-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Aw0Jrf+ovi/ky5Khk5JMFbQam+Yy8jHSRTP8VZ/gVS4paOPxzxtfDJu/B0tjdFmw ef2TYucg3oz+Bb/X053pRA== 0000852220-95-000005.txt : 19951205 0000852220-95-000005.hdr.sgml : 19951205 ACCESSION NUMBER: 0000852220-95-000005 CONFORMED SUBMISSION TYPE: SC 13E4 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19951204 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ALLSTATE FINANCIAL CORP /VA/ CENTRAL INDEX KEY: 0000852220 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [6153] IRS NUMBER: 541208450 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E4 SEC ACT: 1934 Act SEC FILE NUMBER: 005-41446 FILM NUMBER: 95598800 BUSINESS ADDRESS: STREET 1: 2700 S QUINCY ST STE 540 CITY: ARLINGTON STATE: VA ZIP: 22206 BUSINESS PHONE: 7039312274 MAIL ADDRESS: STREET 1: 2700 S QUINCY STREET STREET 2: STE 540 CITY: ARLINGTON STATE: VA ZIP: 22206 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ALLSTATE FINANCIAL CORP /VA/ CENTRAL INDEX KEY: 0000852220 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [6153] IRS NUMBER: 541208450 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E4 BUSINESS ADDRESS: STREET 1: 2700 S QUINCY ST STE 540 CITY: ARLINGTON STATE: VA ZIP: 22206 BUSINESS PHONE: 7039312274 MAIL ADDRESS: STREET 1: 2700 S QUINCY STREET STREET 2: STE 540 CITY: ARLINGTON STATE: VA ZIP: 22206 SC 13E4 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ________________ SCHEDULE 13E-4 ISSUER TENDER OFFER STATEMENT (PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934) ALLSTATE FINANCIAL CORPORATION (Name of Issuer) ALLSTATE FINANCIAL CORPORATION (Name of person(s) filing statement) Common Stock, no par value per share (Title of class of securities) 020011 10 2 (CUSIP number of class of securities) Craig Fishman, Esq. Senior Vice President and General Counsel Allstate Financial Corporation 2700 South Quincy Street, Suite 540 Arlington, Virginia 22206 (703) 931-2274 (Name, address and telephone number of person authorized to receive notices and communications on behalf of the person(s) filing statement) copy to: Richard A. Krantz, Esq. Robinson & Cole Financial Centre 695 East Main Street Stamford, Connecticut 06901 (203) 462-7500 November 28, 1995 (Date tender offer first published, sent or given to security holders) Calculation of Filing Fee Transaction valuation* Amount of filing fee $2,162,000 $432.40 * For purposes of calculation of fee only. This amount assumes the purchase of 340,473 shares of Common Stock, no par value per share (the "Shares"), of Allstate Financial Corporation, at a purchase price of $6.35 per Share. The amount of the filing fee, calculated in the accordance with Regulation 240.0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50 of one percent of the value of the Shares to be purchased. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: ________ Filing Party: ________ Form of Registration No.: ________ Date Filed: ________ Item 1. Security and Issuer. Preliminary Note: References in this Schedule to the "Offering Circular" and the "Letter of Transmittal" are to the Offering Circular dated November 28, 1995 (the "Offering Circular") and the Letter of Transmittal, dated as of November 28, 1995 (the "Letter of Transmittal"), filed herewith as Exhibits (a)(1) and (a)(2), respectively. (a) The issuer is Allstate Financial Corporation (the "Company"). The Company's principal executive offices are located at 2700 South Quincy Street, Suite 540, Arlington, VA 22206. (b) The securities being sought are outstanding shares of the Company's Common Stock, no par value per share (the "Common Stock"). Upon the terms and subject to the conditions set forth in the Offering Circular and in the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"), the Company is offering to exchange $1,000.00 principal amount of Convertible Subordinated Notes due September 30, 2000 (the "Notes") for each 157.48 shares of its Common Stock, of which 2,655,128 shares are currently outstanding. The terms of the Exchange Offer equate to $6.35 principal amount of Notes for each share of Common Stock properly tendered for exchange. To the extent the number of shares of Common Stock tendered by the holder thereof exceeds 157.48 (or a whole multiple thereof), the holder shall receive a new certificate representing the whole number of excess shares and a cash payment by the Company for any remaining fractional share at a rate of $6.35 per share of Common Stock. The Company is only authorized to issue up to $2,162,000 principal amount of Notes and therefore the Company will only purchase up to that number of shares of Common Stock properly tendered to it pursuant to the Exchange Offer that would allow it to issue Notes in an aggregate principal amount of up to $2,162,000. In the event shares of Common Stock in excess of that number are properly tendered to the Company for exchange pursuant to the terms of the Exchange Offer, the Company will only accept for exchange from each tendering holder of Common Stock a stockholder's pro rata portion of the total number of shares of Common Stock properly tendered for exchange, rounded down to the nearest whole multiple of 157.48 shares. In this event, the excess shares of Common Stock tendered by the stockholder to the Company over the stockholder's pro rata amount of tendered shares, as rounded down to the nearest whole multiple of 157.48, will not be accepted by the Company for exchange, and each such shareholder shall receive a new certificate for shares of Common Stock representing the number of such excess shares and a cash payment by the Company for any fractional share at a rate of $6.35 per share of Common Stock. (c) See "Price Ranges of the Common Stock" in the Offering Circular, incorporated herein by reference. (d) Not applicable. Item 2. Source and Amount of Funds or Other Consideration. (a) The Company and Shawmut Bank Connecticut, National Association, as trustee, have entered into an Indenture of Trust, dated as of September 11, 1995 (the "Indenture"), pursuant to which the Company will issue the Notes as part of the consideration payable in the Exchange Offer. The maximum aggregate principal amount of Notes issuable in the Exchange Offer is $2,162,000. See "The Exchange Offer" in the Offering Circular, incorporated herein by reference. (b) Not applicable. Item 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer or Affiliate. See "Purposes and Effects of the Exchange Offer" in the Offering Circular, incorporated herein by reference. (a) Not applicable. (b) Not applicable. (c) Not applicable. (d) Not applicable. (e) See "Pro Forma Data" and "Dividends" in the Offering Circular, incorporated herein by reference. (f) Not applicable. (g) Not applicable. (h) Not applicable. (i) The Company's Common Stock is presently held of record by less than 300 persons and is therefore eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended. (j) Not applicable. Item 4. Interest in Securities of the Issuer. Neither the Company, nor to the best of its knowledge, any of the other persons covered by Item 4 of this Schedule [i.e., officers, directors, associates and affiliates of the foregoing] has effected any transaction in the Common Stock during the 40 business days preceding the date of the Offering Circular, except that on September 28, 1995, Mr. Craig Fishman, Senior Vice President and General Counsel and a Director of the Company, purchased 1,250 shares of Common Stock in the over-the-counter market for an aggregate purchase price of $7,504. Mr. Craig Fishman has indicated to the Company that he does not intend to tender any shares of Common Stock he beneficially owns pursuant to the Exchange Offer. Item 5. Contracts, Arrangements, Understandings or Relationships With Respect to the Issuer's Securities. Mr. Leon Fishman, the President and Chief Executive Officer of the Company, and Mr. Eugene R. Haskin, the Chairman of the Board of the Company, and Mr. Craig Fishman, Senior Vice President and General Counsel and a Director of the Company, have indicated to the Company that they do not intend to tender any shares of Common Stock they beneficially own pursuant to the Exchange Offer. As of November 28, 1995, these shareholders beneficially owned in the aggregate 502,832 shares of Common Stock, or approximately 19% of the outstanding shares of Common Stock. These shareholders will increase their percentage ownership interest of the shares of Common Stock depending upon the number of shares of Common Stock tendered in the Exchange Offer. Item 6. Persons Retained, Employed or to be Compensated. See "The Exchange Offer -Exchange Agent" in the Offering Circular, incorporated herein by reference. Item 7. Financial Information. (a)(1) See Part II - Item 7. "Financial Statements" in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1994, incorporated herein by reference, filed as Exhibit (g) hereto. (a)(2) See Part I - Item 1. "Financial Statements" in the Company's Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 1995, incorporated herein by reference, filed as Exhibit (h) hereto. (a)(3) See "Summary Financial Data" in the Offering Circular, incorporated herein by reference. (a)(4) See "Summary Financial Data" in the Offering Circular, incorporated herein by reference. (b)(1) See "Pro Forma Data" in the Offering Circular, incorporated herein by reference. (b)(2) See "Pro Forma Data" in the Offering Circular, incorporated herein by reference. (b)(3) See "Pro Forma Data" in the Offering Circular, incorporated herein by reference. Item 8. Additional Information. (a) There is no present or proposed material contract, arrangement, understanding or relationship between the Company and any of its executive officers, directors or affiliates, other than as disclosed in Item 5 of this Schedule or otherwise previously disclosed in the Company's Annual Report on Form 10-KSB or the Company's Quarterly Report on Form 10-QSB. (b) Not applicable. (c) Not applicable. (d) Not applicable. (e) The Company's Offering Circular and Transmittal Letter should be read in their entirety and are incorporated herein by reference. Item 9. Material to be Filed as Exhibits. (a)(1) Offering Circular, dated November 28, 1995. (a)(2) Letter of Transmittal. (a)(3) Letter to securities dealers, commercial banks, trust companies and other nominees. (a)(4) Form of Letter to Clients of securities dealers, commercial banks, trust companies and other nominees. (a)(5) Notice of Guaranteed Delivery. (a)(6) Press release of the Company, issued November 30, 1995, concerning the Exchange Offer. (a)(7) Questions and Answers about the Exchange Offer. (b) Not applicable. (c) Not applicable. (d) Not applicable. (e) Not applicable. (f) The Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1994, is incorporated by reference herein. (g) The Company's quarterly report on Form 10-QSB for the quarterly period ended September 30, 1995, is incorporated by reference herein. SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: November 28, 1995 ALLSTATE FINANCIAL CORPORATION By: Craig Fishman Senior Vice President and General Counsel EX-99 2 OFFERING CIRCULAR OFFERING CIRCULAR ALLSTATE FINANCIAL CORPORATION Offer to Exchange $1,000.00 Principal Amount of Convertible Subordinated Notes due September 30, 2000 for each 157.48 shares of Common Stock THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME, ON FRIDAY, JANUARY 12, 1996, UNLESS EXTENDED (SUCH TIME AND DATE, THE "EXPIRATION DATE"). Allstate Financial Corporation, a Virginia corporation (the "Company"), hereby offers, upon the terms and subject to the conditions set forth in this Offering Circular and in the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"), to exchange $1,000.00 principal amount of Convertible Subordinated Notes due September 30, 2000 (the "Notes") for each 157.48 shares of its Common Stock, no par value per share (the "Common Stock"), of which 2,655,128 shares are currently outstanding. The terms of this Exchange Offer equate to $6.35 principal amount of Notes for each share of Common Stock properly tendered for exchange. To the extent the number of shares of Common Stock tendered by the holder thereof exceeds 157.48 (or a whole multiple thereof), the holder shall receive a new certificate representing the whole number of excess shares and a cash payment by the Company for any remaining fractional share at a rate of $6.35 per share of Common Stock. The Company is only authorized to issue up to $2,162,000 principal amount of Notes and therefore the Company will only purchase up to that number of shares of Common Stock properly tendered to it pursuant to the Exchange Offer that would allow it to issue Notes in an aggregate principal amount of up to $2,162,000. In the event shares of Common Stock in excess of that number are properly tendered to the Company for exchange pursuant to the terms of the Exchange Offer, the Company will only accept for exchange from each tendering holder of Common Stock (each, a "Common Stockholder") a stockholder's pro rata portion of the total number of shares of Common Stock properly tendered for exchange, rounded down to the nearest whole multiple of 157.48 shares. In this event, the excess shares of Common Stock tendered by the stockholder to the Company over the stockholder's pro rata amount of tendered shares, as rounded down to the nearest whole multiple of 157.48, will not be accepted by the Company for exchange, and each such stockholder shall receive a new certificate for shares of Common Stock representing the whole number of excess shares and a cash payment by the Company for any fractional share at a rate of $6.35 per share of Common Stock. THIS OFFER IS NOT CONDITIONED UPON A MINIMUM NUMBER OF SHARES BEING EXCHANGED. EXCEPT AS OTHERWISE PROVIDED IN THIS EXCHANGE OFFER, THE COMPANY WILL EXCHANGE ANY SHARES PROPERLY TENDERED TO IT FOR UP TO $2,162,000 IN AGGREGATE PRINCIPAL AMOUNT OF NOTES. Mr. Leon Fishman, the President and Chief Executive Officer of the Company, Mr. Eugene R. Haskin, the Chairman of the Board of the Company, and Mr. Craig Fishman, Senior Vice President and General Counsel and a Director of the Company, have indicated to the Company that they do not intend to tender any shares of Common Stock they beneficially own pursuant to the Exchange Offer. As of November 27, 1995, these shareholders beneficially owned in the aggregate 501,166 shares of Common Stock, or approximately 19% of the outstanding shares of Common Stock. These shareholders will increase their percentage ownership interest of the shares of Common Stock depending upon the number of shares of Common Stock tendered in the Exchange Offer. Tenders of shares of Common Stock may be withdrawn at any time prior to the Expiration Date or, unless previously accepted for exchange by the Company, after 5:00 P.M., eastern standard time, on January 24, 1996. Upon the terms and subject to the conditions set forth herein, the Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. The last sale price of the Common Stock (Symbol: ASFN) as reported on the National Association of Securities Dealers, Inc. ("NASDAQ") National Market System on November 27, 1995 was $5.625 per share. The Notes are not listed on any securities exchange and the Company does not intend to make an application to list the Notes on any such exchange. There is no trading market for the Notes and it is unlikely that an active trading market for the Notes will develop. Holders of shares of Common Stock should carefully review the information under "Risk Factors." The Exchange Offer is not conditioned upon a minimum number of shares of Common Stock being tendered for exchange. The Company is only authorized to issue up to $2,162,000 principal amount of Notes and therefore the Company will only purchase up to that number of shares of Common Stock properly tendered to it pursuant to the Exchange Offer that would allow it to issue Notes in an aggregate principal amount of up to $2,162,000. The Exchange Offer is also subject to certain customary conditions, any or all of which may be waived by the Company. See "The Exchange Offer - Conditions of the Exchange Offer." The Board of Directors of the Company is not making any recommendation that the shareholders of the Company tender or refrain from tendering shares pursuant to the Exchange Offer. THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. _____________________ The date of this Offering Circular is November 28, 1995. TABLE OF CONTENTS Page Incorporation of Certain Documents by Reference . . . .. . . . . . . . . 3 Available Information . . . . . . . . . . . . . . . . . . . . . . . . . 4 Summary of the Exchange Offer . . . . . . . . . . . . . . . . . . . . . 5 The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Purposes and Effects of the Exchange Offer. . . . . . . . . . . . . . . 12 Summary Comparison of Terms of the Common Stock . . . . . . . . . . . . 14 Summary Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . 16 Pro Forma Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Price Ranges of the Common Stock. . . . . . . . . . . . . . . . . . . . 18 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 The Exchange Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Federal Income Tax Considerations . . . . . . . . . . . . . . . . . . . 24 Description of Common Stock . . . . . . . . . . . . . . . . . . . . . . 25 Description of the Notes. . . . . . . . . . . . . . . . . . . . . . . . Item 6. Persons Retained, Employed or to be Compensated. See "The Exchange Offer -Exchange Agent" in the Offering Circular, incorporated herein by reference. Item 7. Financial Information. The Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1994; and (b) The Company's Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1995, June 30, 1995 and September 30, 1995, respectively. Pursuant to Rule 13e-4 under the Exchange Act, the Company has filed an Issuer Tender Offer Statement on Schedule 13E-4 (the "Schedule 13E-4") with the Commission. The Schedule 13E-4, including exhibits, may be inspected or copied at the public reference facilities of the Commission. See "Available Information." All reports subsequently filed by the Company pursuant to Section 13(a) and (c) of the Exchange Act and any definitive proxy or information statements filed pursuant to Section 14 of the Exchange Act in connection with any subsequent stockholders' meeting and any reports filed pursuant to Section 15(d) of the Exchange Act prior to the completion of the Exchange Offer shall be deemed to be incorporated by reference into this Offering Circular and to be a part hereof from the date of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Offering Circular to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Offering Circular. This Offering Circular incorporates by reference documents which are not present herein or delivered herewith. The Company will provide without charge to each person to whom this Offering Circular is delivered, on the request of any such person, a copy of any or all of the foregoing documents incorporated herein by reference (other than exhibits to such documents). Written or telephone requests for such documents should be directed to the Company at (703) 931-2274. The Exchange Offer is being made by the Company in reliance on the exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), afforded by Section 3(a)(9) thereof. The Company therefore will not pay any commission or other remuneration to any broker, dealer, salesman or other person for soliciting tenders of the Common Stock. Regular employees of the Company, who will not receive additional compensation therefor, may solicit exchanges from Common Stockholders. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "Commission"). Information as of particular dates, concerning directors and officers, their remuneration, options granted to them, the principal holders of securities of the Company and any material interest of such persons in transactions with the Company, is disclosed in proxy statements distributed to stockholders of the Company and filed with the Commission. Such reports, proxy statements and other information can be inspected and copied (at prescribed rates) at the public reference facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can also be obtained by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. No person has been authorized to give any information or to make any representations in connection with the Exchange Offer other than those contained in this Offering Circular. If given or made, such information or representations should not be relied upon as having been authorized by the Company. Neither the delivery of this Offering Circular nor any exchange made hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Company since the respective dates as of which information is given herein. To the extent there is a material change in the affairs of the Company after the date hereof, the Company will promptly disclose such information in a manner reasonably calculated to inform the holders of Common Stock of such change. The Exchange Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of shares of Common Stock in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. However, the Company may, at its discretion, take such action as it may deem necessary to make the Exchange Offer in any such jurisdiction and to extend the Exchange Offer to holders of shares of Common Stock in such jurisdiction. In any jurisdiction the securities laws or blue sky laws of which require the Exchange Offer to be made by a licensed broker or dealer, the Exchange Offer is being made on behalf of the Company by one or more registered brokers or dealers which are licensed under the laws of such jurisdiction. SUMMARY OF THE EXCHANGE OFFER The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Offering Circular. Terms used in this summary and not otherwise defined herein shall have the meanings given to them elsewhere in this Offering Circular. The Exchange Offer ........Subject to the terms and conditions set forth herein and in the Letter of Transmittal, the Company is offering to ex- change $1,000.00 principal amount of Notes for each 157.48 shares of the Company's Common Stock properly tendered and accepted. To the extent the number of shares of Common Stock tendered by the holder thereof exceeds 157.48 (or a whole multiple thereof), such holder shall receive a new certificate representing the whole number of excess shares and a cash payment by the Company for any remaining fractional share at a rate of $6.35 per share of Common Stock. Purposes of the Exchange Offer........The principal purpose of the Exchange Offer is to increase shareholder value by giving holders of the Company's Common Stock the opportunity to receive Notes for their shares of Common Stock tendered, which Notes (i) are in a principal amount in excess of the current market price for their shares, (ii) represent the opportunity to receive a fixed return from the Notes and (iii) give the holder the flexibility to convert the Notes back into shares of the Company's Common Stock at a later date. The Exchange Offer will achieve this purpose by reducing the amount of Common Stock included in the Company's equity capital and by increasing its debt capital by an amount approximately equal to the value of the Notes issued in the Exchange Offer. This has the potential effect of increasing the amount of earnings per share of the Common Stock, thereby potentially stimulating increased market interest in the Common Stock. The Exchange Offer also enables the Company to purchase shares of Common Stock below their current book value per share. Since the Notes are convertible into shares of Common Stock at a price of $7.50 principal amount of Notes for each share of Common Stock, holders of the Notes have an opportunity to participate in future potential increases in the market price of the Common Stock. Expiration Date........5:00 P.M., eastern standard time, on January 12, 1996, unless extended. See "The Exchange Offer - Expiration Date; Extensions; Termination; Amendments." Withdrawal of Tenders........Tenders of shares of Common Stock may be withdrawn at any time prior to the Expiration Date or, unless previously accepted for exchange by the Company, after 5:00 P.M., eastern standard time, on January 24, 1996. See "The Exchange Offer-Withdrawal Rights." Acceptance of Common Stock and Delivery of Notes........Subject to the terms and conditions of the Exchange Offer, the Company will accept, promptly after the Expiration Date, all shares of Common Stock properly tendered and not withdrawn prior to the Expiration Date. The Company will cause the Notes to be delivered promptly following the Expiration Date. See "The Exchange Offer-Acceptance of Shares of Common Stock for Exchange; Delivery of Notes." Conditions of the Exchange Offer........The Exchange Offer is not conditioned upon a minimum number of shares of Common Stock being tendered for exchange. The Company is only authorized to issue up to $2,162,000 principal amount of Notes and therefore the Company will only purchase up to that number of shares of Common Stock properly tendered to it pursuant to the Exchange Offer that would allow it to issue Notes in an aggregate principal amount of up to $2,162,000. In the event a greater number of shares of Common Stock are properly tendered to the Company for exchange pursuant to the terms of the Exchange Offer, the Company will only accept for exchange from each tendering Common Stockholder that stockholder's pro rata portion of the total number of shares of Common Stock properly tendered for exchange, rounded down to the nearest multiple of 157.48 shares. The Exchange Offer is further subject to certain customary conditions, any or all of which may be waived by the Company. See "The Exchange Offer-Conditions of the Exchange Offer" and "-Tenders of Excess Shares of Common Stock." Procedures for Tendering Common Stock........Each Common Stockholder who wishes to tender his or her shares of Common Stock must deliver the following documents prior to the Expiration Date to the Exchange Agent at one of the addresses set forth on the back cover hereof: (i) certificates representing such shares of Common Stock together with the Letter of Transmittal, which will have been properly completed and duly executed by such Common Stockholder, and all other documents required by the Letter of Transmittal, or (ii) if such Common Stockholder wishes to tender by guaranteed delivery, a properly completed and duly executed Notice of Guaranteed Delivery. Any Common Stockholder whose Common Stock is registered in the name of a broker, dealer, commercial bank, trust company or nominee is urged to contact such registered holder promptly if such Common Stockholder wishes to participate in the Exchange Offer. Letters of Transmittal, Notices of Guaranteed Delivery and certificates for Common Stock should be sent to the Exchange Agent and not to the Company. See "The Exchange Offer-Procedures for Tendering" and "-Tenders of Excess Shares of Common Stock." The Notes........See "Summary Comparison of Terms of the Common Stock and the Notes" and "Description of the Notes". The Company does not intend to make an application to list the Notes on any securities exchange. The Common Stock........See "Summary Comparison of Terms of the Common Stock and the Notes" and "Description of Common Stock." Certain Federal Income Tax Considerations........For a complete discussion of the federal income tax considerations related to the exchange of the Common Stock for the Notes, see "Federal Income Tax Considerations." Exchange Agent........Shawmut Bank Connecticut, National Association (the "Exchange Agent"), 777 Main Street, Hartford, CT, telephone (860) 986-2910. Further Information........For further information concerning procedures for tendering shares of Common Stock, please contact either the Exchange Agent or the Company. At the Company, please contact Craig Fishman at (703) 931-2274. THE COMPANY The Company's principal business is the discounted purchase of accounts receivable, usually on a full recourse, full notification basis. In addition, the Company also makes advances collateralized by inventory, equipment, and real estate (collectively, "Collateralized Advances"). The Company has elected to more aggressively pursue the making of Collateralized Advances, as it perceives the need by its targeted customers for such funding and such funding is not readily available from many of the Company's competitors. As of September 30, 1995, Collateralized Advances constituted approximately 31% of the Company's portfolio of finance receivables. The Company also provides its clients with letters of guaranty, arranges for the issuance of letters of credit for its clients and provides other related financial services. The Company's clients are small- to medium-sized businesses with annual revenues typically ranging between $600 thousand and $50 million. The Company's clients do not typically qualify for traditional bank or asset-based financing because they are either too new, too small, undercapitalized (or over-leveraged), unprofitable or otherwise unable to satisfy the requirements of a bank or traditional asset-based lender. Accordingly, there is a significant risk of default and client failure inherent in the Company's business. The Company addresses these risks in various ways, including: (i) the Company thoroughly evaluates the collateral to be made available by each client; (ii) the Company collects its clients' accounts receivable directly from its clients' account debtors, which are frequently (though not always) large, creditworthy companies or governmental entities; (iii) the Company purchases, or takes a first priority security interest in, all accounts receivable of each client; (iv) the Company takes, whenever available, blanket liens on all of its clients' assets and, when making Collateralized Advances, the Company employs what management believes to be conservative loan-to-value ratios based on auction or liquidation value appraisals performed by independent appraisers; (v) the Company requires personal guaranties (either unlimited guaranties or validity guaranties) from its clients' principals; (vi) the Company actively monitors its portfolio of purchased accounts receivable, including the creditworthiness of account debtors and periodically evaluates the value of other collateral and (vii) the Company maintains loss reserves which management believes are adequate and appropriate for its business. Notwithstanding the foregoing, clients (and account debtors) may fail and the collateral available to the Company (together with personal guaranties) may prove insufficient to enable the Company to recover all amounts due in full. Continuing competition within the marketplace from banks and asset- based lenders (previously not in competition with the Company) and newly created finance companies have infringed on the Company's potential client base and have negatively affected earned discounts. Additionally, the Company continues to attract larger clients which often increases the amount of time needed to negotiate and fund new business. Also, Collateralized Advances require more in-depth and diverse due diligence which can further delay the funding of new business. Nonetheless, the Company believes that its ability to respond quickly and to provide specialized, flexible financing structures to its clients enables it to compete effectively. In order to remain competitive, however, the Company has, where necessary and appropriate, offered lower rates than it has historically. The Company believes that increased competition will continue for the foreseeable future and will continue to exert downward pressure on pricing, especially in the Company's core factoring business. To counter the downward pressure on pricing, the Company intends to try to diversify its sources of income, primarily by continuing its emphasis on funding relationships which include (in addition to the factoring of accounts receivable) the making of Collateralized Advances. Historically, the Company did not expect to maintain a funding relationship with a client for more than two years; the Company expected that its clients would ultimately qualify for more competitively priced bank or asset based financing. Therefore, the Company's major clients have tended to change significantly over time. Today, however, because the Company is, where necessary and appropriate, offering lower rates and providing Collateralized Advances, it is possible that the duration of the Company's funding relationships with its clients may be extended. Although the Company has historically been successful in replacing major clients, the loss of one or more major clients and an inability to replace those clients could have a material adverse effect on the Company. Lifetime Options, a wholly-owned subsidiary of the Company, provides financial assistance to individuals facing life-threatening illness by purchasing their life insurance policies at a discount from face value. The amount of the discount is determined by Lifetime Options based on the size of the policy being purchased, the maximum life expectancy of the insured, the amount of the anticipated premiums payable with respect to the policy being purchased and the anticipated financing cost associated with purchasing and carrying the policy. In general, the purchase price for a policy is between 55% and 85% of the benefits payable under the policy. Because most of the life insurance policies purchased by Lifetime Options are underwritten by highly rated insurance companies (and, in many cases, backed by state guaranty funds), management of Lifetime Options believes that credit risk is not material to its business. Before purchasing each policy, Lifetime Options has each insured's medical records reviewed by at least one (and typically three) independent physician(s) who provide(s) Lifetime Options with an opinion(s) of the insured's life expectancy. To date, the physicians engaged by Lifetime Options have provided life expectancies which, on average, fairly approximate actual lifespans. However, there is no assurance that the physicians engaged by Lifetime Options will in the future be able to perform as they have in the past. If the physicians engaged by Lifetime Options were to systematically underestimate life expectancies or if life extending treatments (or a cure) were found for AIDS (almost all of the life insurance policies purchased by Lifetime Options to date have been purchased from individuals with AIDS), there would be a material adverse effect on the earnings of Lifetime Options. Other than Lifetime Options, none of the Company's subsidiaries is currently engaged in business which has a material effect on the Company. RECENT DEVELOPMENTS On September 11, 1995, the Company entered into a transaction with two affiliated shareholders, Scoggin Capital Management, LP and Selig Partners, LP (together, the "Original Tendering Shareholders"), whereby the Company exchanged Notes for all of the shares of stock held by the Original Tendering Shareholders. Specifically, the Original Tendering Shareholders exchanged 447,200 shares of Common Stock, representing approximately 14% of the total number of then outstanding shares of Common Stock, for $2,838,000 principal amount of Notes at a rate of $1,000.00 principal amount of Notes for each 157.48 shares of Common Stock exchanged. This rate of exchange represented a small discount from the average closing trading price of the Common Stock on the NASDAQ for the three month period prior to the consummation of the transaction. The Notes were issued pursuant to an Indenture, dated as of September 11, 1995, between the Company and Shawmut Bank Connecticut, National Association, as Trustee (the "Indenture") and are identical to the Notes offered in the Exchange Offer. The Company purchased from the Original Tendering Shareholders an additional 271.76 shares of Common Stock not theretofore exchanged for Notes at a cash price of $6.35 per share of Common Stock. Prior to the consummation of such transaction, the Original Tendering Shareholders together formed the Company's largest single shareholder. The action taken by the Company in entering into this transaction with the Original Tendering Shareholders was in response to continued expressions of concern by the Original Tendering Shareholders over the financial performance of the Company, as well as the Company's refusal to implement a stock repurchase program. This concern culminated in May 1995 when the Original Tendering Shareholders filed certain preliminary materials with the Commission seeking to take action to pursue representation on the Company's Board of Directors of nominees of the Original Tendering Shareholders. Subsequently, the Company and the Original Tendering Shareholders agreed to the foregoing exchange of securities and the Original Tendering Shareholders agreed not to pursue their filing with the Commission. The Original Tendering Shareholders also received certain limited demand and "piggy-back" registration rights with respect to their Notes and the shares of Common Stock issuable upon conversion of their Notes. In addition, the Company agreed that the Original Tendering Shareholders could nominate one or two members of the Board of Directors of the Company, depending on their continued ownership of Company securities. The Original Tendering Shareholders have agreed not to convert their Notes into Common Stock before March 1, 1997, with certain exceptions. The Original Tendering Shareholders have also agreed not to purchase or acquire any shares of Common Stock (other than upon conversion of their Notes) until September, 2002. One of the conditions the Company insisted upon in negotiating the foregoing transaction with the Original Tendering Shareholders was that subsequent to the consummation of such transaction, all Common Stockholders of the Company also have the opportunity to exchange their shares of Common Stock for Notes at the same exchange rate as that agreed upon between the Company and the Original Tendering Shareholders. On September 28, 1995, Mr. Craig Fishman, Senior Vice President and General Counsel and a Director of the Company, purchased 1,250 shares of Common Stock in the over-the-counter market for an aggregate purchase price of $7,504. Mr. Craig Fishman has indicated to the Company that he does not intend to tender any shares of Common Stock he beneficially owns pursuant to the Exchange Offer. RISK