UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
Allstate Financial Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[_] 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:
SEC 1913 (3-99)
<PAGE>
ALLSTATE FINANCIAL CORPORATION
8180 Greensboro Drive, Suite 525
McLean, Virginia 22102
703-883-9757
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on August 8, 2000
The Annual Meeting of Shareholders of Allstate Financial Corporation (the
"Company") will be held at the Bank of America, Mezzanine Level, 8300 Greensboro
Drive, McLean, VA 22102, on August 8, 2000, at 11:00 a.m., for the following
purposes:
1. To elect six (6) directors for a term of one year or until their successors
have been elected and qualified.
2. To approve (a) the reincorporation of the Company as a Delaware
corporation, and as separate proposals the following provisions:
(b) a provision in the Delaware certificate of incorporation
restricting the transfer of the Company's securities, (c)a
provision in the Delaware certificate of incorporation which
increases the number of authorized shares of common stock from 10
million to 20 million, and (d) provisions in the Delaware bylaws
regarding shareholder proposals and nominations.
3. To approve the Company's 2000 Stock Option Plan.
4. To approve the Company's 2000 Restricted Stock Plan for Non-Employee
Directors.
5. To ratify the appointment of McGladrey & Pullen, LLP as independent auditors
for the year ended December 31, 2000.
6. To transact such other business as may properly come before the
meeting. Except with respect to procedural matters incident to
the conduct of the meeting, management is not aware of any other
such business.
Shareholders of record of the Company as of the close of business on June 15,
2000 are entitled to notice of, and to vote at, the Annual Meeting or any
adjournment thereof. Shareholders have the right to elect dissenter's rights
under Virginia Law.
BY ORDER OF THE BOARD OF DIRECTORS
ALLSTATE FINANCIAL CORPORATION
C Fred Jackson
Secretary
McLean, Virginia
July 11, 2000
1
<PAGE>
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
ALLSTATE FINANCIAL CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
August 8, 2000
The enclosed proxy is solicited by the Board of Directors of Allstate Financial
Corporation (the "Company") for use at the Annual Meeting of Shareholders to be
held at the Bank of America, Mezzanine Level, 8300 Greensboro Drive, McLean, VA
22102,on August 8, 2000, at 11:00 a.m., and at any adjournment thereof (the
"Annual Meeting"). This proxy is first being sent to shareholders on July 6,
2000.
At the Annual Meeting, shareholders will be asked to consider and vote upon five
proposals: to elect six (6) directors for a term of one year or until their
successors have been elected and qualified; to approve the reincorporation of
the Company as a Delaware corporation; to approve the Company's 2000 Stock
Option Plan; to approve the Company's 2000 Restricted Stock Plan for
Non-Employee Directors; and to ratify the appointment of McGladrey & Pullen, LLP
as independent auditors for the year ended December 31, 1999(the "Proposals").
The second proposal regarding the reincorporation of the company includes three
additional related proposals as proposals 2(b), 2(c) and 2(d) to approve the
following provisions: (b) a provision in the Delaware certificate of
incorporation restricting the transfer of the company's securities, (c) a
provision in the Delaware certificate of incorporation increasing the number of
authorized shares of common stock from 10 million to 20 million, and (d)
provisions in the Delaware bylaws regarding shareholder proposals and
nominations. If proposal 2(a) regarding the reincorporation into Delaware is not
approved, then proposals 2(b), 2(c) and 2(d) cannot be implemented and will be
moot. If proposal 2(a) is approved but one or more of proposals 2(b), 2(c) and
2(d) are not approved, then the company's board of directors will re-evaluate
the feasibility of the reincorporation and may elect to abandon the
reincorporation despite the shareholder approval of proposal 2(a).
2
<PAGE>
In addition to solicitation by mail, officers, directors and employees of the
Company may solicit proxies by telephone, facsimile, telegraph or in person.
None of these persons will receive additional compensation for such solicitation
but will be reimbursed for actual expenses in connection therewith. Expenses in
connection with the solicitation of proxies, including the reasonable expenses
of brokers, fiduciaries and other nominees in forwarding proxy material, will be
borne by the Company.
VOTING OF PROXIES
Each holder of the Company's common stock of record as of the close of business
on the record date, June 15, 2000, is entitled to vote in person or by proxy on
all matters to be voted upon at the Annual Meeting. As of the record date, the
Company had 2,324,616 shares of common stock outstanding, each of which shares
is entitled to one vote on each matter presented.
If a proxy in the accompanying form is properly executed and returned to the
Company in time for the Annual Meeting and is not revoked prior to the time it
is exercised, the shares represented by the proxy will be voted in accordance
with the directions specified therein for the matters listed on the proxy card.
Unless the proxy indicates otherwise, proxies will be voted FOR each of the
proposals and otherwise in the discretion of the proxy holders as to any other
matter that may come before the Annual Meeting.
Any shareholder giving a proxy has the power to revoke it at any time before it
is exercised by (1) filing with the Secretary of the Company written notice
thereof, delivered to Allstate Financial Corporation, 8180 Greensboro Drive,
McLean, Virginia 22102; (2) submitting a duly executed proxy bearing a later
date; or (3) 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.
Directors are elected by a plurality of the votes cast with a quorum present. A
quorum consists of shareholders 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 of
the New York Stock Exchange applicable to broker-dealers, the election of
directors is considered a "discretionary" item upon which brokerage firms may
vote in their discretion on behalf of their clients if such clients have not
furnished voting instructions and for which there will not be "broker
non-votes."
3
<PAGE>
The proposal to approve the reincorporation into Delaware requires the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of the Company's common stock. The company is applying this same vote
requirement to each of the three related proposals identified as proposals 2(b),
2(c) and 2(d). The proposals to approve the 2000 Stock Option Plan (the "Option
Plan") and the 2000 Restricted Stock Plan for Non-Employee Directors (the
"Restricted Stock Plan") require the affirmative vote of the holders of a
majority of the total votes eligible to be cast in person or by proxy at the
meeting for approval. These three proposals are "non-discretionary" items upon
which brokerage firms may not vote unless their clients have furnished voting
instructions on such proposals. As a result, there may be "broker non-votes" at
the meeting. Because of the required votes, abstentions and broker non-votes
will have the same effect as a vote against the proposals to approve the
reincorporation proposal(including the related proposals,) the Option Plan and
the Restricted Stock Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 15, 2000, the amount of common stock
of the Company beneficially owned by: (1) each person known to the Company to be
the beneficial owner of more than 5% of the aggregate shares of the Company's
outstanding common stock, (2) each director of the Company, (3) each of the
current named executive officers in the Summary Compensation Table, and (4) all
executive officers and directors as a group.
4
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------- ---------------------------------- ---------------------------
Name and Address Common Shares Percent of Class
Beneficially Owned
------------------------------------------------------- ---------------------------------- ---------------------------
<S> <C> <C>
Timothy G. Ewing 1, 2
Ewing and Partners
Value Partners, Ltd.
4514 Cole Avenue, Suite 808
Dallas, Texas 75201 1,314,060 44.2%
Herzog,Heine,Geduld,Inc.
525 Washington Blvd.,10th Flr.
Jersey City, NJ 07002 200,571 8.6%
Tweedy,Browne Company L.L.C.
52 Vanderbilt Avenue
New York, NY 10017 136,150 5.9%
Lindsay B. Trittipoe 3
4208 West Franklin St.
Richmond, VA 23221 135,289 5.8%
Walter P. Carucci 4
Carucci Family Partners
Carr Securities Corp. 128,456 5.5%
One Penn Plaza, Suite 4720
New York, NY 10014
</TABLE>
1 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.
5
<PAGE>
2 Value Partners owns $4,197,000 of the Company's Convertible Subordinated
Notes due September 30, 2003 ("New Notes"), which are currently convertible into
645,692 shares of common stock and are included in the table. Excluding such
shares, Value Partners owns 668,368 shares or 28.8% of the issued and
outstanding common stock.
3 Mr. Trittipoe is also a director of the Company
4 Walter P. Carucci is the general partner of Carucci Family Partners and
President of Carr Securities Corp. Mr. Carucci personally owns 50,000 shares,
Carucci Family Partners owns 56,500 shares, and Carr Securities owns 2,264
shares. In addition, Carucci Family Partners owns $128,000 of New Notes, which
are convertible into 19, 692 shares of stock, which are included in the table.
Directors:
<TABLE>
<CAPTION>
------------------------------------------------------- ---------------------------------- ---------------------------
Name and Address Common Shares Percent of Class
Beneficially Owned
------------------------------------------------------- ---------------------------------- ---------------------------
<S> <C> <C>
C. Scott Bartlett, Jr.5 13,495 0.6%
David W. Campbell 9,000 0.3%
Charles G. Johnson 61,000 2.6%
Steven W. Lefkowitz 13,000 0.6%
Edward A. McNally 14,000 0.6%
William H. Savage 6 50,385 2.1%
</TABLE>
6
<PAGE>
Executive Officer who is not a Director:
<TABLE>
<CAPTION>
------------------------------------------------------- ---------------------------------- ---------------------------
Name and Address Common Shares Percent of Class
Beneficially Owned
------------------------------------------------------- ---------------------------------- ---------------------------
<S> <C> <C>
C. Fred Jackson 7 40,133 1.7%
For all Executive Officers and Directors as a
Group (8 persons) 335,302 14.3%
</TABLE>
The amounts in the table are based on filings or other information furnished by
the respective individuals or entities. 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. 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
June 15, 2000 pursuant to the exercise of outstanding stock options or
convertible notes. Shares of common stock owned by such person or group 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 above include shares which may be received
upon the exercise of stock options within 60 days of June 15, 2000 as follows:
Mr. Bartlett, 13,000 shares; Mr. Campbell, none; Mr. Johnson, 60,000 shares; Mr.
Lefkowitz, 13,000 shares; Mr. McNally, 13,000 shares; Mr. Savage, 13,000 shares;
Mr. Trittipoe, 13,000 shares; Mr. Jackson, 30,000 shares; and all directors and
officers as a group, 155,000 shares.
7
<PAGE>
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTORS
AND EXECUTIVE OFFICERS
PROPOSAL NUMBER ONE
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 six for purposes of the Annual
Meeting. There is only one class of directors.
Directors of the Company are elected to serve until the next annual meeting of
the shareholders of the Company and until their respective successors are
elected and qualified.
There are no arrangements or understandings between the Company and any person
pursuant to which such person has been elected or nominated as a director, and
no director or nominee for director is related to any other director, nominee
for director or executive officer of the Company by blood, marriage or adoption.
Unless otherwise directed, each proxy executed and returned by a shareholder
will be voted for the election of the nominees for director listed below. If any
person named as a nominee should be unable or unwilling to stand for election at
the time of the Annual Meeting, the proxies will nominate and vote for any
replacement nominee or nominees recommended by the Board of Directors. At this
time, the Board of Directors knows of no reason why any of the nominees listed
below may not be able to serve as a director if elected.
<TABLE>
<CAPTION>
Principal Occupation Director
Name Age And Other Directorships Since
<S> <C> <C> <C> 1995
David W. Campbell 53 Interim CEO from June 1998 to January 1999. Chairman, Director and CEO of
Dominion Savings Bank in Front Royal, Virginia. 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; formerly
President and Chief Executive Officer of Ameribanc Savings Bank ("ASB") in
Annandale, Virginia (June 1990 through March 1995); prior to that, 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.
8
<PAGE>
Charles G. Johnson 54 President and CEO of the Company since January 1999. He is President of 1999
the Commercial Finance Association, the national trade association of the
factoring and asset based lending industry, and will become its Chairman
in the year 2001. From February 1997 to November 1998, he was Executive
Vice President and Division Manager for Heller Commercial Funding in
Chicago, Illinois. From 1993 to February 1997, he was Senior Vice
President and Region Manager for Heller Business Credit. He was Vice
President and Regional Manager of Whirlpool Financial Corporation from
1989 to 1993,President and CEO of First Union Commercial Corporation from
1983 to 1987, and Vice President and Senior Credit Officer of that
organization during 1982 and 1983.
Steven W. Lefkowitz 44 Founder and President of Wade Capital Corporation,a privately held 1998
investment firm in New York City, since 1990. From 1988 to 1990, he served
as Vice President of Corporate Finance for Drexel Burnham Lambert, Inc.,
where he had been employed since 1985. He serves on the Board of Franklin
Credit Management Corporation (Nasdaq: "FCSC"), as well as several private
companies.
Edward A. McNally 57 Managing Director, Windham Partners, LLC (commencing August 1996). The 1996
principal business of the company is management consulting for the
financial services industry. The company is headquartered in Ridgefield,
Connecticut. Since 1991, he has served as a management consultant
specializing in domestic and international financial services companies.
Prior to 1991, he was Senior Vice President, National Westminster Bank
USA, specializing in middle market companies. In addition, he has
extensive experience with equipment leasing, commercial finance, media,
and textile and apparel companies.
William H. Savage 67 Chairman of Island Preservation Partnership, developer of a 1,200 acre 1995
private, oceanfront retreat near Charleston, S.C.; President and Director of
Richards United Corporation, a real estate investment company based in
Alexandria, Virginia, and Chairman of Orchids Dominicana, S.A., Santo
Domingo, D.R., which propagates and cultivates orchid plants for the U.S.
market. From 1994 to 1995, he was a Director of Jefferson Federal Savings
Bank in Warrenton, Virginia. Prior to 1990, he was the Chief Executive
Officer and Trustee of Ameribanc Investors Group, headquartered in
Annandale, Virginia.
9
<PAGE>
Lindsay B. Trittipoe 42 Since January 1998, President of Commonwealth Acceptance, Inc., a 1997
Richmond, Virginia company specializing in commercial finance
transactions. Prior to forming Commonwealth, he was Vice President,
Capital Markets of Wheat First Securities (now First Union Securities), a
Richmond, Virginia based investment bank and brokerage firm, from
September 1995 to October 1997. He was Vice President of Craigie
Incorporated, a Richmond, Virginia based investment bank and bond trading
firm, from 1989 to September 1995. He also served as a director of
TideMark Bancorp, a Virginia savings and loan holding company, from 1989
to the sale of the company in 1995 to Crestar Bank. He served on
TideMark's Executive Committee and as Chairman of its Investment Committee.
</TABLE>
Executive Officer Who Is Not a Director
The following table sets forth certain information with respect to the current
executive officer of the Company who is not a director. There are no
arrangements or understandings between the Company and this person pursuant to
which he was elected an executive officer of the Company, and he is not related
to any director or officer of the Company by blood, marriage or adoption.
<TABLE>
<CAPTION>
Principal Occupation
Name Age During The Past Five Years
<S> <C>
C. Fred Jackson 47 Senior Vice President, Secretary, Treasurer, and Chief Financial Officer of the
Company since April 1999. Senior Vice President and Chief Credit Officer of the
Company from September 1998 through March 1999. Independent Consultant to the
financial services industry from July 1997 through September 1998. From October
1996 to June 1997, Senior Vice President and Chief Financial Officer of Jayhawk
Acceptance Corp. From 1991 to 1996, employed by The Money Store Inc. most recently
as Vice President, Finance. From 1981 to 1991, employed at National Westminster
Bank USA.
</TABLE>
Meetings and Committees of the Board
During 1999, there were eight regular meetings of the Board of Directors and
seven telephonic meetings. The Board has Audit and Compensation Committees as
described below. Each of the directors of the Company attended at least 75% of
the meetings of the Board of Directors held during the period he served, and at
least 75% of the meetings of any committees upon which he serves.
The Audit Committee currently consists of Messrs. C. Scott Bartlett, a current
director who is not standing for reelection, Lefkowitz, and Campbell, ex
officio. The committee met two times during 1999. The Audit Committee reviews
the internal controls and operations of the Company, recommends independent
accountants for appointment by the Board of Directors, and reviews the scope of
the work of the independent accountants and their audit reports.
The Compensation Committee currently consists of Messrs. McNally, Savage, and
Trittipoe. The Compensation Committee met once in 1999. The committee reviews
executive compensation, employment contracts, and other related compensation
matters, and makes recommendations to the Board of Directors concerning the
selection of employees to receive stock options and the terms of such option
10
<PAGE>
grants.
The Board does not have a nominating committee. The functions of this committee
are performed by the Board of Directors. The Board also does not have a separate
executive committee.
Compensation of Directors
For the period from January 1999 through June 1999, directors who are not
officers of or consultants to the Company received 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 or consultants
to the Company also may receive a fee of $500 per board meeting attended by
conference telephone call. Beginning July 1999 the board eliminated such fees.
In addition, from January 1999 through June 1999, non-management directors were
granted 1,000 stock options per meeting attended at an exercise price equal to
the greater of (a) $7.00 per share and (b) 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, 2000. All stock option grants made to directors
during this period were made under the Company's Non Qualified Stock Option
Plan.
Directors do not receive additional fees to serve on any committee or as chair
of any committee. Directors who are officers of or consultants to the Company
receive no compensation for serving as directors, but are reimbursed for
out-of-pocket expenses related to attending board or committee meetings.
Mr. Campbell was paid a consulting fee of $2,500 per month as non-executive
chairman of the board for the period during which he was not employed by the
Company, from July 1999, through December 1999.
11
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain summary information concerning compensation
paid or accrued by the Company for the years ended December 31, 1999, 1998 and
1997, to or on behalf of individuals serving as the Company's Chief Executive
Officer, the Company's only other executive officer as of the end of the last
fiscal year, and two additional individuals for whom disclosure would have been
provided but for the fact that each was not serving as an executive officer at
the end of the fiscal year.
Annual compensation does not include amounts attributable to other miscellaneous
benefits received by the named executive officers. The costs to the Company of
providing such benefits during 1999 did not exceed 10% of the total salary and
bonus paid to or accrued for the benefit of any such individual executive
officer.
<TABLE>
<CAPTION>
12
<PAGE>
-------------------------------------- ------------ -------------- ------------ -------------------- ----------------------
Awards- All Other
Annual Annual Securities Compen-
Name and Salary Bonus Underlying sation
Principal Position Year ($) ($) Options ($)
-------------------------------------- ------------ -------------- ------------ -------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Charles G. Johnson 1999 178,222 - 60,000 1,517(1)
Director/CEO 1998 - - - 18,765(2)
David W. Campbell 1999 83,032 - - 12,500(3)
Director, Interim CEO (4), 1998 90,200 - - 9,964(5)
Chairman of the Board 1997 - - 8,000 22,365(6 )
C. Fred Jackson 1999 178,500 - - -
Secretary/Treasurer and CFO, Senior 1998 69,598 - 30,000 -
Credit Officer
Lawrence M. Winkler 1999 26,315 - - 115,706(7)
Secretary/Treasurer 1998 163,550 17,685 - 4,417(1)
and CFO 1997 163,373 23,572 - 3,580(1)
Wade Hotsenpiller 1999 112,852 - - 21,154(7)
Sr. VP and COO, 1998 138,096 23,750 - 3,631(1)
Sr. VP and Mgr., Factoring 1997 122,831 12,500 - 2,263(1)
</TABLE>
1 Represents contributions made by the Company to its 401(k) plan
2 Represents consulting fees paid during the period prior to becoming an
employee.
3 Represents consulting fees.
4 Interim CEO from June 29, 1998 to January 21, 1999.
5 Includes directors fees of $8,500, and contributions made by the Company
to its 401(k) plan of $1,464.
6 Includes directors fees of $14,500 and consulting fees of $7,865.
7 Represents an amount payable pursuant to an arrangement in connection
with termination of employment.
13
<PAGE>
Stock Options
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Number of Percent of Total
Securities Options Granted to Exercise or
Name Underlying Employees in Fiscal Base Price Expiration Date
Options Created Year
<S> <C> <C> <C> <C>
Charles G. Johnson 30,000 50.0 $4.00 1/21/2006
Charles G. Johnson 30,000 50.0 $6.50 1/21/2006
</TABLE>
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year End Option
Values
None of the named executive officers exercised any stock options during 1999.
14
<PAGE>
<TABLE>
<CAPTION>
Name Number of Value Realized Number of Securities Underlying Value of Unexercised In-the-Money
Underlying $ Unexercised Options at Fiscal Year Options at Fiscal year End
Securities End
acquired Upon
Exercise
<S> <C> <C> <C> <C> <C> <C>
Exercisable Unexercisable Exercisable Unexercisable
Charles G. Johnson -- -- 60,000 -- -- --
David W. Campbell -- -- -- -- -- --
C. Fred Jackson -- -- 30,000 -- -- --
Lawrence Winkler -- -- -- -- -- --
Wade Hotsenpiller -- -- -- -- -- --
</TABLE>
All options granted and reported in the above tables were made pursuant to the
1990 Qualified Stock Option Plan (1990 Compensatory Option Plan in the case of
Mr. Campbell) and have the following material terms:
Options may be either (1) "incentive stock options" under Section 422 of the
Internal Revenue Code of 1986 or (2) non-qualified stock options. 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%
Stockholder") shall be eligible to receive any incentive stock options under the
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 Plan cannot be exercised more than ten
years from the date of grant, except that incentive stock options issued to a
10% Stockholder are limited to five year terms.
15
<PAGE>
Employment Agreements and Termination of Employment Agreements
The Company is currently a party to employment agreements with Messrs. Johnson
and Jackson. The following sets forth their principal terms:
Mr. Johnson, the Company's President and CEO, has entered into an employment
agreement with the Company dated January 20, 1999. The agreement is for a term
of three years from the initial date. However, commencing on January 1, 2001,
the term is extended one day at the end of every day during its length and the
new maturity date of the term shall be increased by that day, unless either
party shall notify the other of its intention to stop such extension, in which
case the new maturity date shall be one year from the date of such notice. Mr.
Johnson's salary was established at $185,000 per annum, subject to periodic
increases by the Board of Directors. Mr. Johnson may receive an annual incentive
bonus of up to 100% of his annual salary at the sole discretion of the Board.
Mr. Johnson received a grant of 60,000 stock options (30,000 with an exercise
price equal to $4.00 per share and 30,000 options with an exercise price of
$6.50 per share). All of the options have a maturity date of seven years from
the date of issuance and are immediately exercisable. Mr. Johnson was provided
an automobile allowance of $500 per month, reimbursement of housing expenses up
to $15,000, and reimbursement of moving and short-term storage expenses up to
$10,000, with the housing and moving expenses to be grossed-up to reflect
federal, state and local taxes. Beginning July 1999 management deferred receipt
of automobile allowances.
The agreement contains confidentiality and non-compete provisions, obligates the
Company to include Mr. Johnson in any benefit plans generally made available to
employees, provides reimbursement of bona fide business and trade association
expenses, and provides for certain death and disability benefits. In addition,
if Mr. Johnson's employment is terminated by the Company for other than death,
disability or cause or by Mr. Johnson for Good Reason (as defined), then Mr.
Johnson will receive severance equal to (1) a lump sum payment equal to his base
salary for the greater of one year or the remaining term, (2) various fringe
benefits, including his automobile allowance, for one year, and (3) bonuses
through and including the year of termination, pro-rated as appropriate. "Good
16
<PAGE>
Reason" is defined to include certain adverse actions following a business
combination or Change of Control. "Change of Control" is defined to include the
acquisition of a controlling interest in the Company, including beneficial
ownership of 25% or more of the common stock, by any person or entity other than
Value Partners.
Mr. Jackson's agreement is dated September 1, 1998, provides for a base salary
of $175,000, and has a term of one year that is extended one day at the end of
every day during the term, unless either party shall notify the other of its
intention to stop such extensions, in which case the closing date of the term
shall be one year from the date of such notice. Pursuant to the agreement, Mr.
Jackson received a grant of 30,000 incentive stock options with an exercise
price of $5.00 per share. Said options will expire upon the earlier of ten years
from the date of issuance or termination of employment. The agreement contains
confidentiality and non-compete provisions, obligates the Company to provide Mr.
Jackson with an automobile allowance of $500 per month, requires the Company to
include Mr. Jackson in any benefit plans generally made available to employees,
and provides for certain death and disability benefits. In addition, if Mr.
Jackson's employment is terminated either by the Company for other than death,
disability or cause or by Mr. Jackson following certain adverse actions
subsequent to a business combination or Change of Control, then Mr. Jackson will
receive severance equal to (1) a lump sum payment equal to his base salary for
one year, and (2) various fringe benefits, including his bonuses and automobile
allowance, for one year. The definition of Change in Control in Mr. Jackson's
agreement is similar to the definition in Mr. Johnson's agreement. Beginning
July 1999 management deferred receipt of automobile allowances.
Lawrence W. Winkler, formerly the Senior Vice President, Secretary and Treasurer
of the Company, had a contract with the Company that expired on March 31, 1999.
Effective April 1, 1999, the Company and Mr. Winkler agreed that Mr. Winkler's
employment would be terminated without cause effective immediately and the
Company paid Mr. Winkler a severance amount of $115,706 upon execution of a
Separation and Release Agreement.
17
<PAGE>
Wade Hotsenpiller, formerly Senior Vice President and Chief Operating Officer of
the Company, had a contract with the Company that expired on March 31, 1999.
Effective April 1, 1999, the Company and Mr. Hotsenpiller agreed that if Mr.
Hotsenpiller's employment was terminated for other than cause he would receive
severance payments. Effective October 8, 1999 the Company and Mr. Hotsenpillar
agreed that Mr. Hotsenpiller's employment would be terminated without cause
effective immediately and the Company paid Mr. Hotsenpiller a severance amount
of $21,154 upon execution of a Separation and Release Agreement.
In September 1998, Value Partners purchased $2,896,000 of Notes ("New Notes")
for cash from the Company in order to fund the Company's repurchase of a similar
amount of subordinated convertible notes due September 30, 2000 ("Old Notes").
