<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
Allstate Financial Corporation
(Name of Registrant as Specified in Its Charter)
Allstate Financial Corporation Independent Shareholders/Directors Committee
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
<PAGE>
1998 ANNUAL MEETING OF STOCKHOLDERS
of
ALLSTATE FINANCIAL CORPORATION
2700 S. Quincy Street
Arlington, Virginia 22206
To Be Held on May 12, 1998
---------------------------------------------
PROXY STATEMENT
of the
ALLSTATE FINANCIAL CORPORATION
INDEPENDENT SHAREHOLDERS/DIRECTORS COMMITTEE
---------------------------------------------
This Proxy Statement and the accompanying WHITE proxy card are being
furnished in connection with the solicitation of proxies by the Allstate
Financial Corporation Independent Shareholders/Directors Committee (the
"Committee") to be used at the 1998 Annual Meeting of Stockholders of Allstate
Financial Corporation, a Virginia corporation ("Allstate" or the "Company"), to
be held at the Sheraton National Hotel, 900 South Orme Street, Arlington,
Virginia 22202 on May 12, 1998 at 11:00 a.m. and at any adjournments or
postponements thereof (the "Annual Meeting"). This Proxy Statement and the
accompanying WHITE proxy card are first being mailed to Allstate stockholders on
or about April , 1998.
The Committee consists of Value Partners, Ltd ("Value Partners"), which owns
21.1% of Allstate's outstanding common stock and is the single largest
stockholder of the Company, plus David W. Campbell, Edward A. McNally, William
H. Savage, Malcolm M. B. Sterrett and Lindsay B. Trittipoe. Messrs. Campbell,
McNally, Savage and Trittipoe currently serve as independent directors of
Allstate.
The Committee is soliciting your proxy in support of the election of Messrs.
Campbell, McNally, Savage, Sterrett and Trittipoe (the "Committee Nominees") as
the Directors of Allstate. Four of the Committee Nominees currently serve as
independent directors of Allstate on a 10-person Board, and these independent
directors have been unable to implement the reforms which they believe are
necessary at Allstate because they represent only a minority of the current
Board. The size of the Board has been reduced to five as of the date of the
Annual Meeting, and all five directors will be elected at that time. The
Committee believes that obtaining majority representation on the Board of
Directors will enable the Committee Nominees to implement the reforms they
believe are necessary.
As discussed below, the Committee believes that the Company's financial
performance has been poor, that executive salaries have increased or remained
high, and that the price of Allstate's common stock declined significantly in
1993 and then remained flat for more than four years until just recently. On
<PAGE>
March 16, 1998, certain members of the Committee filed an amended Schedule
13D announcing their intent to seek majority representation on the Board of
Directors at the meeting to be held on May 12, 1998 pursuant to a court
order. See "Problems with the Company - Court-Ordered Meeting."
Allstate's management directors and officers continue to engage in
affiliated transactions with the Company and have blocked most initiatives by
the independent directors to implement corporate governance reforms designed to
increase the accountability of Allstate's management. The Committee believes
that the Board of Directors of Allstate needs to be independent of management in
order to provide effective oversight and leadership on behalf of the Company's
stockholders.
PROBLEMS WITH THE COMPANY
BACKGROUND
In 1993, Premium Sales Corporation ("Premium Sales") filed for Chapter 11
bankruptcy. Allstate and its wholly-owned subsidiary Premium Sales Northeast,
Inc. ("PSN") had previously provided financing to Premium Sales. After
Premium Sales filed for bankruptcy, Allstate and PSN initially filed claims
aggregating $1.5 million. However, according to Allstate's Form 10-KSB for
1994, the bankruptcy trustee sought recovery from Allstate and PSN of alleged
preferences and certain fraudulent transfers. In the first quarter of 1995,
Allstate and its subsidiary agreed to waive their $1.5 million claim and to
instead make a $1.4 million cash payment. In addition, Eugene Haskin and Leon
Fishman, the Chairman and the then President/CEO of Allstate, respectively,
each agreed to personally pay $280,000 as part of the settlement.
In 1995, one of Allstate's then largest stockholders, Scoggin Capital
Management, L.P., began pressing for changes in Allstate's management and
management-dominated Board, particularly in light of Allstate's poor financial
performance. In response, Allstate's management agreed to the election of
Messrs. Campbell and Savage to the Board as independent, outside directors at
the November 1995 annual meeting.
Certain outside directors subsequently urged Allstate management to agree
to, among other changes, the establishment of an Executive Committee "to build
and maintain the confidence of major investors, analysts, and market makers" and
"dispel the perception that Allstate is being run primarily for the benefit of
Lee Fishman, Gene Haskin and management," as stated in a memorandum from Mr.
Savage to Craig Fishman, dated January 9, 1996. As a result, Allstate's
management, including the management directors, agreed at a special Board
meeting on May 16, 1996 to the addition of two new, independent outside
directors, Messrs. Edward A. McNally and Lawrence Vecker. Value Partners agreed
at that time that it would not challenge the membership of the Board as
restructured prior to the 1997 annual meeting.
Allstate subsequently reported a loss of over $1.0 million for 1996, rather
than a profit as had been projected. Dissatisfaction with management's
performance continued to increase, and Value Partners made it known that it was
considering whether to oppose the re-election of the management directors with a
separate slate of directors at the annual stockholders meeting in November 1997.
In August and early-September 1997, Board members discussed potential
changes in Allstate's management structure with the goal of improving poor
stockholder value. During those discussions, Messrs. Campbell, McNally and
Savage advised the Board that they would not stand for re-election to the Board
on a management-endorsed slate of directors unless
2
<PAGE>
the Board agreed to a proposed plan of reorganization that these independent
directors considered the minimum organizational reform necessary to allow
them to address fundamental issues of corporate governance.