FACTORS Common Stockholders should consider the factors set forth below, as well as the other information set forth in this Offering Circular, in determining whether to participate in the Exchange Offer. Absence of Trading Market Prior to the consummation of the Exchange Offer, there will not have been any trading market for the Notes. The Notes will not be listed on any securities exchange or quoted in any automated inter-dealer quotation system and it is unlikely that a trading market for the Notes will develop. This may adversely affect the ability of a holder of Notes to sell or transfer all or a portion of such Notes prior to their maturity. Odd Lot Shares Open market transactions in securities are typically effected in round lots of 100 shares or other customary units of trading. The Company is offering to exchange $1,000 principal amount of Notes for each 157.48 shares of Common Stock. Therefore, if a Common Stockholder tenders shares of Common Stock to the Company for exchange, it is unlikely that the remaining number of shares of Common Stock held by that stockholder will be a multiple of 100. Such "odd lot" number of shares may be more difficult or expensive for a stockholder to subsequently sell or transfer on the open market. Ranking of Notes and Common Stock The Notes will rank junior to the indebtedness of the Company to its institutional lenders under a revolving credit agreement in the aggregate principal amount of up to $25,000,000, and all indebtedness of the Company incurred in connection with, or extending the maturity of, refinancing, replacing or restructuring all or any portion of, the Company's obligations under that revolving credit agreement. See "Description of the Notes - Subordination". To the extent shares of Common Stock are tendered for exchange in the Exchange Offer and the tendering Common Stockholder receives Notes in return, there will be a greater amount of debt outstanding ranking prior to the Common Stock not so accepted for exchange in the Exchange Offer. In the event of a liquidation of the Company, this could have a materially adverse effect on Common Stockholders who do not participate in the Exchange Offer since there would be a larger amount of outstanding indebtedness ranking prior to the Common Stock. Redemption of Notes To the extent a tendering Common Stockholder receives Notes in the Exchange Offer, the Notes are subject to redemption prior to maturity, in whole or in part, at the option of the Company, commencing on January 1, 1997. Under certain circumstances, the Company is also required to redeem the Notes prior to maturity. See "Description of the Notes -Optional Redemption" and "-Mandatory Redemption." In the event Notes are redeemed by the Company, the holder thereof would lose the ability to receive a fixed return on the Notes as well as the right to convert the Notes into shares of the Company's Common Stock. PURPOSES AND EFFECTS OF THE EXCHANGE OFFER The principal purpose of the Exchange Offer is to increase shareholder value by giving holders of the Company's Common Stock the opportunity to receive Notes for their shares of Common Stock tendered, which Notes (i) are in a principal amount in excess of the current market price for their shares, (ii) represent the opportunity to receive a fixed return from the Notes and (iii) give the holder the flexibility to convert the Notes back into shares of the Company's Common Stock at a later date. The Exchange Offer will achieve this purpose by reducing both the proportion and the amount of Common Stock included in the Company's capital structure and by correspondingly increasing its debt capital by an amount approximately equal to the value of the Notes issued in the Exchange Offer. While the Company's debt service costs will increase due to the interest payments on the Notes, by reducing the number of outstanding shares of Common Stock, the Company's earnings per share of Common Stock may increase at a proportionately faster rate. The Company believes that increasing its earnings per share will generate interest in the Company's Common Stock thereby producing better market returns. Since the Notes are convertible into shares of Common Stock at any time at the option of the holders thereof at a conversion price of $7.50 per share, holders of the Notes are provided an opportunity to participate in future potential increases in the market price of the Common Stock. In addition, the Exchange Offer also enables the Company to purchase shares of Common Stock below their current book value per share. Assuming the maximum allowable number of shares of Common Stock had been tendered and accepted pursuant to the terms of the Exchange Offer, the Company would have realized a decrease in its common stockholders' equity of approximately $2,162,000. Under the same assumptions, $2,162,000 principal amount of the Notes would be issued pursuant to the Exchange Offer thereby initially increasing the Company's annual debt service costs by $216,200. The effects of this would be to cause the book value per share of Common Stock outstanding to increase from $9.90 as of September 30, 1995 to $10.19 on a pro forma basis, while at the same time causing the earnings per share of Common Stock outstanding to increase from $0.33 to $0.34 for the nine month period ended September 30, 1995 on a pro forma basis, assuming that the Exchange Offer, including the exchange made by the Original Tendering Shareholders, had been consummated as of January 1, 1994. If the Exchange Offer is consummated, but fewer than the maximum allowable number of shares of Common Stock are exchanged, these increases and decreases would be proportionally adjusted, reflecting the number of shares of Common Stock that are not tendered and accepted in the Exchange Offer. See "Pro Forma Data" for the anticipated effects of the Exchange Offer on the Company's capital structure and for certain pro forma effects of the Exchange Offer. The Notes will rank junior to the indebtedness of the Company to its institutional lenders under a revolving credit agreement in an aggregate principal amount of up to $25,000,000, and all indebtedness of the Company incurred in connection with, or extending the maturity of, refinancing, replacing or restructuring all or any portion of, the Company's obligations under this revolving credit agreement. See "Description of the Notes - Subordination." To the extent shares of Common Stock are tendered for exchange in the Exchange Offer and the tendering Common Stockholder receives Notes in return, there will be a greater amount of debt outstanding ranking prior to the Common Stock not so tendered in the Exchange Offer. In the event of a liquidation of the Company, this will have a materially adverse effect on Common Stockholders who do not participate in the Exchange Offer since there would be a larger amount of outstanding indebtedness ranking prior to the Common Stock. Mr. Leon Fishman, the President and Chief Executive Officer of the Company, and Mr. Eugene R. Haskin, the Chairman of the Board of the Company, and Mr. Craig Fishman, Senior Vice President and General Counsel and a Director of the Company, have indicated to the Company that they do not intend to tender any shares of Common Stock they beneficially own pursuant to the Exchange Offer. As of November 27, 1995, these shareholders beneficially owned in the aggregate 501,666 shares of Common Stock, or approximately 19% of the outstanding shares of Common Stock. These shareholders will increase their percentage ownership interest of the shares of Common Stock depending upon the number of shares of Common Stock tendered in the Exchange Offer. Upon the terms and subject to the conditions of the Exchange Offer, Common Stockholders who tender shares of Common Stock accepted by the Company will receive the Notes promptly upon consummation of the Exchange Offer and, as holders of the Notes, will be entitled to full rights and privileges available to holders of the Notes, but will no longer be entitled to any opportunity to receive dividends on the shares Common Stock so accepted for exchange. See "Summary Comparison of Terms of the Common Stock and the Notes." The Company has not paid a dividend on shares of its Common Stock since 1989 and the Company has no plans to do so for the foreseeable future. The Notes will be issued in the amount of $1,000 principal amount of Notes for each 157.48 shares of Common Stock tendered. This equates to $6.35 principal amount of Notes for each share of Common Stock exchanged pursuant to the Exchange Offer. This rate of exchange is in excess of the current market value of the Common Stock as of the date of this Offering Circular. Holders of the Notes will also be entitled to a fixed return of 10% per annum, subject to adjustment as discussed in "Description of the Notes -General." Holders of shares of Common Stock of the Company are entitled to one vote per share on all matters to be properly voted upon by the Common Stockholders of the Company. The Notes have no voting rights. The Notes are not listed on any securities exchange and the Company does not intend to make an application to list the Notes on any exchange. See "Risk Factors" and "Federal Income Tax Considerations." SUMMARY COMPARISON OF TERMS OF THE COMMON STOCK AND THE NOTES The following table summarizes the existing rights and preferences of the Company's Common Stock and the Notes. Each capitalized term utilized in this subsection and not otherwise defined in this Offering Circular shall have the meaning ascribed to it in the Indenture. See "Description of Common Stock" and "Description of the Notes." Common Stock Notes Shares Outstanding as of November 27, 1995 2,655,128 Principal Amount Outstanding as $2,838,000 aggregate principal of November 27, 1995 amount currently outstanding. Assuming a maximum number of shares of Common Stock are tendered for exchange, $5,000,000 aggregate principal amount of Notes will be outstanding. Dividend Payments When and if declared by the Board None. of Directors of the Company. No dividends have been declared to date and the Company does not intend to declare any dividends for the foreseeable future. Interest Rate and Payments None. Initially, $100 per annum in interest, accruing from the date of issuance, payable quarterly in arrears on December 31, March 31, June 30 and September 30, for each $1,000 principal amount Note (subject to certain adjustments). Optional Redemption None. 101% of the principal amount thereof, plus accrued interest to the date of redemption, if redeemed during the period January 1, 1997 through August 31, 1997 and at a price of 100% of the principal amount thereof, plus accrued interest to the date of redemption, if redeemed on or after September 1, 1997. Except under certain limited circumstances, the Notes are not redeemable at the Company's option prior to January 1, 1997. Mandatory Redemption None. Under certain circumstances, at a price of 100% of the principal amount thereof, plus accrued interest to the date of redemption. Optional Repurchase None. Under certain circumstances, at a price of 100% of the principal amount thereof, plus accrued interest to the date of redemption. Voting Rights One vote per share on all matters. None. Conversion None. Convertible into shares of Common Stock at the rate of $7.50 per share, subject to adjustment under certain circumstances. Maturity None. September 30, 2000, unless redeemed earlier. Subordination Subordinated in right of payment to the prior payment in full of all Senior Indebtedness. Right of Payment in Event of Liquidation After payment in full of all After payment in indebtedness of the Company, full of all Senior including the Notes. Indebtedness but prior to the Common Stock.
SUMMARY FINANCIAL DATA The following table sets forth, in summary form, certain financial data for each of the periods indicated. This summary is qualified in its entirety by the detailed information and financial statements included in the documents incorporated herein by reference. See "Incorporation of Certain Documents by Reference." Nine Months Ended Years Ended September 30, December 31, ----------------- ------------------- 1995 1994 1994 1993 ---- ---- ---- ---- (dollars in thousands, except per share amounts) Consolidated Summary of Financial Results: Earned discounts $7,877 $6,663 $ 9,948 $ 9,424 Fees and other income 1,656 1,423 2,082 1,427 Total income 9,533 8,086 12,030 10,850 Net earnings 1,014 1,484 148 457 Earnings (Loss) Per Common Share: Income per common share $.33 $.48 $.05 $.15 Weighted average number of shares 3,071,204 3,102,328 3,102,328 3,116,460 Ratio of earnings to fixed charges 3.34:1 5.48:1 1.25:1 2.74:1
Balance Sheet Information ------------------------- September 30, 1995 December 31, 1994 ------------------ ----------------- (in thousands, except per share amounts) Total assets $36,738 $41,851 Total liabilities 10,443 13,729 Working capital 26,198 25,261 Long-term debt 2,904 66 Common stock 40 40 Additional paid-in capital 18,852 18,852 Treasury stock (2,840) - Retained earnings 10,243 9,229 Total shareholders' equity 26,296 28,121 Book value per common share $9.90 $9.06
PRO FORMA DATA The following table sets forth certain financial information of the Company at September 30, 1995 and December 31, 1994 and as adjusted to give effect to the issuance of the Notes upon consummation of the Exchange Offer, assuming 100% participation in the Exchange Offer and assuming the issuance of all Notes (including the issuance of Notes to the Original Tendering Shareholders) had occurred on January 1, 1994. As of and for the nine months As of and for the year ended ended September 30, 1995 December 31, 1994 ----------------------------- ---------------------------- Actual Pro Forma Actual Pro Forma ---------- ----------- -------- ----------- (dollars in thousands, except per share amounts) Net income (loss) $1,014 $787 $148 $(167) Income (loss) per Common Share .33 .34 .05 (.07) Total Assets 36,738 36,511 41,851 41,536 Total liabilities 10,443 12,605 13,729 18,729 Working capital 26,198 25,971 25,261 24,946 Long-term debt 2,904 5,066 66 5,066 Common Stock 40 40 40 40 Additional paid-in capital 18,852 18,852 18,852 18,852 Treasury stock (2,840) (5,000) - (5,000) Retained earnings 10,243 9,702 9,229 8,913 Total shareholders' equity 26,296 23,594 28,121 22,805 Ratio of earnings to fixed charges 3.34:1 2.18:1 1.25:1 .81:1 Book value per common share 9.90 10.19 9.06 9.85 Weighted average number of shares 3,071,204 2,314,493 3,102,328 2,314,493
If the Exchange Offer for the Common Stock is consummated, but fewer than $2,162,000 in principal amount of additional Notes is issued, the increases and decreases indicated above would be proportionately reduced, reflecting the number of shares of Common Stock that are not tendered and accepted in the Exchange Offer. PRICE RANGES OF THE COMMON STOCK The Company's Common Stock is traded on the over-the-counter market under the symbol (ASFN) with quotes supplied by the National Market System of the NASDAQ. The following table sets forth the high and low bid prices for the Common Stock, as reported on the NASDAQ National Market System, for each quarterly period since January 1, 1993. The stock prices shown represent prices between dealers and do not include retail markups, markdowns or commissions and may not necessarily represent actual transactions. High Low ---- --- 1993 - --------------- First Quarter $19.25 $10.25 Second Quarter 13.50 10.75 Third Quarter 13.75 4.88 Fourth Quarter 7.50 5.63 1994 - ---------------- First Quarter 7.13 5.38 Second Quarter 6.63 4.63 Third Quarter 6.63 5.69 Fourth Quarter 6.88 6.00 1995 - --------------- First Quarter 7.19 6.00 Second Quarter 8.00 6.25 Third Quarter 7.50 5.50 Fourth Quarter through November 27, 1995 5.75 5.38 On November 27, 1995, the last reported sales price for the Common Stock on the NASDAQ National Market System was $5.625 per share. On November 27, 1995, there were 58 holders of record of the Common Stock and the number of outstanding shares of the Common Stock was 2,655,128. DIVIDENDS The Company has not paid a dividend on shares of its Common Stock since its inception. The Company does not intend to pay a dividend on its shares of Common Stock for the foreseeable future. THE EXCHANGE OFFER Terms of the Exchange Offer The Company hereby offers, upon the terms and subject to the conditions set forth herein and in the accompanying applicable Letter of Transmittal, to exchange shares of its Common Stock for up to $2,162,000 in aggregate principal amount of Notes as set forth below: The holder of For each 157.48 shares of: Common Stock will receive: -------------------------- -------------------------- Common Stock . . . . . . . $1,000 principal amount of Notes Additionally, to the extent the number of shares of Common Stock tendered by the holder thereof exceeds a whole multiple of 157.48, the holder shall receive a new certificate representing the whole number of excess shares and a cash pay- ment by the Company for any remaining fractional share at a rate of $6.35 per share of Common Stock. The Exchange Offer is not conditioned upon a minimum number of shares of Common Stock being tendered for exchange, except that any tendering share- holder must tender at least 157.48 shares of Common Stock. The Company is only authorized to issue up to $2,162,000 principal amount of Notes and therefore the Company will only purchase up to that number of shares of Common Stock properly tendered to it pursuant to the Exchange Offer that would allow it to issue Notes in an aggregate principal amount of up to $2,162,000. See "-Tenders of Excess Shares of Common Stock," below. The Exchange Offer is also subject to certain other customary terms and conditions set forth herein and in the accompanying applicable Letter of Transmittal. See "-Conditions of the Exchange Offer," below. Subject to the foregoing, the Company will accept any and all shares of Common Stock properly tendered in the Exchange Offer prior to the Expiration Date. Tendered shares of Common Stock accepted by the Company for exchange will be retired. In the event that the Company modifies the consideration offered for the shares of Common Stock in the Exchange Offer, the modified consideration would be paid with regard to all shares of Common Stock tendered and accepted in the Exchange Offer. If the consideration is modified, the Exchange Offer will remain open at least ten business days from the date the Company first gives notice, by public announcement or otherwise, of such modification, if and to the extent required by applicable law. As of November 27, 1995, 2,655,128 shares of Common Stock were out- standing and $2,838,000 principal amount of Notes was outstanding. This Offer- ing Circular, together with the applicable Letter of Transmittal, is first being sent to all holders of record of Common Stock as of November 28, 1995. Although the Company currently has no plan or intention to do so, sub- ject to applicable laws and regulations, it reserves the right in its sole dis- cretion to purchase, redeem or make offers for any shares of the Common Stock that remain outstanding subsequent to the consummation of the Exchange Offer. The terms of any such purchases, redemptions or offers could differ from