The New Notes have a higher interest rate (10% fixed), a lower conversion rate
into the common stock ($6.50 per share versus $7.50 per share under the Old
Notes), a maturity date of September 30, 2003, and more restrictive financial
covenants. The Company made an exchange offer of new Notes to all holders of Old
Notes who were accredited investors and who did not have their Old Notes
repurchased by the Company, and $1,701,000 of Old Notes (including $1,301,000
held by Value Partners) were exchanged for new Notes. During 1999 the Company
paid Value Partners $314,777 in interest on the New Notes. As the holder of over
50% of the new Notes, Value Partners has the right to name, at any time and from
time to time so long as the Notes are outstanding, (a) one of the directors of
the Company so long as the Board shall have eight or fewer members, including
the director named by Value Partners, and (b) two directors of the Company if
the Board exceeds eight members, including the first director named by Value
Partners. To date, Value Partners has not exercised this right.
The Company obtained a $1,000,000 working capital loan from Value Partners. The
working capital loan bears a 10% rate of interest, which is payable quarterly,
and repayment terms of 25% of collections of certain assets. The outstanding
balance of the loan is due March 31, 2000. As of December 31, 1999, the Company
owed $799,772 on the working capital loan. In 1999 the Company paid $18,599 in
interest on the working capital loan.
18
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 ("1934 Act")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
Securities and Exchange Commission (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, and
written representations from certain reporting persons, the Company believes
that all Section 16(a) filing requirements applicable to its officers, directors
and greater than ten percent stockholders were complied with during 1999.
PROPOSALS NUMBER 2(a)-2(d)
PROPOSAL TO REINCORPORATE AS A DELAWARE CORPORATION
General
The Board of Directors of the Company has unanimously approved, subject to
stockholder approval, a proposal (the "Reincorporation Proposal") to change the
Company's state of incorporation from Virginia to Delaware by means of a merger
(the "Merger") of the Company with and into Allstate Financial Corporation, a
newly formed Delaware corporation and wholly owned subsidiary of the Company
("Allstate Delaware"). Allstate Delaware will be the surviving corporation in
the Merger, and the effect of the Merger will be to change the law applicable to
the Company's corporate affairs from the Virginia Stock Corporation Act
("Virginia Law") to the Delaware General Corporation Law ("Delaware Law"). This
change in applicable law results in certain differences in stockholders' rights.
See "-Comparison of Stockholder Rights."
The following discussion summarizes certain aspects of the Reincorporation
Proposal, including certain material differences between Delaware Law and
Virginia Law. This summary is not intended to be a complete description of the
Reincorporation Proposal or the differences between stockholders' rights under
Delaware Law or Virginia Law, and is qualified in its entirety by reference to
the following documents:
o the Agreement and Plan of Merger dated June 13, 2000 between the Company
and Allstate Delaware (the "Agreement") attached hereto at Appendix A;
o the Certificate of Incorporation of Allstate Delaware (the "Certificate")
attached hereto at Appendix B;
o the Amended and Restated Bylaws of Allstate Delaware (the "New Bylaws")
attached hereto at Appendix C; and
o the Company's Articles of Incorporation (the "Articles") and Bylaws
(the "Present Bylaws"), which are available for inspection at the
Company's principal executive office and which will be provided to
stockholders upon request.
The Company's Board of Directors has unanimously approved the Reincorporation
Proposal and, for the reasons set forth below, believes that the best interests
of the Company and its stockholders will be served by changing the Company's
state of incorporation from Virginia to Delaware. The Company's stockholders are
being asked to approve the Reincorporation Proposal (including the adoption of
the Agreement and the approval of the Certificate and the New Bylaws) at the
Annual Meeting. The Board of Directors unanimously recommends that the Company's
stockholders vote FOR the Reincorporation Proposal. Approval of the
Reincorporation Proposal by the Company's stockholders will constitute adoption
of the Agreement and approval of the Merger, the Certificate and the New Bylaws,
except as set forth below. As a result of the Merger, the Certificate and New
Bylaws will replace the Articles and Present Bylaws as the charter documents
affecting corporate governance and stockholders' rights. See "-Comparison of
Stockholder Rights." Accordingly, stockholders are urged to read carefully this
proxy statement and the appendices attached hereto.
19
<PAGE>
Several provisions in the certificate and the New Bylaws are being submitted to
stockholders as separate but related proposals 2(b), 2(c), and 2(d). The
reincorporation Proposal is proposal 2(a), and the separate but related
proposals are to approve the following provisions: (b) a provision in the
certificate restricting the transfer of the company's securities, (c) a
provision in the Certificate increasing the number of authorized shares of
common stock from 10 million to 20 million, and (d) provisions in the New Bylaws
regarding stockholder proposals and nominations. If proposal 2(a) regarding the
reincorporation is not approved, then proposals 2(b), 2(c) and 2(d) cannot be
implemented and will be moot. If proposal 2(a) is approved but one of more of
proposals 2(b), 2(c) and 2(d) are not approved, then the Company's board of
directors will re-evaluate the feasibility of the reincorporation and may elect
to abandon the reincorporation despite the stockholder approval of proposal
2(a).
Description of the Reincorporation Proposal 2(a)
At the Effective Date of the Merger (as defined in the Agreement), the separate
existence of the Company will cease and Allstate Delaware, as the surviving
corporation, will succeed to all business, properties, assets and liabilities of
the Company. Each share of Common Stock of the Company issued and outstanding
immediately prior to the Effective Date will by virtue of the Merger be
converted into one share of common stock, par value $.01 per share, of Allstate
Delaware ("Allstate Delaware Common Stock"). As of the Voting Record Date, there
were 2,324,616 shares of Common Stock issued and outstanding. At the Effective
Date, certificates which immediately prior to the Effective Date represented
shares of Common Stock of the Company will be deemed for all purposes to
represent the same number of shares of Allstate Delaware Common Stock. It will
not be necessary for stockholders of the Company to exchange their existing
stock certificates for stock certificates of Allstate Delaware. However, when
outstanding certificates representing shares of Common Stock are presented for
transfer after the Merger, new certificates representing shares of Allstate
Delaware Common Stock will be issued. New certificates will also be issued upon
the request of any stockholder, subject to proper endorsement, signature
guarantee, if required, and payment of applicable taxes, if any.
Following consummation of the Merger, the Allstate Delaware Common Stock is
expected to listed for trading on the OTC Bulletin Board, the market on which
20
<PAGE>
the Common Stock currently is listed for trading. The Allstate Delaware Common
Stock is expected to be listed under the symbol "ASFN," which is the same symbol
as the Company's current symbol. Delivery of existing stock certificates
representing Common Stock of the Company will constitute "good delivery" of
shares of Allstate Delaware in transactions subsequent to the Effective Date of
the Merger. Approval of the Reincorporation Proposal will effect a change in the
legal domicile of the Company and certain other changes of a legal nature, as
described in this proxy statement. Reincorporation of the Company will not, in
and of itself, result in any change in the name, business, management, location
of the principal executive offices, assets, liabilities or stockholders' equity
of the Company. The directors and officers of the Company prior to the Merger
will continue to serve as the directors and officers of Allstate Delaware
following the Merger.
Pursuant to the terms of the Agreement, each option to purchase Common Stock
outstanding immediately prior to the Effective Date of the Merger under the
Company's stock option plans (the "Option Plans") will be converted into an
option to purchase Allstate Delaware Common Stock, subject to the same terms and
conditions as set forth in the Option Plans or other agreements pursuant to
which such option was granted. All other employee benefit plans and other
agreements and arrangements of the Company will be continued by Allstate
Delaware upon the same terms and subject to the same conditions.
Upon approval of the Reincorporation Proposal by the Company's stockholders, the
proposed reorganization will be consummated at such time as the Boards of
Directors of the Company and Allstate Delaware determine is advisable. The
Agreement provides, however, that the Merger may be abandoned by the Board of
Directors of either the Company or Allstate Delaware prior to the Effective
Date, either before or after stockholder approval. In addition, the Agreement
may be amended prior to the Effective Date, either before or after stockholder
approval; provided, however, that the Agreement may not be amended after
stockholder approval if such amendment would (1) alter or change the amount or
kind of shares or other consideration to be received by stockholders in the
Merger; (2) alter or change any term of the Certificate, other than as reflected
by the stockholder vote on proposals 2(b) and 2(c); (3) alter or change any of
the terms and conditions of the Agreement if such alteration or change would
adversely affect the stockholders; or (4) otherwise violate applicable law.
Reasons for the Reincorporation Proposal 2(a)
21
<PAGE>
The primary purpose for reincorporating in Delaware is to take advantage of a
provision in Delaware Law that will facilitate the recapitalization of the
Company. In light of the Company's significant losses in 1998, 1999 and the
first quarter of 2000, its limited sources of capital and its substantially
reduced ability to fund new advances to clients, the Board of Directors has
adopted a strategic plan (the "Plan") in an effort to return the Company to
profitability. A key component of this Plan is the conversion of the Company's
convertible subordinated notes due September 30, 2003 (the "2003 Notes"),
including the accrued but unpaid interest thereon, into common stock. The 2003
Notes bear interest at a fixed rate of 10% per annum (subject to a default rate
of 14%) are not redeemable at the option of the Company, and are convertible
into Common Stock at $6.50 per share.
At June 13, 2000, the Company had $4.6 million of 2003 Notes outstanding, plus
$400,529 of accrued but unpaid interest on the 2003 Notes. Of this amount, Value
Partners, Ltd. held $4.2 million of the 2003 Notes, plus $365,678 of accrued but
unpaid interest. Value Partners has agreed to convert its 2003 Notes and accrued
but unpaid interest, with the accrued and unpaid interest calculated at the rate
of 12.5% simple interest, into Allstate Delaware Common Stock at the rate of
$0.95 per share. The interest rate and the lower conversion rate were determined
by arm's-length negotiations between Value Partners and a committee of three
independent directors of the Company consisting of Messrs. Campbell, Lefkowitz,
and McNally. However, this agreement is contingent upon (1) stockholder approval
of this proposal to reincorporate into Delaware, (2) completion of the Merger,
(3) approval of an amendment to the 2003 Notes to provide for the lower
conversion price, (4) approval of the Plan by holders of a majority in number
and three-fourths in value of the 2003 Notes, and (5) approval of the conversion
of Value Partners' 2003 Notes by the Delaware Court of Chancery. There can be no
assurances that all of these conditions will be met.
As discussed below under "-Tax Consequences," a condition to the Merger is the
Company's receipt of a tax opinion from PricewaterhouseCoopers LLP that the use
of the Company's net operating loss ("NOL") carryforwards will not be impaired
by the Merger or by the issuance of Allstate Delaware Common Stock upon
conversion of the 2003 Notes. At December 31,1999, the Company had $18.7 million
of NOL carryforwards, which expire in 2018 and 2019. The Company's ability to
use these NOL carryforwards may be restricted by Section 382 of the Internal
Revenue Code of 1986 (the "Code") if there is a change in ownership of the
22
<PAGE>
Company as defined in Section 382. The issuance of Allstate Delaware Common
Stock to Value Partners upon the conversion of Value Partners' New Notes will
not trigger the limitations on NOL carryforwards imposed by Section 382, if
Allstate Delaware is under court jurisdiction "in a Title 11 or similar case." A
provision in Delaware law permits the Delaware Court of Chancery to approve a
compromise or settlement of claims in a proceeding that is deemed to be a
"similar case" for purposes of Section 382 of the Code.
The Board of Directors believes that this Delaware proceeding can be
accomplished in a more economical and expeditious manner than the costly and
protracted federal court proceedings under Title 11 of the United States
bankruptcy code. As a result, the Board of Directors believes that it is in the
best interests of the Company and its stockholders to reincorporate the Company
into Delaware in order to take advantage of this favorable provision of Delaware
Law.
Upon conversion of Value Partners' 2003 Notes (plus accrued but unpaid interest
at the rate of 12.5% simple interest, as of June 13, 2000) at the reduced
conversion price of $0.95 per share, Value Partners will be issued 4,802,818
shares, plus additional shares to reflect accrued but unpaid interest subsequent
to June 13, 2000. When combined with the existing shares of common stock held by
Value Partners, Value Partners will beneficially own a total of at least
5,470,818 shares. If none of the other holders of 2003 Notes elect to convert
their votes, the Company will have issued and outstanding upon conversion of
Value Partners' 2003 Notes a total of at least 7,127,434 shares of common stock.
Value Partners' pro forma percentage ownership will be 76.8%.
For many years Delaware has followed a policy of encouraging incorporation in
that state. In furtherance of that policy, Delaware has adopted comprehensive
corporate laws that are revised regularly to meet changing business
circumstances. The Delaware legislature is sensitive to issues regarding
corporate law and is responsive to developments in modern corporate law. The
Delaware courts have developed considerable expertise in dealing with corporate
issues as well as a substantial body of case law construing Delaware's corporate
law. As a result of these factors, it is anticipated that Delaware law will
provide greater predictability in the Company's legal affairs than is presently
available under Virginia law. Many major American corporations have initially
chosen Delaware for their state of incorporation or have subsequently
reincorporated in Delaware in a manner similar to that proposed.
After considering the advantages and disadvantages of the Reincorporation
Proposal, including the differences between Delaware Law and Virginia Law, the
23
<PAGE>
Board of Directors concluded that the benefits of being incorporated in Delaware
outweigh the benefits and drawbacks of remaining in Virginia. In light of the
foregoing, the Board of Directors of the Company believes that the best
interests of the Company and its stockholders will be served by changing the
Company's state of incorporation from Virginia to Delaware. See "-Comparison of
Stockholder Rights" and "-Possible Disadvantages of the Reincorporation
Proposal."
Comparison of Stockholder Rights Under Reincorporation Proposal 2(a)
Upon consummation of the Merger, the Company will be governed by Delaware Law
and by the Certificate and New Bylaws. The provisions of the Certificate and New
Bylaws are similar to the provisions of the Articles and Present Bylaws of the
Company, except for those differences attributable to the differences between
Delaware Law and Virginia Law and the following significant differences:
o the Certificate prohibits any attempted sale, purchase, transfer,
assignment, conveyance, pledge or other disposition ("Transfer") of any
stock, warrants, rights or options in Allstate Delaware to any person or
entity who owns (or would own after giving effect to the Transfer) more
than 4.9% of any class of securities of Allstate Delaware, unless the
Transfer is approved by at least two-thirds of the Board of Directors of
Allstate Delaware (this provision is being submitted to stockholders as
proposal 2(b));
o the Certificate provides for the issuance of 20 million shares of Allstate
Delaware Common Stock, compared to only 10 million shares of Common Stock
under the Articles (this provision is being submitted to stockholders as
proposal 2(c)); and
o the New Bylaws require stockholders who wish to submit stockholder
proposals or to nominate directors to meet certain timing and informational
requirements (these provisions are being submitted to stockholders as
proposal 2(d)).
The following table compares in summary form a number of the provisions of the
Company's Articles of Incorporation and Bylaws with the provisions of Allstate
Delaware's Certificate of Incorporation and Bylaws, as well as certain
provisions of Virginia and Delaware law. The summary table is not a complete
description of all of the differences between the Virginia Articles and Bylaws
and the Delaware Certificate and Bylaws, nor is it a complete description of the
differences between the laws of the two states.
24
<PAGE>
<TABLE>
<CAPTION>
------------------------------ --------------------------------------------- ------------------------------------------
Item Virginia Delaware
------------------------------ --------------------------------------------- ------------------------------------------
<S> <C> <C>
Authorized shares 10 million common, 2 20 million common, 2 million preferred.
million preferred.
Restrictions on transfers No similar provision in Articles or Bylaws. Certificate prohibits transfer of stock
to any person or entity which owns, or
would own after the transfer, more than
4.9% of the common stock, unless
approved by at least two-thirds of the
Board of Directors.
Directors
- number Currently 7, with number to be 10 or less. 6, with number to be between 3 and 10.
- term One year. One year.
- cumulative voting Articles and Bylaws provide for one vote Certificate states that there is no
per share. cumulative voting.
- filling of
vacancies By majority of the directors. By majority of the directors.
- removal
without cause By majority vote of stockholders, with By majority vote of stockholders, with
or without cause. or without cause.
Preemptive rights Articles state that there are no Certificate states that there are no
preemptive rights. preemptive rights.
Stockholder No provision in Articles or Bylaws. Need to satisfy certain timing and information
nominations requirements.
Stockholder No similar provision in Articles or Bylaws. Need to satisfy certain timing and
proposals information requirements.
Special meetings of May be called by the Board of Directors, May be called by the Board of Directors,
stockholders the Chairman of the Board or the President. the Chairman of the Board or the
President.
Stockholder action without Virginia law permits action without a Delaware law permits action without a
a meeting meeting if taken by all stockholders meeting if taken by stockholders having
entitled to vote. the minimum number of votes required to
take the action at a meeting.
25
<PAGE>
Limitations on liability Directors and officers not liable except Directors and officers not liable except
for (1) willful misconduct or (2) knowing for (1) breach of duty of loyalty, (2)
violation of criminal or securities laws. acts not in good faith or which involve
intentional misconduct or a knowing
violation of the law, (3) unlawful payment
of dividends or unlawful stock repurchases,
or (4) transactions involving improper
personal benefit.
24
Indemnification Bylaws provide for indemnification of Certificate provides for indemnification
directors and officers to the fullest of directors, officers, employees and
extent permitted by Virginia law. agents to the fullest extent permitted
by Delaware law.
Transactions with Virginia law restricts transactions Delaware law restricts
interested stockholders a more than 10% stockholder, transactions with a 15% or
unless approved by a super-majority more stockholder for a
vote of disinterested stockholders period of three years after
or unless certain other conditions are met. reaching the 15% threshold,
This is not applicable to the Company subject to certain exceptions.
since there are less than 300 stockholders This provision
of record. is inapplicable since the
Stock is not quoted on the
Nasdaq Stock Market.
Limitation of voting Virginia has a control share Delaware has no similar provision.
rights acquisition statute which limits the
voting rights of stockholders who hold
20% or more of the voting stock, if the
corporation has 300 or more
stockholders.
26
<PAGE>
Franchise tax Virginia charges an annual registration fee Delaware charges a higher franchise tax.
of less than $1,000 per year. The Company's tax is estimated to be
$4,000 per year.
</TABLE>
Significant provisions of the Certificate and New Bylaws and certain differences
between such new charter documents and the present charter documents of the
Company are discussed below. Although it is impracticable to compare all of the
aspects in which Virginia Law and Delaware Law differ, the following is a
summary of certain significant differences between the provisions of these laws.
The following discussion is not intended to be a complete statement of the
differences affecting the rights of stockholders, but rather summarizes material
differences and certain important similarities. The discussion is qualified in
its entirety by reference to the Certificate and New Bylaws which are attached
at Appendices B and C, respectively, to this Proxy Statement, and the Articles
and Present Bylaws, copies of which are available for inspection at the
Company's executive office or will be provided to stockholders upon request.
Board of Directors. The New Bylaws provide that the Board of Directors of
Allstate Delaware shall consist of not less than three nor more than 10
directors, with the initial Board to consist of six persons. The Company's Board
is being reduced from seven to six persons at the annual meeting. Following the
Merger, the then current directors of the Company will continue to serve as
directors of Allstate Delaware.
Cumulative Voting. Neither the Articles and Present Bylaws nor the Certificate
and New Bylaws permit cumulative voting. Cumulative voting would entitle each
stockholder to vote as many votes as he or she has shares of Common Stock,
multiplied by the number of directors to be elected at any stockholder meeting.
If cumulative voting were permitted, the stockholder would be able to cast all
votes for a single nominee or may distribute votes among as many nominees as
such stockholder chooses. If available, cumulative voting could possibly allow
holders of a significant minority of a corporation's stock to assure the
election of one or more directors.
Board Vacancies. Under the Present Bylaws and New Bylaws, any vacancies on the
Board of Directors, however caused, and newly created directorships may be
filled by a majority vote of the directors then in office, whether or not there
27
<PAGE>
is a quorum. Under the Present Bylaws and New Bylaws, any director selected to
fill such a vacancy by the remaining members of the Board of Directors shall
hold office for the remainder of the term to which the director has been
selected and until such director's successor is elected and qualified.
Removal of Directors. The Present Bylaws and New Bylaws provide that a director
or the entire Board of Directors may be removed with or without cause by the
affirmative vote of a majority of the shares of capital stock then outstanding
and entitled to vote in an election of directors. The New Bylaws clarify that
this ability to remove directors is subject to the rights of the holders of the
outstanding debt instruments and any future preferred stock to elect directors.
Preemptive Rights. The Virginia Articles and the Delaware Certificate provide
that stockholders do not have any preemptive rights for any shares of Common
Stock or other securities of the Company or of Allstate Delaware. As a result,
if the Company or Allstate Delaware was to issue any new shares or new class of
stock, or securities convertible into any such stock, existing stockholders
would not be entitled, as a matter of right, to subscribe for or purchase any of
the new shares or securities unless the Company or Allstate Delaware elected to
provide such opportunity.
Special Meetings of Stockholders. The Present Bylaws and the New Bylaws provide
that special meetings of stockholders may only be called by the Board of
Directors, the Chairman of the Board of Directors or by the President of the
Company. Stockholders are not authorized to call a special meeting.
Stockholder Action Without a Meeting. Both Virginia and Delaware Law provide
that any action required or permitted to be taken at an annual or special
meeting of stockholders may be taken by written consent of the stockholders
without a meeting. Virginia Law requires that written consent be given by all of
the stockholders entitled to vote on the action, while Delaware Law only
requires written consent by stockholders having the minimum number of votes that
would be necessary to take the action at a meeting, unless otherwise provided
for in the Certificate of Incorporation. There are no provisions in either the
Articles and Present Bylaws or the Certificate and New Bylaws with respect to
action by the stockholders without a meeting.
Limitations on Director and Officer Liability; Indemnification. The Certificate
and Articles both contain a provision that eliminates or limits a director's and
officer's personal liability for monetary damages to the fullest extent
permitted by the Delaware Law and the Virginia Law, respectively. Delaware Law
provides that a director (and any officer who exercises or performs powers or
28
<PAGE>
duties conferred or imposed by the Board) of Allstate Delaware shall not be
liable for breach of his or her duty as a director, except for liability for:
(1) any breach of the director's duty of loyalty to Allstate Delaware or its
stockholders; (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law; (3) under Section 174
of Delaware Law which imposes liability on directors for unlawful payment of
dividends or unlawful stock repurchases; or (4) any transaction from which the
director derived an improper personal benefit.
The Articles eliminate a director's or officer's liability to the Company or its
stockholders except to the extent such liability may not be limited under
Virginia law. Under Virginia Law, in any proceeding brought by or on behalf of a
stockholder of the Company or in the right of the Company, the damages assessed
against an officer or director arising out of a single transaction, occurrence
or course of conduct, shall not exceed the lesser of: (1) the monetary amount,
including the elimination of liability, specified in the articles of
incorporation or, if approved by the stockholders, in the bylaws as a limitation
on or elimination of the liability of the officer or director; or (2) the
greater of (a) $100,000 or (b) the amount of cash compensation received by the
officer or director from the Company during the twelve months immediately
preceding the act or omission for which liability was imposed. However, an
officer or director will be liable without limitation if he or she engaged in
willful misconduct, knowing violation of criminal law or any federal or state
securities law, including, without limitation, any claim of unlawful insider
trading or manipulation of the market of any security. The Certificate and the
Articles each provide that the purpose of these provisions is to eliminate the
liability of the directors and officers to the fullest extent permitted by law.
Indemnification provisions contained in the Certificate and the Present Bylaws
as governed by Delaware Law and Virginia Law, respectively, are similar except
that the Present Bylaws do not provide for the indemnification of employees and
agents. Both provisions generally allow for indemnification to the fullest
extent permitted by law. In general, Delaware Law and Virginia Law permit a
corporation to provide indemnification for officers and directors (among others
such as employees, agents of the corporation or such person serving at the
request of the Company) who is a party or is threatened to be made a party to
any threatened or pending action, suit or proceeding (whether civil, criminal,
administrative or investigative) against expenses, judgments, fines and amounts
paid in settlement that are actually and reasonably incurred. Under Delaware
Law, indemnification is permitted if the indemnitee acted in good faith and in a
manner the person reasonably believed to be in the corporation's best interest,
and in a criminal proceeding, had no reasonable cause to believe that the
29
<PAGE>
conduct was unlawful. Under Virginia Law, indemnification is permitted provided
that (1) the director or officer conducted himself or herself in good faith; (2)
the director or officer believed that his conduct was in the best interests of
the Company or at least not opposed to such interests; and (3) in the case of a
criminal proceeding, the director or officer had no reasonable cause to believe
his conduct was unlawful. Indemnification is not permitted under Virginia Law
(a) in connection with a proceeding by or in the right of the corporation in
which the director or officer was adjudged liable to the corporation; or (b) in
connection with any other proceeding charging improper personal benefit to such
officer or director whether or not involving action in his official capacity, in
which he was adjudged liable on the basis that a personal benefit was improperly
received. Under Delaware Law and Virginia Law, before an officer or director may
be indemnified, the indemnification must be approved either by a court, a
majority of the disinterested directors (even though less than a quorum in
Delaware), a committee of disinterested directors, independent legal counsel or
stockholders.
Virginia Law and Delaware Law both prohibit such indemnification if the proposed
indemnitee is adjudged liable to the corporation, except upon application to a
court which determines such person is reasonably entitled to such
indemnification. The rights to indemnification are not exclusive of any other
right which any person may have or hereafter acquire under any statute, the
Certificate, the New Bylaws, agreement, vote of stockholders or disinterested
directors, or otherwise.
The New Bylaws also provide for the advancement of reasonable expenses incurred
by a director, officer or employee of Allstate Delaware in defending any of the
above actions, suits or proceedings and for the purchase of insurance on behalf
of such persons by Allstate Delaware.
Payments of Dividends. Dividends paid by the Company on its capital stock are
governed by Virginia Law. Under Virginia Law, dividends may be declared and paid
as determined by the Company's Board of Directors, provided that no dividends
may be paid if, after giving effect to the distribution (1) the Company would
not be able to pay its debts as they become due in the usual course of business,
or (2) the Company's total assets would be less than the sum of its total
liabilities plus any amount required to be paid to holders of preferred stock in
the event of liquidation of the Company.