At the September 24, 1997 Board meeting, the outside directors and the
management directors agreed on specific changes in Allstate's organization and
corporate that the directors "hope[d] and expect[ed]...will enhance the value of
[Allstate] for the benefit of all shareholders." Memorandum from Craig Fishman,
President and Chief Executive Officer of Allstate, to Messrs. Campbell, McNally
and Savage, dated September 15, 1997. At the September 24, 1997 meeting, the
Board unanimously approved a plan of reorganization under which, among other
things: (1) Allstate's Board was expanded from nine to ten directors; (2)
Messrs. Campbell, McNally and Savage consented to stand for re-election as part
of a management-endorsed slate with the management directors; (3) Craig
Fishman's employment contract was extended through July 1999; and (4) the newly
elected Board would, immediately after the 1997 Annual Meeting: (a) elect Mr.
Campbell as Chairman of the Board; and (b) create an Executive Committee that
would consist of three of Allstate's independent directors (Messrs. Campbell,
McNally and Savage) and Craig Fishman (the "Agreement"). Solely as a result of
this agreement, Messrs. Campbell, McNally and Savage agreed to stand for
re-election with the management directors.
BREACH OF AGREEMENT BY MANAGEMENT DIRECTORS
At the 1997 Annual Meeting held on November 18, 1997, the Board-nominated
slate of ten directors was elected without a competing slate. Immediately
thereafter, the newly-elected Board convened to transact business, including the
implementation of the balance of the Agreement that the newly-elected Board
members had agreed to and which Allstate's Proxy Statement dated October 17,
1997 represented would be carried out by the new Board. All members of the Board
were present, with the exception of director Vecker. Having by then obtained
their benefits under the Agreement, Messrs. Craig Fishman, Leon Fishman,
Freeman, Haskin and Spector (the "Management Directors") immediately and for the
first time disavowed the balance of the Agreement. All five Management Directors
formally voted against carrying out the remaining provisions of the Agreement,
including the election of a new Chairman and a new Executive Committee. As a
result, the Board failed to implement the balance of the Agreement by a vote of
five to four.
Had Messrs. Campbell, McNally and Savage known that the Management
Directors' would not abide by the Agreement once re-elected, they would have
withdrawn their names as nominees prior to the casting of votes at the 1997
Annual Meeting and would have demanded an adjournment of the 1997 Annual Meeting
until corrective action could have been taken.
Had Value Partners known that the Management Directors would not implement
the balance of the Agreement once re-elected, it would have demanded an
adjournment of the
3
<PAGE>
1997 Annual Meeting to afford it an opportunity to nominate an opposing slate
and to cause the distribution of a corrected proxy statement.
By letter dated December 4, 1997 to Eugene R. Haskin as Board Chairman and
Craig Fishman as Allstate's President, Messrs. Campbell, McNally, Savage and
Trittipoe gave notice to Allstate and the Management Directors that they
contested the election of the Management Directors and demanded a new election
of directors and the calling of a special stockholders meeting for that purpose,
as authorized by Virginia law. By letter dated December 12, 1997 to Messrs.
Campbell, McNally, Savage and Trittipoe, Chairman Haskin and President Craig
Fishman refused to call a special stockholders meeting as they were authorized
to do pursuant to the By-Laws and Virginia law.
On December 18, 1997, the Board met, at which time it considered the demand
of Messrs. Campbell, McNally and Savage for a special stockholders meeting. The
Board, under the control of the Management Directors, rejected that demand by a
vote of 5 to 4, with director Vecker being absent.
In the view of the Committee, the Management Directors' refusal to carry out
the Agreement that had secured their election and other benefits rendered both
inaccurate and misleading the representations of Allstate in its 1997 Proxy
Statement concerning the intentions and promises of the management-endorsed
slate. As a result, Messrs. Campbell, McNally and Savage and Value Partners
believed that the resulting election of the Management Directors was tainted,
inequitable and unfair and should be set aside.
Following the 1997 Annual Meeting, Messrs. Campbell, McNally and Savage
informed Mr. Ewing of Value Partners that the Management Directors had
determined not to honor the terms of the Agreement reached by the Board of
Directors on September 24, 1997, as described in Allstate's 1997 Proxy
Statement. Various discussions were then held, which resulted in Mr. Ewing
deciding to join Messrs. Campbell, McNally and Savage in filing a lawsuit
against the Company following the December 18, 1997 meeting of the Company's
Board of Directors.
On December 29, 1997, Value Partners and Messrs. Campbell, McNally and
Savage jointly filed in the Circuit Court of Arlington County, Virginia a
Petition to Set Aside Election of Directors. The petition requested the Court to
(i) proceed forthwith in a summary way to hear and decide the issues presented;
(ii) set aside the election of directors held at the 1997 Annual Meeting; (iii)
order that there be held as soon as possible a new election of directors of
Allstate; (iv) enjoin and restrain the Management Directors from exercising
without court approval any powers as directors pending a new election; and (v)
grant such other relief as the Court may deem just and equitable.
4
<PAGE>
COURT-ORDERED MEETING
A hearing was held in the Circuit Court of Arlington County on February 2,
1998, and closing arguments were presented on February 18, 1998. Since all of
Allstate's directors are elected at each annual meeting, the Committee's
litigation counsel proposed that the 1998 election of directors take place in
May 1998 in accordance with Allstate's By-Laws, as the effect would be the same
as setting aside the 1997 election in terms of providing the stockholders with a
fair opportunity to elect directors. This proposal by the Committee also had the
benefit of avoiding the cost and expense of re-doing the 1997 election.
On February 18, 1998, in commenting on the 1997 election, the Circuit Court
judge stated that the vote was not fair and that "... the best thing to do would
be to have another election. I DON'T THINK THIS WAS FAIR AND I THINK THE ONLY
WAY ON BALANCE TO CORRECT IT IS TO HAVE ANOTHER ELECTION." (emphasis added) On
March 4, 1998, the Circuit Court judge entered a decree indicating that it had
granted the Committee's motion for Summary Relief and then ordered that an
election of directors of Allstate be held on Tuesday, May 12, 1998. This was the
date that had been suggested by the Committee's counsel.