the terms of the Exchange Offer. Tendering Common Stockholders will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmit- tal, transfer taxes with respect to the exchange of Common Stock pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes, in connection with the Exchange Offer. See "-Payment of Expenses," below. Tenders of Excess Shares of Common Stock The Indenture provides that the Company is authorized to issue up to $5,000,000 aggregate principal amount of Notes. On September 11, 1995, the Company issued $2,838,000 aggregate principal amount of Notes to the Original Tendering Shareholders in exchange for 447,200 shares of Common Stock. See "Recent Developments." The Company is therefore only authorized to issue up to an additional $2,162,000 aggregate principal amount of Notes pursuant to the terms of the Indenture and consequently the Company will only purchase up to that number of shares of Common Stock properly tendered to it pursuant to the Exchange Offer that would allow it to issue Notes in an aggregate principal amount of up to $2,162,000. In the event shares of Common Stock in excess of that number are properly tendered to the Company for exchange pursuant to the terms of the Exchange Offer, the Company will only accept for exchange from each Common Stockholder that stockholder's pro rata portion of the total number of shares of Common Stock properly tendered for exchange, rounded down to the near- est multiple of 157.48 shares. In this event, the excess shares of Common Stock tendered by a stockholder to the Company over the stockholder's pro rata amount of tendered shares, as rounded down to the nearest whole multiple of 157.48, will not be accepted by the Company for exchange, and each such stockholder shall receive a new certificate for shares of Common Stock representing the whole number of excess shares and a cash payment by the Company for any fractional share at a rate of $6.35 per share of Common Stock. This payment shall be made by the Company by check. Expiration Date; Extensions; Termination; Amendments The Exchange Offer will expire at 5:00 P.M., eastern standard time, on January 12, 1996, subject to extension by the Company by notice to the Exchange Agent as herein provided (the "Expiration Date"). The Company reserves the right to extend the Exchange Offer at its discretion, in which event the term "Expiration Date" with regard to the extended Exchange Offer shall mean the time and date on which such Exchange Offer as so extended shall expire. The Company shall notify the Exchange Agent of any extension by written notice and shall make a public announcement thereof, prior to 9:00 A.M., eastern standard time, on the next business day after the previously scheduled Expiration Date. The Company reserves the right (i) to delay accepting any shares of Common Stock for exchange, to extend or to terminate the Exchange Offer and not accept for exchange any shares of Common Stock if any of the events set forth below under the caption "Conditions of the Exchange Offer" shall have occurred and shall not have been waived by the Company, by giving written notice of such delay or termination to the Exchange Agent, and (ii) to amend the terms of the Exchange Offer. Any such delay in acceptance for exchange, extension, termination or amendment will be followed as promptly as practicable by public announcement thereof. If the consideration offered in the Exchange Offer is modified, the Exchange Offer will remain open at least ten additional business days from the date the Company first gives notice, by public announcement or otherwise, of such modification. If the Exchange Offer is amended in any other manner determined by the Company to constitute a material change, the Company will promptly disclose such amendment in a manner reasonably calculated to inform the Common Stockholders of such amendment and the Company will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to Common Stockholders, if the Exchange Offer would otherwise expire during such five to ten business day period. The rights reserved by the Company in this paragraph are in addition to the Company's rights set forth below under "Conditions of the Exchange Offer." Procedures for Tendering The acceptance by a Common Stockholder of the Exchange Offer pursuant to one of the procedures set forth below will constitute an agreement between such Common Stockholder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. To be tendered effectively, certificates for Common Stock, together with the properly completed Letter of Transmittal, executed by the Common Stock- holder of record and any other documents required by the Letter of Transmittal, must be received by the Exchange Agent at the address set forth on the back cover hereof prior to the Expiration Date, except as otherwise provided below under "Guaranteed Delivery Procedure." LETTERS OF TRANSMITTAL AND CERTIFICATES FOR COMMON STOCK SHOULD BE SENT TO THE EXCHANGE AGENT AND NOT TO THE COMPANY. Signatures on the Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the shares of Common Stock tendered or withdrawn pursuant thereto are tendered (i) by a Common Stockholder of record who has not completed the box entitled "Special Issuance and Delivery Instructions" on the Letter of Transmittal or (ii) for the account of a firm that is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or by a commercial bank, credit union, savings association or trust company having an office in the United States (each, an "Eligible Institution"). In the event a signature is required to be guaranteed in connection with the above, the signature of the record holder on the endorsement or instrument of assignment and transfer must correspond with the name as written upon the face of the certificate in every particular and must be guaranteed by a guarantor that is a member of a "Signature Guarantee Program" recognized by the Exchange Agent, i.e., Securities Transfer Agents Medallion Program, Stock Exchanges Medallion Program and New York Stock Exchanges Medallion Signature Program. The method of delivery of certificates of Common Stock and other documents to the Exchange Agent is at the election and risk of the holder. If such delivery is by mail, it is suggested that the mailing be made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to the Expiration Date. If the Letter of Transmittal is signed by a person other than a holder of record of any certificate(s) listed therein, such certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holder or holders appear on the certificate(s). If the Letter of Transmittal or Notice of Guaranteed Delivery or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered shares of Common Stock will be resolved by the Company, whose determination will be final and binding. The Company reserves the absolute right to reject any or all tenders that are not in proper form or the acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any irregularities or conditions of tender as to particular shares of Common Stock. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding. Unless waived, any irregularities in connection with tenders must be cured within such time as the Company shall determine. Neither the Company nor the Exchange Agent shall be under any duty to give notification of defects in such tenders or shall incur liabilities for failure to give such notification. Tenders of shares of Common Stock will not be deemed to have been made until such irregularities have been cured or waived. Any shares of Common Stock received by the Exchange Agent that are not properly tendered and as to which the irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering Common Stockholder, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. Guaranteed Delivery Procedure If a Common Stockholder desires to tender his or her shares of Common Stock and the certificate(s) representing such shares of Common Stock are not immediately available, or time will not permit such Common Stockholder's certificate(s) or any other required documents to reach the Exchange Agent before the Expiration Date, a tender may be effected if: (i) The tender is made through an Eligible Institution; (ii) Prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery by mail or hand delivery, setting forth the name and address of the Common Stockholder and the number of shares of Common Stock tendered, stating that the tender is being made thereby and guaranteeing that, within three over-the-counter market trading days after the Expiration Date, the certificate(s) representing such shares of Common Stock, together with the Letter of Transmittal that has been properly completed and duly executed, and all other documents required by the Letter of Transmittal, will be deposited by the Eligible Institution with the Exchange Agent; and (iii) The certificate(s) for all tendered shares of Common Stock, as well as the Letter of Transmittal that has been properly completed and duly executed, and all other documents required by the Letter of Transmittal, are received by the Exchange Agent within three over-the- counter market trading days after the Expiration Date. Conditions of the Exchange Offer The Company will not be required to accept for exchange any shares of Common Stock not theretofore accepted for exchange or exchanged, and may terminate or amend the Exchange Offer as provided herein before the acceptance of shares of Common Stock, if any of the following conditions exist: (i) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer that, in the sole judgment of the management of the Company, may have a material adverse effect on the contemplated benefits of the Exchange Offer to the Company; or (ii) there shall have occurred (A) any general suspension of, or limitation on prices for, trading in securities listed on the over-the- counter market; (B) a declaration of a banking moratorium by United States, New York, Virginia or Connecticut authorities; or (C) a commencement of a war, armed hostilities or other international or national emergency directly or indirectly involving the United States. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to such conditions or may be waived by the Company in whole or in part at any time and from time to time in its sole discretion. Any determination by the Company concerning the events described above will be final and binding upon all parties. Acceptance of Shares of Common Stock for Exchange; Delivery of the Notes Upon the terms and subject to the conditions of the Exchange Offer (see "Conditions of the Exchange Offer", above), the Company will accept any and all shares of Common Stock properly tendered pursuant to the Exchange Offer and not properly withdrawn. The Company will cause the Trustee and the Exchange Agent to deliver the Notes issued pursuant to the Exchange Offer promptly after the Expiration Date. For purposes of the Exchange Offer, the Company shall be deemed to have accepted the validly tendered shares of Common Stock when, as and if the Company has given written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering Common Stockholders for, among other things specified in the Letter of Transmittal, the purposes of delivering the shares of Common Stock to the Company. If any tendered shares of Common Stock are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, certificates for any such unaccepted shares of Common Stock will be returned, without expense, to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. In the event that shares of Common Stock in excess of those that could be exchanged for Notes are properly tendered to the Company for exchange pursuant to the terms of the Exchange Offer, the Company will only accept for exchange from each tendering Common Stockholder that stockholder's pro rata portion of the total number of shares of Common Stock properly tendered for exchange, rounded down to the nearest multiple of 157.48 shares. In this event, the excess shares of Common Stock tendered by the stockholder to the Company over the stockholder's pro rata amount of tendered shares, as rounded down to the nearest whole multiple of 157.48, will not be accepted by the Company for exchange, and each such stockholder shall receive a new certificate for shares of Common Stock representing the whole number of excess shares and a cash payment by the Company for any fractional share at a rate of $6.35 per share of Common Stock. This payment shall be made by the Company by check. Withdrawal Rights Any Common Stockholder of record who has tendered shares of Common Stock may withdraw that tender prior to the Expiration Date, and, unless previously accepted for exchange by the Company, after 5:00 P.M., eastern standard time, on January 24, 1996, by delivery of written notice of withdrawal to the Exchange Agent. To be effective, a written notice of withdrawal must be timely received by the Exchange Agent at the address set forth on the back cover hereof, must have a guaranteed signature included thereon (unless not required by the terms set forth above under "Procedures for Tendering") and must specify the name of the person having tendered the shares of Common Stock to be withdrawn and the aggregate number of shares of Common Stock to be withdrawn. If certificates have been delivered or otherwise identified to the Exchange Agent, the name of the registered holder and the serial numbers of the particular certificate(s) evidencing the shares of Common Stock withdrawn must also be so furnished to the Exchange Agent as aforesaid prior to the physical release of the certificate(s) for the withdrawn shares of Common Stock. Withdrawals of tenders of shares of Common Stock may not be rescinded, and any shares of Common Stock withdrawn will thereafter be deemed not validly tendered for purposes of the Exchange Offer; provided, however, that withdrawn shares of Common Stock may be retendered by again following one of the procedures described herein so long as the retender is proper and made prior to the Expiration Date. All questions as to the validity (including time of receipt) of notices of withdrawal will be determined by the Company, whose determination will be final and binding. None of the Company, the Exchange Agent nor any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Exchange Agent Shawmut Bank Connecticut, National Association, has been appointed as Exchange Agent for the Exchange Offer. Requests for information concerning procedures for tendering Common Stock or for additional copies of this Offering Circular or the Letter of Transmittal should be directed to the Exchange Agent. For further information concerning the Company or the terms of the Exchange Offer, please contact Mr. Craig Fishman at the Company at (703) 931-2274. Payment of Expenses The Company has not retained any dealer-manager or similar agent in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The Company will also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this Offering Circular and related documents to the beneficial owners of Common Stock and in handling or forwarding tenders for their customers. The cash expenses to be incurred in connection with the Exchange Offer, including the fees and expenses of the Exchange Agent and printing, accounting and legal fees, will be paid by the Company and are estimated at $25,000. The Company will pay all transfer taxes, if any, applicable to the transfer and sale of Common Stock to it or its order pursuant to the Exchange Offer. If, however, Common Stock certificates or substitute Common Stock certificates for excess shares or shares not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Common Stock tendered hereby, or if tendered certificates are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the transfer and sale of Common Stock to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the holder of record or any other persons) will be payable by the tendering Common Stockholder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering Common Stockholder. FEDERAL INCOME TAX CONSIDERATIONS The following is a general discussion of the anticipated federal income tax consequences to the Common Stockholders who exchange their Common Stock for Notes. This discussion is based upon the Internal Revenue Code of 1986, as amended (the "Code"), regulations of the Treasury Department, administrative rulings and pronouncements of the Internal Revenue Service (the "IRS") and judicial decisions, all as of the date hereof. All of the foregoing are subject to change and any such change may be retroactively applied. This discussion does not purport to address all of the federal income tax consequences that may be applicable to particular categories of Common Stockholders, some of which may be subject to special rules. COMMON STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO ANY FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX CONSIDERATIONS RELEVANT TO THEM. The exchange of Common Stock for Notes pursuant to the Exchange Offer will be a taxable transaction for federal income tax purposes and will be a taxable transaction under applicable state, local and foreign laws. Under Code Sections 354, 356 and 302, the exchange may be treated as a redemption transaction in which a Common Stockholder who is not a dealer in securities will recognize capital gain or loss, provided that the exchange (i) results in a "complete redemption" of the shareholder's interest, (ii) is "substantially disproportionate" with respect to the shareholder or (iii) is "not essentially equivalent to a dividend." For purposes of calculating gain or loss, the Notes will be treated as having a value equal to their principal amount, assuming that the Notes will not be traded on an established securities market. A Common Stockholder who exchanges all of his Common Stock and who holds no other shares of the Company directly, or under the attribution rules of Code Section 318, will treat the exchange as a redemption resulting in capital gain or loss, since he has experienced a complete redemption of his interest in the Company. If none of the tests for redemption treatment is satisfied, the exchange will be treated first as a dividend distribution to a holder of the Common Stock to the extent of his proportion of the Company's current and accumulated earnings and profits, then as a nontaxable return of capital to the extent of the holder's basis in his Common Stock, and finally as capital gain. Common Stockholders who will hold shares of the Company after the Exchange Offer should consult their own tax advisors regarding their own particular situation. Dividends on the Common Stock which are deemed to come out of earnings and profits paid to corporate stockholders are eligible for the 70% dividends received deduction. There is no corresponding deduction for interest received by holders of Notes. DESCRIPTION OF COMMON STOCK The authorized capital stock of the Company consists of 10,000,000 shares of Common Stock, no par value (the Common Stock"), and 2,000,000 shares of Preferred Stock, no par value. All shares of Common Stock to be issued by the Company upon conversion of the Notes will be fully-paid and nonassessable. The following is a brief summary of certain rights and provisions of the Common Stock. As of November 27, 