After the Merger, the ability of Allstate Delaware to pay dividends on its
capital stock will be limited by certain restrictions imposed upon corporations
under Delaware Law. Under Delaware Law, dividends may be declared and paid out
30
<PAGE>
of capital surplus, or, in case there is no capital surplus, out of the
corporation's net profits for the fiscal year in which the dividend is declared
and/or the net profits from the preceding fiscal year. The distribution of
dividends is not permitted by a Delaware corporation in the event the capital of
such corporation shall have diminished by depreciation of property or losses to
an amount less than the aggregate amount of the capital represented by issued
and outstanding stock having a preference upon distribution of assets.
The Board of Directors has no intention of paying dividends on the common stock
in the foreseeable future.
Stockholders' Inspection Rights. Under Delaware Law a stockholder may inspect a
corporation's stock ledgers, the stockholders' list and its other books and
records for any purpose reasonably related to such person's interest as a
stockholder. Virginia Law and the Virginia Bylaws provide for stockholder
inspection of the "corporate records" of Virginia corporations upon written
demand of at least five business days prior to such inspection, provided that
the requesting stockholder: (1) has been a stockholder of record for at least
the six months preceding the written demand or a stockholder of record of at
least 5% of the outstanding shares; (2) makes a demand in good faith and for a
proper purpose; (3) describes, with reasonable particularity, the purpose and
the records to be inspected; and (4) requests records that are directly
connected with the purpose. Under Virginia Law, "corporate records" include the
following: (a) excerpts from minutes of any meeting of the board of directors,
records of any action of a committee of the board of directors while acting in
place of the board of directors on behalf of the corporation, minutes of the
stockholders, and records of action taken by the stockholders or board of
directors without a meeting, to the extent permitted under statute; (b)
accounting records of the corporation; and (c) the record of stockholders.
Restrictions on Business Combinations with Principal Stockholders; Anti-takeover
Statutes. Delaware Law and Virginia Law regulate transactions with major
stockholders after they become major stockholders. Under Delaware Law, a
Delaware corporation is prohibited from engaging in (1) mergers or
consolidations, (2) sales, leases, exchanges, mortgages, pledges, transfers or
other dispositions of 10% or more of its assets, and (3) issuances of stock and
other transactions ("business combinations") with a person or group that owns
15% or more of the voting stock of the corporation (an "interested
stockholder"), for a period of three years after the interested stockholder
crosses the 15% threshold. These restrictions on transactions involving an
interested stockholder do not apply in certain circumstances, including those
transactions in which (1) prior to an interested stockholder owning 15% or more
31
<PAGE>
of the voting stock, the board of directors approved the business combination or
the transaction that resulted in the person or group becoming an interested
stockholder; (2) upon consummation of a transaction that resulted in a person or
group becoming an interested stockholder, the person or group owned at least 85%
of the voting stock other than stock owned by inside directors and certain
employee stock plans; or (3) after the person or group became an interested
stockholder, the board of directors and at least two-thirds of the voting stock
other than stock owned by the interested stockholder approved the business
combination. A Delaware corporation may exempt itself from the requirements of
the statute on its certificate of incorporation, although Allstate Delaware has
not done so. In addition, the statute does not apply to corporations whose stock
is (1) not listed on a national securities exchange, (2) not authorized for
quotation on the Nasdaq Stock Market, and (3) held of record by 2,000 or less
stockholders. As a result, this statute will at least initially not be
applicable to Allstate Delaware.
Virginia Law contains a similar statute designed to provide Virginia
corporations with additional protections against hostile takeovers. The Virginia
Affiliated Transactions Act restricts certain transactions between a Virginia
corporation and a holder of more than 10% of the corporation's outstanding
voting stock, together with affiliates or associates thereof (an "interested
stockholder"). For a period of three years following the date that a stockholder
becomes an interested stockholder, the Virginia Affiliated Transactions Act
generally prohibits the following types of transactions between the corporation
and the interested stockholder (unless certain conditions, described below, are
met): (1) mergers or share exchanges; (2) sales, leases, exchanges, mortgages,
pledges, transfers or other dispositions (in one or a series of transactions not
in the ordinary course of business) having a total market value in excess of 5%
of the corporation's consolidated net worth; (3) any guarantees by the
corporation or any subsidiary thereof of indebtedness of any interested
stockholder in an amount in excess of 5% of the corporation's consolidated net
worth; (4) sales or other dispositions by the corporation or any subsidiary
thereof of any voting shares of the corporation or any subsidiary thereof having
a market value in excess of 5% of the total market value of the outstanding
voting shares of the corporation to any interested stockholder or affiliate of
any interested stockholder other than pursuant to a stock dividend or the
exercise of rights or warrants offered proportionately to all holders of the
class; (5) the dissolution of the corporation if proposed by or on behalf of an
interested stockholder; and (6) any reclassification of securities, including
any reverse stock split, or recapitalization of the corporation, or any merger
of the corporation with any of its subsidiaries or any distribution or other
transaction which has the effect directly or indirectly of increasing by more
32
<PAGE>
than 5% the percentage of the outstanding voting shares of the corporation or
any of its subsidiaries beneficially owned by any interested stockholder, unless
the affiliated transaction is approved by (a) a majority (but not less than two)
of the disinterested directors, and (b) two-thirds of the disinterested voting
shares.
After the initial three-year restriction on affiliated transactions has expired
under the above Virginia Law, an affiliated transaction must be approved by the
holders of at least two-thirds of the disinterested voting shares, unless the
particular affiliated transaction (1) has been approved by a majority of the
disinterested directors; (2) meets the rigorous fair price requirements of the
Virginia Affiliated Transactions Act; or (3) qualifies for one of the statutory
exemptions. A Virginia corporation may exempt itself from the requirements of
the statute in its articles of incorporation. In this regard, the Company has
not exempted itself from the provisions of the Virginia Affiliated Transactions
Act. However, the Virginia Affiliated Transactions Act does not apply to
corporations with less than 300 stockholders of record, and the Company
currently has less than 300 stockholders of record.
Virginia Law also contains a control share acquisition statute, which requires
an interested investor who acquires a threshold percentage of stock in a target
corporation to obtain the approval of non-interested stockholders before it may
fully exercise its voting rights. Under this statute, certain notice and
informational filings and stockholder meeting and voting procedures must be
followed in order for the interested investor to be able to vote the shares
acquired in a "control share acquisition," which is generally defined as any
acquisition of an issuer's shares which would entitle the acquirer, immediately
after such acquisition, directly or indirectly, to exercise or direct the
exercise of voting power of the issuer in the election of directors within any
of the following ranges of such voting power: (1) one-fifth or more but less
than one-third of such voting power; (2) one-third or more but less than a
majority of such voting power; or (3) a majority or more of such voting power.
Assuming compliance with the notice and information filings prescribed by
statute, the proposed control share acquisition may be made only if the
acquisition is approved by a majority of all votes entitled to be cast for the
election of directors, excluding the combined voting power of the "interested
shares" (generally, the shares held by the intended acquirer and the employee
directors and the officers of the issuer). A Virginia corporation may include a
provision in its articles of incorporation or bylaws exempting the corporation
from Virginia's control share acquisition statute, although the Company has not
done so. In addition, this statute does not apply to corporations with less than
300 stockholders. Delaware Law does not contain any similar type of statute.
33
<PAGE>
Consolidation, Merger, Share Exchange and Transfer of Assets. In addition to the
anti-takeover provisions discussed above, Virginia Law requires consolidations,
mergers, share exchanges and certain asset transfers to be approved by a
two-thirds vote of the voting power of the corporation. Delaware Law does not
require stockholder approval in the case of asset and share acquisitions and, in
general, requires approval of mergers and disposition of substantially all of a
corporation's assets by a majority vote of the voting power of the corporation.
Amendment of the Present Bylaws and New Bylaws. The Present Bylaws provide for
amendment by the Board of Directors or otherwise as provided by Virginia Law,
which states that the stockholders also have such authority. The New Bylaws
provide for amendment by the affirmative vote of a majority of directors or at
least a majority of the outstanding shares of capital stock of Allstate Delaware
as well as such additional vote of preferred stock as may be required by the
provisions of any series thereof.
Amendment of the Certificate and Articles. The Certificate provides that no
amendment, addition, alteration, change or repeal shall be made unless it is
first approved by the Board of Directors of Allstate Delaware pursuant to a
resolution adopted by the affirmative vote of a majority of the directors then
in office, and is thereafter approved by the holders of at least two-thirds of
the shares entitled to vote generally in an election of directors, as well as
such additional vote the preferred stock as may be required by the provisions of
any series thereof. Notwithstanding the preceding sentence, any amendment to the
Certificate recommended for adoption by at least two-thirds of the entire Board
of Directors (including any vacancies) shall, to the extent the Delaware Law
requires stockholder approval of such amendment, require the affirmative vote of
a majority of the shares entitled to vote generally in an election of directors,
as well as such additional vote of the preferred stock as may be required by the
provisions of any series thereof.
The Board of Directors may propose and adopt amendments to the Articles as
permitted under Virginia Law. For any amendment which requires stockholder
approval, the Board of Directors must first act upon the amendment and
thereafter the amendment must receive the affirmative vote of at least
two-thirds of all the votes entitled to be cast by each voting group.
Stockholders' Rights in Certain Transactions. Virginia Law provides generally,
with certain exceptions hereinafter described, that a stockholder of a Virginia
corporation has the right to demand and receive payment of the fair value of the
stockholder's stock if the corporation engages in any of the following
34
<PAGE>
transactions and stockholder approval of the transaction is required: (1) a
merger of the corporation with another corporation; (2) an exchange of the
stockholder's stock for stock in another corporation; or (3) a sale or exchange
of substantially all of the corporation's assets.
In order for a stockholder to perfect his dissenters rights, such stockholder
must file with the corporation prior to the vote a notice of his intent to
demand payment demand in writing for the fair cash value of his shares. Virginia
Law provides that the right to fair value does not apply, with certain
exceptions, if (1) the stock is listed on a national securities exchange or the
Nasdaq Stock Market or (2) the stock is held by at least 2,000 record
stockholders. Dissenters' rights are available to the Company's stockholders in
connection with the Merger.
See "-Dissenters' Rights."
Delaware Law provides similar rights in the context of a merger or consolidation
only. Such rights are not available, however, with respect to the merger of a
parent corporation with a wholly owned subsidiary corporation.
Anti-takeover Effects. Many of the provisions contained in the Certificate and
New Bylaws and under Delaware Law are similar to the provisions contained in the
Articles and Present Bylaws and under Virginia Law. These provisions could have
the effect of discouraging an acquisition of the Company or stock purchases in
furtherance of an acquisition, and could, under certain circumstances,
discourage transactions which might otherwise have a favorable effect on the
price of the Company's Common Stock. These provisions may serve to make it more
difficult to remove incumbent management and may also discourage all attempts to
acquire control not approved by the Board of Directors for any reason. As a
result, stockholders who might desire to participate in, or benefit from, such a
transaction may not have an opportunity to do so.
Possible Disadvantages of the Reincorporation Proposal 2(a)
The Company currently pays a registration fee in Virginia of less than $1,000
per year. Delaware imposes significantly greater annual franchise taxes and
other fees on corporations incorporated in Delaware. The annual franchise tax
for a Delaware corporation is calculated either by the authorized number of
shares or assumed capital methods, with the lesser tax being payable. Based on
the Company's total assets at March 31, 2000 and the anticipated number of
35
<PAGE>
shares of Common Stock to be issued and outstanding following the conversion of
Value Partners' 2003 Notes, the franchise tax in Delaware is estimated to be
approximately $4,000 per year.
Despite the belief of the Company's Board of Directors that the Reincorporation
Proposal is in the best interests of the Company and its stockholders,
stockholders should be aware that many provisions in the Articles and the New
Bylaws and under Delaware Law may be viewed as having an anti-takeover effect.
Tax Consequences
Consummation of the Merger is subject to the Company's receipt of an
opinion from its special counsel, Elias, Matz, Tiernan & Herrick L.L.P.,
Washington, D.C. , to the effect that : (1) no gain or loss will be recognized
for federal income tax purposes by the stockholders of the Company as a result
of the Merger; (2) the basis and holding period for the stock of Allstate
Delaware received by the stockholders of the Company in exchange for Common
Stock of the Company will be the same as the basis and holding period of the
stock of the Company exchanged therefor; and (3) no gain or loss will be
recognized for federal income tax purposes as a result of the Merger by the
Company or Allstate Delaware. State, local or foreign income tax consequences to
stockholders may vary from the federal tax consequences described above, and
stockholders should consult their own tax advisors as to the effect of the
Reincorporation Proposal under applicable state, local or foreign income tax
laws.
Consummation of the Merger is also subject to the Company's receipt of a tax
opinion from PricewaterhouseCoopers LLP in form and substance reasonably
satisfactory to the Company to the effect that the use of the Company's NOL
carryforwards will not be impaired by the Merger or by the issuance of Allstate
Delaware Common Stock upon conversion of the 2003 Notes. There can be no
assurances that the above opinions will be received.
Dissenters' Rights of Appraisal
The following discussion is not a complete statement of the law pertaining to
dissenters' rights under Virginia Law and is qualified in its entirety by the
full text of Article 15 of the Virginia Law. Article 15 is reprinted in its
entirety as Appendix D to this proxy statement. Any stockholder of the Company
who desires to exercise his dissenters' rights should review carefully Article
15 and is urged to consult a legal advisor before electing or attempting to
36
<PAGE>
exercise his rights. All references in Article 15 to a "stockholder" and in this
summary to a "Company stockholder" or a "holder of Company Common Stock" are to
the record holder of shares as to which dissenters' rights are asserted.
Subject to the exceptions stated below, holders of Company Common Stock who
comply with the applicable procedures summarized below will be entitled to
dissenters' rights under Article 15. Voting against, abstaining from voting or
failing to vote on approval and adoption of the proposed reincorporation will
not constitute a demand for appraisal within the meaning of Article 15.
Company stockholders electing to exercise dissenters' rights under Article 15
must not vote for approval of the proposed reincorporation. A vote by a
stockholder against the merger is not required to exercise dissenters' rights.
However, if a stockholder returns a signed proxy but does not specify a vote
against the proposed reincorporation or a direction to abstain, the proxy, if
not revoked prior to the annual meeting, will be voted for approval of the
proposed reincorporation, which will have the effect of waiving that
stockholder's dissenters' rights.
What Are Dissenters' Rights? Company stockholders who follow the procedures of
Article 15 will be entitled to receive from the Company the fair value of their
shares, plus accrued interest from the Effective Date, as determined immediately
before the completion of the reincorporation. Fair value takes into account all
relevant factors but excludes any appreciation or depreciation in anticipation
of the reincorporation unless exclusion would be inequitable. Company
stockholders who elect to exercise their dissenters' rights must comply with all
of the procedures to preserve those rights.
Shares Eligible for Dissenters' Rights. Generally, if you choose to assert your
dissenters' rights, you must dissent as to all of the shares you own. Article 15
distinguishes between record holders and beneficial owners. You may assert
dissenters' rights as to fewer than all the shares registered in your name only
if you are not the beneficial owner of all of the shares and you (1) dissent
with respect to all of the shares beneficially owned by any one person and (2)
notify the Company in writing of the name and address of each person on whose
person you assert dissenters' rights.
Record Holder Who is Not the Beneficial Owner. A record holder may assert
dissenters' rights on behalf of the beneficial owner. If you are a registered
owner and you wish to exercise dissenters' rights on behalf of the beneficial
owner, you must disclose the name and address of the person or persons on whose
37
<PAGE>
behalf you dissent. In that event, your rights shall be determined as if the
dissenting shares and the other shares were registered in the names of the
beneficial holders.
Beneficial Owner Who is Not the Record Holder. A beneficial owner of Company
Common Stock who is not also the record holder may assert dissenters' rights. If
you are a beneficial owner who is not the record holder and you wish to assert
your dissenters' rights, then you must submit a written consent of the record
holder to the Secretary of the Company no later than the time you assert your
dissenters' rights. You may not dissent with respect to some but less than all
of the shares you own.
Procedure to Exercise Dissenters' Rights
Notice of Intention to Dissent. If you wish to exercise your dissenters' rights,
you must follow the procedures set forth in Appendix D. You must file a written
notice of intention to demand the fair value of your shares with the Secretary
of Company prior to the vote, but in no event later than the annual meeting. You
must refrain from voting your shares for the adoption of the reincorporation.
Notice of Approval and Your Notice to Us. If the Company stockholders approve
the reincorporation, we will mail a notice to all dissenters who filed a notice
of intention to dissent prior to the vote on the reincorporation proposal and
who refrained from voting for the adoption of the reincorporation. The Company
expects to mail the notice of approval within 10 days after the reincorporation
is completed. The notice of approval will state where and when a demand for
payment must be sent and where the certificates for eligible shares must be
deposited in order to obtain payment. The notice of approval will also supply a
form for demanding payment which includes a request for certification of the
date on which the holder, or the person on whose behalf the holder dissents,
acquired beneficial ownership of the shares. The demand form will be accompanied
by a copy of Article 15.
If you assert your dissenters' rights, you must ensure that the Company receives
your demand form and your certificates on or before the demand deadline, which
will be between 30 and 60 days after the above notice from the Company is
delivered. All mailings to the Company are at your risk. Accordingly, we
recommend that your notice of intention to dissent, demand form and stock
certificates be sent only by certified mail, overnight courier or hand delivery.
If you fail to file a notice of intention to dissent, fail to complete and
return the demand form, or fail to deposit stock certificates with the Company,
38
<PAGE>
each within the specified time period, you will lose your dissenters' rights
under Article 15. You will retain all rights of a stockholder, or beneficial
owner, until those rights are modified by completion of the reincorporation.
Payment of Fair Value by the Company. Upon timely receipt of the completed
demand form, Article 15 requires us to pay to dissenters who complied with the
above procedures the amount we estimate to be the fair value for such dissenting
shares, plus accrued interest, if the dissenter beneficially owned the shares on
or before the Company's first public announcement of the proposed
reincorporation. If the dissenter acquired beneficial ownership after that date,
then the Company may elect to withhold payment and instead offer to pay to the
dissenter the Company's estimate of the fair value of the shares, plus accrued
interest.
The Company's remittance or offer will be accompanied by:
o the Company's balance sheet as of December 31, 1999, the
statements of income and changes in stockholders' equity of
the Company for the fiscal year ended December 31, 1999, and
the latest available interim financial statements;
o a statement of how the Company estimated the fair value
of the shares and how the interest was calculated; and
o notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a
copy of Article 15.
Dissenting Stockholders Estimate of Fair Value or Interest. If you disagree with
our estimate of the fair value of your shares or how the interest was
calculated, you may send to us your own estimate of the fair value of the shares
and the amount of interest due. Such estimate shall be deemed a demand for
payment of the amount of the deficiency. If you do not file your estimate within
30 days after the Company made or offered payment for your shares, then you will
only be entitled to the amount stated in the notice or remittance to you by the
Company.
Resort to Court Action. If your demand for additional payment remains unsettled,
then the Company will commence a proceeding within 60 days after receiving the
payment demand, requesting the court to determine the fair value of the shares
and accrued interest. In the court proceeding, all dissenters, wherever
39
<PAGE>
residing, whose demands have not been settled will be made parties to any such
appraisal proceeding. The court may appoint an appraiser to receive evidence and
recommend a decision on the issue of fair value. Each dissenter made a party
will be entitled to recover an amount equal to the fair value of the dissenter's
shares, plus interest, or if the Company previously remitted any amount to the
dissenter, any amount by which the fair value of the dissenter's shares is found
to exceed the amount previously remitted, plus interest.
If we fail to commence a proceeding, any dissenter who made a demand and who has
not already settled his claim against us within the 60-day period after the
reincorporation shall be paid the amount demanded.
Costs and Expenses of Court Proceedings. The costs and expenses of the court
proceedings, including the reasonable compensation and expenses of any
appraisers appointed by the court, will be determined by the court and assessed
against the Company. The court may, however, assess costs against all or some of
the dissenters, in amounts the court finds equitable, to the extent the court
finds the dissenters did not act in good faith in making their payment demand.
If we fail to comply substantially with the requirements of Article 15, the
court may assess fees and expenses of experts, excluding counsel, for the
parties as it deems appropriate against us and in favor of any or all
dissenters. The court may assess fees and expenses of experts, excluding
counsel, against either the Company or a dissenter, if the court finds that a
party acted in bad faith. If the court finds that the services of counsel for
any dissenter substantially benefited other dissenters similarly situated, it
may award counsel reasonable fees to be paid out of the amounts awarded to the
dissenters who benefited.
Abandonment
Notwithstanding a favorable vote of the stockholders, the Company reserves the
right by action of its Board of Directors to abandon the proposed
reincorporation prior to the Effective Date of the Merger if it determines that
such abandonment is in the best interests of the Company.
Description of the Restrictions on Transfers and Acquisitions of Securities
Proposal 2(b).
The Certificate prohibits any attempted Transfer of any stock, warrants, rights
or options in Allstate Delaware to any person or entity who owns (or would own
after giving effect to the Transfer) more than 4.9% of the Allstate Delaware
40
<PAGE>
Common Stock, unless such transfer is approved by at least two-thirds of the
Board of Directors of Allstate Delaware. This provision will remain in effect
from the Effective Date of the Merger and end on the earlier of (1) the
expiration of 20 years after the Effective Date, or (2) the date which is the
first day of the beginning of the taxable year of the Corporation to which no
NOL, capital loss, general business credit, alternative minimum tax, foreign tax
credit or net unrealized built-in loss may be carried forward. In addition, no
shares beneficially owned in violation of the foregoing percentage limitation,
as determined by the Board of Directors of Allstate Delaware, shall be entitled
to any rights of stockholders of Allstate Delaware, including the right to vote.
The Certificate also provides that the Board of Directors may require any shares
proposed to be transferred in violation of this provision to be instead
transferred to an agent designated by the Board of Directors, for sale by the
agent in a Transfer that is not prohibited. The sales proceeds will first be
used to cover the costs and expenses of the agent. Any remaining proceeds will
then be paid to the purported transferee, up to the amount paid by the
transferee for such shares. Thereafter, all remaining sales proceeds will be
paid to one or more charitable organizations selected by the Board of Directors.
To ensure compliance with this transfer restriction, all certificates reflecting
corporate securities issued by Allstate Delaware on or after the Effective Date
shall bear a conspicuous legend in substantially the following form:
THE TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS SUBJECT TO
RESTRICTION PURSUANT TO ARTICLE 9 OF THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF THE CORPORATION, A COPY OF WHICH IS
AVAILABLE UPON REQUEST TO THE CORPORATION OR ITS TRANSFER AGENT.
ARTICLE 9 PROHIBITS THE TRANSFER OF THE SECURITIES TO ANY PERSON,
ENTITY OR GROUP ("TRANSFEREE") WHO DIRECTLY OR INDIRECTLY OWNS (OR WHO
WOULD DIRECTLY OR INDIRECTLY OWN AFTER GIVING EFFECT TO THE PROPOSED
TRANSFER) MORE THAN 4.9% OF ANY CLASS OF SECURITIES OF THE CORPORATION,
OR THE TRANSFER BY ANY TRANSFEROR WHO DIRECTLY OR INDIRECTLY OWNS 5% OR
MORE OF ANY CLASS OF SECURITIES OF THE CORPORATION, IN EACH CASE UNLESS
APPROVED BY AT LEAST TWO-THIRDS OF THE BOARD OF DIRECTORS OF THE
CORPORATION.
Reasons for the Restrictions on Transfers and Acquisitions of Securities
Proposal 2(b)
The purpose of this provision is to preserve the Company's NOL carryforwards, by
ensuring that the change of ownership provisions of Section 382 of the Internal
Revenue Code of 1986, as amended, are not triggered.
41
<PAGE>
Anti-Takeover effects. This provision may be deemed to have a significant
anti-takeover effect because it will preclude persons or entities from acquiring
more than 4.9% of the Allstate Delaware Common Stock, unless the acquisition is
approved by at least two-thirds of the Board of Directors.
Description of the Capital Stock Proposal 2(c).
The Company's authorized capital stock consists of 10,000,000 shares of Common
Stock and 2,000,000 shares of preferred stock, no par value per share. As of the
Voting Record Date, 2,324,616 shares of Common Stock were issued and
outstanding. No shares of preferred stock of the Company have been issued. The
amount of the authorized capital stock of Allstate Delaware is 20,000,000 shares
of Allstate Delaware Common Stock and 2,000,000 shares of preferred stock, par
value $.01 per share ("Allstate Delaware Preferred Stock").
Reasons for the Capital Stock Proposal 2(c).
The number of authorized shares of common stock has been increased from 10
million in the Company's Articles to 20 million in Allstate Delaware's
Certificate primarily to reflect the issuance of additional shares upon the
conversion of Value Partners' 2003 Notes. If these Notes plus accrued but unpaid
interest at 12.5% simple interest, are converted pursuant to the Plan, there
would be at least 7,127,434 shares of Allstate Delaware Common Stock
outstanding. If all of the other 2003 Notes are also converted at the new
exchange rate, there would be at least 7,862,044 shares of Allstate Delaware
Common Stock outstanding. There would also be an additional 780,000 shares of
Allstate Delaware Common Stock reserved for issuance under all benefit plans, if
the proposed 2000 Stock Option Plan and the proposed 2000 Restricted Stock Plan
are approved. The increase to 20 million shares is intended to allow the Board
of Directors sufficient flexibility to issue additional shares of Allstate
Delaware Common Stock for general corporate purposes, including but not limited
to possible issuance as stock dividends or stock splits, in future mergers or
acquisitions, under a cash dividend reinvestment and stock purchase plan, in a
future underwritten or other public offering, or under a stock-based employee
benefit plan.