As Allstate's counsel unsuccessfully argued to the Circuit Court with
respect to having another meeting in May, "(t)o have two elections in one
year SENDS A MESSAGE LOUD AND CLEAR TO THE INVESTING COMMUNITY SOMETHING IS
WRONG WITH THIS COMPANY." (emphasis added) The Committee agrees that a loud
and clear message has been sent to Allstate's stockholders. The Committee
believes that the Management Directors are not running the Company on an
arm's-length basis for the benefit of all stockholders and that the insider
deals, high salaries and poorly conceived business plan have resulted in low
earnings and a flat stock price. The Committee believes that the Company's
problems can only be solved if a completely independent Board of Directors is
elected.
ALLSTATE'S POOR FINANCIAL PERFORMANCE
In 1994 and 1995, Allstate had net income of $0.05 per share and $0.16 per
share, respectively, representing a return on average equity of less than 2% in
each of 1994 and 1995. In 1996, Allstate suffered a net loss of $.45 per share
as total income declined and each expense category increased. During these
years, the return on average equity was less than the interest rate that
stockholders could have earned if their money had instead been invested in a
passbook savings account at an insured financial institution!
Allstate had net income of $0.45 per share in 1997, which still represents a
return on average equity of less than 5%. Craig Fishman, Allstate's President,
testified in the recent litigation that this "demonstrated a substantial
turnaround." The Committee believes that the earnings are still poor and that
there has not been a substantial turnaround. In fact, Allstate's net income for
the September 30, 1997 and December 31, 1997 quarters has
5
<PAGE>
declined from both the immediately preceding quarters and the comparable
quarters in 1996, as shown below.
<TABLE>
<CAPTION>
ALLSTATE'S NET INCOME
--------------------------
QUARTER ENDED 1997 1996
- -------------------------------------------------------------------------------------- ---------- --------------
<S> <C> <C>
March 31.............................................................................. $ 257,872 $ 224,000
June 30............................................................................... 273,124 (1,980,242)(1)
September 30.......................................................................... 252,394 339,606
December 31........................................................................... 250,126 375,304
</TABLE>
- ------------------------
(1) Reflects a $3.9 million provision for credit losses. Without this provision,
net income for the June 30, 1997 quarter also would have declined from the
comparable 1996 quarter.
The Committee believes that Allstate has entered and exited new lines of
business (i.e., Lifetime Options) with little to show for its efforts. In
addition, in the past the Company has engaged in high risk lending, which has
resulted in large provisions for credit losses. For 1994, 1995 and 1996,
provisions for credit losses aggregated $16.2 million. Since total shareholders'
equity was only $22.5 million at December 31, 1996, the Committee believes that
these provisions for credit losses were unacceptably high. At December 31, 1997,
total nonperforming assets were $8.5 million or 35% of total stockholders'
equity.
THE PRICE OF THE COMMON STOCK DECLINED SIGNIFICANTLY AND THEN REMAINED FLAT
The following table sets forth the high and low bid prices for the Company's
Common Stock on the Nasdaq National Market System for the periods shown, as
furnished by the National Association of Securities Dealers, Inc. These bids
represent prices among dealers, do not include retail markups, markdowns or
commissions, and may not represent actual transactions.
<TABLE>
<CAPTION>
LOW HIGH
--------- ---------
<S> <C> <C>
1993 $ 4.875 $ 19.250
1994 4.625 7.125
1995 5.375 8.000
1996 5.500 6.875
1997 5.125 7.000
1998 (through March 18) 5.688 6.188
</TABLE>
In the first quarter of 1993, the price of Allstate's Common Stock
declined from $19.25 to $11.50 primarily due to problems with Premium Sales.
The stock then declined substantially further to $5.375 in the third quarter
of 1993 after Premium Sales filed for bankruptcy. See "Problems with the
Company--Background." On January 4, 1993, the closing price of the Company's
Common Stock was $7.00, as compared to $5.875 on March 18, 1998. Based on the
above prices, the price of the
6
<PAGE>
Company's Common Stock has declined by over 16% over the past four years,
which was a time when most stock market indexes experienced substantial
appreciation.
The Circuit Court judge, after hearing testimony regarding the poor
financial performance of Allstate and its stock performance, stated that "IT'S
REALLY EXTRAORDINARY TO SEE WHAT THIS COMPANY IS WORTH IN LIGHT OF THE MARKET
THAT'S DOUBLED IN THE LAST FEW YEARS." THE COMMITTEE AGREES WITH THE COURT AND
BELIEVES THAT IT IS TIME FOR A CHANGE IN THE WAY THE MANAGEMENT DIRECTORS HAVE
RUN THE COMPANY.
EXECUTIVE SALARIES HAVE INCREASED OR REMAINED HIGH
The following table shows the salaries of the Company's executive officers
for the periods shown. Such amounts exclude bonuses, contributions on behalf of
the executives by the Company to its 401(k) plan, and the granting of stock
options.
<TABLE>
<CAPTION>
LEON FISHMAN
CRAIG FISHMAN DIRECTOR/VICE LAWRENCE WINKLER
PRESIDENT/CEO(1) CHAIRMAN(2) SECRETARY/TREASURER/CFO
---------------- ------------------------ ----------------------
<S> <C> <C> <C>
1994 $ 126,405 $ 375,000 $ 143,533
1995 161,177 377,885 154,732
1996 170,330 295,009 169,450
1997 210,000 225,000 167,775
</TABLE>
- ------------------------
(1) Craig Fishman became President and Chief Executive Officer on July 1, 1996
and was previously Senior Vice President and General Counsel of Allstate.