1995, there were 2,655,128 shares of Common Stock outstanding. Holders of Common Stock are entitled to one vote per share, to receive dividends when and if declared by the Board of Directors and to share ratably in the assets of the Company legally available for distribution to holders of Common Stock in the event of liquidation. Holders of Common Stock have no preemptive, subscription, redemption or conversion rights. All outstanding shares of Common Stock are fully paid and nonassessable. The shares of Common Stock have non-cumulative voting rights, and therefore, the holders of over 50% of the shares voting at a legally constituted meeting can elect the entire Board of Directors, if they so choose, and, in such event, the holders of the remaining shares cannot elect any directors. The Virginia Stock Corporation Act requires that an "Affiliated ransaction" be approved by the affirmative vote of the holders of two-thirds of the Company's voting shares other than shares beneficially owned by an "Interested Shareholder". The two-thirds voting requirement will not apply if: (i) the Affiliated Transaction has been approved by a majority of "Disinterested Directors"; (ii) consideration will be paid to the holders of voting shares and specified minimum price requirements are met; (iii) the Affiliated Transaction is with a party that has been an Interested Shareholder continuously since the later of the date the Company first had 300 shareholders of record or the date such person became an Interested Shareholder with the approval of a majority of Disinterested Directors; or (iv) the Company does not have more than 300 shareholders of record. In general, an Affiliated Transaction is defined to include any of the following transactions involving the Company and an Interested Shareholder; (i) a merger or issuance of Company shares pursuant to certain exchanges; (ii) disposition of Company assets having an aggregate market value in excess of five percent of the Company's net worth; (iii) sale or other disposition of the Company's voting shares having an aggregate fair market value in excess of five percent of the aggregate fair market value of all outstanding voting shares; (iv) dissolution of the Company; or (v) reclassification of the Company's securities. An Interested Shareholder is defined primarily to mean any person that is the beneficial owner of more than ten percent of any class of the Company's outstanding voting shares, or that is an affiliate or associate of the Company and at any time within the preceding three years was an Interested Shareholder of the Company. The Exchange Offer is not an Affiliated Transaction requiring shareholder ratification within the meaning of the Virginia Stock Corporation Act. The transfer agent for the Company's Common Stock is Registrar and Transfer Company, Cranford, New Jersey. DESCRIPTION OF THE NOTES The Notes will be issued under an Indenture of Trust dated as of September 11, 1995, between the Company and Shawmut Bank Connecticut, National Association (the "Trustee"). The statements under this caption are brief summaries of certain provisions of the Indenture, do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the Indenture, including the definitions therein of certain terms. Whenever particular sections of the Indenture or terms that are defined in the Indenture are referred to herein, it is intended that such sections or defined terms shall be incorporated by reference herein. General The Notes issued in the Exchange Offer will be limited to an aggregate authorized principal amount of $2,162,000 and will be issuable only in registered form under the Indenture. Subject to the foregoing, the aggregate principal amount of Notes to be issued will be determined based upon the number of shares of Common Stock tendered and accepted by the Company pursuant to the Exchange Offer. In addition, $2,838,000 of Notes were issued on September 11, 1995 to the Original Tendering Shareholders. See "Recent Developments." The Indenture limits the Notes to an aggregate maximum amount of $5,000,000. Accordingly, up to an aggregate of $2,162,000 of additional Notes may be issued pursuant to the Indenture. The Notes will mature on September 30, 2000. Interest on the Notes will be paid from the date of issuance, and will be payable quarterly in arrears on each December 31, March 31, June 30 and September 30, commencing December 31, 1995, to the persons in whose names the Notes are registered at the close of business on the day 15 days prior to the payment date, at the initial rate of 10% per annum, subject to adjustment as set forth below. Principal of and interest on the Notes will be payable by check mailed to the registered address of the person entitled thereto. The Notes shall originally bear interest at the rate of 10% per annum. If on any interest payment date the prime rate (as set forth in the Wall Street Journal) shall have increased or decreased (whether in one or more increments) from the prime rate as in effect on the immediately preceding Adjustment Date (as defined below), the interest rate on the Notes shall be correspondingly increased or decreased so as to be 125 basis points above the prime rate then in effect; provided, however, (i) that no such adjustment shall be made unless the prime rate shall have increased or decreased by 50 basis points or more from the prime rate as in effect on the immediately preceding Adjustment Date, and (ii) in no event shall the interest rate payable on the Notes be more than 10% per annum or less than 8% per annum. The Company shall notify the Trustee of any adjustment in the interest rate on the Notes at least ten days prior to the Interest Payment Date following the interest rate adjustment. For purposes hereof, "Adjustment Date" means each interest payment date on which the interest rate on the Notes is adjusted in accordance with the foregoing. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. The Notes constitute unsecured, subordinated indebtedness of the Company. The Notes are issued in minimum denominations of $1,000. No service charge will be made for any transfer or exchange of the Notes, but the Company may require the payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Subordination The Notes will be subordinated and subject in right of payment to the prior payment in full of the principal of (and premium, if any) and interest on all Senior Indebtedness (as defined below), provided that certain payments on the Notes may be made, subject to the specific limitations set forth in the Indenture. The Indenture provides that if there shall have occurred a default in the payment of the principal of (or premium, if any) or interest on any Senior Indebtedness, or if there shall have occurred an event of default with respect to any Senior Indebtedness permitting the holders thereof to accelerate the maturity thereof, or if such payment would itself constitute such an event of default, then, unless and until such default or event of default shall have been cured or waived or shall have ceased to exist, no payment shall be made by the Company on account of principal of or interest on the Notes or on account of the purchase or other acquisition of the Notes. The Indenture further provides that, in the event of any insolvency or bankruptcy proceedings relative to the Company or its property, or any receivership, liquidation, reorganization or other similar proceedings in connection therewith or, in the event of any proceedings for voluntary liquidation, dissolution or other winding up of the Company or distribution or marshaling of its assets or any composition with creditors of the Company, whether or not involving insolvency or bankruptcy, or if the Company shall cease its operations, call a meeting of its creditors or no longer do business as a going concern, the holders of all Senior Indebtedness shall first be paid in full in cash or money's worth all amounts due or to become due thereon before any payment is made on account of the Notes. The term "Senior Indebtedness" is defined to mean all obligations of any kind owed by the Company to its institutional lenders from time to time under or pursuant to the revolving credit agreement among the Company and such lenders (and all agreements, documents and instruments related to or incurred in connection with, or extending the maturity of, refinancing, replacing or restructuring all or any portion of, the foregoing or the obligations thereunder) including, without limitation, all principal, interest (including all interest accruing after commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Company) accruing thereon, charges, expenses, fees and other sums chargeable to the Company by such lenders under or pursuant to the revolving credit agreement, and reimbursement, indemnity or other obligations due and payable to such lenders under or pursuant to the revolving credit agreement. Senior Indebtedness shall also include any obligation of the Company incurred to refinance the Senior Indebtedness. Senior Indebtedness shall continue to constitute Senior Indebtedness, notwithstanding the fact that such Senior Indebtedness or any claim for such Senior Indebtedness is subordinated, voided or disallowed under the Federal Bankruptcy Code or other applicable law. At November 27, 1995, the Company had approximately $9,992,390 in aggregate principal amount of outstanding indebtedness that would constitute Senior Indebtedness. The Indenture does not contain any limitations on the amount of Senior Indebtedness which may be incurred by the Company so long as the Company is in compliance with the covenants described below. Optional Redemption The Notes are redeemable at any time on or after January 1, 1997, at the option of the Company, in whole or in part, on not less than 15 nor more than 60 days' notice, given as provided in the Indenture, at the redemption price (expressed as a percentage of principal amount of the Notes or portions thereof to be so redeemed) opposite such period in the table below, plus interest accrued to the redemption date: Redemption Period Redemption Price January 1, 1997 through August 31, 1997 101% September 1, 1997 and thereafter 100% Additionally, in the event of a consolidation of the Company with, or merger of the Company into, another entity, or in the event of any other Fundamental Change (as defined in the Indenture), at the option of the Company, the Notes shall be subject to redemption prior to maturity in whole or in part, at a redemption price equal to their principal amount, plus interest accrued to the redemption date. Mandatory Redemption In the event the Company elects to declare or pay any dividend on, or make any distribution on or in respect of, or purchase, redeem or otherwise acquire or retire for value any of the Company's capital stock and the aggregate amount of all such payments made during any fiscal year is in excess of the sum of the Company's consolidated net income for the fiscal year last preceding such payment plus any proceeds received by the Company during such last preceding fiscal year upon the sale of nonredeemable capital stock, the Notes shall be subject to mandatory redemption prior to maturity, on not less than 15 nor more than 60 days' notice, at a redemption price equal to their principal amount, plus interest accrued to the redemption date. In such event, the Indenture provides for certain limitations on the aggregate principal amount of Notes subject to mandatory redemption. Repurchase of Notes at the Option of the Holder In the event that there occurs a "Fundamental Change" (as defined below), each Note holder will have the right, at such holder's option, to require the Company to repurchase all, or any portion that is an integral multiple of $1,000, of such holder's Notes at a repurchase price equal to the principal amount of such Notes plus accrued and unpaid interest to the Repurchase Date. "Fundamental Change" is defined in the Indenture to include a tender offer for the Company's voting stock, a merger or consolidation into or with another entity, the sale of all or substantially all of the Company's assets and the liquidation or dissolution of the Company. Conversion The Indenture provides that Note holders have the right, at any time, and upon written notice to the Company and the Trustee at least 15 days prior to such conversion, to convert each $1,000 principal amount of Notes into shares of Common Stock at a price of $7.50 aggregate principal amount of Notes for each share of Common Stock. The conversion price is subject to certain adjustments, among them, provision for stock dividends, stock splits and reclassifications of the Common Stock. The Notes may be converted in whole or in part, provided that if any Note is converted in part, the principal amount remaining with respect to the Notes shall be in a denomination of $1,000. No fractional shares will be issued upon the conversion of the Notes and any fractional amount shall be paid to the holder in cash. Notes surrendered for conversion during the period from the close of business on the fifteenth day before an interest payment date to the opening of business on such interest payment date shall be accompanied by payment of an amount equal to the interest payable from the date of conversion to and including the interest payment date on the principal amount of Notes surrendered for conversion. The Company will pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on conversions of Notes. However the Company is not required to pay any tax which may be payable in respect of any registration of transfer involved in the issue or delivery of Common Stock in a name other than that of the holder of the Notes to be converted. The Trustee Shawmut Bank Connecticut, National Association, is the Trustee under the Indenture and is also the Exchange Agent for the Exchange Offer. The Trustee may resign and thereby become discharged from the trusts created under the Indenture by notice in writing given to the Company and by notice mailed, postage prepaid, to the holders of the Notes not less than sixty days before such resignation is to take effect, but such resignation shall take effect only upon the appointment of and acceptance of the trust created by the Indenture by a successor Trustee. The Trustee may be removed at any time by an instrument or concurrent instruments in writing, filed with the Trustee and signed by the holders of more than fifty percent (50%) in principal amount of the Notes then outstanding. The Trustee shall promptly give notice of such filing to the Company. Covenants The Indenture contains, among others, the following covenants: Restriction on incurrence of additional indebtedness. Neither the Company, nor any significant subsidiary thereof, shall, directly or indirectly, create, incur, issue, assume, guarantee, permit to exist or otherwise become directly or indirectly liable with respect to any indebtedness (other than, in the case of the Company, Subordinated Indebtedness), except for (i) indebtedness, in the case of the Company, issued under the Indenture, (ii) indebtedness, in the case of the Company, that is pari passu in right of payment to the Notes, refinancing or replacing all or a portion of the Notes, (iii) indebtedness, in the case of the Company or any significant subsidiary, for borrowed money issued to any bank or other financial institution, (iv) indebtedness, in the case of the Company or any significant subsidiary, existing on the date hereof and not otherwise allowed pursuant to the Indenture not to exceed for the Company and all such significant subsidiaries together an aggregate of $500,000 outstanding, (v) intercompany indebtedness, (vi) indebtedness, in the case of the Company, in respect of commercial paper to the extent the obligations of the Company thereunder are guaranteed by, or otherwise receive a credit enhancement from, a bank or other financial institution, and (vii) additional indebtedness, in the case of the Company or any significant subsidiary, not to exceed for the Company and all such significant subsidiaries together an aggregate of $5,000,000 outstanding at any time; provided, that any such additional indebtedness issued by the Company shall be pari passu in right of payment to the Notes. The Company shall not, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any indebtedness that is subordinated in right of payment to the Notes ("Subordinated Indebtedness") unless (i) the Subordinated Indebtedness has a maturity date after the maturity date of the Notes, (ii) no payment in respect of the principal of any Subordinated Indebtedness (whether at maturity, by redemption, repurchase or otherwise) shall be permitted to be made (or actually made) until after the maturity date of the Notes, and (iii) the Subordinated Indebtedness is subordinated to the Notes (including restrictions on the Company's ability to pay the Subordinated Indebtedness) at least to the same extent that the Notes are subordinated to the Senior Indebtedness. Restriction on transactions with related parties. Neither the Company, nor any subsidiary thereof, shall, directly or indirectly, enter into any transaction or series of related transactions with any director or executive officer of the Company or any subsidiary thereof, any holder of ten percent or more of the capital stock of the Company or any relative or affiliate of any of the foregoing, unless (i) the transaction or series of transactions is on terms that are no less favorable to the Company than would be available in a comparable transaction with an unrelated party, (ii) if the transaction or series of transactions involves in the aggregate payments in excess of $1,000,000, the Company's Board of Directors determines that such transaction complies with clause (i) above and such determination is evidenced by a resolution of the Board of Directors of the Company or (iii) if the transaction or series of transactions is approved by the affirmative vote of a majority of the shareholders entitled to vote without taking into account the vote of any stockholder who is an executive officer or director of the Company or any subsidiary thereof or any affiliate of any executive officer or director. Merger and Consolidation The Indenture provides that the Company may, without the consent of the holders of the Notes, consolidate with or merge into any other corporation, or sell, lease, convey or otherwise dispose of all or substantially all of its assets to any person, provided that in any such case: (i) the successor corporation shall be the Company or a domestic corporation and such corporation shall assume by a supplemental indenture all the Company's obligations under theIndenture; and (ii) immediately after giving effect to such transaction, no event of default under the Indenture shall have occurred and be continuing. Upon compliance with these provisions by a successor corporation, the Company would be relieved of its obligations under the Indenture. Events of Default The following events are defined in the Indenture as "Events of Default": (i) default in the payment of interest when due and continuance of such default for a period of 30 days; (ii) default in the payment of principal or redemption price or repurchase price; (iii) default in