The Certificate authorizes the Board of Directors to issue Allstate Delaware
Preferred Stock by resolution from time to time in one or more series and to fix
and state the designations, powers and preferences and relative, participating,
optional and other special rights of such shares, including voting rights (which
42
<PAGE>
could be full or limited) and conversion rights. The Board of Directors of the
Company also has the ability to issue up to 2,000,000 shares of the Company's
preferred stock. The authorized but unissued shares of Allstate Delaware
Preferred Stock are similarly available for issuance in future mergers or
acquisitions, in a future underwritten public offering or private placement or
for other general corporate purposes.
Possible Adverse Effects of the Proposal. Except as required by law or as
otherwise required to approve the transaction in which the additional authorized
shares of Allstate Delaware Common Stock or authorized shares of Allstate
Delaware Preferred Stock would be issued, no stockholder approval is required
for the issuance of these shares. Accordingly, the Board of Directors of
Allstate Delaware, without stockholder approval, can issue Allstate Delaware
Preferred Stock with voting and conversion rights which could adversely affect
the voting power of the holders of Allstate Delaware Common Stock.
The issuance of additional common or preferred stock may have certain effects
upon the holders of common stock. Holders of common stock will not have
preemptive rights with respect to new common or preferred stock. The issuance of
further common stock would increase the number of shares of common stock
outstanding, thereby diluting percentage ownership of existing shareholders. The
issuance of preferred stock could possibly dilute book value per share or
earnings per share for the then existing holders of common stock.
Anti-takeover Effects. The authorization or issuance of common stock or
preferred stock may be viewed as being an anti-takeover device. In the event of
a proposed merger, tender offer, or attempt to gain control of the Company,
which the Board of Directors does not believe to be in the best interests of the
Company or its shareholders, the board could issue additional common or
preferred stock that could make any such takeover attempt more difficult to
complete. Except for the conversion of Value Partners' Notes, at this time the
Board of Directors has no specific plans, agreements, or commitments to issue
any additional shares of common stock or preferred stock.
Notice Requirements for Stockholder Nominations and Stockholder Proposals
(Proposal 2(d)). The New Bylaws provide that nominations for the election of
directors and the submission of stockholder proposals for any new business to be
taken up at any annual meeting of stockholders may be made by the Board of
Directors of Allstate Delaware or by any stockholder of Allstate Delaware
entitled to vote generally in the election of directors. Stockholders who want
to make a nomination for the election of directors or a proposal for new
43
<PAGE>
business at any annual meeting must deliver a written notice to the Secretary of
Allstate Delaware providing certain specified information so that it is received
not less than 120 days prior to the anniversary date of the mailing of proxy
materials by Allstate Delaware in connection with the immediately preceding
annual meeting of stockholders or, with respect to the first annual meeting to
be held after completion of the Merger, by December 15, 2000. With respect to an
election of directors at a special meeting, such written notice shall be
delivered to the Secretary of Allstate Delaware so that it is received no later
than the close of business on the tenth day following the date on which notice
of the meeting was first given to stockholders.
Anti-takeover Effects. These provisions regarding stockholder proposals and
director nominations by stockholders in the New Bylaws may have anti-takeover
effects. These sections generally require more advance notice by stockholders
and that more detailed information be provided.
Possible Adverse Effects of the Proposal. These provisions may serve to make it
more difficult to remove incumbent management and may also discourage all
attempts to acquire control not approved by the Board of Directors for any
reason. As a result, stockholders who might desire to participate in, or benefit
from, such a transaction may not have an opportunity to do so.
VOTE REQUIRED FOR THE PROPOSAL TO REINCORPORATE AS A DELAWARE CORPORATION
Pursuant to Virginia Law, the affirmative vote of the holders of two-thirds of
the outstanding shares of the Company's Common Stock is required for approval of
the Merger in proposal 2(a) to effectuate the reincorporation of the Company in
Delaware. Approval of the Reincorporation Proposal by stockholders of the
Company will constitute adoption of the Agreement and approval of the Merger,
the Certificate and the New Bylaws, except as reflected in proposals 2(b), 2(c),
and 2(d). The Company is applying the same two-thirds vote requirement to each
of these three related proposals. If proposal 2(a) regarding the reincorporation
into Delaware is not approved, then proposals 2(b), 2(c), and 2(d) cannot be
implemented and will be moot. If proposal 2(a) is approved but one or more of
proposals 2(b), 2(c) and 2(d) are not approved, the Company's board of directors
will re-evaluate the feasibility of the reincorporation and may elect to abandon
the reincorporation despite the stockholder approval of proposal 2(a).
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE REINCORPORATION PROPOSAL AND
THE MERGER WHICH WILL EFFECTUATE THE PROPOSED REINCORPORATION AND UNANIMOUSLY
RECOMMENDS A VOTE FOR APPROVAL OF THE REINCORPORATION PROPOSAL, INCLUDING EACH
44
<PAGE>
OF THE OTHER THREE SEPARATE BUT RELATED PROPOSALS.
PROPOSAL NUMBER THREE
PROPOSAL TO ADOPT THE 2000 STOCK OPTION PLAN
General
The Board of Directors has adopted the Option Plan, which is designed to attract
and retain qualified personnel in key positions, provide directors, officers and
key employees with a proprietary interest in the Company and as an incentive to
contribute to the success of the Company, and reward key employees for
outstanding performance. The Option Plan provides for the grant of incentive
stock options intended to comply with the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended ("Code") ("incentive stock options"),
non-qualified or compensatory stock options and stock appreciation rights
(collectively "Awards"). Awards will be available for grant to directors and key
employees of the Company and any of its subsidiaries, except that non-employee
directors will be eligible to receive only awards of non-qualified stock
options. If stockholder approval is obtained, options to acquire shares of
Common Stock will be awarded to officers, key employees and directors of the
Company with an exercise price equal to the fair market value of the Common
Stock on the date of grant.
Description of the Option Plan
The following description of the Option Plan is a summary of its terms and is
qualified in its entirety by reference to the Option Plan, a copy of which is
attached hereto as Appendix E.
Administration. The Option Plan will be administered and interpreted by a
committee of the Board of Directors ("Committee") that is comprised solely of
two or more non-employee directors. The initial members of the Committee have
not yet been selected.
Stock Options. Under the Option Plan, the Board of Directors or the Committee
will determine which officers, key employees and non-employee directors will be
granted options, whether such options will be incentive or compensatory options
(in the case of options granted to employees), the number of shares subject to
45
<PAGE>
each option, the exercise price of each option and whether such options may be
exercised by delivering other shares of Common Stock. The per share exercise
price of both an incentive stock option and a compensatory option shall be at
least equal to the fair market value of a share of Common Stock on the date the
option is granted (or 110% of fair market value in the case of incentive stock
options granted to any employees who own more than 10% of the outstanding Common
Stock).
All options granted to participants under the Option Plan shall become vested
and exercisable at the rate, to the extent and subject to such limitations as
may be specified by the Board or the Committee. Notwithstanding the foregoing,
no vesting shall occur on or after a participant's employment or service with
the Company, including service as a non-employee director, is terminated. Unless
the Committee or Board of Directors shall specifically state otherwise at the
time an option is granted, all options granted to participants shall become
vested and exercisable in full on the date an optionee terminates his employment
or service with the Company or a subsidiary company or service as a non-employee
director because of his death, disability or retirement. In addition, all
outstanding options shall become immediately vested and exercisable in full in
the event that there is a change in control of the Company, as defined in the
Option Plan.
Each stock option or portion thereof shall be exercisable at any time on or
after it vests and is exercisable until the earlier of ten years after its date
of grant or six months after the date on which the optionee's employment or
service terminates, unless extended by the Committee or the Board of Directors
to a period not to exceed five years from such termination. Unless specifically
provided otherwise, (1) if an optionee terminates his employment or service with
the Company as a result of disability or retirement without having fully
exercised his options, the optionee shall have three years following his
termination due to disability or retirement (or such longer period as may
otherwise be provided) to exercise such options, and (2) if an optionee
terminates his employment or service with the Company following a change in
control of the Company without having fully exercised his options, the optionee
shall have the right to exercise such options during the remainder of the
original ten-year term (or five-year term for certain incentive stock options)
of the option. However, failure to exercise incentive stock options within three
months after the date on which the optionee's employment terminates may result
in adverse tax consequences to the optionee. If an optionee dies while serving
as an employee or a non-employee director or terminates employment or service as
a result of disability or retirement and dies without having fully exercised his
46
<PAGE>
options, the optionee's executors, administrators, legatees or distributees of
his estate shall have the right to exercise such options during the one-year
period following his death. In no event shall any option be exercisable more
than ten years from the date it was granted.
Stock options are generally non-transferable except by will or the laws of
descent and distribution, and during an optionee's lifetime, shall be
exercisable only by such optionee or his guardian or legal representative.
Notwithstanding the foregoing, an optionee who holds non-qualified options may
transfer such options to his spouse, lineal ascendants, lineal descendants, or
to a duly established trust for the benefit of one or more of these individuals.
Options so transferred may thereafter be transferred only to the optionee who
originally received the grant or to an individual or trust to whom the optionee
could have initially transferred the option. Options which are so transferred
shall be exercisable by the transferee according to the same terms and
conditions as applied to the optionee.
Payment for shares purchased upon the exercise of options may be made (1) in
cash or by check, (2) by delivery of a properly executed exercise notice,
together with irrevocable instructions to a broker to sell the shares and then
to properly deliver to the Company the amount of sale proceeds to pay the
exercise price, all in accordance with applicable laws and regulations or(3)if
permitted by the Committee or the Board, by delivering shares of Common Stock
(including shares acquired pursuant to the exercise of an option) with a fair
market value equal to the total option price of the shares being acquired
pursuant to the option, by withholding some of the shares of Common Stock which
are being purchased upon exercise of an option, or any combination of the
foregoing. With respect to sub-clause (3) in the preceding sentence, the shares
of Common Stock delivered to pay the purchase price must have either been (a)
purchased in open market transactions or (b) issued by the Company pursuant to a
plan thereof, in each case more than six months prior to the exercise date of
the option.
If the fair market value of a share of Common Stock at the time of exercise is
greater than the exercise price per share, this feature would enable the
optionee to acquire a number of shares of Common Stock upon exercise of the
Option which is greater than the number of shares delivered as payment for the
exercise price. In addition, an optionee can exercise his option in whole or in
part and then deliver the shares acquired upon such exercise (if permitted by
47
<PAGE>
the Committee or the Board) as payment for the exercise price of all or part of
his options. Again, if the fair market value of a share of Common Stock at the
time of exercise is greater than the exercise price per share, this feature
would enable the optionee to either (1) reduce the amount of cash required to
receive a fixed number of shares upon exercise of the option or (2) receive a
greater number of shares upon exercise of the option for the same amount of cash
that would have otherwise been used. Because options may be exercised in part
from time to time, the ability to deliver Common Stock as payment of the
exercise price could enable the optionee to turn a relatively small number of
shares into a large number of shares. In addition, an optionee who is a
non-employee director or an executive officer can elect, with the Committee's
concurrence, to defer the recognition of ordinary income resulting from the
exercise of any compensatory option not transferred under the terms of the
Option Plan. Such deferral must comply with the provisions of the Option Plan
and other requirements as may be established by the Board of Directors.
Stock Appreciation Rights. Under the Option Plan, the Board of Directors or the
Committee is authorized to grant rights to optionees ("stock appreciation
rights") under which an optionee may surrender any exercisable incentive stock
option or compensatory stock option or part thereof in return for payment by the
Company to the optionee of cash or Common Stock, or a combination thereof, in an
amount equal to the excess of the fair market value of the shares of Common
Stock subject to the option over the option price of such shares. Stock
appreciation rights may be granted concurrently with the stock options to which
they relate or, with respect to compensatory options, at any time thereafter
which is prior to the exercise or expiration of such options. The proceeds of
the exercise of a stock appreciation right may also be deferred as provided by
the provisions of the Option Plan.
Number of Shares Covered by the Option Plan. The number of shares of Common
Stock reserved for future issuance pursuant to the Option Plan equals the lesser
of 8% of the then issued and outstanding shares of Common Stock (as may be
increased from time to time) or 450,000 shares of Common Stock. Based on the
2,324,616 shares of Common Stock outstanding as of the date of this Proxy
Statement, 8% of the number of shares outstanding would initially be reserved
under the Option Plan, or 185,969 shares. If and when the 2003 Notes held by
Value Partners are converted, Allstate Delaware would have at least 7,127,434
shares of common stock issued and outstanding, and the number of shares reserved
under the Option Plan would increase to the maximum of 450,000 shares.
48
<PAGE>
In the event of a stock split, subdivision, stock dividend or any other capital
adjustment, then (a) the number of shares of Common Stock under the Option Plan,
(b) the number of shares to which any Award relates, and (c) the exercise price
per share under any option or stock appreciation right shall each be adjusted to
reflect such increase or decrease in the total number of shares of Common Stock
outstanding or such capital adjustment.
As of June 15,2000, the Company's non-employee directors held compensatory
options for 65,000 shares of Common Stock, and all of these options have an
exercise price of $7.00 per share. Also at that date, the Company's two
executive officers held stock options for 90,000 shares of Common Stock, with
exercise prices ranging between $ 4.00 per share and $6.50 per share. These
options have an average exercise price of $5.17 per share. No additional stock
options can be granted under the Company's prior stock option plans.
Awards to be Granted. The Board of Directors of the Company adopted the Option
Plan and the Committee to be established thereunder expects to grant options to
executive officers, employees and non-employee directors of the Company. It is
currently anticipated that each of the non-employee directors will be granted
compensatory stock options and each executive officer will be granted incentive
stock options, although the amounts have not yet been determined. Other than as
set forth above, the timing of any such grants, the individual recipients and
the specific amounts of such grants have not been determined.
The Company has a total of three employees and five non-employee directors who
may be entitled to receive Awards under the Option Plan. The closing price for
the Common Stock was $.51 per share on June 15, 2000.
Amendment and Termination of the Option Plan. The Board of Directors may at any
time terminate or amend the Option Plan with respect to any shares of Common
Stock as to which Awards have not been granted, subject to any required
stockholder approval or any stockholder approval which the Board may deem to be
advisable. The Board of Directors may not, without the consent of the holder of
an Award, alter or impair any Award previously granted or awarded under the
Option Plan except as specifically authorized by the Option Plan.
Unless sooner terminated, the Option Plan shall continue in effect for a period
of ten years from June 13, 2000, the date the Option Plan was adopted by the
Board of Directors. Termination of the Option Plan shall not affect any
49
<PAGE>
previously granted Awards.
Federal Income Tax Consequences
Under current provisions of the Code, the federal income tax treatment of
incentive stock options and compensatory stock options is different. With
respect to incentive stock options, an optionee who meets certain holding period
requirements will not recognize income at the time the option is granted or at
the time the option is exercised, and a federal income tax deduction generally
will not be available to the Company at any time as a result of such grant or
exercise. With respect to compensatory stock options, the difference between the
fair market value on the date of exercise and the option exercise price
generally will be treated as compensation income upon exercise, and the Company
will be entitled to a deduction in the amount of income so recognized by the
optionee. Upon the exercise of a stock appreciation right, the holder will
realize income for federal income tax purposes equal to the amount received by
him, whether in cash, shares of stock or both, and the Company will be entitled
to a deduction for federal income tax purposes in the same amount.
Section 162(m) of the Code generally limits the deduction for certain
compensation in excess of $1.0 million per year paid by a publicly traded
corporation to its chief executive officer and the four other most highly
compensated executive officers ("covered executives"). Certain types of
compensation, including compensation based on performance goals, are excluded
from the $1.0 million deduction limitation. In order for compensation to qualify
for this exception, (1) it must be paid solely on account of the attainment of
one or more pre established, objective performance goals; (2) the performance
goal must be established by a compensation committee consisting solely of two or
more outside directors, as defined; (3) the material terms under which the
compensation is to be paid, including performance goals, must be disclosed to,
and approved by, stockholders in a separate vote prior to payment; and (4) prior
to payment, the compensation committee must certify that the performance goals
and any other material terms were in fact satisfied (the "Certification
Requirement").
Treasury regulations provide that compensation attributable to a stock option or
stock appreciation right is deemed to satisfy the requirement that compensation
be paid solely on account of the attainment of one or more performance goals if:
(1) the grant is made by a compensation committee consisting solely of two or
more outside directors, as defined; (2) the plan under which the option or stock
50
<PAGE>
appreciation right is granted states the maximum number of shares with respect
to which options or stock appreciation rights may be granted during a specified
period to any employee; and (3) under the terms of the option or stock
appreciation right, the amount of compensation the employee could receive is
based solely on an increase in the value of the stock after the date of grant or
award. The Certification Requirement is not necessary if these other
requirements are satisfied.
The Option Plan has been designed to meet the requirements of Section 162(m) of
the Code and, as a result, the Company believes that compensation attributable
to stock options and stock appreciation rights granted under the Option Plan in
accordance with the foregoing requirements will be fully deductible under
Section 162(m) of the Code. The Company also does not expect the compensation
for its covered executives to exceed the $1.0 million threshold. The Board of
Directors believes that the likelihood of any impact on the Company from the
deduction limitation contained in Section 162(m) of the Code is remote at this
time.
The above description of tax consequences under federal law is necessarily
general in nature and does not purport to be complete. Moreover, statutory
provisions are subject to change, as are their interpretations, and their
application may vary in individual circumstances. Finally, the consequences
under applicable state and local income tax laws may not be the same as under
the federal income tax laws.
Accounting Treatment
Stock appreciation rights will, in most cases, require a charge against the
earnings of the Company each year representing appreciation in the value of
such rights over periods in which they become exercisable. Such charge is based
on the difference between the exercise price specified in the related option
and the current market price of the Common Stock. In the event of a decline in
the market price of the Common Stock subsequent to a charge against earnings
related to the estimated costs of stock appreciation rights, a reversal of
prior charges is made in the amount of such decline (but not to exceed
aggregate prior charges).
Neither the grant nor the exercise of an incentive stock option or a
non-qualified stock option under the Option Plan currently requires any charge
against earnings under generally accepted accounting principles. Statement of
51
<PAGE>
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," establishes financial accounting and reporting standards for
stock-based employee compensation plans. This Statement defines a fair value
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for those plans using the intrinsic value method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Under the fair value method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period, which is usually the vesting period. Under the intrinsic value method,
compensation cost is the excess, if any, of the quoted market price of the stock
at the grant date or other measurement date over the amount an employee must pay
to acquire the stock. The Company anticipates that it will use the intrinsic
value method, in which event pro forma disclosure will be included in the
footnotes to the Company's financial statements to show what net income and
earnings per share would have been if the fair value method had been utilized.
If the Company elects to utilize the fair value method, its net income and
earnings per share may be adversely affected.
Stockholder Approval
No awards will become exercisable under the Option Plan unless the Option Plan
is approved by stockholders. Stockholder approval of the Option Plan will also
satisfy the requirements of the Nasdaq Stock Market and the Code.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
ADOPTION OF THE 2000 STOCK OPTION PLAN.
PROPOSAL NUMBER FOUR
PROPOSAL TO ADOPT THE 2000 RESTRICTED STOCK
PLAN FOR NON-EMPLOYEE DIRECTORS
General
The Board of Directors of the Company has adopted the 2000 Restricted
Stock Plan for Non-Employee Directors ("Restricted Stock Plan"), the objective
of which is to compensate the Company's non-employee directors for services
52
<PAGE>
rendered since June 1999. The Company's non-employee directors have not received
any cash compensation, stock options or other form of compensation since June
1999. As set forth below, the Board has approved grants to each of the
non-employee directors, subject to the receipt of shareholder approval.
Description of the Restricted Stock Plan
The following description of the Restricted Stock Plan is a summary of
its terms and is qualified in its entirety by reference to the Restricted Stock
Plan, a copy of which is attached hereto as Appendix F.
On June 13, 2000, the Board approved the grant of 25,000 restricted
shares to each of Directors Bartlett, Lefkowitz, McNally, Savage and Trittipoe
and 50,000 restricted shares to Chairman Campbell. The grants are contingent
upon the receipt of shareholder approval of the Restricted Stock Plan and will
be null and void if shareholder approval is not received. Because the grants
represent compensation for services previously rendered, the grants will be
fully vested and restricted shares will be issued to the recipients of the
grants upon shareholder approval of the Plan. The closing price for the common
stock was $.51 per share on June 13, 2000.
The total shares available under the Plan is 175,000 shares, all of
which are subject to the above grants to the non-employee directors. The
certificates for the shares will bear a restrictive transfer legend when they
are issued upon receipt of shareholder approval of the Plan.
Federal Income Tax Consequences
Pursuant to Section 83 of the Code, recipients of the restricted shares
will recognize ordinary income in an amount equal to the fair market value of
the shares of Common Stock granted to them at the time that the shares vest and
become transferable. A recipient may also elect, however, to accelerate the
recognition of income with respect to his or her restricted shares to the time
of grant, notwithstanding that the shares have not yet vested. The Company will
be entitled to deduct as a compensation expense for tax purposes the same
amounts recognized as income by recipients of restricted shares awards in the
year in which such amounts are included in income.
The above description of tax consequences under federal law is
necessarily general in nature and does not purport to be complete. Moreover,
53
<PAGE>
statutory provisions are subject to change, as are their interpretations, and
their application may vary in individual circumstances. Finally, the
consequences under applicable state and local income tax laws may not be the
same as under the federal income tax laws.
Accounting Treatment
For a discussion of SFAS No. 123, see "Proposal to Adopt the 2000 Stock
Option Plan - Accounting Treatment." Under the intrinsic value method, the
Company will also recognize a compensation expense when shares of Common Stock
granted pursuant to the Restricted Stock Plan vest. The amount of compensation
expense recognized for accounting purposes is based upon the fair market value
of the Common Stock at the date of grant to recipients, rather than the fair
market value at the time of vesting for tax purposes. The vesting of grants will
have the effect of increasing the Company's compensation expense.
Shareholder Approval
No grants under the Restricted Stock Plan shall become vested until the
Restricted Stock Plan is approved by shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR ADOPTION
OF THE 2000 RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS.
PROPOSAL NUMBER FIVE
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of McGladrey & Pullen, LLP served as the independent auditors for the
Company for the fiscal year ending December 31, 1999. The Company has appointed
McGladrey & Pullen, LLP independent auditors for the year ending December 31,
2000. Representatives of McGladrey & Pullen, 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.
As of May 18,1999, the Company dismissed its former independent auditors,
Deloitte & Touche LLP, which had audited the Company's financial statements for
the years ended December 31, 1998 and 1997. The reports of Deloitte & Touche LLP
54
<PAGE>
on our financial statements for 1998 and 1997 did not contain any adverse
opinion or disclaimer of opinion, and were not modified as to uncertainty, audit
scope or accounting principles. The decision to change accountants was made by
the Company's board of directors acting upon the recommendation of the board's
audit committee. To the Company's knowledge, there were no disagreements with
the former auditors, whether or not resolved, on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which, if not resolved to Deloitte & Touche's satisfaction, would
have caused them to make reference to the subject matter of the disagreement in
connection with their reports.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE RATIFICATION OF THE APPOINTMENT OF MCGLADREY &
PULLEN, LLP AS INDEPENDENT AUDITORS FOR THE YEAR 2000.
SHAREHOLDER PROPOSALS
Any proposal which a shareholder wishes to have included in the proxy materials
of the Company relating to the next annual meeting of shareholders of the
Company, which is scheduled to be held in May 2001, must be received at the
principal executive offices of the Company, 8180 Greensboro Drive, Suite 525,
McLean, Virginia 22206, Attention: Corporate Secretary, no later than December
15, 2000. If such proposal is in compliance with all of the requirements of Rule
14a-8 under the 1934 Act, it will be included in the proxy statement and set
forth on the form of proxy issued for such annual meeting of shareholders. The
Company urges shareholders to send any such proposals by certified mail, return
receipt requested.
ANNUAL AND QUARTERLY REPORTS
Copies of the Company's Annual Report on Form 10-KSB/A for the year ended
December 31, 1999 and Quarterly report on Form 10-QSB for the quarter ended
March 31, 2000 accompany this Proxy Statement. The Form 10-KSB/A includes a list
of the exhibits that have been filed with the Securities and Exchange Commission
under the 1934 Act. The Form 10-KSB/A and the Form 10-QSB are not part of the
proxy solicitation materials, except as set forth below under "Documents
55
<PAGE>
Incorporated by Reference".
DOCUMENTS INCORPORATED BY REFERENCE
The following portions of the Company's accompanying Annual Report on Form
10-KSB/A for the year ended December 311,1999 are incorporated herein by
reference:
(a) Item 6. Management's Discussion and analysis on pages 10 through 15; and (b)
Item 7. Financial Statements on pages 15 and 18 through 43.
In addition, the consolidated financial statements, notes to consolidated
financial statements and the management's discussion and analysis of financial
condition and results of operations on pages 10-15 of the Company's
accompanying Quarterly Report on Form 10-QSB for the quarter ended March 31,
2000 are incorporated herein by reference.
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the Board of
Directors of the Company to vote the proxy with respect to the approval of the
minutes of the last meeting of shareholders, the election of any person as a
director if the 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. Management is not aware of any
business that may properly come before the Annual Meeting other than those
matters described above in this Proxy Statement. However, if any other matters
should properly come before the Annual 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.
PLEASE PROMPTLY SIGN, DATE AND RETURN YOUR PROXY IN
THE ENCLOSED POSTAGE PAID ENVELOPE.
56
<PAGE>
Appendix A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Merger Agreement"), dated as of June 28, 2000, by
and between Allstate Financial Corporation, a Virginia corporation (the
"Company"), and Allstate Financial Corporation, a to be formed Delaware
corporation ("New Allstate").