(2) Leon Fishman became Vice Chairman of the Board on July 1, 1996 and was
previously President and Chief Executive Office of Allstate. Mr. Leon
Fishman only worked part-time in 1997.
AFFILIATED TRANSACTIONS CONTINUE WITH THE MANAGEMENT DIRECTORS
In the view of the Committee, the Management Directors have run your public
company as if it was their own private company. Leon Fishman is the father of
Craig Fishman, and Lawrence Winkler is the uncle of Craig Fishman. In addition,
Eugene Haskin, the Chairman of the Board, and members of his family have engaged
in various transactions with the Company over a number of years.
7
<PAGE>
The following is a list of some of the affiliated transactions disclosed in
Allstate's public filings:
In January 1989, a corporation wholly owned by Mr. Winkler, his wife and a
son of Mr. Haskin purchased an apartment building from the Company for
consideration in the form of a $100,000 interest-free demand note.
In May 1994, the Company reduced the exercise price on stock options granted
to Messrs. Craig Fishman and Winkler from $14.00 per share to $6.50 per share.
This was done at a time when most of the Company's stockholders had suffered a
significant decline in the market value of their investment, yet the Company's
officers were rewarded with a lower exercise price on their options.
Certain members of the immediate families of Messrs. Haskin and Leon
Fishman, directly or through trusts, provided financing in the past to Lifetime
Options, Inc., a wholly owned subsidiary of the Company, through unsecured loans
with interest payable monthly at an annual interest rate of 1% over the prime
rate. At December 31, 1993, Lifetime Options' total indebtedness to members of
Mr. Haskin's immediate family was $460,553, of which $445,407 was repaid in 1994
at the request of members of Mr. Haskin's family. By the end of 1996, the
Company had decided to curtail the primary business of Lifetime Options, which
was the purchase of discounted life insurance policies from individuals with
AIDS.
In February 1994, the Company loaned $1,000,000 to Mr. Haskin and his wife,
which was subsequently repaid in 1994.
A subsidiary of the Company maintains a condominium in Georgetown in
Washington, D.C. for the personal use of Mr. Leon Fishman. The amount paid by
Mr. Leon Fishman to the Company for such personal use has not increased since
at least 1993. The Committee believes that it is unlikely that the market
rate for "rent" would not have increased in five years, and the Committee
believes that the condominium should be sold for its fair market value.
The members of the Committee who are independent directors of the Company
discovered for the first time in connection with the recent litigation that Mr.
Haskins, Chairman of the Board, receives a consulting fee of $25,000 per year in
addition to his Board fees. This consulting fee had not been previously
disclosed to the full Board of Directors because management had deemed it to be
immaterial. The Committee believes that all affiliated transactions should
receive the prior approval of the Board of Directors.
8
<PAGE>
THE COMMITTEE'S PROGRAM
ALL COMMITTEE NOMINEES ARE COMMITTED TO IMPROVING THE EARNINGS OF THE
COMPANY, REDUCING OVERALL MANAGEMENT COMPENSATION, AND ELIMINATING ALL FUTURE
AFFILIATED TRANSACTIONS (SUCH AS LOANS, LEASES AND SALES OR PURCHASES OF ASSETS)
BETWEEN ALLSTATE AND ITS OFFICERS AND DIRECTORS.
If elected, the Committee Nominees would seek to--
- provide quality leadership and consistent focus;
- conduct a thorough review of all of the assets, operations, management
and litigation matters;
-ensure that competent management is in place with appropriate
performance-based incentives;
- engage in prudent underwriting of loans in niche businesses where
Allstate can compete effectively against larger, better capitalized
competitors; and
- eliminate future affiliated transactions (such as loans, leases or
sales or purchases of assets) between Allstate and its officers and directors
except normal course employment relationships.
The Committee believes that the Company is at a crossroads. It needs, but
currently lacks, the type of leadership and guidance that can be provided by a
completely independent Board of Directors.
A vote for the Committee Nominees is a vote for directors who are
independent of management and who are committed to providing the proper
leadership and oversight which the Company desperately needs.
IMPORTANT
The record date for determining stockholders entitled to notice of and to
vote at the Annual Meeting is April 7, 1998 (the "Voting Record Date").
Stockholders of record at the close of business on the Voting Record Date will
be entitled to one vote at the Annual Meeting for each share of Allstate common
stock, no par value per share (the "Common Stock"), held on the Voting Record
Date. As of , 1998, based on the Company's Form 10-KSB for the year ended
December 31, 1997, there were shares of Common Stock issued and
outstanding.
9
<PAGE>
At the Annual Meeting, the Committee will seek to elect the Committee
Nominees as the Directors of Allstate. The election of the Committee Nominees
requires the affirmative vote of a plurality of the votes cast, assuming a
quorum is present or otherwise represented at the Annual Meeting.
THE COMMITTEE URGES YOU NOT TO SIGN ANY PROXY CARD SENT TO YOU BY ALLSTATE.
IF YOU HAVE ALREADY DONE SO, YOU MAY REVOKE YOUR PROXY BY SIGNING, DATING AND
RETURNING THE ENCLOSED WHITE PROXY CARD TODAY, AS ONLY YOUR LATEST DATED PROXY
WILL COUNT. SEE "PROXY PROCEDURES" BELOW.
If, like us, you believe that the Board of Directors of Allstate needs to be
independent of management in order to implement the necessary reforms, the
Committee urges you to mark, sign, date and return the enclosed WHITE proxy card
to vote FOR the election of each of the Committee Nominees.