the performance of any covenant in the Indenture for 60 days after notice; (iv) a default under any bond, debenture, note or other evidence of indebtedness or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness of the Company or any significant subsidiary thereof, which default shall have resulted in the acceleration of such indebtedness prior to its stated maturity and the aggregate principal amount outstanding of such indebtedness exceeds $3,000,000; (v) one or more uninsured judgments for the payment of money aggregating in excess of $1,000,000 is or are outstanding against one or more of the Company and its subsidiaries and any one of such judgments has been outstanding for more than 60 days from the date of its entry and has not been discharged in full or stayed; and (vi) certain events of bankruptcy, insolvency or reorganization involving the Company or any significant subsidiary thereof. If an Event of Default shall occur and be continuing, either the Trustee or the holders of not less than one third in principal amount of the outstanding Notes may accelerate the maturity of all the Notes. The right of the Trustee or of the holders of not less than one-third (33.33%) in principal amount of the Notes to make any declaration of acceleration of the Notes as provided in (i) above is subject to the condition that if, at any time before such declaration, all overdue installments of interest upon the Notes together with the reasonable and proper charges, expenses and liabilities of the Trustee, shall either be paid by or for account of the Company or provision satisfactory to the Trustee shall be made for such payment, then in every such case any such default and its consequences shall ipso facto be deemed to be annulled, but no such annulment shall extend to or affect any subsequent default or impair or exhaust any right or power consequent thereon. Under the Indenture, the Company will be required to furnish to the Trustee a statement by certain officers of the Company to the effect that to the best of their knowledge, the Company is not in default in the fulfillment of any of its obligations under the Indenture or, if there has been such a default or defaults, specifying each such default. The holders of a majority in principal amount of the outstanding Notes have the right, subject to certain limitations, to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, and to waive certain defaults. The Indenture provides that in case an Event of Default shall occur and be continuing, the Trustee shall exercise such of its rights and powers under the Indenture, and use the same degree of skill and care in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his, her or its own affairs. Subject to certain provisions of the Indenture, the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request of any of the holders of the Notes unless they have offered to the Trustee security or indemnity, to its satisfaction, against the costs, expenses, and liabilities which might be incurred by it in compliance with such request. Satisfaction and Discharge of the Indenture The Indenture will be discharged and shall cease to be of further force or effect when all outstanding Notes theretofore authenticated and issued have been delivered (other than destroyed, lost or stolen Notes that have been replaced or paid) to the Trustee for cancellation and the Company has paid all sums payable by the Company under the Indenture. Modification of the Indenture With certain exceptions, the Indenture may be modified or amended with the consent of the holders of not less than a majority in principal amount of the outstanding Notes; provided, however, that no such modification or amendment may be made without the consent of the holder of each Note affected which would: (i) reduce the principal amount, redemption price or repurchase price of any Note, change the stated maturity of the principal of, or any installment of interest on, any Note, or change the other terms of payment; or (ii) reduce the percentage of Notes, the consent of the holders of which is required to modify or amend the Indenture or to waive certain past defaults. The Exchange Agent is: Shawmut Bank Connecticut, National Association By Mail/Overnight Delivery: By Hand: Shawmut Bank Connecticut, Shawmut Bank Connecticut, National Association National Association 777 Main Street, MSN 224 Corporate Trust Operations Hartford, CT 06115 Lower Level Attn: Patricia Williams 777 Main Street Hartford, Ct 06115 For Information Call: (860) 986-2910 EX-99 3 LETTER OF TRANSMITTAL ALLSTATE FINANCIAL CORPORATION LETTER OF TRANSMITTAL To Accompany COMMON STOCK THE EXCHANGE OFFER (AS DEFINED BELOW) WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME, ON JANUARY 12, 1996, UNLESS EXTENDED (SUCH TIME AND DATE, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE, AND, UNLESS PREVIOUSLY ACCEPTED FOR EXCHANGE BY ALLSTATE FINANCIAL CORPORATION, AFTER 5:00 P.M., EASTERN STANDARD TIME, ON JANUARY 24, 1996. To: Shawmut Bank Connecticut, National Association, Exchange Agent By Mail/Overnight Delivery: By Hand: Shawmut Bank Connecticut, Shawmut Bank Connecticut, National Association National Association 777 Main Street, MSN 224 Corporate Trust Operations Hartford, CT 06115 Lower Level Attn: Patricia Williams 777 Main Street Hartford, CT 06115 For Information Call: (860) 986-2910 The undersigned acknowledges that he, she or it has received and reviewed the Offering Circular, dated November 28, 1995 (the "Offering Circular"), of Allstate Financial Corporation, a Virginia corporation (the "Company"), and this Letter of Transmittal (the "Letter"), which together constitute the Company's offer (the "Exchange Offer") to exchange $1,000.00 principal amount of Convertible Subordinated Notes due September 30, 2000 (the "Notes") for each 157.48 shares of its Common Stock, no par value per share (the "Common Stock"), and understands the matters described therein. The Exchange Offer is not conditioned upon a minimum number of shares of Common Stock being tendered for exchange. To the extent the number of shares of Common Stock tendered by the holder thereof exceeds 157.48 (or a whole multiple thereof), the holder shall receive a new certificate representing the whole number of excess shares and a cash payment by the Company for any remaining fractional share at a rate of $6.35 per share of Common Stock. The Company is only authorized to issue up to $2,162,000 principal amount of Notes and therefore the Company will only purchase up to that number of shares of Common Stock properly tendered to it pursuant to the Exchange Offer that would allow it to issue Notes in an aggregate principal amount of up to $2,162,000. In the event shares of Common Stock in excess of such number are properly tendered to the Company for exchange pursuant to the terms of the Exchange Offer, the Company will only accept for exchange from each tendering holder of Common Stock (each, a "Common Stockholder") that stockholder's pro rata portion of the total number of shares of Common Stock properly tendered for exchange, rounded down to the nearest whole multiple of 157.48 shares. In this event, the excess shares of Common Stock tendered by the stockholder to the Company over the stockholder's pro rata amount of tendered shares, as rounded down to the nearest whole multiple of 157.48, will not be accepted by the Company for exchange, and each such stockholder shall receive a new certificate for shares of Common Stock representing the number of excess shares (the "Excess Shares") and a cash payment by the Company for any fractional share at a rate of $6.35 per share of Common Stock. The Exchange Offer is also subject to certain customary conditions, any or all of which may be waived by the Company. The Company reserves the right to extend the Exchange Offer at its discretion, in which event the term "Expiration Date" shall mean the time and date on which the Exchange Offer as so extended shall expire. The Company shall notify the Exchange Agent of any extension by written notice and shall make a public announcement thereof, prior to 9:00 A.M., eastern standard time, on the next business day after the previously scheduled Expiration Date. In the event that the Company modifies the consideration offered for the Common Stock tendered and accepted in the Exchange Offer, the modified consideration would be paid with regard to all shares of Common Stock tendered and accepted in the Exchange Offer. If the consideration is modified, the Exchange Offer will remain open at least ten business days from the date the Company first gives notice, by public announcement or otherwise, of such modification, if and to the extent required by applicable law. The undersigned has completed the appropriate boxes below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the number of shares of Common Stock indicated below. Subject to, and effective upon, the Company's acceptance for exchange of the Common Stock tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to any shares of Common Stock as are being tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that said Exchange Agent also acts as the agent of the Company) with respect to the Common Stock with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to: (a) deliver certificates representing shares of Common Stock and deliver all accompanying evidences of transfer and authenticity to or upon the order of the Company upon receipt by the Exchange Agent, as the undersigned's agent, of the Notes, the Excess Shares and any cash consideration for fractional shares of Common Stock to which the undersigned is entitled upon the acceptance by the Company of shares of Common Stock under the Exchange Offer; (b) present certificates for cancellation and transfer of shares of Common Stock on the Company's books; and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of shares of Common Stock, all in accordance with the terms of the Exchange Offer. The undersigned represents and warrants that (a) the undersigned has full power and authority to tender, sell, assign and transfer the shares of Common Stock tendered hereby and that the Company will acquire good, marketable and unencumbered title thereto, free and clear of all security interests, liens, charges, encumbrances, conditional sales agreements or other obligations relating to their sale or transfer, and not subject to any adverse claim; (b) on request, the undersigned will execute and deliver any additional documents the Exchange Agent or the Company deems necessary or desirable to complete the assignment, transfer and purchase of the shares of Common Stock tendered hereby; and (c) the undersigned has read and agrees to all the terms of the Exchange Offer. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. The undersigned understands that each 157.48 shares of Common Stock properly tendered and not withdrawn will be exchanged for $1,000 principal amount of Notes (or such other consideration as may be set forth in an amendment to the Offering Circular), upon the terms and subject to the conditions of the Offering Circular. The undersigned further understands that the Company is only authorized to issue up to $2,162,000 principal amount of Notes and therefore the Company will only purchase up to that number of shares of Common Stock properly tendered to it pursuant to the Exchange Offer that would allow it to issue Notes in an aggregate principal amount of up to $2,162,000. In the event shares of Common Stock in excess of this number are properly tendered to the Company for exchange pursuant to the terms of the Exchange Offer, the Company will only accept for exchange from each tendering Common Stockholder that stockholder's pro rata portion of the total number of shares of Common Stock properly tendered for exchange, rounded down to the nearest whole multiple of 157.48 shares. In this event, the Excess Shares of Common Stock tendered by the stockholder to the Company over the stockholder's pro rata amount of tendered shares, as rounded down to the nearest whole multiple of 157.48, will not be accepted by the Company for exchange, and each such stockholder shall receive a new certificate for shares of Common Stock representing the number of Excess Shares and a cash payment by the Company for any fractional share at a rate of $6.35 per share of Common Stock. The undersigned recognizes that the Exchange Offer is conditioned upon the satisfaction of certain conditions specified in the Offering Circular. The undersigned further recognizes that the Company may waive any or all of these conditions. The undersigned recognizes that tenders of shares of Common Stock pursuant to any one of the procedures described under the captions "The Exchange Offer - Procedures for Tendering" and "-Guaranteed Delivery Procedure" in the Offering Circular and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that under certain circumstances set forth in the Offering Circular the Company may not accept a portion of the shares of Common Stock tendered by the undersigned. Shares of Common Stock not accepted by the Company or withdrawn will be returned to the undersigned at the address specified in the first column of the table below entitled "Description of Common Stock" unless otherwise indicated under "Special Delivery Instructions" below. This tender may be withdrawn only in accordance with the procedures set forth in the Instructions contained in this Letter of Transmittal. Unless otherwise indicated in the box entitled "Special Delivery Instructions" or the box entitled "Special Issuance and Delivery Instructions" below, please send the Notes, and any cash consideration in respect of fractional shares, for the tendered shares of Common Stock (and, if applicable, substitute Common Stock certificates for any shares of Common Stock not accepted, including Excess Shares) to the undersigned at the address shown below the signature of the undersigned. The undersigned recognizes that the Company has no obligation pursuant to the "Special Issuance and Delivery Instructions" to transfer any shares of Common Stock from the name of the registered holder thereof if the Company does not accept any of the shares of Common Stock so tendered. THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF COMMON STOCK" BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE SHARES OF COMMON STOCK AS SET FORTH IN SUCH BOX BELOW. IMPORTANT: THIS LETTER OF TRANSMITTAL (TOGETHER WITH THE CERTIFICATES FOR COMMON STOCK AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING SHAREHOLDERS) (See Instructions 1 and 3 and the following paragraph) .................................................................... .................................................................... Signature(s) of Owner(s) Date .................................................................... Area Code and Tel. No. Must be signed by the registered holder(s) exactly as their name(s) appear(s) on the certificate(s) representing shares of Common Stock or by person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3. Name(s): .................................................................... .................................................................... (Please Type or Print) Capacity: .......................................................... Address:............................................................ .................................................................... (Include Zip Code) SIGNATURE GUARANTEE (If Required by Instruction 3) Signature(s) Guaranteed by an Eligible Institution: .................................................................... (Authorized Signature) .................................................................... (Please Type or Print Name) .................................................................... (Title) .................................................................... (Name of Firm) Dated: ............................................................. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX BELOW This Letter of Transmittal must be used whether certificates for shares of Common Stock are to be forwarded herewith or whether the guaranteed delivery procedure has been utilized. Your bank or broker can assist you in completing this form. The Instructions included with this Letter of Transmittal must be followed. Questions and requests for assistance or for additional copies of the Offering Circular and this Letter of Transmittal may be directed to the Exchange Agent or the Company. List below the shares of Common Stock to which this Letter of Transmittal relates. If the space provided below is inadequate, list the certificate numbers and number of shares of Common Stock on a separate SIGNED schedule and affix such schedule to this Letter of Transmittal. DESCRIPTION OF COMMON STOCK - ------------------------------------------------------------------------------- | | Number of | | Name(s) and Address(es) | | Shares | Number of | of Registered Holder(s) | Certificate | Represented by | Shares | (Please fill in, if blank) | Number(s) | Certificate(s) | Tendered* | - -------------------------------|----------------|-----------------|------------| _______________________________|________________|_________________|____________| | | | | _______________________________|________________|_________________|____________| | | | | _______________________________|________________|_________________|____________| | | | | _______________________________|Total Shares____|_________________|____________| * Unless otherwise indicated in this column, a shareholder that delivers shares of Common Stock through physical delivery of certificates will be deemed to have tendered the aggregate number of shares of Common Stock specified in the third column or, if none, by the certificate or certificates specified in the second column or, if none, the aggregate number of all shares of Common Stock held by the registered holder indicated in the first column. See Instruction 2. [ ] CHECK HERE IF TENDERED SHARES OF COMMON STOCK ARE ENCLOSED HEREWITH. [ ] CHECK HERE IF TENDERED SHARES OF COMMON STOCK WERE TENDERED AND ARE NOW BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING (See Instruction 1): Name of Registered Owner(s):...................................... Window Ticket No. (if any):....................................... Date of Execution of Notice of Guaranteed Delivery:............... Name of Eligible Institution which Guaranteed Delivery: .......... SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS (See Instructions 3 and 4) To be completed ONLY if certificates for shares of Common Stock not accepted, including Excess Shares, are to be registered in the name of and sent to someone other than the person or persons whose signature(s) ap- pear(s) on this Letter of Transmittal above. Issue and mail: shares of Common Stock to: Name(s): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Please Type or Print) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Please Type or Print) Address: .