WHEREAS, the Company is a corporation to be duly organized and existing under
the laws of the State of Virginia;
WHEREAS, New Allstate is a corporation duly organized and existing under the
laws of the State of Delaware;
WHEREAS, the Company has authority to issue 10,000,000 shares of common stock,
no par value per share (the "Company's Common Stock"), of which 2,324,616 shares
are issued and outstanding and 2,000,000 shares of preferred stock, no par value
per share (the "Company's Preferred Stock"), none of which has been issued;
WHEREAS, prior to the Effective Date of the Merger (as such terms are
hereinafter defined), additional shares of the Company's Common Stock may be
issued upon the exercise of options or convertible subordinated debt to purchase
the Company's Common Stock;
WHEREAS, New Allstate will have authority to issue 20,000,000 shares of common
stock, par value $.01 per share (the "Delaware Common Stock"), and, 2,000,000
shares of preferred stock, par value $.01 per share;
WHEREAS, one thousand (1000) shares of the Delaware Common Stock will be issued
and outstanding, all of which will be owned, beneficially and of record, by the
Company;
WHEREAS, the respective Boards of Directors of the Company and New Allstate have
or will have determined that, for the purpose of effecting the reincorporation
of the Company in the State of Delaware, it is advisable and in the best
interest of both corporations that the Company merge with and into New Allstate
57
<PAGE>
upon the terms and conditions hereinafter provided and in accordance with the
laws of the State of Virginia and Delaware in a transaction qualifying as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"); and
WHEREAS, the respective Boards of Directors of the Company and New Allstate have
or will have approved this Merger Agreement and directed that this Merger
Agreement be submitted to a vote of their respective shareholders for approval;
NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and New Allstate hereby agree as
follows:
1. Merger. Subject to the terms and conditions of this Merger Agreement, the
Company shall be merged with and into New Allstate (the "Merger") in accordance
with Section 253 of the Delaware General Corporation Law ("DGCL") and Section
13.1-716 of the Virginia Stock Corporation Act ("VSCA") such that New Allstate
shall be the surviving corporation (hereinafter referred to as the "Surviving
Corporation"). The Merger shall become effective upon the date (the "Effective
Date") on which a certified copy of this Merger Agreement or a Certificate of
Merger, executed and acknowledged on behalf of New Allstate and the Company, in
accordance with the requirements of the DGCL and the VSCA, has been filed with
the Delaware Secretary of State and the State Corporation Commission of
Virginia.
2. Certificate of Incorporation. The Certificate of Incorporation of New
Allstate shall read in the form attached hereto as Exhibit 1. The Certificate of
Incorporation of New Allstate shall be the Certificate of Incorporation of the
Surviving Corporation as of the Effective Date without change or amendment,
until thereafter amended in accordance with the provisions thereof and
applicable laws.
3. Directors, Officers and Bylaws. The directors of the Company immediately
prior to the Effective Date shall be the directors of the Surviving Corporation,
each to hold office in accordance with the Certificate of Incorporation and the
Bylaws of the Surviving Corporation. The officers of the Company immediately
58
<PAGE>
prior to the Effective Date shall be the officers of the Surviving Corporation,
each to hold office in accordance with the Certificate of Incorporation and the
Bylaws of the Surviving Corporation. The Bylaws of New Allstate shall be amended
and restated prior to the Effective Date to read in the form attached hereto as
Exhibit 2. The Amended and Restated Bylaws shall be the Amended and Restated
Bylaws of the Surviving Corporation as of the Effective Date without change or
amendment, until thereafter amended in accordance with the provisions thereof
and applicable laws.
4. Succession. From and after the Effective Date, the Surviving Corporation
shall succeed, insofar as permitted by law, to all of the rights, assets,
liabilities and obligations of the Company; and the title to any real estate
vested by deed or otherwise, in either of the Company and/or the Surviving
Corporation, shall not revert or be in any way impaired by reason of the Merger,
but all rights of creditors and all liens on any property of either of said
corporations shall be reserved unimpaired, and all debts, liabilities and duties
of said corporations shall, as of the Effective Date, attach to the Surviving
Corporation, and may be enforced against the Surviving Corporation to the same
extent as if said debts, liabilities and duties had been incurred or contracted
by it, and any
claim existing or action or proceeding pending by or against any of said
corporations may be prosecuted as if the Merger had not taken place, or the
Surviving Corporation may be prosecuted as if the Merger had not taken place, or
the Surviving Corporation may be substituted in its place. The employees and
agents of the Company shall become the employees and agents of the Surviving
Corporation and continue to be entitled to the same rights and benefits which
they enjoyed as employees and agents of the Company.
5. Further Assurances. From time to time as and when requested by the Surviving
Corporation or by its successors and assigns, there shall be executed and
delivered on behalf of the Company and/or the Surviving Corporation such deeds
and other instruments, and there shall be taken or caused to be taken by it such
further and other action, as shall be appropriate or necessary in order to vest,
protect or confirm, of record or otherwise, in the Surviving Corporation the
title to and possession of all property, interest, assets, rights, privileges,
immunities, powers, franchises, and authority of the Company, and otherwise to
carry out the purposes of this Merger Agreement, and the officers and directors
of the Surviving Corporation are fully authorized, in the name and on behalf of
the Company, or otherwise, to take any and all such action and to execute and
59
<PAGE>
deliver any and all such deeds and other instruments.
6. Conversion of Shares.
(a) Upon the Effective Date, each share of the Company's Common Stock issued and
outstanding or held in the treasury of the Company immediately prior thereto
(other than shares of the Company's Common Stock in respect of which dissenters'
rights shall properly have been exercised in accordance with the VSCA) shall, by
virtue of the Merger and without any action on the part of any holder thereof,
be changed and converted into one fully paid and non assessable share of
Delaware Common Stock, with the terms thereof as reflected in the Certificate of
Incorporation of New Allstate.
(b) Upon the Effective Date, the one thousand(1000) shares of Delaware Common
Stock to be issued and outstanding in the name of the Company shall be canceled
and retired without any consideration being issued or paid therefor and shall
resume the status of authorized and unissued shares of Delaware Common Stock,
and no shares of Delaware Common Stock or other securities of the Surviving
Corporation shall be issued in respect thereof.
(c) Each outstanding option to purchase shares of the Company's Common Stock
under any of the stock option plans of the Company (an "Old Option") and
outstanding immediately prior to the Effective Date shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become an option (the "New Option") to purchase, upon the same terms
and conditions, the number of shares of Delaware Common Stock which is equal to
the same number of shares of Company's Common Stock which may be purchased under
such Old Option. The exercise price per share under each New Option shall be
equal to the exercise price per share immediately prior to the Effective Date
with respect to each Old Option. All of the Company's stock option plans and
stock options granted thereunder, outstanding immediately prior to the Effective
Date, shall be automatically amended to permit plan continuance and stock option
continuance and conversion into those of the Surviving Corporation following the
Merger notwithstanding any provisions heretofore contained in such plans or
outstanding options providing for termination in the event of a merger in which
the Company is not the surviving corporation.
7. Stock Certificates. Upon the Effective Date, each certificate representing
60
<PAGE>
issued and outstanding shares of the Company's Common Stock (other than shares
of the Company's Common Stock in respect of which dissenters' rights shall
properly have been exercised in accordance with the VSCA) shall be deemed and
treated for all purposes as representing the shares of Delaware Common Stock
into which such shares of the Company's Common Stock have been converted. Each
shareholder of the Company may, but is not required to, exchange any existing
stock certificates representing shares of the Company's Common Stock for stock
certificates representing the same number of shares of Delaware Common Stock.
All shares of Delaware Common Stock into which shares of the Company's Common
Stock shall have been converted pursuant to this Merger Agreement shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
converted shares. When the Merger becomes effective, the holders of certificates
representing the Company's Common Stock outstanding immediately prior to the
Effective Date (except for shares of the Company's Common Stock in respect of
which dissenters' rights shall have been properly exercised in accordance with
the VSCA) shall cease to have any rights with respect to such stock, and their
sole rights shall be with respect to the Delaware Common Stock into which their
shares of the Company's Common Stock are to be converted by the Merger. Upon the
Effective Date, the stock transfer books of the Company shall be closed and no
transfer of shares of the Company's Common Stock outstanding immediately prior
to the Effective Date shall thereafter be made or consummated.
8. Employee Option and Benefit Plans, Convertible Subordinated Debt, and Other
Stock Rights. As of the Effective Date: (a) all employee option, benefit or
compensation plans of the Company (collectively, the "Plans") and all
obligations of the Company under the Plans, including the outstanding options
granted pursuant to the Plans, (b) all obligations of the Company under all
other benefit or compensation plans and outstanding stock rights in effect as of
the Effective Date with respect to which employee rights or accrued benefits or
other rights are outstanding as of the Effective Date, and (c) all obligations
of the Company under all convertible subordinated debt instruments outstanding
as of the Effective Date, shall be assumed by, and continue to be the plan or
obligation of, the Surviving Corporation. To the extent any employee option,
benefit or compensation plan or convertible subordinated debt instrument of the
Company provided for the issuance or purchase of, or otherwise related to, the
Company's Common Stock, after the Effective Date such plan or instrument shall
be deemed to provide for the issuance or purchase of, or otherwise relate to,
Delaware Common Stock.
9. Shareholder Approval. This Merger Agreement shall be submitted to a vote of
61
<PAGE>
the shareholders of the Company and the sole shareholder of New Allstate in
accordance with the laws of the State of Virginia and the State of Delaware,
respectively. In the event that this Merger Agreement shall be not approved by
the requisite vote of holders of two-thirds of the Company's Common Stock
entitled to vote at the Company's 2000 annual meeting or any adjournment
thereof, this Merger Agreement shall thereupon be terminated without further
action of the parties hereto.
10. Plan of Reorganization. This Agreement is intended to be a plan of
reorganization within the meaning of Section 368(a) of the Code and the Treasury
Regulations promulgated thereunder.
11. Conditions to Closing. The obligations of the Company and New Allstate to
complete the Merger are subject to the following conditions:
(a) the receipt of the shareholder approvals referenced in
Section 9;
(b) the Company's receipt of an opinion from Elias, Matz, Tiernan
& Herrick L.L.P., Washington, D.C., to the effect that: (1) no
gain or loss will be recognized for federal income tax
purposes by the stockholders of the Company as a result of the
Merger; (2) the basis and holding period for the Delaware
Common Stock received by the stockholders of the Company in
exchange for Company's Common Stock will be the same as the
basis and holding period of the stock of the Company exchanged
therefor; and (3) no gain or loss will be recognized for
federal income tax purposes as a result of the Merger by the
Company or New Allstate; and
(c) the Company's receipt of a tax opinion from
PricewaterhouseCoopers LLP in form and substance reasonably
satisfactory to the Company to the effect that the use of the
Company's NOL carryforwards will not be impaired by the Merger
or by the issuance of Delaware Common Stock upon conversion of
the 10% Convertible Notes Due September 30, 2003.
12. Amendment. Subject to applicable law, this Merger Agreement may be amended,
modified or supplemented by written agreement of the parties hereto at any time
62
<PAGE>
prior to the Effective Date with respect to any of the items contained herein.
13. Abandonment. At any time before the Effective Date, this Merger Agreement
may be terminated and the Merger may be abandoned by the Board of Directors of
either New Allstate or the Company or both, notwithstanding the approval of this
Merger Agreement by the shareholders of the Company or the sole shareholder of
New Allstate.
14. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Virginia, except to the extent the
laws of the State of Delaware are required to apply to the Merger.
IN WITNESS WHEREOF, this Merger Agreement is hereby executed on behalf of the
Company and New Allstate by their respective duly authorized officers as of the
date first written above.
ALLSTATE FINANCIAL CORPORATION,
a Virginia corporation
/s/ Charles G. Johnson
-------------------------------
Name: Charles G. Johnson
Title: President
ALLSTATE FINANCIAL CORPORATION,
a Delaware Corporation
/s/ Charles G. Johnson
-------------------------------
Name: Charles G. Johnson
Title: President
63
<PAGE>
APPENDIX B
CERTIFICATE OF INCORPORATION OF
ALLSTATE FINANCIAL CORPORATION
Article 1. Name. The name of the corporation is Allstate Financial Corporation
(hereinafter referred to as the "Corporation").
Article 2. Registered Office and Registered Agent. The address of the registered
office of the Corporation in the State of Delaware is 1105 N. Market Street,
Suite 1300, in the city of Wilmington, county of New Castle. The name of the
registered agent at such address is Delaware Corporate Management, Inc.
Article 3. Nature of Business. The purpose of the Corporation is to engage in
any lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware.
Article 4. Capital Stock. The total number of shares of capital stock which the
Corporation has authority to issue is 22,000,000 of which 20,000,000 shall be
common stock, $.01 par value per share (hereinafter the "Common Stock"), and
2,000,000 shall be preferred stock, $.01 par value per share (hereinafter the
"Preferred Stock").
The Board of Directors is hereby expressly authorized, by resolution or
resolutions to provide, out of the unissued shares of Preferred Stock, for
series of Preferred Stock. Before any shares of any such series are issued, the
Board of Directors shall fix, and hereby is expressly empowered to fix, by
resolution or resolutions, the following provisions of the shares thereof:
(a) the designation of such series, the number of shares to constitute such
series and the stated value thereof if different from the par value thereof;
(b) whether the shares of such series shall have voting rights, including any
authority to elect directors, in addition to any voting rights provided by law,
and, if so, the terms of such voting rights, which may be general or limited;
(c) the dividends, if any, payable on such series, whether any such dividends
shall be cumulative, and, if so, from what dates, the conditions and dates upon
64
<PAGE>
which such dividends shall be payable, and the preference or relation which such
dividends shall bear to the dividends payable on any shares of stock of any
other class or any other series of this class;
(d) whether the shares of such series shall be subject to redemption by the
Corporation, and, if so, the times, prices and other conditions of such
redemption;
(e) the amount or amounts payable upon shares of such series upon, and the
rights of the holders of such series in, the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, or upon any
distribution of the assets of the Corporation;
(f) whether the shares of such series shall be subject to the operation of a
retirement or sinking fund and, if so, the extent to and manner in which any
such retirement or sinking fund shall be applied to the purchase or redemption
of the shares of such series for retirement or other corporate purposes and the
terms and provisions relative to the operation thereof;
(g) whether the shares of such series shall be convertible into, or exchangeable
for, shares of stock of any other class or any other series of this class or any
other securities, and, if so, the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting the same, and any
other terms and conditions of conversion or exchange;
(h) the limitations and restrictions, if any, to be effective while any shares
of such series are outstanding upon the payment of dividends or the making of
other distributions on, and upon the purchase, redemption or other acquisition
by the Corporation of, the Common Stock or shares of stock of any other class or
any other series of this class;
(i) the conditions or restrictions, if any, upon the creation of indebtedness of
the Corporation or upon the issue of any additional stock, including additional
shares of such series or of any other series of this class or of any other
class; and
(j) any other powers, preferences and relative, participating, optional and
other special rights, and any qualifications, limitations and restrictions
thereof.
65
<PAGE>
The powers, preferences and relative, participating, optional and other special
rights of each series of Preferred Stock, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all other series
at any time outstanding. All shares of any one series of Preferred Stock shall
be identical in all respects with all other shares of such series, except that
shares of any one series issued at different times may differ as to the dates
from which dividends thereon shall accrue and/or be cumulative.
Article 5. Preemptive Rights. No holder of the capital stock of the Corporation
shall be entitled as such, as a matter of right, to subscribe for or purchase
any part of any new or additional issue of stock of any class whatsoever of the
Corporation, or of securities convertible into stock of any class whatsoever,
whether now or hereafter authorized, or whether issued for cash or other
consideration or by way of a dividend.
Article 6. Directors. The business and affairs of the Corporation shall be
managed by or under the direction of a Board of Directors. The initial Board of
Directors shall consist of David W. Campbell and Charles G. Johnson, and each of
their addresses is Allstate Financial Corporation, 8180 Greensboro Drive, Suite
525, McLean, Virginia 22102. Except as otherwise fixed pursuant to the
provisions of Article 4 hereof relating to the rights of the holders of any
class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect additional directors, the number of
directors shall be determined as stated in the Corporation's Bylaws, as may be
amended from time to time. Shareholders of the Corporation shall not be
permitted to cumulate their votes for the election of directors.
Article 7. Liability of Directors and Officers. The personal liability of the
directors and officers of the Corporation for monetary damages shall be
eliminated to the fullest extent permitted by the General Corporation Law of the
State of Delaware as it exists on the effective date of this Certificate of
Incorporation or as such law may be thereafter in effect. No amendment,
modification or repeal of this Article 7 shall adversely affect the rights
provided hereby with respect to any claim, issue or matter in any proceeding
that is based in any respect on any alleged action or failure to act prior to
such amendment, modification or repeal.
Article 8. Indemnification. The Corporation shall indemnify its directors,
66
<PAGE>
officers, employees, agents and former directors, officers, employees and
agents, and any other persons serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, association,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees, judgments, fines and amounts paid in settlement)
incurred in connection with any pending or threatened action, suit or
proceeding, whether civil, criminal, administrative or investigative, with
respect to which such director, officer, employee, agent or other person is a
party, or is threatened to be made a party, to the full extent permitted by the
General Corporation Law of the State of Delaware, provided, however, that the
Corporation shall not be liable for any amounts which may be due to any person
in connection with a settlement of any action, suit or proceeding effected
without its prior written consent or any action, suit or proceeding initiated by
any person seeking indemnification hereunder without its prior written consent.
The indemnification provided herein (i) shall not be deemed exclusive of any
other right to which any person seeking indemnification may be entitled under
any bylaw, agreement or vote of shareholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
any other capacity, and (ii) shall inure to the benefit of the heirs, executors
and administrators of any such person. The Corporation shall have the power, but
shall not be obligated, to purchase and maintain insurance on behalf of any
person or persons enumerated above against any liability asserted against or
incurred by them or any of them arising out of their status as corporate
directors, officers, employees or agents, whether or not the Corporation would
have the power to indemnify them against such liability under the provisions of
this Article 8.
Article 9. Restrictions on Transfers and Acquisitions of the Corporation's
Securities.
A. Upon the effective date of the reincorporation of Allstate Financial
Corporation, the incorporator of the Corporation and a Virginia corporation,
from Virginia to Delaware ("Effective Date"), and ending on the earlier of (1)
the expiration of twenty (20) years after the Effective Date, or (2) the date
which is the first day of the beginning of the taxable year of the Corporation
(or any successor thereto) to which no net operating loss, capital loss, general
business credit, alternative minimum tax, foreign tax credit or net unrealized
built-in loss ("Tax Benefits") may be carried forward, any attempted sale,
purchase, transfer, assignment, conveyance, pledge or other disposition
67
<PAGE>
("Transfer") of any share of Common Stock, any warrants, rights or options to
purchase Common Stock, or any other interests that would be treated as "stock"
of the Corporation under Section 382 of the Internal Revenue Code of 1986, as
amended ("Code") (collectively, "Corporate Securities") to any person or entity
or group of persons or entities acting in concert ("Transferee") who directly or
indirectly owns or is treated as owning (within the meaning of the attribution
rules applicable under Section 382 of the Code) ("Own") more than 4.9% of the
outstanding shares of any class of Corporate Securities or, after giving effect
to the Transfer, would directly or indirectly Own more than 4.9% of the
outstanding shares of any class of Corporate Securities shall be void ab initio
and shall not be effective to Transfer any of such shares of Corporate
Securities to the extent the Transfer increases the Transferee's direct or
indirect ownership of the Corporate Securities above 4.9% of the total
outstanding shares of such class of Corporate Securities. Similarly, any
Transfer by a transferor who directly or indirectly Owns five percent (5%) or
more of the outstanding shares of any class of Corporate Securities shall be
void ab initio and shall not be effective to Transfer any of such shares to the
purported Transferee.
B. The foregoing restrictions on transfer of Corporate Securities shall not
apply to a proposed Transfer if the transferor or the Transferee obtains the
approval of at least two-thirds of the Board of Directors of the Corporation. As
a condition to granting such approval, the Board of Directors may, in its
discretion, require that the transferor or the Transferee, as the case may be,
deliver an opinion of counsel acceptable in form and substance to the Board of
Directors to the effect that the Transfer shall not result in the application of
any limitation on the use of Tax Benefits under Sections 382 and 269 of the
Code. If the board requires and receives such an opinion of counsel, the
decision to approve a Transfer (whether or not that decision is contrary to the
opinion so delivered) shall still remain in the sole discretion of the Board of
Directors.
C. If the Board of Directors determines that a Transfer of Corporate Securities
constitutes a Transfer prohibited by Article 9.A ("Prohibited Transfer"), then,
upon written demand by the Corporation, the purported Transferee shall transfer
or cause to be transferred any certificate or other evidence of ownership of
Corporate Securities that are the subject of the Prohibited Transfer
("Prohibited Securities"), together with any dividends or other distributions
that were received by the Transferee from the Corporation with respect to such
68
<PAGE>
Prohibited Securities ("Prohibited Distributions"), to an agent designated by
the Board of Directors ("Agent"). The Agent shall thereupon sell to a buyer or
buyers the Prohibited Securities transferred to it. If the purported Transferee
has resold the Prohibited Securities before receiving the Corporation's demand
to surrender the Prohibited Securities to the Agent, the purported Transferee
shall be deemed to have sold the Prohibited Securities for the Agent and shall
be required to transfer to the Agent any Prohibited Distributions and the
proceeds of such sale. If the purported Transferee fails to surrender the
Prohibited Securities, or the proceeds of a sale thereof, and any Prohibited
Distributions to the Agent within thirty (30) business days from the date on
which the Corporation makes a demand for such surrender, then the Corporation
may institute legal proceedings to compel surrender.
D. No employee or agent of the Corporation shall record any Prohibited Transfer,
and the purported Transferee shall not be recognized as a shareholder of the
Corporation for any purpose whatsoever in respect of the Prohibited Securities.
Until the Prohibited Securities are acquired by another person in a Transfer
that is not a Prohibited Transfer, the purported Transferee shall not be
entitled with respect to such Prohibited Securities to any rights of
shareholders of the Corporation, including, without limitation, the right to
vote such Prohibited Securities and to receive dividend distributions, whether
liquidating or otherwise, in respect thereof, if any. Once the Prohibited
Securities have been acquired in a Transfer that is not a Prohibited Transfer,
the Corporate Securities shall cease to be Prohibited Securities.
E. The Agent shall apply any proceeds of a sale by it of Prohibited Securities
and, if the purported Transferee has previously resold the Prohibited
Securities, any amounts received by it from a purported Transferee, as follows:
(1) first, such amount shall be paid to the Agent to the extent necessary to
cover its costs and expenses incurred in connection with its duties hereunder;
(2) second, any remaining amounts shall be paid to the purported Transferee, up
to the amount paid by the purported Transferee for the Prohibited Securities,
which amount shall be determined in the discretion of the Board of Directors;
and (3) third, any remaining amounts shall be paid to one or more organizations
qualifying under Section 501(c)(3) of the Code as selected by the Board of
Directors of the Corporation.
F. All certificates reflecting Corporate Securities issued by the Corporation on
or after the Effective Date shall bear a conspicuous legend in substantially the
69
<PAGE>
following form:
THE TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS SUBJECT TO
RESTRICTION PURSUANT TO ARTICLE 9 OF THE CERTIFICATE OF INCORPORATION OF
THE CORPORATION, A COPY OF WHICH IS AVAILABLE UPON REQUEST TO THE
CORPORATION OR ITS TRANSFER AGENT. ARTICLE 9 PROHIBITS THE TRANSFER OF
THE SECURITIES TO ANY PERSON, ENTITY OR GROUP ("TRANSFEREE") WHO DIRECTLY
OR INDIRECTLY OWNS (OR WHO WOULD DIRECTLY OR INDIRECTLY OWN AFTER GIVING
EFFECT TO THE PROPOSED TRANSFER) MORE THAN 4.9% OF ANY CLASS OF
SECURITIES OF THE CORPORATION, OR THE TRANSFER BY ANY TRANSFEROR WHO
DIRECTLY OR INDIRECTLY OWNS 5% OR MORE OF ANY CLASS OF SECURITIES OF THE
CORPORATION, IN EACH CASE UNLESS APPROVED BY AT LEAST TWO-THIRDS OF THE
BOARD OF DIRECTORS OF THE CORPORATION.
G. In the event any provision (or portion thereof) of this Article 9 shall be
found to be invalid, prohibited or unenforceable for any reason, the remaining
provisions (or portions thereof) of this Article 9 shall remain in full force
and effect, and shall be construed as if such invalid, prohibited or
unenforceable provision had been stricken herefrom or otherwise rendered
inapplicable, it being the intent of this Corporation and its shareholders that
each such remaining provision (or portion thereof) of this Article 9 remain, to
the fullest extent permitted by law, applicable and enforceable as to all
shareholders.
Article 10. Compromises or Arrangements With Creditors or Stock-holders.
Whenever a compromise or arrangement is proposed between the Corporation and its
creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under Section 291 of
Title 8 of the Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for the Corporation under Section 279 of
Title 8 of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
70
<PAGE>
arrangement and to any reorganization of the Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
Article 11. Amendment of Certificate of Incorporation. The Corporation reserves
the right to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter prescribed by law,
and all rights conferred upon shareholders herein are granted subject to this
reservation. No amendment, addition, alteration, change or repeal of this
Certificate of Incorporation shall be made unless it is first approved by the
Board of Directors of the Corporation pursuant to a resolution adopted by the
affirmative vote of a majority of the directors then in office, and is
thereafter approved by the holders of at least two-thirds of the shares entitled
to vote generally in an election of directors (after giving effect to Article
9.D hereof), voting together as a single class, as well as such additional vote
of the Preferred Stock as may be required by the provisions of any series
thereof. Notwithstanding the preceding sentence, any amendment to this
Certificate of Incorporation recommended for adoption by at least two-thirds of
the entire Board of Directors (including any vacancies) shall, to the extent the
General Corporation Law of the State of Delaware requires shareholder approval
of such amendment, require the affirmative vote of a majority of the shares
entitled to vote generally in an election of directors (after giving effect to
Article 9.D hereof), voting together as a single class, as well as such
additional vote of the Preferred Stock as may be required by the provisions of
any series thereof.