10
<PAGE>
SECURITY OWNERSHIP OF THE MEMBERS OF THE COMMITTEE
The following table sets forth, as of April 7, 1998, the amount of Common
Stock of the Company beneficially owned by each member of the Committee.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY
NAME AND ADDRESS OWNED(1)(2) PERCENT OF CLASS
- --------------------------------- ---------------------- -----------------
<S> <C> <C>
Value Partners, Ltd.(3).......... 661,835(4) 26.6%
2200 Ross Avenue
Dallas, TX 75201
David W. Campbell................ 13,500(5) .6%
6410 Nobel Rock Court
Clifton, VA 22024
Edward A. McNally................ 13,000 .6%
120-41 Prospect Street
Ridgefield, CT 06877
William H. Savage................ 19,000(6) .8%
314 Franklin Street
Alexandria, VA 22314
Malcolm M. B. Sterrett........... -- --
4516 Wetherill Road
Bethesda, MD 20816
Lindsay B. Trittipoe............. 73,289 3.2%
4208 W. Franklin Street
Richmond, VA 23221
</TABLE>
- ------------------------
(1) Based on information furnished by the respective individuals or entity.
Under applicable regulations, shares are deemed to be beneficially owned by
a person if he directly or indirectly has or shares the power to vote or
dispose of the shares, whether or not he has any economic interest in the
shares. Unless otherwise indicated, the named beneficial owner has sole
voting and dispositive power with respect to the shares.
(Footnotes on next page)
11
<PAGE>
(2) Under applicable regulations, a person is deemed to have beneficial
ownership of any shares of Common Stock which may be acquired within 60 days
of the Voting Record Date pursuant to the exercise of outstanding stock
options or convertible notes. Shares of Common Stock which are subject to
stock options or convertible notes are deemed to be outstanding for the
purpose of computing the percentage of outstanding Common Stock owned by
such person or group but not deemed outstanding for the purpose of computing
the percentage of Common Stock owned by any other person or group. The
amounts set forth in the table include shares which may be received upon the
exercise of stock options within 60 days of the Voting Record Date as
follows: Mr. Campbell, 11,000 shares; Mr. McNally, 12,000 shares; Mr.
Savage, 12,000 shares; and Mr. Trittipoe, 2,000 shares.
(3) Ewing & Partners, a Texas general partnership, is the general partner of
Value Partners. Timothy G. Ewing is the general partner and the Managing
Partner of Ewing & Partners. In addition, Ewing Asset Management, L.L.C., a
Texas limited liability company ("EAM"), holds a 1% general partnership
interest in Ewing & Partners. Mr. Ewing is the Manager and 100% owner of
EAM. The principal place of business for Ewing & Partners, EAM and Mr. Ewing
is the same as for Value Partners.
(4) Value Partners owns $1,301,000 of Allstate's Convertible, Subordinated Notes
due September 30, 2000 (the "Notes"), which are currently convertible into
173,467 shares of Common Stock and are included in the table. Excluding such
shares, Value Partners owns 488,368 shares or 21.1% of the issued and
outstanding Common Stock.
(5) Includes 2,500 shares which are owned jointly with Mr. Campbell's spouse.
(6) Includes 1,000 shares which are owned by Mr. Savage's spouse.
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide that the number of
directors shall be ten or such lesser number as the Board of Directors shall
fix. The Board of Directors has fixed that number at five for purposes of the
Annual Meeting. There is only one class of directors and they will all be
candidates for election at the Annual Meeting. Directors of the Company are
elected to serve until the next annual meeting of the stockholders of the
Company and until their respective successors are elected and qualified.
The Committee recommends that Allstate stockholders elect the Committee
Nominees as the Directors of Allstate at the Annual Meeting. If all Committee
Nominees are elected, the Committee Nominees would constitute the entire Board
of Directors of Allstate and would be able to implement the reforms which they
believe are necessary. The Committee Nominees and their business qualifications
are listed below.
12
<PAGE>
Mr. Campbell. Mr. Campbell has been a director of Allstate since November
1995. He was formerly President and Chief Operating Officer and Director of
Southern Financial Bancorp, Inc. and Southern Financial Bank in Warrenton,
Virginia from April 1996 to June 1997. He was also formerly President and Chief
Executive Officer of Ameribanc Savings Bank ("ASB") in Annandale, Virginia (June
1990 through March 1995); prior thereto, Executive Vice President and Chief
Operating Officer of ASB (1984 through June 1990); also, a director of ASB (1988
through March 1995); served as a Trustee of the Ameribanc Investors Group, a
savings and loan holding company headquartered in Annandale, Virginia, from 1992
to March 1995. In addition, Mr. Campbell was a Vice President and Branch Officer
of The National Bank of Fairfax in Fairfax, Virginia from 1972 to 1977. Mr.
Campbell is 51 years old.
Mr. McNally. Mr. McNally has been a director of Allstate since August 1996.
He is the Managing Director of Windham Partners, LLC (commencing August 1996)
and the President of McNally and Co. (commencing August 1995). The principal
business of each company is management consulting for the financial services
industry, and each company is headquartered in Ridgefield, Connecticut. Since
1991, Mr. McNally has served as a management consultant specializing in
financial services companies. Prior to 1991, he was Senior Vice President of
National Westminster Bank, specializing in loans to equipment leasing,
commercial finance, media, and textile and apparel companies. Mr. McNally is 54
years old.
Mr. Savage. Mr. Savage has been a director of Allstate since November 1995.
He is currently Chairman of Island Preservation Partnership, Isle of Palms,
South Carolina, developer of a 1,200 acre private, oceanfront retreat near
Charleston, South Carolina; President and Director of Richards United
Corporation, a real estate investment company located in Alexandria, Virginia;
and Chairman of Arbec Orchids Dominicana, S.A., Santo Domingo, D.R., which
propagates and cultivates orchid plants for the United States market. From 1994
to 1995, Mr. Savage was a Director of Jefferson Federal Savings Bank in
Warrenton, Virginia. Since 1990, Mr. Savage has also been engaged in a variety
of other investment ventures in real estate development and banking. Prior to
1990, Mr. Savage was the Chief Executive Officer and Trustee of Ameribanc
Investors Group, a savings and loan holding company headquartered in Annandale,
Virginia, and its predecessor, Mortgage Investors of Washington, a real estate
investment trust. Mr. Savage is 65 years old.
