible Notes that while it does not have any present intention to exercise
its rights to put the Convertible Notes upon a "fundamental change", it reserves
its rights to do so should it for any reason change its intentions.
Third, the Company believes that seizure of control of the Board by the
Dissident Group could lead to the departure of key executives necessary to the
conduct of the Company's business. Additionally, if the Dissident Group is
successful in electing its full slate of director nominees, a Change of Control
will result under the various employee arrangements between the Company and its
executive officers. Under certain circumstances following a Change of Control,
such executive officers would be entitled to certain benefits. See "Executive
Compensation--Employment Agreements."
14
<PAGE>
Finally, despite having had representatives on the Board of Directors
for more than two years, in the opinion of Management, 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 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, including
the right to acquire shares of Common Stock, by directors, director nominees and
executive officers is provided in the sections entitled "Security Ownership of
Certain Beneficial Owners and Management, "Executive Compensation--Options" and
"Executive Compensation--Compensation of Directors." Information about
employment arrangements with executive officers is provided in the section
entitled "Executive Compensation--Employment Agreements." Information about
other transactions between the Company and each of the directors and director
nominees is provided in the section entitled "Certain Transactions." The
business address for each participant is c/o Allstate Financial Corporation,
2700 South Quincy 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").
15
<PAGE>
Purchases and Sales of Common Stock
Number of Shares
Name Purchased (Sold) Date of Transaction(s)
Craig Fishman 1,1001 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
251 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 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
16
<PAGE>
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, L.P. 343,200 12.89% - -
(4)
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
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.
17
<PAGE>
(2) Numbers based upon shares owned as of April 7, 1998, as adjusted to
eliminate those shares the Company believes are 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. 11 to Schedule 13D, which was filed
with the Commission on or about April 6, 1998 by Value Partners, Ltd. Includes
173,467 shares issuable upon the conversion of an aggregate of $1,301,000 of
Convertible Notes. Excludes an aggregate of 119,264 shares beneficially owned by
David W. Campbell, Edward A. McNally, William H. Savage, Lindsay B. Trittipoe
and C. Scott Bartlett, Jr., members of the Dissident Group. If such shares were
to be included in the number of shares beneficially owned by Value Partners,
Ltd., Value Partners, Ltd. would beneficially own 781,099 shares of Company
Common Stock or 30.9% of the outstanding shares of Company Common Stock. Of the
488,368 shares owned by Value Partners, Ltd. as of the record date for the
Annual Meeting, the Company believes that 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 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 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 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 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 Commission on or about November 4, 1997 by Tweedy, Browne Company
L.L.C.
18
<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 *
Wayne M. Lee - -
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%
Lawrence Vecker (12) 7,000 *
Lawrence M. Winkler (13) 11,717 *
- ----------------------- ------- ------
All directors, director nominees and
executive officers as a group (17 persons) 698,300 28.69%
- -----------------------
*Less than 1.0%
19
<PAGE>
(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 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
20
<PAGE>
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.
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.
21
<PAGE>
(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.
<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
Secretary/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 $7,500 unanimously approved by
the Board of Directors.
22
<PAGE>
Options
No options were granted during the fiscal year ended December 31, 1997
to the Named Executive Officers; however, options to acquire 2,500 and 5,000
shares of Common Stock, which were scheduled to expire on December 15, 1997,
were extended by the Board of Directors to May 15, 1998 for Messrs. C. Fishman
and Winkler, respectively.
The following table sets forth information concerning option exercises
and the value of unexercised options held by the Named Executive Officers as of
December 31, 1997.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises In
Last Fiscal Year and F/Y End Option/SAR Value
<S> <C> <C> <C> <C>
Shares Value of Unexercised
Acquired on Value Number of Unexercised In-the-Money Options/
Exercise Realized Options at F/Y End (#) SARS at F/Y End ($)
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).
23
<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. All of the
following agreements were unanimously approved by the Board of Directors at the
time such arrangements were authorized and all executive salary and bonus
decisions for each of the Named Executive Officers whose compensation is
described in the table set forth above were likewise unanimously approved by the
Board of Directors. 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 was extended in September 1997 to June 30, 1999. Under certain
circumstances following a Business Combination (as defined in the agreement) or
Change of Control, 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
24
<PAGE>
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 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 was extended in early 1998 to March 31, 1999. Under certain
circumstances following a Business Combination (as defined in the Agreement) or
Change of Control, 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 was extended in early 1998 to March
31, 1999. Under certain circumstances following a Business Combination (as
defined in the agreement) or Change of Control, 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 (as defined in the agreement) or
a Change of Control, 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 was extended in early
1998 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
25
<PAGE>
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 was extended in early 1998 to March 31, 1999.
Under certain circumstances following a Business Combination (as defined in the
agreement) or Change of Control, or if Mr. Hotsenpiller 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 month's compensation plus
benefits (except in the event of death) during such period.
In each of the agreements described above, a "Change of Control" is
defined as a transaction or other event (or series thereof) that results in the
acquisition of a controlling interest (defined as the possession, directly or
indirectly, of power to direct or cause the direction of management or policies,
whether through ownership of voting securities, by contract or otherwise) in the
Company by a person or entity (or group thereof) that did not have a controlling
interest prior to such transaction or event. Each of the executive officers are
entitled to the benefits described above if, following a Change of Control, such
officer is not offered a position with the Company that involves comparable
duties, responsibilities, powers and functions at the officer's then current
annual rate of compensation and the officer's employment is terminated (whether
by the Company or the officer). The Company believes that the election of all of
the Dissident Group's nominees will constitute a Change of Control under such
agreements.
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 1996 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
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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.
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, L.P. 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 up to two members of the Company's
Board of Directors, but has waived that right for the Annual Meeting. The
Company has reached an understanding with Scoggin that, if all of the Company's
nominees are elected at the Annual Meeting, the Board will, if
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requested by Scoggin, increase the size of the Board and elect a qualified
designee of Scoggin to the Board.
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
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
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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.
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 [16], 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.
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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
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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
Wayne M. Lee
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.
____