71
<PAGE>
IN WITNESS WHEREOF, Allstate Financial Corporation, a Virginia corporation has
caused this Certificate of Incorporation to be signed by its President and
attested to by its Chairman on this 28th day of June, 2000.
Attest:
ALLSTATE FINANCIAL CORPORATION
By: /s/ David W. Campbell
Name: David W. Campbell
Title: Chairman
8180 Greensboro Drive, Suite 525
McLean, Virginia 22102
By: /s/Charles G. Johnson
-------------------------
Name: Charles G. Johnson
Title: President
8180 Greensboro Drive, Suite 525
McLean, Virginia 22102
72
<PAGE>
APPENDIX C
AMENDED AND RESTATED BYLAWS
OF
ALLSTATE FINANCIAL CORPORATION
ARTICLE I. OFFICES
1.1 Registered Office and Registered Agent. The registered office of Allstate
Financial Corporation (the "Corporation") shall be located in the State of
Delaware at such place as may be fixed from time to time by the Board of
Directors upon filing of such notices as may be required by law, and the
registered agent shall have a business office identical with such registered
office.
1.2 Other Offices. The Corporation may have other offices within or without the
State of Delaware at such place or places as the Board of Directors may from
time to time determine.
ARTICLE II. SHAREHOLDERS' MEETINGS
2.1 Meeting Place. All meetings of the shareholders shall be held at the
principal place of business of the Corporation, or at such other place within or
without the State of Delaware as shall be determined from time to time by the
Board of Directors, and the place at which any such meeting shall be held shall
be stated in the notice of the meeting.
2.2 Annual Meeting. The annual meeting of the shareholders for the election of
directors and for the transaction of such other business as may properly come
before the meeting shall be held each year on such date and time as determined
by the Board of Directors and stated in the notice of such meeting.
2.3 Organization. Each meeting of the shareholders shall be presided over by the
Chairman of the Board, or in his absence by the President, or in their absences,
any other individual selected by the Board of Directors. The Secretary, or in
his absence a temporary Secretary, shall act as secretary of each meeting of the
shareholders. In the absence of the Secretary and any temporary Secretary, the
73
<PAGE>
chairman of the meeting may appoint any person present to act as secretary of
the meeting. The chairman of any meeting of the shareholders shall announce the
date and time of the opening and the closing of the polls for each matter upon
which the shareholders will vote at a meeting and, unless prescribed by law or
regulation or unless the Board of Directors has otherwise determined, shall
determine the order of the business and the procedure at the meeting, including
such regulation of the manner of voting and the conduct of discussions as seem
to him in order.
2.4 Special Meetings. Except as otherwise required by law and subject to the
rights of the holders of any class or series of Preferred Stock, special
meetings of the shareholders may be called by the Chairman of the Board of
Directors, the President of the Corporation or by the Board of Directors
pursuant to a resolution approved by the affirmative vote of at least a majority
of the directors then in office.
2.5 Notice.
------
(a) Notice of the place, day and hour of the annual meeting of shareholders
shall be given by delivering personally or by mailing a written notice of the
same, not less than ten days and not more than sixty days prior to the date of
the meeting, to each shareholder of record entitled to vote at such meeting.
When any shareholders' meeting, either annual or special, is adjourned for
thirty days or more, or if a new record date is fixed for an adjourned meeting
of shareholders, notice of the adjourned meeting shall be given as in the case
of an original meeting. It shall not be necessary to give any notice of the time
and place of any meeting adjourned for less than thirty days (unless a new
record date is fixed therefor), other than an announcement at the meeting at
which such adjournment is taken. At the adjourned meeting the Corporation may
transact any business which might have been transacted at the original meeting.
(b) Not less than ten days and not more than sixty days prior to the meeting, a
written notice of each special meeting of shareholders, stating the place, day
and hour of such meeting, and the purpose or purposes for which the meeting is
called, shall be either delivered personally or mailed to each shareholder of
record entitled to vote at such meeting.
(c) If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, addressed to the shareholder at his address as it appears on
74
<PAGE>
the stock transfer books of the Corporation, with postage thereon prepaid.
2.6 Record List of Shareholders. At least ten days before each meeting of
shareholders, a complete record of the shareholders entitled to vote at such
meeting, or any adjournment thereof, shall be made, arranged in alphabetical
order, with the address of and number of shares registered in the name of each,
which record shall be kept open to the examination of any shareholder, for a
purpose germane to the meeting, in accordance with the General Corporation Law
("GCL") of the State of Delaware. The record also shall be kept open at the time
and place of such meeting for the inspection of any shareholder.
2.7 Quorum; Actions of Shareholders. Except as otherwise required by law or the
Corporation's Certificate of Incorporation:
(a) A quorum at any annual or special meeting of shareholders shall consist of
shareholders representing, either in person or by proxy, a majority of the
outstanding capital stock of the Corporation entitled to vote at such meeting.
(b) In all matters other than the election of directors, the affirmative vote of
the majority of shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter shall be the act of the shareholders.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors.
2.8 Voting of Shares. Except as otherwise provided in these Amended and Restated
Bylaws or to the extent that voting rights of the shares of any class or classes
are limited or denied by the Certificate of Incorporation, each shareholder, on
each matter submitted to a vote at a meeting of shareholders, shall have one
vote for each share of stock registered in his name on the books of the
Corporation.
2.9 Closing of Transfer Books and Fixing of the Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders, or any adjournment thereof, or entitled to receive payment of any
dividend, the Board of Directors may provide that the stock transfer books shall
be closed for a stated period not to exceed 60 days nor less than ten days
preceding such meeting. In lieu of closing the stock transfer books, the Board
of Directors may fix in advance a record date for any such determination of
shareholders, which record date shall not precede the date upon which the
75
<PAGE>
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty days and, in case of a meeting of
shareholders, not less than ten days prior to the date on which the particular
action requiring such determination of shareholders is to be taken.
2.10 Proxies. A shareholder may vote either in person or by proxy executed in
writing by the shareholder or his duly authorized attorney-in-fact. Without
limiting the manner in which a shareholder may authorize another person or
persons to act for him as proxy, a shareholder may grant such authority in the
manner specified in Section 212(c) of the GCL (or any successor thereto). No
proxy shall be valid after three years from the date of its execution, unless
otherwise provided in the proxy.
2.11 Waiver of Notice. A waiver of any notice required to be given any
shareholder, signed by the person or persons entitled to such notice, whether
before or after the time stated therein for the meeting, shall be equivalent to
the giving of such notice. The attendance of any shareholder at a meeting, in
person or by proxy, shall constitute a waiver of notice by such shareholder,
except where a shareholder attends a meeting for the express purpose of
objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or commenced.
2.12 Voting of Shares in the Name of Two or More Persons. When ownership stands
in the name of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise, or if two or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary of the Corporation is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided, at
any meeting of the shareholders of the Corporation any one or more of such
shareholders may cast, in person or by proxy, all votes to which such ownership
is entitled. In the event an attempt is made to cast conflicting votes, in
person or by proxy, by the several persons in whose names shares of stock stand,
the vote or votes to which those persons are entitled shall be cast as directed
by a majority of those holding such stock and present in person or by proxy at
such meeting, but no votes shall be cast for such stock if a majority cannot
agree, except to the extent provided in Section 217(b)(3) of the GCL (or any
successor thereto).
2.13 Voting of Shares by Certain Holders. Shares standing in the name of another
76
<PAGE>
corporation may be voted by an officer, agent or proxy as the bylaws of such
corporation may prescribe, or, in the absence of such provision, as the Board of
Directors of such corporation may determine. Shares held by an administrator,
executor, guardian or conservator may be voted by him, either in person or by
proxy, without a transfer of such shares into his name. Shares standing in the
name of a trustee may be voted by him, either in person or by proxy, but no
trustee shall be entitled to vote shares held by him without a transfer of such
shares into his name. Shares standing in the name of a receiver may be voted by
such receiver, and shares held by or under the control of a receiver may be
voted by such receiver without the transfer thereof into his name if authority
to do so is contained in an appropriate order of the court or other public
authority by which such receiver was appointed. A shareholder whose shares are
pledged shall be entitled to vote such shares until the shares have been
transferred into the name of the pledgee, and thereafter the pledgee shall be
entitled to vote the shares so transferred.
2.14 Proposals. At an annual meeting of the shareholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, or (b) otherwise properly brought before the meeting by
a shareholder. For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not later than 120 days prior to the anniversary date of the mailing
of proxy materials by the Corporation in connection with the immediately
preceding annual meeting of shareholders of the Corporation or, in the case of
the first annual meeting of shareholders of the Corporation following the
reincorporation of Allstate Financial Corporation from Virginia to Delaware (the
"Reincorporation"), which meeting is expected to be held in May 2001, notice by
the shareholder must be so delivered and received no later than the close of
business on December 15, 2000, notwithstanding any determination by the
Corporation to schedule such first annual meeting later than May 2001. A
shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (a) a description of the
business desired to be brought before the annual meeting, (b) the name and
address, as they appear on the Corporation's books, of the shareholder proposing
such business, (c) the class and number of shares of Corporation stock which are
beneficially owned by the shareholder submitting the notice, by any person or
77
<PAGE>
entity who is an Affiliate or Associate of such shareholder (as such capitalized
terms are defined in Rule 12b-2 of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), or any successor thereto), by any Person who is a
member of any group with such shareholder with respect to the Corporation stock
or who is known by such shareholder to be supporting such proposal on the date
the notice is given to the Corporation, and by each Person who is in control of,
is controlled by or is under common control with any of the foregoing Persons,
(d) the identification of any person retained or to be compensated by the
shareholder submitting the proposal, or any person acting on his or her behalf,
to make solicitations or recommendations to shareholders for the purpose of
assisting in the passage of such proposal and a brief description of the terms
of such employment, retainer or arrangement for compensation, and (e) any
material interest of the shareholder in such business. The chairman of an annual
meeting shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting in accordance with the
provisions of this Article II, Section 2.14, and if he should so determine, he
shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted. This provision is not a limitation
on any other applicable laws and regulations.
2.15 Inspectors. For each meeting of shareholders, the Board of Directors shall
appoint one or more inspectors of election, who shall make a written report of
such meeting. If for any meeting the inspector(s) appointed by the Board of
Directors shall be unable to act or the Board of Directors shall fail to appoint
any inspector, one or more inspectors shall be appointed at the meeting by the
chairman thereof. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his ability. An
inspector or inspectors shall (i) ascertain the number of shares outstanding and
the voting power of each, (ii) determine the shares represented at a meeting and
the validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors and (v) certify their
determination of the number of shares represented at the meeting and their count
of all votes and ballots. The date and time of the opening and the closing of
the polls for each matter upon which the shareholders will vote at a meeting
shall be announced at the meeting by the chairman thereof. An inspector or
inspectors shall not accept a ballot, proxy or vote, nor any revocations thereof
or changes thereto, after the closing of the polls (unless the Court of Chancery
of the State of Delaware upon application by a shareholder shall determine
78
<PAGE>
otherwise) and may appoint or retain other persons or entities to assist them in
the performance of their duties. Inspectors need not be shareholders and may not
be nominees for election as directors.
ARTICLE III. CAPITAL STOCK
3.1 Certificates. Certificates of stock shall be issued in numerical order, and
each shareholder shall be entitled to a certificate signed by the President or a
Vice President, and by the Secretary or an Assistant Secretary, and may be
sealed with the seal of the Corporation or facsimile thereof. The signatures of
such officers may be facsimiles if the certificate is manually signed on behalf
of a transfer agent, or registered by a registrar, other than the Corporation
itself or an employee of the Corporation. If an officer who has signed or whose
facsimile signature has been placed upon such certificate ceases to be an
officer before the certificate is issued, it may be issued by the Corporation
with the same effect as if the person were an officer on the date of issue. Each
certificate of stock shall state:
(a) that the Corporation is organized under the laws of the State of Delaware;
(b) the name of the person to whom issued;
(c) the number and class of shares and the designation of the series, if any,
which such certificate represents; and
(d) the par value of each share represented by such certificate, or a statement
that such shares are without par value.
3.2 Transfers.
(a) Transfers of stock shall be made only upon the stock transfer books of the
Corporation, kept at the registered office of the Corporation or at its
principal place of business, or at the office of its transfer agent or
registrar, and before a new certificate is issued, the old certificate shall be
surrendered for cancellation. The Board of Directors may, by resolution, open a
share register in any state of the United States, and may employ an agent or
agents to keep such register, and to record transfers of shares therein.
(b) Shares of stock shall be transferred by delivery of the certificates
therefor, accompanied either by an assignment in writing on the back of the
79
<PAGE>
certificate or an assignment separate from the certificate, or by a written
power of attorney to sell, assign and transfer the same, signed by the holder of
said certificate. No shares of stock shall be transferred on the books of the
Corporation until the outstanding certificates therefor have been surrendered to
the Corporation.
(c) A written restriction on the transfer or registration of transfer of a
certificate evidencing stock of the Corporation, if permitted by the GCL and
noted conspicuously on such certificate, may be enforced against the holder of
the restricted certificate or any successor or transferee of the holder,
including an executor, administrator, trustee, guardian or other fiduciary
entrusted with like responsibility for the person or estate of the holder.
3.3 Registered Owner. Registered shareholders shall be treated by the
Corporation as the holders in fact of the stock standing in their respective
names and the Corporation shall not be bound to recognize any equitable or other
claim to or interest in any share on the part of any other person, whether or
not it shall have express or other notice thereof, except as expressly provided
by the laws of the State of Delaware.
3.4 Lost, Stolen or Destroyed Certificates. The Corporation may issue a new
certificate of stock in place of any certificate previously issued by it which
is alleged to have been lost, stolen or destroyed, and the Corporation may
require the owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
3.5 Fractional Shares or Scrip. The Corporation may (a) issue fractions of a
share which shall entitle the holder to exercise voting rights, to receive
dividends thereon and to participate in any of the assets of the Corporation in
the event of liquidation; (b) arrange for the disposition of fractional
interests by those entitled thereto; (c) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such shares are
determined; or (d) issue scrip in registered or bearer form which shall entitle
the holder to receive a certificate for a full share upon the surrender of such
scrip aggregating a full share.
3.6 Shares of Another Corporation. Shares owned by the Corporation in another
80
<PAGE>
corporation, domestic or foreign, may be voted by such officer, agent or proxy
as the Board of Directors may determine or, in the absence of such
determination, by the President of the Corporation.
ARTICLE IV. BOARD OF DIRECTORS
4.1 Powers. The business and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors, which may exercise all such
authority and powers of the Corporation and do all such lawful acts and things
as are not by law, the Certificate of Incorporation or these Amended and
Restated Bylaws directed or required to be exercised or done by the
shareholders.
4.2 Election, Term and Qualifications. Each director shall hold office until his
successor shall have been elected and qualified or until his earlier
resignation, removal from office or death. Directors of the Corporation shall be
elected annually. Directors need not be residents of this state or shareholders
of the Corporation.
4.3 Number of Directors. The initial Board of Directors shall consist of six (6)
persons. The number of directors may at any time be increased or decreased by a
vote of a majority of the Board of Directors, provided that no decrease shall
have the effect of shortening the term of any incumbent director.
Notwithstanding anything to the contrary contained within these Amended and
Restated Bylaws, the number of directors may not be less than three nor more
than 10.
4.4 Vacancies. Except as may be otherwise specified in the Corporation's
Certificate of Incorporation relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect directors, or in the Corporation's debt instruments,
any vacancy occurring in the Board of Directors, including any vacancy created
by reason of an increase in the number of directors, may be filled by a majority
vote of the directors then in office, whether or not a quorum is present, or by
a sole remaining director, and any director so chosen shall hold office for the
remainder of the term to which the director has been selected and until such
81
<PAGE>
director's successor shall have been elected and qualified.
4.5 Removal of Directors. Subject to the rights of any class or series of stock
having preference over the Common Stock as to dividends or upon liquidation to
elect directors, and subject to any rights of the holders of the Corporation's
debt instruments, any director (including persons elected by directors to fill
vacancies in the Board of Directors) may be removed from office with or without
cause by an affirmative vote of the holders of a majority of the shares then
outstanding and entitled to vote in an election of directors.
4.6 Regular Meetings. Regular meetings of the Board of Directors or any
committee thereof may be held at the principal place of business of the
Corporation or at such other place or places, either within or without the State
of Delaware, as the Board of Directors or such committee, as the case may be,
may from time to time designate. Notice of such meetings shall be provided to
directors in accordance with the provisions of the GCL. Unless otherwise
determined by the Board of Directors, the annual meeting of the Board of
Directors shall be held immediately after the adjournment of the annual meeting
of shareholders.
4.7 Special Meetings.
----------------
(a) Special meetings of the Board of Directors may be called at any time by the
Chairman of the Board, the President or by a majority of the authorized number
of directors, to be held at the principal place of business of the Corporation
or at such other place or places as the Board of Directors or the person or
persons calling such meeting may from time to time designate. Notice of all
special meetings of the Board of Directors shall be given to each director at
least twenty-four (24) hours prior to such meeting if notice is given in person
or by telephone, telegraph, telex, facsimile or other electronic transmission
and at least five (5) days prior to such meeting if notice is given in writing
and delivered by courier or by postage prepaid mail. Such notice need not
specify the business to be transacted at, nor the purpose of, the meeting. Any
director may waive notice of any meeting by submitting a signed waiver of notice
with the Secretary, whether before or after the meeting. The attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
at the beginning of the meeting to the transaction of any business because the
82
<PAGE>
meeting is not lawfully called or convened.
(b) Special meetings of any committee of the Board of Directors may be called at
any time by such person or persons and with such notice as shall be specified
for such committee by the Board of Directors, or in the absence of such
specification, in the manner and with the notice required for special meetings
of the Board of Directors.
4.8 Waiver of Notice. Attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. A waiver of notice signed by the
director or directors, whether before or after the time stated for the meeting,
shall be equivalent to the giving of notice.
4.9 Quorum; Actions of the Board of Directors. Except as may be otherwise
specifically provided by law, the Certificate of Incorporation or these Amended
and Restated Bylaws, at all meetings of the Board of Directors, a majority of
the entire Board of Directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
4.10 Action by Directors Without a Meeting. Any action required or which may be
taken at a meeting of the directors, or of a committee thereof, may be taken
without a meeting if a consent in writing, setting forth the action so taken or
to be taken, shall be signed by all of the directors, or all of the members of
the committee, as the case may be, and such consents are filed with the minutes
of proceedings of the Board of Directors or committee, as the case may be. Such
consent shall have the same effect as a unanimous vote.
4.11 Action by Directors by Communications Equipment. Any action required or
which may be taken at a meeting of directors, or of a committee thereof, may be
taken by means of a conference telephone or similar communications equipment
subject to any applicable provisions of the GCL.
4.12 Registering Dissent. A director who is present at a meeting of the Board of
Directors at which action on a corporate matter is taken shall be presumed to
83
<PAGE>
have assented to such action unless his dissent shall be entered in the minutes
of the meeting, or unless he shall file his written dissent to such action with
the person acting as the secretary of the meeting, before the adjournment
thereof, or shall forward such dissent by registered mail to the Secretary of
the Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
4.13 Executive and Other Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees which
in each case consist of one or more directors of the Corporation, and may from
time to time invest such committees with such powers as it may see fit, subject
to such conditions as may be prescribed by the Board. An Executive Committee may
be appointed by resolution passed by a majority of the full Board of Directors.
It shall have and exercise all of the authority of the Board of Directors,
except in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation or plan of voluntary liquidation,
recommending to the shareholders the sale, lease or exchange or other
disposition of all or substantially all the property and assets of the
Corporation, declaring a dividend on the Corporation's capital stock or amending
these Amended and Restated Bylaws. The designation of any such committee, and
the delegation of authority thereto, shall not relieve the Board of Directors,
or any member thereof, of any responsibility imposed by law.
4.14 Remuneration. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors, a stated salary as
director and/or such other compensation as may be fixed by the Board of
Directors. Members of special or standing committees may be allowed like
compensation for serving on committees of the Board of Directors. No such
payments shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
4.15 Nominations of Directors. Subject to the rights of holders of any class or
series of stock having a preference over the common stock as to dividends or
upon liquidation, or the rights of holders of any debt instruments, nominations
for the election of directors may be made by the Board of Directors or committee
appointed by the Board of Directors or by any shareholder entitled to vote
generally in an election of directors. However, any shareholder entitled to vote
generally in an election of directors may nominate one or more persons for
election as directors at a meeting only if written notice of such shareholder's
84
<PAGE>
intent to make such nomination or nominations has been given, either by personal
delivery or by United States mail, postage prepaid to the Secretary of the
Corporation, which notice is delivered to or received by the Secretary not later
than (i) 120 days prior to the anniversary date of the mailing of proxy
materials by the Corporation in connection with the immediately preceding annual
meeting of shareholders of the Corporation or, in the case of the first annual
meeting of shareholders of the Corporation following the Reincorporation, which
is expected to be held in May 2001, any such nomination by a shareholder must be
so delivered or received no later than the close of business on December 15,
2000, notwithstanding any determination by the Corporation to schedule such
first annual meeting later than May 2001, and (ii) with respect to an election
to be held at a special meeting of shareholders for the election of directors,
the close of business on the tenth day following the date on which notice of
such meeting is first given to shareholders. Each such notice shall set forth:
(a) the name, age, business address and residence address of the shareholder who
intends to make the nomination and of the person or persons to be nominated; (b)
the principal occupation or employment of the shareholder submitting the notice
and of each person being nominated; (c) the class and number of shares of
Corporation stock which are beneficially owned by the shareholder submitting the
notice, by any person or entity who is an Affiliate or Associate of such
shareholder (as such capitalized terms are defined in Rule 12b-2 of the Exchange
Act, or any successor thereto), by any Person who is a member of any group with
such shareholder with respect to the Corporation stock or who is known by such
shareholder to be supporting such nominee(s) on the date the notice is given to
the Corporation, by each person being nominated, and by each Person who is in
control of, is controlled by or is under common control with any of the
foregoing Persons; (d) a representation that the shareholder is a holder of
record of stock of the Corporation entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (e) a description of all arrangements or understandings
between the shareholder and each nominee and any arrangements or understandings
between the shareholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are to
be made by the shareholder; (f) such other information regarding the shareholder
submitting the notice and each nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission; and (g) the consent of each nominee
to serve as a director of the Corporation if so elected. The presiding officer
of the meeting may refuse to acknowledge the nomination of any person not made
85
<PAGE>
in compliance with the foregoing procedures.
ARTICLE V. OFFICERS
5.1 Designations. The officers of the Corporation shall be a President, a
Secretary and a Treasurer appointed by the Board of Directors, as well as such
Executive Vice Presidents, Vice Presidents, Assistant Vice Presidents, Assistant
Secretaries, Assistant Treasurers and such other officers as the Board of
Directors or the Chairman of the Board and President may designate. Officers of
the Corporation shall be elected for one year by the directors at their first
meeting after the annual meeting of shareholders, and officers of the
Corporation shall hold office until their successors are elected and qualified.
Any two or more offices may be held by the same person, except the offices of
President and Secretary may not be held by the same person.
5.2 Powers and Duties. The officers of the Corporation shall have such authority
and perform such duties as the Board of Directors or, in the case of officers
with a title of Vice President or lower, the Chairman of the Board and
President, may from time to time authorize or determine. In the absence of
action by the Board of Directors or the Chairman of the Board and President, as
applicable, the officers shall have such powers and duties as generally pertain
to their respective offices.
The President shall be the chief executive officer of the Corporation, shall
have general and active management of the business and affairs of the
Corporation subject to the directions of the Board of Directors, and in the
absence of the Chairman of the Board of Directors shall preside at all meetings
of the shareholders and Board of Directors.
The Vice President or Vice Presidents shall assist the President in the
performance of his duties and may further be assigned such specific areas of
responsibility and such specific duties, subject to the supervision of the
President, as the Board of Directors from time to time shall determine.
The Secretary, together with any Assistant Secretary or Secretaries the Board
decides to appoint and/or the designee or designees of such officers, shall have
custody of, and maintain, all of the corporate records except the financial
records; shall record the minutes of all meetings of the shareholders and Board
of Directors; shall send all notices of all meetings; and shall perform such
86
<PAGE>
other duties as may be prescribed by the Board of Directors or the President.
The Treasurer and/or his designee shall have custody of all corporate funds and
financial records, shall keep full and accurate accounts of receipts and
disbursements and render accounts thereof at the annual meetings of shareholders
and whenever else required by the Board of Directors or the President, and shall
perform such other duties as may be prescribed by the Board of Directors or the
President.
5.3 Delegation. In the case of absence or inability to act of any officer of the
Corporation and of any person herein authorized to act in his place, the Board
of Directors may from time to time delegate the powers or duties of such officer
to any other officer or any director or other person whom it may select.
5.4 Vacancies. Vacancies in any office arising from any cause may be filled by
the Board of Directors at any regular or special meeting of the Board.
5.5 Term - Removal. The officers of the Corporation shall hold office until
their successors are chosen and qualified. Any officer or agent elected or
appointed by the Board of Directors or by the Chairman and the President may be
removed at any time, with or without cause, by the affirmative vote of a
majority of the whole Board of Directors, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
5.6 Bonds. The Board of Directors may, by resolution, require any and all of the
officers to give bonds to the Corporation, with sufficient surety or sureties,
conditions for the faithful performance of the duties of their respective
offices, and to comply with such other conditions as may from time to time be
required by the Board of Directors.