Malcolm B. Sterrett. Mr. Sterrett has been a private investor since 1993. He
was a partner of Pepper Hamilton & Scheetz, a law firm in Washington, D.C., from
1989 to 1993. He was formerly the General Counsel of the United States
Department of Health and Human Services from 1988 to 1989; a Commissioner of the
United States Interstate Commerce Commission from 1982 to 1988; and the Vice
President and General Counsel of the United States Railway Association from 1980
to 1982. Mr. Sterrett is 55 years old.
Lindsay B. Trittipoe. Mr. Trittipoe has been a director of Allstate since
November 1997. Since January 1998, he has been President of Commonwealth
Acceptance, Inc., a
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<PAGE>
commercial finance company. Mr. Trittipoe was Vice President/Capital Markets
of Wheat First Butcher Singer, a Richmond, Virginia based investment bank and
brokerage firm, from September 1995 to October 1997. Prior thereto, he was
Vice President of Craigie Incorporated, a Richmond, Virginia based investment
bank and bond trading firm, from 1989 to September 1995. Mr. Trittipoe is 40
years old.
Each Committee Nominee, if elected, would hold office until the 1999 Annual
Meeting of Stockholders and until a successor has been elected and qualified or
until his earlier death, resignation or removal. Although the Committee has no
reason to believe that any of the Committee Nominees will be unable to serve as
a director, if any one or more of the Committee Nominees is not available for
election, the persons named on the WHITE proxy card will vote for the election
of such other nominees as may be proposed by the Committee. Should Allstate
increase the number of directors to be elected at the Annual Meeting, it is the
current intention of the Committee to propose additional nominees for such
directorships.
ADDITIONAL INFORMATION WITH RESPECT TO THE MEMBERS OF THE COMMITTEE
The following table sets forth information with respect to those members of
the Committee who have purchased Common Stock of the Company in the two years
preceding the date of this Proxy Statement. The table below does not include
information with respect to stock option grants made under the Company's stock
option plan.
<TABLE>
<CAPTION>
NAME DATE PURCHASED AMOUNT PURCHASED
- ----------------------------- --------------- -----------------
<S> <C> <C>
Value Partners, Ltd. 10/4/96 20,000
David W. Campbell 12/8/97 1,500
Edward A. McNally 7/19/96 1,000
</TABLE>
None of the holdings of the members of the Committee set forth herein are
held of record but not beneficially, nor are any of such securities owned
beneficially by associates of such persons, except as set forth herein. As of
the date of this Proxy Statement, no member of the Committee has purchased the
Common Stock with funds that were borrowed or otherwise obtained for the purpose
of acquiring such shares of Common Stock, except that Mr. Campbell holds his
shares in two separate brokerage accounts which had an aggregate outstanding
margin balance of $350,000 as of March 24, 1998. As of the date hereof, no
member of the Committee has sold any shares of the Common Stock in the two years
preceding the date of this Proxy Statement, except that Value Partners sold
20,000 shares on September 16, 1996 and Mr. Trittipoe sold 5,000 shares on
September 30, 1996 and 5,000 shares on October 3, 1996.
In addition, no member of the Committee is or was during the past year a
party to any contracts, arrangements or understandings with any person with
respect to the Common Stock other than in connection with Allstate's stock
benefit plans, and no member of the
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<PAGE>
Committee beneficially owns, directly or indirectly, any securities of any of
the Company's subsidiaries. Other than as set forth herein, no member of the
Committee or any associates thereof has any arrangement or understanding with
any person: (i) with respect to any future employment by the Company or its
affiliates; or (ii) with respect to any future transactions to which the
Company or any of its affiliates will or may be a party. Finally, no member
of the Committee has, during the past 10 years, been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
POSSIBLE CHANGE IN CONTROL
Based upon publicly available information concerning Allstate, there are
various change of control provisions in the Company's financing arrangements,
Notes and employment agreements that may possibly be triggered by the election
of the Committee Nominees to a majority of the Board of Directors of Allstate (a
"Change of Control"), as discussed below.
FINANCING ARRANGEMENTS
Allstate has entered into a $25 million secured credit facility (the "Loan
Agreement"), of which up to $5 million is available as a letter of credit
sub-facility, up to $5 million is available as a sub-facility the proceeds of
which may be used to make advances to clients secured by machinery and
equipment, and up to $2.5 million is available as a sub-facility the proceeds
of which may be used to make advances to clients secured by inventory. Under
the terms of the Loan Agreement, the lenders would have the option to
terminate their commitments and declare the outstanding loans thereunder due
and payable upon the occurrence of a Change of Control. According to
Allstate's Annual Report on Form 10-KSB for the quarter ended December 31,
1997, as of December 31, 1997, approximately $14.3 million principal amount of
loans were outstanding under the Loan Agreement. The maturity date on this
credit facility is May 27, 2000.
NOTES
At December 31, 1997, the Company had outstanding approximately $5.0 million
in aggregate principal amount of Convertible Subordinated Notes which were
issued in exchange for shares of Common Stock. The Notes (i) mature on September
30, 2000, (ii) bear interest at a rate of 9.5% per annum as of December 31,
1997, which rate of interest may fluctuate with the prime rate, but may not fall
below 8% nor rise above 10% per annum, (iii) are convertible into Common Stock
of the Company at $7.50 per share, (iv) are subordinated in right of payment to
the Company's obligations under the Loan Agreement, and (v) were issued pursuant
to an indenture which contains certain covenants which are less restrictive than
those contained in the Loan Agreement. Upon the occurrence of certain change of
control events, the holders of the Notes have the right to have their Notes
redeemed at par. Since four of the five Committee Nominees currently serve as
directors of the Company and were originally elected to the Board after being
nominated by the
15
<PAGE>
Board of Directors of the Company, the Committee believes that the election
of the Committee Nominees may not trigger such redemption rights. However,
even if such redemption rights were triggered, Value Partners currently does
not intend to seek to have its $1.3 million of Notes redeemed, although other
Note holders may elect to do so. In addition, the Company currently has the
right to elect to redeem the Notes at par in whole or in part at any time or
from time to time.