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Zip Code) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Employer Identification or Social Security No.) SPECIAL DELIVERY INSTRUCTIONS (See Instructions 3 and 4) To be completed ONLY if certificates for shares of Common Stock not accepted, including Excess Shares, and/or the Notes and any cash consider- ation for fractional shares of Common Stock for the accepted shares of Common Stock are to be sent to someone other than the person or persons whose signature(s) appear(s) on this Letter of Transmittal above or to such person or persons at an address other than that shown in the box entitled "Description of Common Stock" on this Letter of Transmittal above. Mail or deliver: The Notes; Cash consideration; and Shares of Common Stock to: Name(s): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Please Type or Print) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Please Type or Print) Address: .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Zip Code) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Employer Identification or Social Security No.) TO BE COMPLETED BY ALL TENDERING SHAREHOLDERS (See Instruction 5) SUBSTITUTE FORM W-9 PAYOR'S NAME: ALLSTATE FINANCIAL CORPORATION - ------------------------------------------------------------------------------ Part I - Taxpayer Identification Number ("TIN") ______________________________________ PLEASE PROVIDE YOUR TIN IN Name (if joint names, list first THE BOX TO THE RIGHT AND [_________] and circle the name of the person CERTIFY BY SIGNING AND or entity whose number you enter in DATING BELOW. Part 1 below) ____________________________________ Business Name Part II - For Payees Exempt from Backup Withholding ____________________________________ If you are an exempt recipient, Address (number and street) you should complete this form to avoid possible erroneous backup withholding. Enter ____________________________________ your correct TIN in Part I, City, State, and ZIP code write "Exempt" in the box to the right, sign and date the form. [___________] SUBSTITUTE | CERTIFICATION - Under the penalties of perjury, I | certify that: FORM W-9 | (1) the number shown on this form is my correct | taxpayer identification number (or I am waiting | for a number to be issued to me), and | Department of | the Treasury | (2) I am not subject to backup withholding either Internal Revenue | because: (a) I am exempt from backup Service | withholding, or (b) I have not been notified by | the Internal Revenue Service (the "IRS") that I | am subject to backup withholding as a Payor's Request | result of a failure to report all interest or for Taxpayer | dividends, or (c) the IRS has notified me that Identification | I am no longer subject to backup withholding. Number (TIN) | | | CERTIFICATION INSTRUCTIONS - You must cross out item | (2) above if you have been notified by the IRS that | you are currently subject to backup withholding | because of underreporting of interest or dividends on | your tax return. | | _______________________ ______________________ | Signature Date - ------------------------------------------------------------------------------- INSTRUCTIONS Forming Part of the Terms and Conditions of the Exchange Offer 1. Delivery of this Letter and Certificates; Guaranteed Delivery Procedure. This Letter is to be used whether certificates are to be forwarded herewith pursuant to the procedures set forth in the Offering Circular under the caption "The Exchange Offer-Procedures for Tendering," or whether tenders were made pursuant to the procedure for guaranteed delivery set forth below and in the Offering Circular under the caption "The Exchange Offer-Guaranteed Delivery Procedure." Certificates for shares of Common Stock, as well as a properly completed and duly executed copy of this Letter, and any other documents required by this Letter, must be received by the Exchange Agent at one of its addresses set forth herein. The method of delivery of this Letter, the Common Stock and any other required documents is at the election and risk of the Common Stockholder, but, except as otherwise provided below, the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If certificates for shares of Common Stock are sent by mail, it is suggested that registered mail be used and the mailing be made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to the Expiration Date. Common Stockholders whose certificates representing the shares of Common Stock that they wish to tender are not immediately available or who cannot deliver their certificates or any other required documents to the Exchange Agent prior to the Expiration Date may tender their shares of Common Stock pursuant to the guaranteed delivery procedure set forth in the Offering Circular. Pursuant to that procedure: (i) tender must be made by or through an Eligible Institution (as defined in the Offering Circular); (ii) by the Expiration Date, the Exchange Agent must have received from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery by mail or hand delivery setting forth the name and address of the Common Stockholder and the number of shares of Common Stock tendered, stating that the tender is being made thereby and guaranteeing that, within three over-the-counter market trading days after the Expiration Date, the Common Stock certificates, together with a properly completed and duly executed Letter and all other documents required by this Letter will be deposited by the Eligible Institution with the Exchange Agent; and (iii) the certificate(s) for all tendered shares of Common Stock and a properly completed and duly executed copy of this Letter, and all other documents required by this Letter, must be received by the Exchange Agent within three over-the-counter market trading days after the Expiration Date, all as provided in the Offering Circular under the caption "The Exchange Offer-Guaranteed Delivery Procedure." See "The Exchange Offer" section of the Offering Circular. 2. Partial Tenders and Withdrawals. If less than the entire number of shares of Common Stock evidenced by a submitted certificate is to be tender- ed, the tendering Common Stockholder should fill in the number of shares to be tendered in the column entitled "Number of Shares Tendered" in the box above entitled "Description of Common Stock." Reissued shares of Common Stock for the number of shares not exchanged will be sent to such Common Stockholder, unless otherwise provided in the appropriate box on this Letter, as soon as practicable after the Expiration Date. The aggregate number of shares of all Common Stock delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. Any Common Stockholder of record who has tendered shares of Common Stock may withdraw the tender by delivering written notice of withdrawal to the Exchange Agent prior to the Expiration Date, and, unless such tenders have previously been accepted for exchange by the Company, after 5:00 P.M., eastern standard time on January 24, 1996. For a withdrawal to be effective, the Exchange Agent must timely receive a written notice of withdrawal at its address set forth herein. Any notice of withdrawal must specify the name of the person having tendered the shares of Common Stock to be withdrawn, the aggregate number of shares of Common Stock to be withdrawn and the name of the registered holder(s), if different from the name of the person having tendered the shares of Common Stock to be withdrawn. If the certificates have been delivered or otherwise identified to the Exchange Agent, the serial numbers shown on the particular certificates evidencing the shares of Common Stock to be withdrawn and a signed notice of withdrawal with such signature guaranteed by an Eligible Institution (except in the case of shares of Common Stock tendered by an Eligible Institution) must be submitted prior to the release of the certificates or the shares of Common Stock to be withdrawn. Withdrawals of tendered shares of Common Stock may not be rescinded, and any shares of Common Stock properly withdrawn will thereafter be deemed not to be validly tendered for purposes of the Exchange Offer; provided, however, that withdrawn shares of Common Stock may be retendered by again following one of the procedures described herein so long as the retender is made prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Company, in its sole discretion, which determination will be final and binding on all parties. None of the Company, the Exchange Agent or any other person is or will be obligated to give any notice of any defects or irregularities in any notice of withdrawal, and none of them will incur any liability for failure to give any such notice. 3. Signatures on this Letter, Stock Powers and Endorsements; Guarantee of Signatures. If this Letter is signed by the registered holder of the Common Stock tendered hereby, the signature must correspond exactly with the name as written on the face of the certificate representing such Common Stock without any change whatsoever. If any tendered shares of Common Stock are owned of record by two or more joint owners, all such owners must sign this Letter. If any tendered shares of Common Stock are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates. When this Letter is signed by the registered holder or holders of the shares of Common Stock specified herein and tendered hereby, no endorsements of certificates or separate stock powers are required. If, however, the Notes are to be issued, or the Excess Shares or certificates for any untendered shares of Common Stock are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate stock powers are required. If this Letter is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the certificate(s). If this Letter or a Notice of Guaranteed Delivery or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. Endorsements on certificates for Common Stock or signatures on stock powers required by this Instruction 3 must be guaranteed by a guarantor that is a member of a "Signature Guarantee Program" recognized by the Exchange Agent, i.e., Securities Transfer Agents Medallion Program, Stock Exchanges Medallion Program and New York Stock Exchanges Medallion Signature Program. Signatures on this Letter need not be guaranteed as provided above, provided the shares of Common Stock are tendered: (i) by a registered holder of such Common Stock who has not completed the box entitled "Special Issuance and Delivery Instructions" on this Letter; or (ii) for the account of an Eligible Institution. 4. Special Issuance and Delivery Instructions. Tendering Common Stockholders should indicate in the applicable box the name and address to which the Notes, any cash consideration for fractional shares of Common Stock and/or substitute certificates evidencing Common Stock for the number of shares of Common Stock not exchanged, including Excess Shares, are to be issued or sent, if different from the name and address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. If no instructions are given, the Common Stock not exchanged, including Excess Shares, will be returned to the name and address of the person signing this Letter. 5. Tax Identification Number. Federal income tax law requires that a Common Stockholder whose tendered Common Stock is accepted for exchange by the Company must provide the Company (as payor) with his or her correct Taxpayer Identification Number ("TIN"), which, in the case of a tendering Common Stockholder who is an individual, is his or her social security number. If the Company is not provided with the correct TIN or an adequate basis for exemption, such Common Stockholder will be subject to a $50 penalty imposed by the Internal Revenue Service (the "IRS") unless such failure to provide such TIN is due to reasonable cause and not to willful neglect. In addition, delivery to such Common Stockholder of the Notes and any cash consideration for fractional shares of Common Stock may be subject to backup withholding in an amount equal to 31% of the gross proceeds resulting from the Exchange Offer. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt Common Stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for additional instructions. To prevent backup withholding, each tendering Common Stockholder must provide his or her correct TIN by completing the "Substitute Form W-9" set forth herein, certifying that the TIN provided is correct (or that such Common Stockholder is awaiting a TIN) and that (i) the Common Stockholder is exempt from backup withholding, (ii) the Common Stockholder has not been notified by the IRS that he or she is subject to backup withholding as a result of a failure to report all interest or dividends or (iii) the IRS has notified the Common Stockholder that he or she is no longer subject to backup withholding. In order to satisfy the Exchange Agent and the Company that a foreign individual qualifies as an exempt recipient, a Common Stockholder must submit a statement signed under penalty of perjury attesting to such exempt status. These statements may be obtained from the Exchange Agent and the Company. If the shares of Common Stock are in more than one name or are not in the name of the actual owner, consult the W-9 Guidelines for information on which TIN to report. If you do not have a TIN, consult the W-9 Guidelines for instructions on applying for a TIN, write "applied for" in lieu of your TIN in Part I of the Substitute Form W-9, and sign and date the form. If you do not provide your TIN to the Company within 60 days, backup withholding will begin and continue until you furnish your TIN to the Company. 6. Transfer Taxes. The Company will pay all transfer taxes, if any, applicable to the transfer and sale of Common Stock to it or its order pursuant to the Exchange Offer. If, however, the Notes, any cash consideration for fractional shares of Common Stock and/or certificates for Common Stock for the number of shares of Common Stock not exchanged, including Excess Shares, are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Common Stock tendered hereby, or if a tendered certificate representing Common Stock is registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the transfer and sale of Common Stock to the Company or its order pursuant to the Exchange Offer, the amount of any transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering Common Stockholder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to the tendering Common Stockholder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificate(s) specified in this Letter. 7. Waiver of Conditions. The Company reserves the absolute right to waive satisfaction of any conditions enumerated in the Offering Circular. 8. No Conditional Offers. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering Common Stockholders, by execution of this Letter, shall waive any right to receive notice of the acceptance of their Common Stock for exchange. None of the Company, the Exchange Agent or any other person is obligated to give notice of defects or irregularities in any tender of the Common Stock, nor shall any of them incur any liability for failure to give any such notice. 9. Mutilated, Lost, Stolen or Destroyed Common Stock Certificates. Any Common Stockholder whose certificates for Common Stock have been mutilated, lost, stolen or destroyed should contact the Company's Stock Transfer Agent at the following address for further instructions: Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016 (telephone no.: (908) 272-8511). 10. Requests for Assistance or Additional Copies. Requests for assistance or additional copies of the Offering Circular, this Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to the Exchange Agent at its addresses or telephone number set forth below. The Letter of Transmittal, certificates for shares of Common Stock and any other required documents should be sent or delivered by each shareholder of the Company or such shareholder's broker, dealer, commercial bank, trust company or other nominee to the Exchange Agent at one of its addresses set forth herein. Shareholders may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Exchange Offer. Exchange Agent: Shawmut Bank Connecticut, National Association By Mail/Overnight Delivery: By Hand: Shawmut Bank Connecticut, Shawmut Bank Connecticut, National Association National Association 777 Main Street, MSN 224 Corporate Trust Operations Hartford, CT 06115 Lower Level Attn: Patricia Williams 777 Main Street Hartford, CT 06115 For Information Call: (860) 986-2910 In addition, all questions relating to the Exchange Offer may be directed to Mr. Craig Fishman at the Company at (703) 931-2274. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Guidelines for Determining the Proper Identification Number to Give the Payer. - - Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer. For this type of account: Give the SOCIAL SECURITY number of- - ------------------------------------------------------------------------------- 1. An individual's account The individual 2. Two or more individuals The actual owner if combined funds, any (joint account) of the account or, one of the individuals(a) 3. Husband and wife The actual owner of the account or, if (joint account) joint funds, either person(1) 4. Custodian account of The minor(2) a minor (Uniform Gift to Minors Act) 5. Adult and minor The adult or, if the minor is the only (joint account) contributor, the minor(1) 6. Account in the name of The ward, minor, or incompetent person(3) guardian or committee for a designated ward, minor, or incompetent person 7. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee) b. So-called trust The actual owner(1) account that is not legal or valid trust under State law 8. Sole proprietorship The owner(4) account For this type of account: Give the EMPLOYER IDENTIFICATION number of- - ----------------------------------------------------------------------------- 9. A valid trust, estate Legal Entity (Do not furnish the identifying or pension trust number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious,charitable, The organization educational organization account 12. Partnership account held The partnership in the name of the business 13. Association, club or The organization other tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the Depart- The public entity ment of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name, and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate or pension trust. Note: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 The Tax Identification Number ("TIN") provided in the Substitute Form W-9 should be that of the tendering Holder For a joint account, only that person whose TIN is furnished should sign the Substitute Form W-9. Obtaining a Number If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. Note: Writing "Applied for" on the form means that you have already applied for a TIN OR that you intend to apply for one in the near future. As soon as you receive your TIN, complete another Form W-9, include your TIN, sign and date the form and give it to the requester. Payees Exempt from Backup Withholding The following is a list of payees exempt from backup withholding and for which no information reporting is required. For purposes of this tender offer, only payees listed in (1) through (13), and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. (1) A corporation. (2) An organization exempt from tax under section 501(a), or an individual retirement plan (IRA), or a custodial account under 403(b)(7). (3) The United States or any of its agencies or instrumentalities. (4) A State, the District of Columbia, a possession of the United States, or any or their political subdivisions, or instrumentalities. (5) A foreign government or any of its political subdivisions, agencies or instrumentalities. (6) An international organization or any of its agencies or instrumentalities. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the U.S. or a possession of the U.S. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publications of the American Society of Corporate Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section 664 or described in section 4947. If you are a nonresident alien or a foreign entity not subject to backup withhold- ing, give the payer a completed Form W-8 Certificate of Foreign Status. (1) Civil Penalty for False Information With Respect to Withholding - If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (2) Criminal Penalty for Falsifying Information - Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. EX-99 4 LETTER TO SECURITIES DEALERS, ET AL Exhibit (a)(3) ALLSTATE FINANCIAL CORPORATION Offer to Exchange $1,000.00 Principal Amount of Convertible Subordinated Notes due September 30, 2000 for each 157.48 shares of Common Stock ___________________ November 28, 1995 To Brokers, Dealers, Commercial Banks Trust Companies and Other Nominees: Allstate Financial Corporation (the "Company"), is offering to to exchange, upon the terms and subject to the conditions set forth in the Offering Circular, dated November 28, 1995 (the "Offering Circular"), and the related Letter of Transmittal (which together constitute the "Exchange Offer"), $1,000.00 principal amount of Convertible Subordinated Notes due September 30, 2000 (the "Notes") for each 157.48 shares of its Common Stock, no par value per share (the "Common Stock"). The terms of this Exchange Offer equate to $6.35 principal amount of Notes for each share of Common Stock properly tendered for exchange. To the extent the number of shares of Common Stock tendered by the holder thereof exceeds 157.48 (or a whole multiple thereof), the holder shall receive a new certificate representing the whole number of excess shares and a cash payment by the Company for any remaining fractional share at a rate of $6.35 per share of Common Stock. Enclosed are copies of the following documents: 1. Offering Circular, dated November 28, 1995; 2. Letter of Transmittal for your use and for the information of your clients; 3. Letter to Clients which may be sent to clients for whose account you hold shares of Common Stock in your name or in the name of a nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; and 4. Form of Notice of Guaranteed Delivery. PLEASE NOTE THAT THE OFFER WILL EXPIRE ON JANUARY 12, 1996, AT 5:00 P.M., EASTERN STANDARD TIME, UNLESS EXTENDED. No fees or commission will be payable to brokers, dealers or other persons (other than as described in the Offering Circular) in connection with any tenders pursuant to the Exchange Offer. However, you will be reimbursed for reasonable and necessary costs incurred by you in forwarding the enclosed materials to beneficial owners of shares of Common Stock held by such entities as nominee or in a fiduciary capacity. Additional copies of the enclosed material may be obtained from the Exchange Agent, Shawmut Bank Connecticut, National Association, 777 Main Street, MSN 224, Hartford, Connecticut 06115, by calling (860) 986-2910. Very truly yours, ALLSTATE FINANCIAL CORPORATION NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, IN ANY CAPACITY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT THE STATEMENTS CONTAINED IN THE OFFERING CIRCULAR OR THE LETTER OF TRANSMITTAL. EX-99 5 FORM OF LETTER TO CLIENTS OF SEC DLRS Exhibit (a)(4) ALLSTATE FINANCIAL CORPORATION Offer to Exchange $1,000.00 Principal Amount of Convertible Subordinated Notes due September 30, 2000 for each 157.48 shares of Common Stock ___________________ To Our Clients: Enclosed for your consideration is an Offering Circular, dated November 28, 1995 (the "Offering Circular"), and a form of Letter of Transmittal (the "Letter of Transmittal"), which, together set forth the offer (the "Exchange Offer") of Allstate Financial Corporation, a Virginia corporation (the "Company") to exchange $1,000.00 principal amount of Convertible Subordinated Notes due September 30, 2000 (the "Notes") for each 157.48 shares of its Common Stock, no par value per share (the "Common Stock"). The terms of this Exchange Offer equate to $6.35 principal amount of Notes for each share of Common Stock properly tendered for exchange. To the extent the number of shares of Common Stock tendered by the holder thereof exceeds 157.48 (or a whole multiple thereof), the holder shall receive a new certificate representing the whole number of excess shares and a cash payment by the Company for any remaining fractional share at a rate of $6.35 per share of Common Stock. The Offer to Exchange and the Letter of Transmittal are being forwarded to you as the beneficial owner of shares of Common Stock held by us for your account but not registered in your name. A tender of such shares can be made only by us as the holder of record and only pursuant to your instructions. Upon the terms and subject to the conditions of the Exchange Offer, if shares of Common Stock have been validly tendered and not withdrawn prior to 5:00 P.M., Eastern Standard Time, on January 12, 1996, the shares of Common Stock so tendered will, upon the terms and subject to the conditions of the Exchange Offer, be purchased and shares of Common Stock tendered after such date and time will not be purchased. Your attention is called to the following: 1. The Company is only authorized to issue up to $2,162,000 principal amount of Notes and therefore the Company will only purchase up to that number of shares of Common Stock properly tendered to it pursuant to the Exchange Offer that would allow it to issue Notes in an aggregate principal amount of up to $2,162,000. In the event shares of Common Stock in excess of that number are properly tendered to the Company for exchange pursuant to the terms of the Exchange Offer, the Company will only accept for exchange from each tendering holder of Common Stock a stockholder's pro rata portion of the total number of shares of Common Stock properly tendered for exchange, rounded down to the nearest whole multiple of 157.48 shares. In this event, the excess shares of Common Stock tendered by the stockholder to the Company over the stockholder's pro rata amount of tendered shares, as rounded down to the nearest whole multiple of 157.48, will not be accepted by the Company for exchange, and each such stockholder shall receive a new certificate for shares of Common Stock representing the whole number of excess shares and a cash payment by the Company for any fractional share at a rate of $6.35 per share of Common Stock. 2. Tendering shareholders will not be obligated to pay brokerage commission or, subject to instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of shares of Common Stock by the Company pursuant to the Exchange Offer. 3. The Expiration Date (unless extended) of the Exchange Offer is 5:00 P.M., Eastern Standard Time, on January 12, 1996. Your instructions to us should be forwarded in ample time to permit us to submit a tender on your behalf. If you wish to have us tender all of your shares of Common Stock, will you kindly so instruct us by completing, executing and returning to us the instruction form set forth below. An envelope to return your instructions to us is enclosed. The enclosed specimen Letter of Transmittal is furnished to you for information only and may not be used to tender shares of Common Stock. The Exchange Offer is not being made to, nor will the Company accept tenders from, holders of shares of Common Stock in any jurisdiction in which the making or acceptance of the Exchange Offer would not be in compliance with the laws of such jurisdiction or if the making or acceptance of the Exchange Offer would violate or contravene any agreement to which the Company is a party. In any jurisdiction the securities or blue sky laws of which require the Exchange Offer to be made by a licensed broker or dealer, the Exchange Offer shall be deemed to be made on behalf of the Company by one or more registered brokers or dealers which are licensed under the laws of such jurisdiction. INSTRUCTIONS The undersigned acknowledge(s) receipt of your letter enclosing the Offering Circular, dated November 28, 1995 (the "Offering Circular"), relating to the offer by Allstate Financial Corporation to exchange $1,000.00 principal amount of Convertible Subordinated Notes due September 30, 2000 for each 157.48 shares of its Common Stock, no par value per share (the "Common Stock"). This will instruct you to tender to the Company the number of shares of Common Stock indicated below which are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offering Circular, and in the related Letter of Transmittal that you have furnished to the undersigned. Date: _______________________, 199__ Sign Here ___________________________________ Signature(s) ___________________________________ (Please print name(s)) ___________________________________ (Street Address) ___________________________________ (City, State, Zip) Aggregate number of shares of Common Stock to be tendered by us ______________________________ shares of Common Stock Unless a specific contrary Instruction is given in the spaces provided, your signature(s) hereon shall constitute an instruction to us to tender all your shares of Common Stock pursuant to the terms and conditions set forth in the Offering Circular and the Letter of Transmittal. EX-99 6 NOTICE OF GUARANTEED DELIVERY Exhibit (a)(5) NOTICE OF GUARANTEED DELIVERY FOR SHARES OF COMMON STOCK OF ALLSTATE FINANCIAL CORPORATION A form substantially equivalent to that set forth below must be used to tender certificates representing Common Stock of Allstate Financial Corporation, no par value per share (the "Common Stock"), if such certificates are not immediately available or time will not permit all required documents to reach the Excahnge Agent prior to the Expiration Date, as defined in the Offering Circular, dated November 28, 1995 (the "Offering Circular"). Such form may be delivered by hand or mail to the Exchange Agent. See Instruction 1 of the Letter of Transmittal. Any capitalized terms used in this Notice of Guaranteed Delivery not defined herein shall have the meanings ascribed to them in the Offering Circular and the Letter of Transmittal. To: Shawmut Bank Connecticut, National Association, Exchange Agent By Mail/Overnight Delivery: By Hand: Shawmut Bank Connecticut, Shawmut Bank Connecticut, National Association National Association 777 Main Street, MSN 224 Corporate Trust Operations Hartford, CT 06115 Lower Level Attn: Patricia Williams 777 Main Street Hartford, CT 06115 For Information Call: (860) 986-2910 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE SHOWN ABOVE OR TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. Ladies and Gentlemen: The undersigned hereby tenders to Allstate Financial Corporation, upon the terms and subject to the conditions set forth in the Offering Circular and the related Letter of Transmittal, receipt of which is hereby acknowledged ______ shares of Common Stock pursuant to the guaranteed delivery procedures set forth in the Offering Circular and the Letter of Transmittal. The signature(s) must correspond exactly with the name(s) of the registered holders of the certificates to be delivered. Signature(s):_______________________________________ Name(s):____________________________________________ Address:____________________________________________ ____________________________________________________ Area Code and Telephone No.: ____________________________________________________ GUARANTEE (Not to be used for signature guarantee) The undersigned, an "Eligible Institution", guarantees that (a) the above named person(s) "own(s)" the shares of Common Stock tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, (b) such tender of shares of Common Stock complies with Rule 14e-4, and (c) the Excahnge Agent will receive the stock certificates representing the shares of Common Stock tendered hereby in proper form for transfer together with a properly completed and duly executed Letter of Transmittal and any other required documents, all within three over-the counter market trading days after the date of execution of this notice. Dated:________________, 199__ Firm:___________________________________ Sign Here:______________________________ (Authorized Signature) _______________________________________ (Title) Name:__________________________________ (Please Type or Print) Address:_______________________________ _______________________________________ Area Code and Telephone No.: _______________________________________ Please do not send stock certificates with this form. Stock certificates must be sent with a Letter of Transmittal. EX-99 7 AFC PRESS RELEASE Exhibit (a)(6) For: Allstate Financial Corporation Company Contact: Craig Fishman Senior Vice President (703) 931-2274 ALLSTATE FINANCIAL COMMENCES OFFER TO EXCHANGE NOTES FOR STOCK Arlington, VA, November 30, 1995, Allstate Financial Corporation (the "Company") (NASDAQ:ASFN) today announced that: It has commenced an offer to exchange up to $2,162,000.00 in convertible, subordinated notes for shares of the Company's common stock at rate of exchange equivalent to $6.35 per share of common stock. The Notes will bear interest at a maximum rate of 10% per annum, will be due in full on September 30, 2000 and may be converted into common stock of the Company at a conversion rate of $7.50 per share. Unless extended by the Company, the exchange offer will expire on January 12, 1996. As previously announced, Leon Fishman, Eugene Haskin and Craig Fishman have advised the Company's Board of Directors that they do not intend to exchange any of the Company's common stock owned by them for Notes. EX-99 8 QUESTIONS AND ANSWERS ALLSTATE FINANCIAL CORPORATION Questions & Answers About the Exchange Offer The following are some of the questions that may come to mind when you read the accompanying offering materials. If you have any other questions, please call Craig Fishman at 703-931-2274. November 28, 1995 1. Why is Allstate making this offer? The principal purpose of the Exchange Offer is to increase stockholder value by giving holders of Allstate's common stock the opportunity to receive convertible subordinated Notes for their shares of common stock and to enable Allstate to acquire shares of its common stock at a price less than its current book value per share. 2. Why should a stockholder participate in the Exchange Offer? Based on the closing price of Allstate's common stock on November 27, 1995, of $5.63 per share, the principal amount of the Notes to be received for shares of common stock accepted for tender ($6.35 per share) exceeds the current market price for such shares. In addition, a Note holder will receive a fixed return from the Notes and will have the flexibility to participate in potential future increases in the price of Allstate's stock by converting the Note back into shares of Allstate common stock at a later date. 3. Will Allstate exchange all tendered shares? No. Allstate is only authorized to issue up to $2,162,000 principal amount of Notes. Therefore, Allstate will purchase up to that number of shares of common stock properly tendered pursuant to the Exchange Offer that would allow Allstate to issue Notes in an aggregate principal amount of up to $2,162,000. In the event shares of common stock in excess of that number are properly tendered, the Company will pro rate all shares tendered to it as described in the accompanying Offering Circular. 4. Is the Exchange Offer dependent on a minimum number of shares being tendered for exchange? No. There is no minimum amount of common stock required to be tendered or accepted in the Exchange Offer, except that only exchanges of 157.48 shares of common stock (or whole multiples thereof) will be accepted from each stockholder. 5. Do I have to exchange my shares? No. Tendering your shares for exchange to Notes is a matter of choice. You must decide whether or not to exchange based on your own investment objectives and assessments. 6. What happens if I choose to not participate in the Exchange Offer? The Exchange Offer is voluntary and non-tendering holders will continue to have their existing rights and privileges as common stockholders. 7. What are my alternatives concerning the Exchange Offer? Stockholders can, among other things, (i) tender all or some of their common shares in the Exchange Offer; (ii) sell their common stock in the open market; or (iii) continue to hold their common stock. 8. Can common stockholders expect to receive dividends on the common stock in the near future? Since 1989, Allstate has never paid, and has no current intention to pay, dividends on its common stock. 9. What are the pro-forma effects of the Exchange Offer? If the maximum amount of Notes is issued pursuant to the Exchange Offer, Allstate would realize a reduction in its common stockholders equity of approximately $2,162,000. Book value per common share would increase from $9.90 to $10.19 as of September 30, 1995. 10. Assuming my stock certificate(s) are registered in my name, how do I complete the Letter of Transmittal? (a) In the large block on page 7 of the Letter of Transmittal, provide your name, address, certificate number and number of shares. (b) Sign and date the letter and provide the rest of the information in the area captioned "Please Sign Here" on page 5. (c) Deliver the completed letter, together with all your stock certificate(s) to Shawmut Bank Connecticut, National Association as Exchange Agent at the location shown on the first page of the letter. 11. Why do I have to fill out a substitute form W-9? Internal Revenue Service regulations require 20% withholding unless you certify that you are not subject to such withholding by providing your social security number or employer identification number. 12. When will I receive my Note? As soon as practical after the close of the Exchange Offer and after receipt by the Exchange Agent of a properly executed Letter of Transmittal and stock certificate(s), Notes, stock certificates and checks will be issued to stockholders whose shares are exchanged in the Exchange Offer. 13. How much time do I have to accept the Exchange Offer? The Exchange Offer expires on January 12, 1996 at 5:00 p.m., New York City time, unless extended by Allstate. Your Letter of Transmittal must be delivered to the Exchange Agent by that date and time. 14. If I have lost my stock certificate(s), what should I do? You may still accept the Exchange Offer even if you have lost your stock certificate(s). All you have to do is complete the Letter of Transmittal, forward it to the Exchange Agent, stating that you have lost your stock certificate(s). The Exchange Agent will send you an affidavit and indemnity which you must promptly complete and return so that a replacement certificate can be issued. -----END PRIVACY-ENHANCED MESSAGE-----