ARTICLE VI. INDEMNIFICATION, ETC. OF DIRECTORS, OFFICERS AND EMPLOYEES
6.1 Indemnification. The Corporation shall provide indemnification to its
directors, officers, employees, agents and former directors, officers, employees
and agents and to others in accordance with the Corporation's Certificate of
Incorporation.
6.2 Advancement of Expenses. Reasonable expenses (including attorneys' fees)
incurred by a director, officer or employee of the Corporation in defending any
civil, criminal, administrative or investigative action, suit or proceeding
87
<PAGE>
described in Section 6.1 may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board of
Directors only upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that the person is not
entitled to be indemnified by the Corporation.
6.3 Other Rights and Remedies. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under the Corporation's Certificate of
Incorporation, any agreement, vote of shareholders or disinterested directors or
otherwise, both as to actions in their official capacity and as to actions in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer or employee and shall inure to the
benefit of the heirs, executors and administrators of such person.
6.4 Insurance. Upon resolution passed by the Board of Directors, the Corporation
may purchase and maintain insurance on behalf of any person who is or was a
director, officer of employee of the Corporation, or is or was serving at the
request of the corporation as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against him or incurred by him in any such capacity or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of its
Certificate of Incorporation or this Article VI.
6.5 Modification. The duties of the Corporation to indemnify and to advance
expenses to a director, officer or employee provided in this Article VI shall be
in the nature of a contract between the Corporation and each such person, and no
amendment or repeal of any provision of this Article VI shall alter, to the
detriment of such person, the right of such person to the advance of expenses or
indemnification related to a claim based on an act or failure to act which took
place prior to such amendment or repeal.
ARTICLE VII. DIVIDENDS; FINANCE; AND FISCAL YEAR
7.1 Dividends. Subject to the applicable provisions of the General Corporation
Law of the State of Delaware, dividends upon the capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property or in shares of the capital stock
88
<PAGE>
of the Corporation. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, may deem
proper as a reserve or reserves to meet contingencies, or for dividends, or for
repairing or maintaining any property of the Corporation, or for any other
proper purpose, and the Board of Directors may modify or abolish any such
reserve.
7.2 Disbursements. All checks or demand for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
7.3 Depositories. The monies of the Corporation shall be deposited in the name
of the Corporation in such financial institutions, trust companies or other
entities as the Board of Directors shall designate, and shall be drawn out only
by check or other order for payment of money signed by such persons and in such
manner as may be determined by resolution of the Board of Directors.
7.4 Fiscal Year. The fiscal year of the Corporation shall end on the 31st day of
December of each year.
ARTICLE VIII. NOTICES
Except as may otherwise be required by law, any notice to any shareholder or
director may be delivered personally or by mail. If mailed, the notice shall be
deemed to have been delivered when deposited in the United States mail,
addressed to the addressee at his last known address in the records of the
Corporation, with postage thereon prepaid.
ARTICLE IX. SEAL
The corporate seal of the Corporation shall be in such form and bear such
inscription as may be adopted by resolution of the Board of Directors, or by
usage of the officers on behalf of the Corporation.
ARTICLE X. BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of account and
shall keep minutes of meetings and proceedings of its shareholders and Board of
Directors (including committees thereof); and it shall keep at its registered
89
<PAGE>
office or principal place of business, or at the office of its transfer agent or
registrar, a record of its shareholders, giving the names and addresses of all
shareholders and the number and class of the shares held by each. Any books,
records and minutes may be in written form or any other form capable of being
converted into written form within a reasonable time.
ARTICLE XI. AMENDMENTS
11.1 Amendments. The Board of Directors or shareholders may adopt, alter, amend
or repeal these Amended and Restated Bylaws of the Corporation. Such action by
the Board of Directors shall require the affirmative vote of a majority of the
directors then in office at any regular or special meeting of the Board of
Directors. Such action by the shareholders shall require the affirmative vote of
at least a majority of the then outstanding shares of Common Stock, as well as
such additional vote of the Preferred Stock as may be required by the provisions
of any series thereof.
11.2 Emergency Bylaws. The Board of Directors may adopt emergency Bylaws,
subject to repeal or change by action of the shareholders, which shall be
operative during any national or local emergency.
ARTICLE XII. USE OF PRONOUNS
Use of the masculine gender in these Amended and Restated Bylaws shall be
considered to represent either masculine or feminine gender whenever
appropriate.
90
<PAGE>
APPENDIX D
ARTICLE 15
Dissenter's Rights
13.1-729 DEFINITIONS.-- In this article:
"Corporation" means the issuer of the shares held by a dissenter before
the corporate action, except that (i) with respect to a merger, "corporation"
means the surviving domestic or foreign corporation or limited liability company
by merger of that issuer, and (ii) with respect to a share exchange,
"corporation"means the acquiring corporation by share exchange, rather than the
issuer, if the plan of share exchange places the responsibility for dissenters'
rights on the acquiring corporation.
"Dissenter" means a shareholder who is entitled to dissent from
corporate action under ss.13.1-730 and who exercises that right when and in the
manner required by ss.ss.13.1-730 through 13.1-739.
"Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
"Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or if none, at a rate that is fair and
equitable under all the circumstances.
"Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
"Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.
91
<PAGE>
"Shareholder" means the record shareholder or the beneficial
shareholder.
13.1-730 RIGHT TO DISSENT. -- A. A shareholder is entitled to dissent
from, and obtain payment of the fair value of his shares in the event of, any of
the following corporate actions:
1. Consummation of a plan of merger to which the corporation is a party
(i) if shareholder approval is required for the merger by ss.13.1-718 or the
articles of incorporation and the shareholder is entitled to vote on the merger
or (ii) if the corporation is a subsidiary that is merged with its parent under
ss.13.1-719;
2. Consummation of a plan of share exchange to which the corporation is a party
as the corporation whose shares will be acquired, if the shareholder is entitled
to vote on the plan;
3. Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation if the shareholder was entitled to vote on the
sale or exchange or if the sale or exchange was in furtherance of a dissolution
on which the shareholder was entitled to vote, provided that such dissenter's
rights shall not apply in the case of (i) a sale or exchange pursuant to court
order, or (ii) a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale;
4. Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
B. A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
C. Notwithstanding any other provision of this article, with respect to
a plan of merger or share exchange or a sale or exchange of property there shall
be no right of dissent in favor of holders of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
92
<PAGE>
receive notice of and to vote at the meeting at which the plan of merger or
share exchange or the sale or exchange of property is to be acted on, were (i)
listed on a national securities exchange or on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) or (ii) held by at least
2,000 record shareholders, unless in either case:
1. The articles of incorporation of the corporation issuing such shares provide
otherwise;
2. In the case of a plan of merger or share exchange, the holders of the class
or series are required under the plan of merger or share exchange to accept for
such shares anything except:
a. Cash;
b. Shares or membership interests, or shares or membership interests
and cash in lieu of fractional shares (i) of the surviving or acquiring
corporation or limited liability company or (ii) of any other corporation or
limited liability company which, at the record date fixed to determine the
shareholders entitled to receive notice of and to vote at the meeting at which
the plan of merger or share exchange is to be acted on, were either listed
subject to notice of issuance on a national securities exchange or held of
record by at least 2,000 record shareholders or members; or
c. A combination of cash and shares or membership interests as set forth
in subdivisions 2a and 2b of this subsection; or
3. The transaction to be voted on is an "affiliated transaction" and is not
approved by a majority of "disinterested directors" as such terms are defined
inss.13.1-725.
D. The right of a dissenting shareholder to obtain payment of the fair value of
his shares shall terminate upon the occurrence of any one of the following
events:
1. The proposed corporate action is abandoned or rescinded;
2. A court having jurisdiction permanently enjoins or sets aside
the corporate action; or
3. His demand for payment is withdrawn with the written consent of the
corporation.
E. Notwithstanding any other provision of this article, no shareholder of a
corporation located in a county having a county manager form of government and
93
<PAGE>
which is exempt from income taxation under ss.501(c) or ss.528 of the Internal
Revenue Code and no part of whose income inures or may inure to the benefit of
any private shareholder or individual shall be entitled to dissent and obtain
payment for his shares under this article.
13.1-731 DISSENT BY NOMINEES AND BENEFICIAL OWNERS. -- A. A record
shareholder may assert dissenters rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
B. A beneficial shareholder may assert dissenters' rights as to shares held on
his behalf only if:
1. He submits to the corporation the record shareholder's
written consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
2. He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the vote.
13.1-732 NOTICE OF DISSENTERS' RIGHTS. -- A. If proposed corporate
action creating dissenters' rights under ss.13.1-730 is submitted to a vote at a
shareholders' meeting, the meeting notice shall state that shareholders are or
may be entitled to assert dissenters' rights under this article and be
accompanied by a copy of this article.
B.If corporate action creating dissenters' rights under ss.13.1-730 is
taken without a vote of shareholders, the corporation, during the ten-day period
after the effectuation of such corporate action, shall notify in writing all
record shareholders entitled to assert dissenters' rights that the action was
taken and send them the dissenters' notice described in ss.13.1-734.
13.1-733 NOTICE OF INTENT TO DEMAND PAYMENT. -- A. If proposed
corporate action creating dissenters' rights under ss.13.1-730 is submitted to a
vote at a shareholders' meeting, a shareholder who wishes to assert dissenters'
rights (i) shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
94
<PAGE>
effectuated and (ii) shall not vote such shares in favor of the proposed action.
B. A shareholder who does not satisfy the requirements of
subsection A of this section is not entitled to payment for his shares under
this article.
13.1-734 DISSENTERS' NOTICE. -- A. If proposed corporate action
creating dissenters' rights under ss.13.1-730 is authorized at a shareholders'
meeting, the corporation, during the ten-day period after the effectuation of
such corporate action, shall deliver a dissenters' notice in writing to all
shareholders who satisfied the requirements of ss.13.1-733.
B. The dissenters' notice shall:
1. State where the payment demand shall be sent and where and
when certificates for certificated shares shall be deposited;
2. Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is received;
3. Supply a form for demanding payment that includes the date of
the firstannouncement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not he acquired beneficial ownership of the shares
before or after that date;
4. Set a date by which the corporation must receive the payment emand,
which date may not be fewer than thirty nor more than sixty days after the
date of delivery of the dissenters' notice; and
5. Be accompanied by a copy of this article.
13.1-735 DUTY TO DEMAND PAYMENT. -- A. A shareholder sent a dissenters'
notice described in ss.13.1-734 shall demand payment, certify that he acquired
beneficial ownership of the shares before or after the date required to be set
forth in the dissenters' notice pursuant to paragraph 3 of subsection B of
ss.13.1-734, and, in the case of certificated shares, deposit his certificates
in accordance with the terms of the notice.
B. The shareholder who deposits his shares pursuant to subsection A of
this section retains all other rights of a shareholder except to the extent that
these rights are cancelled or modified by the taking of the proposed corporate
action.
C. A shareholder who does not demand payment and deposits his share
95
<PAGE>
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
13.1-736 SHARE RESTRICTIONS. -- A. The corporation may
restrict the transfer of uncertificated shares from the date the demand for
their payment is received.
B. The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder except to the
extent that these rights are cancelled or modified by the taking of the proposed
action.
13.1-737 PAYMENT. -- A. Except as provided in ss.13.1-738, within
thirty days after receipt of a payment demand made pursuant to ss.13.1-735, the
corporation shall pay the dissenter the amount the corporation estimates to be
the fair value of his shares, plus accrued interest. The obligation of the
corporation under this paragraph may be enforced (i) by the circuit court in the
city or county where the corporation's principal office is located, or, if none
in this Commonwealth, where its registered office is located or (ii) at the
election of any dissenter residing or having its principal office in the
Commonwealth, by the circuit court in the city or county where the dissenter
resides or has its principal office. The court shall dispose of the complaint on
an expedited basis.
B. The payment shall be accompanied by:
1. The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the effective date of the corporate
action creating dissenters' rights, an income statement for that year, a
statement of changes in shareholders' equity for that year, and the latest
available interim financial statements, if any;
2. An explanation of how the corporation estimated the
fair value of the shares and of how the interest was calculated;
3. A statement of the dissenters' right to demand payment
underss.13.1-739; and
4. A copy of this article.
13.1-738 -- AFTER-ACQUIRED SHARES. -- A. A corporation may elect to
withhold payment required by ss.13.1-737 from a dissenter unless he was the
beneficial owner of the shares on the date of the first publication by news
media or the first announcement to shareholders generally, whichever is earlier,
96
<PAGE>
of the terms of the proposed corporate action, as set forth in the dissenters'
notice.
B. To the extent the corporation elects to withhold payment under
subsection A of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
offer to pay this amount to each dissenter who agrees to accept it in full
satisfaction of his demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares and of how the
interest was calculated, and a statement of the dissenter's rights to demand
payment under ss.13.1-739.
13.1-739 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
-- A. A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate (less any payment under ss.13.1-737), or reject the corporation's
offer under ss.13.1-738 and demand payment of the fair value of his shares and
interest due, if the dissenter believes that the amount paid under ss.13.1-737
or offered under ss.13.1-738 is less than the fair value of his shares or that
the interest due is incorrectly calculated.
B. A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection A
of this section within thirty days after the corporation made or offered payment
for his shares.
13.1-740 COURT ACTION.--A. If a demand for payment under ss.13.1-739
remains unsettled, the corporation shall commence a proceeding within sixty days
after receiving the payment demand and petition the circuit court in the city or
county described in subsection B of this section to determine the fair value of
the shares and accrued interest. If the corporation does not commence the
proceeding within the sixty-day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
B. The corporation shall commence the proceeding in the city or county
where its principal office is located, or, if none in this Commonwealth, where
its registered office is located. If the corporation is a foreign corporation
without a registered office in this Commonwealth, it shall commence the
proceeding in the city or county in this Commonwealth where the registered
office of the domestic corporation merged with or whose shares were acquired by
97
<PAGE>
the foreign corporation was located.
C. The corporation shall make all dissenters, whether or not residents
of this Commonwealth, whose demands remain unsettled parties to the proceeding
as in an action against their shares and all parties shall be served with a copy
of the petition. Nonresidents may be served by registered or certified mail or
by publication as provided by law.
D. The corporation may join as a party to the proceeding any shareholder who
claims to be a dissenter but who has not, in the opinion of the corporation,
complied with the provisions of this article. If the court determines that such
shareholder has not complied with the provisions of this article, he shall be
dismissed as a party E. The jurisdiction of the court in which the proceeding is
commenced under subsection B of this section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
a decision on the question of fair value. The appraisers have the powers
described in the order appointing them, or in any amendment to it. The
dissenters are entitled to the same discovery rights as parties in other civil
proceedings.
F. Each dissenter made a party to the proceeding is entitled to
judgment (i) for the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation or (ii)
for the fair value, plus accrued interest, of his after-acquired shares for
which the corporation elected to withhold payment under ss.13.1-738.
13.1-741 COURT COSTS AND COUNSEL FEES.--A. The court in an appraisal
proceeding commenced under ss.13.1-740 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters did not act in good faith in demanding payment under ss.13.1-739.
B. The court may also assess the reasonable fees and expenses
of experts, excluding those of counsel, for the respective parties, in amounts
the court finds equitable:
1. Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially comply
with the requirements ofss.ss.13.1-732 through 13.1-739; or
98
<PAGE>
2. Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed did not act in good faith with respect to the rights provided by this
article.
C. If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, the court
may award to these counsel reasonable fees to be paid out of the amounts awarded
the dissenters who were benefited.
D. In a proceeding commenced under subsection A of ss.13.1-737 the
court shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court finds
that such parties did not act in good faith in instituting the proceeding.
99
<PAGE>
APPENDIX E
ALLSTATE FINANCIAL CORPORATION
2000 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
Allstate Financial Corporation (the "Corporation") hereby establishes
this 2000 Stock Option Plan (the "Plan") upon the terms and conditions
hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of
the Corporation and its Subsidiary Companies by providing Employees and
Non-Employee Directors with a proprietary interest in the Corporation as an
incentive to contribute to the success of the Corporation and its Subsidiary
Companies, and rewarding Employees and Non-Employee Directors for outstanding
performance. All Incentive Stock Options issued under this Plan are intended to
comply with the requirements of Section 422 of the Code, and the regulations
thereunder, and all provisions hereunder shall be read, interpreted and applied
with that purpose in mind. Each recipient of an Award hereunder is advised to
consult with his or her personal tax advisor with respect to the tax
consequences under federal, state, local and other tax laws of the receipt
and/or exercise of an Award hereunder.
ARTICLE III
DEFINITIONS
3.01 "Award" means an Option or Stock Appreciation Right granted
pursuant to the terms of this Plan.
3.02 "Board" means the Board of Directors of the Corporation.
100
<PAGE>
3.03 "Change in Control of the Corporation" shall mean the occurrence
of any of the following: (i) an event that would be required to be reported in
response to Item 1(a) of Form 8-K or Item 6(e) of Schedule 14A of Regulation 14A
pursuant to the Exchange Act, or any successor thereto, whether or not any class
of securities of the Corporation is registered under the Exchange Act; (ii) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Corporation
representing 20% or more of the combined voting power of the Corporation's then
outstanding securities, other than Value Partners, Ltd. or its affiliates; (iii)
during any period of thirty-six consecutive months during the term of an Award,
individuals who at the beginning of such period constitute the Board of
Directors of the Corporation, and any new director whose election by the Board
of Directors or nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the three-year period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute at least a majority of the Board of Directors; (iv) the
stockholders of the Corporation approve a merger or consolidation of the
Corporation with any other corporation, other than a merger or consolidation
that would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting securities of
the surviving corporation outstanding immediately after such merger or
consolidation; or (v) the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the Corporation's
assets. If any of the events enumerated in clauses (i) through (iii) occur, the
Board shall determine the effective date of the Change in Control resulting
therefrom for purposes of the Plan.
3.04 "Code" means the Internal Revenue Code of 1986, as amended.
3.05 "Committee" means a committee of two or more directors appointed
by the Board pursuant to Article IV hereof, each of whom shall be a Non-Employee
Director as defined in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor
thereto and within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder.
101
<PAGE>
3.06 "Common Stock" means shares of common stock, no par value per
share, of the Corporation.
3.07 "Disability" means any physical or mental impairment which
qualifies an individual for disability benefits under the applicable long-term
disability plan maintained by the Corporation or a Subsidiary Company, or, if no
such plan applies, which would qualify such individual for disability benefits
under the Federal Social Security System.
3.08 "Effective Date" means the date this Plan is approved by the Board
of Directors of the Corporation, which date of adoption was June 13, 2000.
3.09 "Employee" means any person who is employed by the Corporation or
any Subsidiary Company, or is an Officer of the Corporation or any Subsidiary
Company, but not including directors who are not also Officers of or otherwise
employed by the Corporation or any Subsidiary Company.
3.10 "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
3.11 "Fair Market Value" shall be equal to the fair market value per
share of the Corporation's Common Stock on the date an Award is granted. For
purposes hereof, the Fair Market Value of a share of Common Stock shall be the
closing sale price of a share of Common Stock on the date in question (or, if
such day is not a trading day in the U.S. markets, on the nearest preceding
trading day), as reported with respect to the principal market (or the composite
of the markets, if more than one) or national quotation system in which such
shares are then traded, or if no such closing prices are reported, the mean
between the high bid and low asked prices that day on the principal market or
national quotation system then in use, or if no such quotations are available,
the price furnished by a professional securities dealer making a market in such
shares selected by the Committee.
3.12 "Incentive Stock Option" means any Option granted under this Plan
which the Board intends (at the time it is granted) to be an incentive stock
option within the meaning of Section 422 of the Code or any successor thereto.
3.13 "Non-Employee Director" means a member of the Board of the
Corporation or any successor thereto, including an advisory director or a
director emeritus of the Board of the Corporation, who is not an Officer or
102
<PAGE>
Employee of the Corporation or any Subsidiary Company.
3.14 "Non-Qualified Option" means any Option granted under this
Plan which is not an Incentive Stock Option.
3.15 "Officer" means an Employee whose position in the Corporation or a
Subsidiary Company is that of a corporate officer, as determined by the Board.
3.16 "Option" means a right granted under this Plan to purchase
Common Stock.
3.17 "Optionee" means an Employee or Non-Employee Director or former
Employee or Non-Employee Director to whom an Option is granted under the Plan.
3.18 "Retirement" means a termination of employment which constitutes a
"retirement" under any applicable qualified pension benefit plan maintained by
the Corporation or a Subsidiary Corporation, or, if no such plan is applicable,
a termination of employment with the Corporation or any successor thereto after
reaching age 65. With respect to Non-Employee Directors, retirement means
retirement from service on the Board of Directors of the Corporation or any
successor thereto (including service as a director emeritus) after attaining the
age of 70.
3.19 "Stock Appreciation Right" means a right to surrender an Option in
consideration for a payment by the Corporation in cash and/or Common Stock, as
provided in the discretion of the Board or the Committee in accordance with
Section 8.10.
3.20 "Subsidiary Companies" means those subsidiaries of the Corporation
which meet the definition of "subsidiary corporations" set forth in Section
424(f) of the Code, at the time of granting of the Option in question.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Duties of the Committee. The Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the authority to adopt, amend
and rescind such rules, regulations and procedures as, in its opinion, may be
advisable in the administration of the Plan, including, without limitation,
103
<PAGE>
rules, regulations and procedures which (i) deal with satisfaction of an
Optionee's tax withholding obligation pursuant to Section 12.01 hereof, (ii)
include arrangements to facilitate the Optionee's ability to borrow funds for
payment of the exercise or purchase price of an Award, if applicable, from
securities brokers and dealers, (iii) establish the method and arrangements by
which an optionee may defer the recognition of income upon the exercise of a
Non-Qualified Option or Stock Appreciation Right pursuant to Article XIII
hereof, and (iv) include arrangements which provide for the payment of some or
all of such exercise or purchase price by delivery of previously-owned shares of
Common Stock or other property and/or by withholding some of the shares of
Common Stock which are being acquired. The interpretation and construction by
the Committee of any provisions of the Plan, any rule, regulation or procedure
adopted by it pursuant thereto or of any Award shall be final and binding in the
absence of action by the Board.
4.02 Appointment and Operation of the Committee. The members of the Committee
shall be appointed by, and will serve at the pleasure of, the Board. The Board
from time to time may remove members from, or add members to, the Committee,
provided the Committee shall continue to consist of two or more members of the
Board, each of whom shall be a Non-Employee Director, as defined in Rule
16b-3(b)(3)(i) of the Exchange Act or any successor thereto. In addition, each
member of the Committee shall be an "outside director" within the meaning of
Section 162(m) of the Code and regulations thereunder at such times as is
required under such regulations. The Committee shall act by vote or written
consent of a majority of its members. Subject to the express provisions and
limitations of the Plan, the Committee may adopt such rules, regulations and
procedures as it deems appropriate for the conduct of its affairs. It may
appoint one of its members to be chairman and any person, whether or not a
member, to be its secretary or agent. The Committee shall report its actions and
decisions to the Board at appropriate times but in no event less than one time
per calendar year.
4.03 Revocation for Misconduct. The Board or the Committee may by
resolution immediately revoke, rescind and terminate any Option, or portion
thereof, to the extent not yet vested, or any Stock Appreciation Right, to the
extent not yet exercised, previously granted or awarded under this Plan to an
Employee who is discharged from the employ of the Corporation or a Subsidiary
Company for cause, which, for purposes hereof, shall mean termination because of
the Employee's incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, or
104
<PAGE>
willful violation of any law, rule, or regulation (other than traffic violations
or similar offenses). Options granted to a Non-Employee Director who is removed
for cause pursuant to the Corporation's Certificate of Incorporation and Bylaws
shall terminate as of the effective date of such removal.
4.04 Limitation on Liability. Neither the members of the Board nor any
member of the Committee shall be liable for any action or determination made in
good faith with respect to the Plan, any rule, regulation or procedure adopted
pursuant thereto or any Awards granted hereunder. If a member of the Board or
the Committee is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of anything done or not done by him
in such capacity under or with respect to the Plan, the Corporation shall,
subject to the requirements of applicable laws and regulations, indemnify such
member against all liabilities and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Corporation and its Subsidiary Companies and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
4.05 Compliance with Law and Regulations. All Awards granted hereunder
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.
The Corporation shall not be required to issue or deliver any certificates for
shares of Common Stock prior to the completion of any registration or
qualification of or obtaining of consents or approvals with respect to such
shares under any federal or state law or any rule or regulation of any
government body, which the Corporation shall, in its sole discretion, determine
to be necessary or advisable. Moreover, no Option or Stock Appreciation Right
may be exercised if such exercise would be contrary to applicable laws and
regulations.
4.06 Restrictions on Transfer. The Corporation may place a legend upon
any certificate representing shares acquired pursuant to an Award granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
105
<PAGE>
ARTICLE V
ELIGIBILITY
Awards may be granted to such Employees and Non-Employee Directors of
the Corporation and its Subsidiary Companies as may be designated from time to
time by the Board or the Committee. Awards may not be granted to individuals who
are not Employees or Non-Employee Directors of either the Corporation or its
Subsidiary Companies. Non-Employee Directors shall be eligible to receive only
Awards of Non-Qualified Options pursuant to this Plan.
ARTICLE VI
COMMON STOCK COVERED BY THE PLAN
6.01 Option Shares. The aggregate number of shares of Common Stock
which may be issued pursuant to this Plan, subject to adjustment as provided in
Article IX, shall be the lesser of 8% of the then issued and outstanding shares
of Common Stock (as may be increased from time to time) or 450,000 shares of
Common Stock, provided that any decrease in the number of issued and outstanding
shares of Common Stock shall not result in a reduction in the number of shares
of Common Stock that may be issued pursuant to this Plan other than as set forth
in Article IX hereof. None of such shares shall be the subject of more than one
Award at any time (provided that Stock Appreciation Rights and the related
Options shall be deemed to be a single Award), but if an Option as to any shares
is surrendered before exercise, or expires or terminates for any reason without
having been exercised in full, or for any other reason ceases to be exercisable,
the number of shares covered thereby shall again become available for grant
under the Plan as if no Awards had been previously granted with respect to such
shares. Notwithstanding the foregoing, if an Option is surrendered in connection
with the exercise of a Stock Appreciation Right, the number of shares covered
thereby shall not be available for grant under the Plan.