EMPLOYMENT AGREEMENTS
Based on Allstate's public filings, the Committee believes that the Company
currently has employment agreements with Craig Fishman, Lawrence M. Winkler,
Peter Matthy, Richard A. Brasch, Francis Madden and Wade Hotsenpiller, which
expire June 30, 1999, June 30, 1998, June 30, 1998, June 30, 1998, May 4, 2000
and June 30, 1998, respectively. These agreements provide that if the officer's
employment is terminated due to a Change of Control, then the Company shall (a)
pay to the officer a lump sum payment equal to the officer's base salary for a
specified period of time (one year for Messrs. Madden and Matthy, six months for
Messrs. Brasch and Hotsenpiller, and the lesser of (i) one year and (ii) the
remaining term of the agreement, but not less than six months for Messrs.
Fishman and Winkler) and (b) provide various fringe benefits to the officer for
the same period of time. The Committee currently has no intention of terminating
these employment agreements prior to their respective termination dates, with
the possible exception of the agreement with Craig Fishman. If elected, however,
the Committee Nominees will review the appropriateness of renewing such
agreements. According to Allstate's public filings, Craig Fishman's current base
salary is $210,000, which the Committee believes is too high.
PROXY PROCEDURES
Stockholders are urged to mark, sign and date the enclosed WHITE proxy card
and return it today in the enclosed postage-paid envelope in time to be voted at
the Annual Meeting.
Only holders of record as of the close of business on the Voting Record Date
will be entitled to vote. If you were a stockholder of record on the Voting
Record Date, you may vote your shares at the Annual Meeting even if you have
since sold your shares. Accordingly, please vote the shares held by you on the
Voting Record Date, or grant a proxy to vote such shares, on the WHITE proxy
card, even if you sold your shares after the Voting Record Date.
If any of your shares are held in the name of a brokerage firm, bank, bank
nominee or other institution on the Voting Record Date, only it can vote such
shares and only upon receipt of your specific instructions. Accordingly, please
contact the person responsible for your account and instruct that person to
execute on your behalf the WHITE proxy card.
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<PAGE>
The WHITE proxy solicited hereby, if properly signed and returned to the
Committee and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted FOR the Committee Nominees for director described
herein and, upon the transaction of such other business as may properly come
before the meeting, in accordance with the best judgment of the persons
appointed as proxies. Any stockholder giving a proxy has the power to revoke it
at any time before it is exercised by (i) submitting a duly executed proxy
bearing a later date; or (ii) appearing at the Annual Meeting and giving the
Secretary notice of his or her intention to vote in person. Proxies solicited
hereby may be exercised only at the Annual Meeting and any adjournment thereof
and will not be used for any other meeting.
Each share of Common Stock is entitled to one vote at the Annual Meeting on
all matters properly presented at the meeting. Directors are elected by a
plurality of the votes cast with a quorum present. A quorum consists of
stockholders representing, either in person or by proxy, a majority of the
outstanding Common Stock entitled to vote at the meeting. Abstentions are
considered in determining the presence of a quorum but will not affect the
plurality vote required for the election of directors.
Under rules applicable to broker-dealers, the proposal for the election of
the Committee Nominees is considered a "non-discretionary" item upon which
broker-dealers may not vote on behalf of their clients unless such clients have
furnished voting instructions. As a result, there may be broker non-votes at the
meeting. However, broker non-votes will have no effect on the election of
directors by a plurality vote.
THE INDEPENDENT SHAREHOLDERS/DIRECTORS COMMITTEE STRONGLY RECOMMENDS A VOTE
FOR THE ELECTION OF THE COMMITTEE NOMINEES.
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the
Independent Shareholders/ Directors Committee to vote the proxy with respect to
the approval of the minutes of the last meeting of stockholders, the election of
any person as a director if a Committee Nominee is unable to serve or for good
cause will not serve, matters incident to the conduct of the meeting, and upon
such other matters as may properly come before the Annual Meeting. The Committee
is not aware of any business that may properly come before the Annual Meeting
other than the matters described above in this Proxy Statement. However, if any
other matters should properly come before the meeting, it is intended that the
proxies solicited hereby will be voted with respect to those other matters in
accordance with the judgment of the persons voting the proxies.
The Committee may solicit proxies by mail, advertisement, telephone,
facsimile, telegraph and personal solicitation. Members of the Committee may
solicit proxies personally or by telephone without additional compensation. The
Committee will reimburse banks, brokerage firms and other custodians, nominees
and fiduciaries for reasonable
17
<PAGE>
expenses incurred by them in sending proxy solicitation materials to the
beneficial owners of the Common Stock.
The Committee has retained D.F. King & Co., Inc., 77 Water Street, New
York, New York 10005, a professional proxy solicitation firm, to assist in
the solicitation of proxies and for related services. The Committee will pay
D.F. King & Co., Inc. a fee of $[20,000] and has agreed to reimburse it for
its reasonable out-of-pocket expenses. The Committee has agreed to indemnify
D.F. King & Co., Inc. and its controlling persons, officers, directors,
employees and agents from and against any and all losses, claims, damages,
liabilities and expenses relating to its engagement, including liabilities
and expenses under the federal securities laws, but excluding matters
relating to the indemnified person's negligence, bad faith or willful
misconduct. Approximately persons will be used by D.F. King & Co., Inc.
in its solicitation efforts.
The members of the Committee will initially bear the cost of soliciting
proxies in connection with the Annual Meeting pro rata based on their ownership
of the shares of Common Stock. The cost of such solicitation, which includes the
fees of the Committee's attorneys, solicitors, advertising, printing and mailing
and other costs incidental to the solicitation, including litigation fees and
expenses, cannot be stated with precision at this time. However, the Committee
estimates that the total expenditures relating to this proxy solicitation will
be approximately $ , of which approximately $ has been incurred
as of March 31, 1998. Of the total estimate, approximately $ relates to
fees and expenses incurred in connection with litigation necessitated by the
refusal of the Management Directors to honor the terms of the agreement
previously reached on September 24, 1997, which litigation resulted in a court
order that the Annual Meeting be held on May 12, 1998. See "Problems With the
Company--Court-Ordered Meeting." If the Committee Nominees are elected to the
Board of Directors, the Committee intends to seek reimbursement from the Company
for the costs incurred by the Committee, but does not intend to submit the
question of such reimbursement to a vote of the stockholders.
In reliance upon Rule 14a-5(c)(1) of the Securities Exchange Act of 1934, as
amended, reference is made to the Company's proxy statement which will be sent
by the Company to each stockholder for information regarding the beneficial
ownership of the Common Stock, the directors and executive officers of the
Company (including compensation), and the date by which stockholders must submit
proposals for inclusion in the Company's proxy statement for the 1999 annual
meeting of stockholders.
The Committee assumes no responsibility for the accuracy or completeness of
any information contained herein which is based on, or incorporated by reference
to, Allstate's 1998 proxy statement or other public filings.
YOUR VOTE IS IMPORTANT! WE URGE YOU TO SIGN AND DATE THE ENCLOSED WHITE
PROXY CARD AND RETURN IT TODAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
18
<PAGE>
IMPORTANT
Your vote is important. Regardless of the number of shares of Allstate
common stock you own, please vote as recommended by the Independent
Shareholders/Directors Committee by taking these two simple steps:
1. PLEASE SIGN, DATE and PROMPTLY MAIL the enclosed WHITE proxy card in the
postage-paid envelope provided.
2. PLEASE DO NOT RETURN ANY PROXY CARDS sent to you by Allstate Financial
Corporation.
IF YOU VOTED ALLSTATE'S PROXY CARD BEFORE RECEIVING THE COMMITTEE'S WHITE
PROXY CARD, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE SIMPLY BY SIGNING, DATING
AND MAILING THE ENCLOSED WHITE PROXY CARD. THIS WILL CANCEL YOUR EARLIER VOTE
SINCE ONLY YOUR LATEST DATED PROXY CARD WILL COUNT AT THE ANNUAL MEETING.
If you own shares in the name of a brokerage firm, only your broker can vote
your shares on your behalf and only after receiving your specific instructions.
Please call your broker and instruct him/her to execute a WHITE card on your
behalf. You should also promptly sign, date and mail your WHITE card when you
receive it from your broker. Please do so for each separate account you
maintain.
You should return your WHITE proxy card at once to ensure that your vote is
counted. This will not prevent you from voting in person at the meeting should
you attend.
If you have any questions or need assistance in voting your shares, please
call D.F. King & Co., Inc., which is assisting us, toll-free at
1-800- - .
19
<PAGE>
ALLSTATE FINANCIAL CORPORATION REVOCABLE PROXY
INDEPENDENT SHAREHOLDERS/DIRECTORS COMMITTEE
THIS PROXY IS SOLICITED ON BEHALF OF THE ALLSTATE FINANCIAL CORPORATION
INDEPENDENT SHAREHOLDERS/DIRECTORS COMMITTEE (THE "COMMITTEE") FOR USE AT THE
ANNUAL MEETING OF STOCKHOLDERS OF ALLSTATE FINANCIAL CORPORATION (THE "COMPANY")
TO BE HELD ON MAY 12, 1998 AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
The undersigned, being a stockholder of the Company as of April 7, 1998,
hereby authorizes the Committee or any successors thereto as proxies with full
powers of substitution, to represent the undersigned at the Annual Meeting of
Stockholders of the Company to be held at the Sheraton National Hotel, 900 South
Orme Street, Arlington, Virginia, on Tuesday, May 12, 1998 at 11:00 a.m.,
Eastern Time, and at any adjournment or postponement of said meeting, and
thereat to act with respect to all votes that the undersigned would be entitled
to cast, if then personally present, as follows:
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
/ / FOR all nominees listed below (except as / / WITHHOLD AUTHORITY for all nominees listed
marked to the contrary below) below
</TABLE>
Nominees for a one-year term: David W. Campbell, Edward A. McNally, William
H. Savage, Malcolm M.B. Sterrett and Lindsay B. Trittipoe
(INSTRUCTION: To withhold authority to vote for one or more but less than all
of the nominees, cross-out the name of the nominee(s) set forth above.)
In their discretion, the proxies are authorized to vote with respect to
approval of the minutes of the last meeting of stockholders, the election of any
person as a director if a nominee is unable to serve or for good cause will not
serve, matters incident to the conduct of the meeting, and upon such other
matters as may properly come before the meeting.
The Board of Directors recommends that you vote FOR the nominees of the
Independent Shareholders/Directors Committee listed above. Shares of common
stock of the Company will be voted as specified. If no specification is made,
shares will be voted for the election of the Committee's nominees to the Board
of Directors and otherwise at the discretion of the proxies. This proxy may not
be voted for any person who is not a nominee of the Committee. This proxy may be
revoked at any time before it is voted at the Annual Meeting.
<PAGE>
The undersigned hereby acknowledges receipt of the Committee's Proxy
Statement for the Annual Meeting.
Dated: ________________, 1998
_____________________________
_____________________________
Signature(s)
Please sign this exactly as your
name(s) appear(s) on this proxy. When
signing in a representative capacity,
please give title. When shares are
held jointly, only one holder need
sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