6.02 Source of Shares. The shares of Common Stock issued under the Plan
may be authorized but unissued shares, treasury shares or shares purchased by
the Corporation on the open market or from private sources for use under the
Plan.
107
<PAGE>
ARTICLE VII
DETERMINATION OF
AWARDS, NUMBER OF SHARES, ETC.
The Board or the Committee shall, in its discretion, determine from
time to time which Employees and Non-Employee Directors will be granted Awards
under the Plan, the number of shares of Common Stock subject to each Award,
whether each Option will be an Incentive Stock Option or a Non-Qualified Stock
Option (in the case of Employees) and the exercise price of an Option. In making
all such determinations there shall be taken into account the duties,
responsibilities and performance of each respective Employee and Non-Employee
Director, his present and potential contributions to the growth and success of
the Corporation, his salary and such other factors deemed relevant to
accomplishing the purposes of the Plan.
ARTICLE VIII
OPTIONS AND STOCK APPRECIATION RIGHTS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 Stock Option Agreement. The proper Officers on behalf of the
Corporation and each Optionee shall execute a Stock Option Agreement which shall
set forth the total number of shares of Common Stock to which it pertains, the
exercise price, whether it is a Non-Qualified Option or an Incentive Stock
Option, and such other terms, conditions, restrictions and privileges as the
Board or the Committee in each instance shall deem appropriate, provided they
are not inconsistent with the terms, conditions and provisions of this Plan.
Each Optionee shall receive a copy of his executed Stock Option Agreement.
8.02 Option Exercise Price.
(a) Incentive Stock Options. The per share price at which the
subject Common Stock may be purchased upon exercise of an Incentive Stock Option
shall be no less than one hundred percent (100%) of the Fair Market Value of a
share of Common Stock at the time such Incentive Stock Option is granted, except
as provided in Section 8.09(b), and subject to any applicable adjustment
108
<PAGE>
pursuant to Article IX hereof.
(b) Non-Qualified Options. The per share price at which the
subject Common Stock may be purchased upon exercise of a Non-Qualified Option
shall be established by the Committee at the time of grant, but in no event
shall be less than one hundred percent (100%) of the Fair Market Value of a
share of Common Stock at the time such Non-Qualified Option is granted, subject
to any applicable adjustment pursuant to Article IX hereof.
8.03 Vesting and Exercise of Options.
(a) General Rules. Incentive Stock Options and Non-Qualified
Options granted hereunder shall become vested and exercisable at the rate, to
the extent and subject to such limitations as may be specified by the Board or
the Committee. Notwithstanding the foregoing, except as provided in Section
8.03(b) hereof, no Option granted to an Employee or a Non-Employee Director
shall continue to vest on or after the date the Optionee's service with the
Corporation and all Subsidiary Companies (or any successor companies), including
as a Non-Employee Director, is terminated. In determining the number of shares
of Common Stock with respect to which Options are vested and/or exercisable,
fractional shares shall be rounded up to the nearest whole number if the
fraction is 0.5 or higher, and down if it is less.
(b) Accelerated Vesting. Unless the Board or the Committee
shall specifically state otherwise at the time an Option is granted, all Options
granted under this Plan shall become vested and exercisable in full on the date
an Optionee terminates his employment with the Corporation or a Subsidiary
Company or service as a Non-Employee Director because of his death, Disability
or Retirement. In addition, all outstanding Options shall become immediately
vested and exercisable in full in the event that there is a Change in Control of
the Corporation.
8.04 Duration of Options.
(a) General Rule. Except as provided in Sections 8.04(b) and
8.09, each Option or portion thereof granted to an Employee shall be exercisable
at any time on or after it vests and remain exercisable until the earlier of (i)
ten (10) years after its date of grant or (ii) six (6) months after the date on
which the Employee ceases to be employed by the Corporation and all Subsidiary
Companies, unless the Board or the Committee in its discretion decides at the
109
<PAGE>
time of grant or thereafter to extend such period of exercise upon termination
of employment to a period not exceeding five (5) years.
Except as provided in Section 8.04(b), each Option or portion thereof
granted to a Non-Employee Director shall be exercisable at any time on or after
it vests and remain exercisable until the earlier of (i) ten (10) years after
its date of grant or (ii) six (6) months after the date on which the
Non-Employee Director ceases to serve as a director of the Corporation and all
Subsidiary Companies, unless the Board or the Committee in its discretion
decides at the time of grant or thereafter to extend such period of exercise
upon termination of service to a period not exceeding five (5) years.
(b) Exceptions. Unless the Board or the Committee shall
specifically provide otherwise, (i) if an Employee terminates his employment
with the Corporation or a Subsidiary Company as a result of Disability or
Retirement without having fully exercised his Options, the Employee shall have
the right, during the three (3) year period following his termination due to
Disability or Retirement (or such longer period as may have been provided under
Section 8.04(a) hereof), to exercise such Options, and (ii) if a Non-Employee
Director terminates his service as a director with the Corporation or a
Subsidiary Company as a result of Disability or Retirement without having fully
exercised his Options, the Non-Employee Director shall have the right, during
the three (3) year period following his termination due to Disability or
Retirement (or such longer period as may have been provided under Section
8.04(a) hereof), to exercise such Options.
Unless the Board or the Committee shall specifically state otherwise at
the time an Option is granted, if an Employee or Non-Employee Director
terminates his employment or service with the Corporation or a Subsidiary
Company following a Change in Control of the Corporation without having fully
exercised his Options, the Optionee shall have the right to exercise such
Options during the remainder of the original ten (10) year term (or five-year
term if Section 8.09(b) hereof is applicable) of the Option from the date of
grant.
If an Optionee dies while in the employ or service of the Corporation
or a Subsidiary Company or terminates employment or service with the Corporation
or a Subsidiary Company as a result of Disability or Retirement and dies without
having fully exercised his Options, the executors, administrators, legatees or
distributees of his estate shall have the right, during the one (1) year period
110
<PAGE>
following his death, to exercise such Options.
In no event, however, shall any Option be exercisable more than ten
(10) years from the date it was granted.
8.05 Nonassignability. Options shall not be transferable by an Optionee
except by will or the laws of descent or distribution, and during an Optionee's
lifetime shall be exercisable only by such Optionee or the Optionee's guardian
or legal representative. Notwithstanding the foregoing, or any other provision
of this Plan, an Optionee who holds vested Non-Qualified Options may transfer
such Options to his spouse, lineal ascendants, lineal descendants, or to a duly
established trust for the benefit of one or more of these individuals. Options
so transferred may thereafter be transferred only to the Optionee who originally
received the grant or to an individual or trust to whom the Optionee could have
initially transferred the Option pursuant to this Section 8.05. Options which
are transferred pursuant to this Section 8.05 shall be exercisable by the
transferee according to the same terms and conditions as applied to the
Optionee.
8.06 Manner of Exercise. Options may be exercised in part or in whole
and at one time or from time to time. The procedures for exercise shall be set
forth in the written Stock Option Agreement provided for in Section 8.01 above.
8.07 Payment for Shares. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of such Option shall
be made to the Corporation upon exercise of such Option. All shares sold under
the Plan shall be fully paid and nonassessable. Payment for shares may be made
by the Optionee (i) in cash or by check, (ii) by delivery of a properly executed
exercise notice, together with irrevocable instructions to a broker to sell the
shares and then to properly deliver to the Corporation the amount of sale
proceeds to pay the exercise price, all in accordance with applicable laws and
regulations, (iii) at the discretion of the Board or the Committee, by
delivering shares of Common Stock (including shares acquired pursuant to the
exercise of an Option) equal in Fair Market Value to the purchase price of the
shares to be acquired pursuant to the Option, (iv) at the discretion of the
Board or the Committee, by withholding some of the shares of Common Stock which
are being purchased upon exercise of an Option, or (v) any combination of the
foregoing. With respect to subclause (iii) hereof, the shares of Common Stock
delivered to pay the purchase price must have either been (x) purchased in open
111
<PAGE>
market transactions or (y) issued by the Corporation pursuant to a plan thereof,
in each case more than six months prior to the exercise date of the Option.
8.08 Voting and Dividend Rights. No Optionee shall have any voting or
dividend rights or other rights of a stockholder in respect of any shares of
Common Stock covered by an Option prior to the time that his name is recorded on
the Corporation's stockholder ledger as the holder of record of such shares
acquired pursuant to an exercise of an Option.
8.09 Additional Terms Applicable to Incentive Stock Options. All
Options issued under the Plan as Incentive Stock Options will be subject, in
addition to the terms detailed in Sections 8.01 to 8.08 above, to those
contained in this Section 8.09.
(a) Notwithstanding any contrary provisions contained
elsewhere in this Plan and as long as required by Section 422 of the Code, the
aggregate Fair Market Value, determined as of the time an Incentive Stock Option
is granted, of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
under this Plan, and stock options that satisfy the requirements of Section 422
of the Code under any other stock option plan or plans maintained by the
Corporation (or any parent or Subsidiary Company), shall not exceed $100,000.
(b) Limitation on Ten Percent Stockholders. The price at which
shares of Common Stock may be purchased upon exercise of an Incentive Stock
Option granted to an individual who, at the time such Incentive Stock Option is
granted, owns, directly or indirectly, more than ten percent (10%) of the total
combined voting power of all classes of stock issued to stockholders of the
Corporation or any Subsidiary Company, shall be no less than one hundred and ten
percent (110%) of the Fair Market Value of a share of the Common Stock of the
Corporation at the time of grant, and such Incentive Stock Option shall by its
terms not be exercisable after the earlier of the date determined under Section
8.03 or the expiration of five (5) years from the date such Incentive Stock
Option is granted.
(c) Notice of Disposition; Withholding; Escrow. An Optionee
shall immediately notify the Corporation in writing of any sale, transfer,
assignment or other disposition (or action constituting a disqualifying
disposition within the meaning of Section 421 of the Code) of any shares of
112
<PAGE>
Common Stock acquired through exercise of an Incentive Stock Option, within two
(2) years after the grant of such Incentive Stock Option or within one (1) year
after the acquisition of such shares, setting forth the date and manner of
disposition, the number of shares disposed of and the price at which such shares
were disposed of. The Corporation shall be entitled to withhold from any
compensation or other payments then or thereafter due to the Optionee such
amounts as may be necessary to satisfy any withholding requirements of federal
or state law or regulation and, further, to collect from the Optionee any
additional amounts which may be required for such purpose. The Committee or the
Board may, in its discretion, require shares of Common Stock acquired by an
Optionee upon exercise of an Incentive Stock Option to be held in an escrow
arrangement for the purpose of enabling compliance with the provisions of this
Section 8.09(c).
8.10 Stock Appreciation Rights.
(a) General Terms and Conditions. The Board or the Committee
may, but shall not be obligated to, authorize the Corporation, on such terms and
conditions as it deems appropriate in each case, to grant rights to Optionees to
surrender an exercisable Option, or any portion thereof, in consideration for
the payment by the Corporation of an amount equal to the excess of the Fair
Market Value of the shares of Common Stock subject to the Option, or portion
thereof, surrendered over the exercise price of the Option with respect to such
shares (each such right being hereinafter referred to as a "Stock Appreciation
Right"). Such payment, at the discretion of the Board or the Committee, may be
made in shares of Common Stock valued at the then Fair Market Value thereof, or
in cash, or partly in cash and partly in shares of Common Stock.
The terms and conditions with respect to a Stock Appreciation Right may
include (without limitation), subject to other provisions of this Section 8.10
and the Plan: the period during which, date by which or event upon which the
Stock Appreciation Right may be exercised; the method for valuing shares of
Common Stock for purposes of this Section 8.10; a ceiling on the amount of
consideration which the Corporation may pay in connection with exercise and
cancellation of the Stock Appreciation Right; and arrangements for income tax
withholding. The Board or the Committee shall have complete discretion to
determine whether, when and to whom Stock Appreciation Rights may be granted.
(b) Time Limitations. If a holder of a Stock Appreciation
Right terminates service with the Corporation as an Officer or Employee, the
113
<PAGE>
Stock Appreciation Right may be exercised only within the period, if any, within
which the Option to which it relates may be exercised.
(c) Effects of Exercise of Stock Appreciation Rights or
Options. Upon the exercise of a Stock Appreciation Right, the number of shares
of Common Stock available under the Option to which it relates shall decrease by
a number equal to the number of shares for which the Stock Appreciation Right
was exercised. Upon the exercise of an Option, any related Stock Appreciation
Right shall terminate as to any number of shares of Common Stock subject to the
Stock Appreciation Right that exceeds the total number of shares for which the
Option remains unexercised.
(d) Time of Grant. A Stock Appreciation Right granted in
connection with an Incentive Stock Option must be granted concurrently with the
Option to which it relates, while a Stock Appreciation Right granted in
connection with a Non-Qualified Option may be granted concurrently with the
Option to which it relates or at any time thereafter prior to the exercise or
expiration of such Option.
(e) Non-Transferable. The holder of a Stock Appreciation Right
may not transfer or assign the Stock Appreciation Right otherwise than by will
or in accordance with the laws of descent and distribution, and during a
holder's lifetime a Stock Appreciation Right may be exercisable only by the
holder.
ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any outstanding Award relates,
and the exercise price per share of Common Stock under any outstanding Option
shall be proportionately adjusted for any increase or decrease in the total
number of outstanding shares of Common Stock issued subsequent to the effective
date of this Plan resulting from a split, subdivision or consolidation of shares
or any other capital adjustment, the payment of a stock dividend, or other
increase or decrease in such shares effected without receipt or payment of
consideration by the Corporation. If, upon a merger, consolidation,
reorganization, liquidation, recapitalization or the like of the Corporation,
the shares of the Corporation's Common Stock shall be exchanged for other
114
<PAGE>
securities of the Corporation or of another corporation, each recipient of an
Award shall be entitled, subject to the conditions herein stated, to purchase or
acquire such number of shares of Common Stock or amount of other securities of
the Corporation or such other corporation as were exchangeable for the number of
shares of Common Stock of the Corporation which such optionees would have been
entitled to purchase or acquire except for such action, and appropriate
adjustments shall be made to the per share exercise price of outstanding
Options. Notwithstanding any provision to the contrary herein and to the extent
permitted by applicable laws and regulations and interpretations thereof, the
exercise price of shares subject to outstanding Awards shall be proportionately
adjusted upon the payment by the Corporation of a special cash dividend or
return of capital in an amount per share which exceeds 10% of the Fair Market
Value of a share of Common Stock as of the date of declaration, provided that
the adjustment to the per share exercise price shall satisfy the criteria set
forth in Emerging Issues Task Force 90-9 (or any successor thereto) so that the
adjustments do not result in compensation expense, and provided further that if
such adjustment with respect to Incentive Stock Options would be treated as a
modification of the outstanding incentive stock options with the effect that,
for purposes of Sections 422 and 425(h) of the Code, and the rules and
regulations promulgated thereunder, new Incentive Stock Options would be deemed
to be granted hereunder, then no adjustment to the per share exercise price of
outstanding Incentive Stock Options shall be made.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend the Plan
with respect to any shares of Common Stock as to which Awards have not been
granted, subject to any required stockholder approval or any stockholder
approval which the Board may deem to be advisable for any reason, such as for
the purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying any applicable stock exchange
listing requirements. The Board may not, without the consent of the holder of an
Award, alter or impair any Award previously granted or awarded under this Plan
115
<PAGE>
except as specifically authorized herein.
ARTICLE XI
EMPLOYMENT AND SERVICE RIGHTS
Neither the Plan nor the grant of any Awards hereunder nor any action
taken by the Committee or the Board in connection with the Plan shall create any
right on the part of any Employee or Non-Employee Director to continue in such
capacity.
ARTICLE XII
WITHHOLDING
12.01 Tax Withholding. The Corporation may withhold from any cash
payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Corporation may require the Optionee to pay to the Corporation
the amount required to be withheld as a condition to delivering the shares
acquired pursuant to an Award. The Corporation also may withhold or collect
amounts with respect to a disqualifying disposition of shares of Common Stock
acquired pursuant to exercise of an Incentive Stock Option, as provided in
Section 8.09(c).
12.02 Methods of Tax Withholding. The Board or the Committee is
authorized to adopt rules, regulations or procedures which provide for the
satisfaction of an Optionee's tax withholding obligation by the retention of
shares of Common Stock to which the Employee would otherwise be entitled
pursuant to an Award and/or by the Optionee's delivery of previously owned
shares of Common Stock or other property.
ARTICLE XIII
DEFERRED PAYMENTS
13.01 Deferral of Options and Stock Appreciation Rights.
Notwithstanding any other provision of this Plan, any Optionee who is either a
Non-Employee Director or an executive officer of the Corporation may elect, with
116
<PAGE>
the concurrence of the Committee and consistent with any requirements
established by the Board (which requirements may include the adoption of a
separate deferred compensation plan or trust by the Corporation), to defer the
recognition of ordinary income resulting from the exercise of any Non-Qualified
Option not transferred under the provisions of Section 8.05 hereof and of any
Stock Appreciation Rights.
13.02 Timing of Election. The election to defer the recognition of
ordinary income resulting from the exercise of any eligible Non-Qualified Option
or Stock Appreciation Right must be made at least six (6) months prior to the
date such Option or Stock Appreciation Right is exercised or at such other time
as the Committee may specify. Deferrals of eligible Non-Qualified Options or
Stock Appreciation Rights shall only be allowed for exercises of Options and
Stock Appreciation Rights that occur while the Participant is in active service
with the Corporation or one of its Subsidiary Companies. Any election to defer
the ordinary income resulting from the exercise of an eligible Non-Qualified
Option or Stock Appreciation Right shall be irrevocable as long as the Optionee
remains an Employee or a Non-Employee Director of the Corporation or one of its
Subsidiary Companies.
ARTICLE XIV
EFFECTIVE DATE OF THE PLAN; TERM
14.01 Effective Date of the Plan. This Plan shall become effective on
the Effective Date, and Awards may be granted hereunder on or after the
Effective Date and no later than the termination of the Plan, provided that any
Awards granted prior to approval of the Plan by the stockholders of the
Corporation shall not be exercisable until this Plan is approved by stockholders
of the Corporation pursuant to Article XV hereof.
14.02 Term of the Plan. Unless sooner terminated, this Plan shall
remain in effect for a period of ten (10) years ending on the tenth anniversary
of the Effective Date. Termination of the Plan shall not affect any Awards
previously granted and such Awards shall remain valid and in effect until they
have been fully exercised or earned, are surrendered or by their terms expire or
are forfeited.
117
<PAGE>
ARTICLE XV
STOCKHOLDER APPROVAL
The Corporation shall submit this Plan to stockholders for approval at
a meeting of stockholders of the Corporation held within twelve (12) months
following the Effective Date in order to meet the requirements of Sections
162(m) and 422 of the Code and regulations thereunder, and any other applicable
statutory, regulatory or stock market requirements.
ARTICLE XVI
MISCELLANEOUS
16.01 Governing Law. This Plan shall be construed under the laws of
the State of Virginia.
16.02 Pronouns. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
118
<PAGE>
APPENDIX F
ALLSTATE FINANCIAL CORPORATION
2000 RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
1. Name of Plan. This plan shall be known as the "Allstate
Financial Corporation 2000 Restricted Stock Plan for Non-Employee Directors"
and is hereinafter referred to as the "Plan."
2. Effective Date. This Plan shall become effective as of
June 13, 2000, the date it was approved by the Board of Directors of Allstate
Financial Corporation (the "Company").
3. Compensation Paid in the Form of Restricted Shares. On the Effective
Date, restricted shares of common stock of the Company shall be granted to each
of the non-employee directors of the Company in the amounts set forth below in
Section 4, with the grants to be contingent upon the receipt of stockholder
approval of the Plan. If stockholder approval is not received, the grants shall
be null and void. Because these non-employee directors have not received any
cash compensation, stock options or other form of compensation since June 1999,
the restricted shares to be granted as of the Effective Date will represent
compensation for services previously rendered and will become fully vested upon
the receipt of stockholder approval of the Plan.
4. Eligible Participants and Amount of Compensation. On the
Effective Date, an aggregate of 175,000 restricted shares of common stock
shall be granted to the non-employee directors of the Company in the amounts set
forth below:
Name Number of Shares
C. Scott Bartlett 25,000
David W. Campbell 50,000
Steven Lefkowitz 25,000
119
<PAGE>
Edward A. McNally 25,000
William H. Savage 25,000
Lindsay B. Trittipoe 25,000
5. Source of Shares. The shares of common stock to be issued
pursuant to this Plan may be authorized but unissued shares or may be treasury
shares, as shall be determined by the President and Chief Executive Officer
of the Company.
6. Restrictive Legend on Stock Certificates. The certificates
evidencing the common stock to be issued pursuant to this Plan upon the
receipt of stockholder approval shall bear a restrictive legend in
substantially the following form:
"THE SHARES OF COMMON STOCK EVIDENCED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES ACT, AND MAY NOT BE TRANSFERRED WITHOUT
REGISTRATION UNDER SUCH ACTS OR AN OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED."
7. Withholding Taxes. When the shares of common stock of the Company
are to be issued upon the receipt of stockholder approval, the Company shall
have the right to require the recipient to remit to the Company an amount
sufficient to satisfy any applicable federal, state and local withholding tax
requirements prior to the issuance or delivery of the certificate(s) for such
shares.
8. No Stockholder Rights Prior to Vesting. The recipients of the
restricted stock grants shall have no stockholder rights with respect to the
underlying shares prior to the grants becoming fully vested and the underlying
shares being issued upon the receipt of stockholder approval of the Plan.
120
<PAGE>
ALLSTATE FINANCIAL CORPORATION
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ALLSTATE
FINANCIAL CORPORATION FOR USE ONLY AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE
HELD ON AUGUST 8, 2000 AND AT ANY ADJOURNMENT THEREOF.
The undersigned hereby appoints the Board of Directors of the Company,
or any successors thereto, as proxies, with full powers of substitution, to vote
the shares of the undersigned at the Annual Meeting of Shareholders of the
Company to be held at the Bank of America, 8300 Greensboro Drive, McLean, VA
22102 on August 8, 2000 at 11:00 a.m., Eastern Time, or at any adjournment
thereof, with all the powers that the undersigned would possess if personally
present, as follows:
1. Election of Directors
FOR all nominees listed WITHHOLD authority to
(except as marked to the vote for all nominees
contrary below) listed below
Nominees for one-year term: David W. Campbell, Charles G. Johnson,
Steven W. Lefkowitz, Edward A. McNally, William H. Savage and
Lindsay B. Trittipoe
To withhold authority to vote for some but not all of the nominees, write the
name of the nominee(s) in the space provided below:
-----------------------------------------------------------------
2. Approval of the Company's reincorporation as a Delaware corporation.
(a) Approve the merger of the Company with Allstate Delaware, with
Allstate Delaware to be the surviving entity, and approve the Merger Agreement,
the Certificate of Incorporation, and the Bylaws, other than as to matters
recommended in proposals 2(b), 2(c), and 2(d);
FOR AGAINST ABSTAIN
121
<PAGE>
(b) Approve the provisions in the Certificate of Incorporation of
Allstate Delaware prohibiting, after the merger, any attempted sale, purchase,
transfer, assignment, conveyance, pledge or other disposition ("Transfer") of
any stock, warrants, rights or options in Allstate Delaware to any person or
entity who owns (or would own after giving effect to the Transfer) more than
4.9% of any class of securities of Allstate Delaware, unless the Transfer is
approved by at least two-thirds of the board of directors of Allstate Delaware;
FOR AGAINST ABSTAIN
(c) Approve the provision in the Allstate Delaware Certificate of
Incorporation which provides that the number of shares of common stock which
Allstate Delaware is authorized to issue after the merger is 20,000,000,
compared with the maximum 10,000,000 authorized shares of common stock which may
be issued by the Company;
FOR AGAINST ABSTAIN
(d) Approve the provisions in the Allstate Delaware Bylaws which
provide that stockholders who want to make a nomination for the election of
directors or a proposal for new business at any annual meeting after the merger
must deliver a written notice to the secretary of Allstate Delaware providing
certain specified information, so that it is received not less than 120 days
prior to the anniversary date of the mailing of proxy materials by Allstate
Delaware in connection with the immediately preceding annual meeting of
stockholders or, with respect to the first annual meeting to be held after
completion of the merger, by December 15, 2000;
FOR AGAINST ABSTAIN
3. Approval of the Company's 2000 Stock Option Plan.
122
<PAGE>
FOR AGAINST ABSTAIN
4. Approval of the Company's 2000 Restricted Stock Plan for Non-Employee
Directors.
FOR AGAINST ABSTAIN
5. Ratification of the appointment of McGladrey & Pullen, LLP as
independent auditors for the year ending December 31, 2000.
FOR AGAINST ABSTAIN
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 the 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 Board of
Directors' nominees and FOR each of the proposals 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 Board of Directors' nominees to the
Board of Directors, FOR proposals 2(a), 2(b), 2(c), 2(d), 3, 4 and 5 and
otherwise at the discretion of the proxies. This proxy may not be voted for any
person who is not a nominee of the Board of Directors of the Company. This proxy
may be revoked at any time before it is exercised.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders of Allstate Financial Corporation called for August 8,
2000, a Proxy Statement for the Annual Meeting and the 1999 Annual Report on
Form 10-KSB.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE
ENCLOSED ENVELOPE.
Dated: , 2000
------------------------------------------------
123
<PAGE>
<PAGE>
Signature(s)
Please sign exactly as your name(s) appear on this Proxy. Only one signature is
required in the case of a joint account. When signing in a representative
capacity, please give title.
124
<PAGE>
