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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 20, 1996
PALFED, Inc.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
South Carolina 0-15334 57-0821925
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(STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
107 Chesterfield Street South
Aiken, South Carolina 29801
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (803) 642-1400
Page 1 of 6 sequentially numbered pages
The Index to Exhibits is on page 4.
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ITEM 5. OTHER EVENTS.
PALFED, Inc. (the "Company"), the parent savings and loan holding company
of Palmetto Federal Savings Bank of South Carolina, announced on November 20,
1996 that it had received a shareholder proposal from Mid-Atlantic Investors for
inclusion in the Company's Proxy Statement for the 1997 Annual Meeting of
Shareholders.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS
None.
(b) PRO FORMA FINANCIAL STATEMENTS
None.
(c) EXHIBITS
Exhibit 28.1 PALFED, Inc. Press Release dated November 20, 1996.
Exhibit 28.2 Shareholder Resolution and Supporting Statement.
Exhibit 28.3 Letter dated November 13, 1996 from Mid-Atlantic
Investors.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PALFED, INC.
By: /s/ John C. Troutman
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John C. Troutman
President and Chief Executive Officer
and Chief Financial Officer
Date: November 20 , 1996
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INDEX TO EXHIBITS
Sequentially
Numbered Page
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28.1 Press Release dated November 20, 1996
28.2 Shareholder Resolution and Supporting Statement
28.3 Letter dated November 13, 1996 from Mid-Atlantic Investors.
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EXHIBIT 28.1
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PALFED, Inc. Press Release
For More Information Call:
PALFED, INC.
107 Chesterfield Street S.
Aiken, South Carolina 29801
John C. Troutman
President and CEO
(803) 642-1433
Howard M. Hickey, Jr.
Executive Vice President and
General Counsel
(803) 642-1437
November 20, 1996
FOR IMMEDIATE RELEASE
AIKEN, South Carolina, November 20, 1996 -- PALFED, INC. (Nasdaq:PALM)
("PALFED" or the "Company") announced that it received a shareholder proposal
from Mid-Atlantic Investors for inclusion in the Company's Proxy Statement for
the 1997 Annual Meeting of Shareholders. Mid-Atlantic's proposal, which, if
adopted, would not be binding on the Company, calls for PALFED's Board of
Directors "immediately to take the necessary steps to achieve a sale, merger or
other acquisition of the Company." Jerry Zucker, a partner of Mid-Atlantic
Investors, joined in the proposal. According to a Schedule 13D filing with the
Securities and Exchange Commission, Mid-Atlantic and its partners, Messrs.
Zucker and Jerry Shearer, own 474,000 shares or 9.1% of the Company's
outstanding stock.
In a separate letter to John Troutman, PALFED's President and Chief
Executive Officer, Mid-Atlantic Investors offered to withdraw its proposal if
PALFED's Board of Directors promptly elected M. Jerry Garfinkle as a director of
PALFED, formed a Merger and Acquisitions Committee of the Board with Mr.
Garfinkle as a member of this Committee, and engaged an investment advisor
skilled in mergers.
Mr. Troutman commented, "We believe the Company's current strategy of
growth will build long-term shareholder value and the directors have no
intention to abandon that strategy and sell the Company solely to satisfy the
demands of Mid-Atlantic and Messrs. Shearer and Zucker.
"The Board of Directors unanimously opposes the resolution and believes a
forced sale of a company is never in the best interest of the shareholders. The
Company already has a Strategic
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Alternatives Committee which considers mergers and acquisitions and also has
engaged an investment advisor skilled in such matters. The Company will not be
coerced into ill-advised action to satisfy the greed of a minority shareholder."
Mr. Troutman also added that the Board of Directors has previously
considered Mid-Atlantic's request to add Jerry Garfinkle, Assistant General
Counsel with Mr. Zucker's Intertech group, to the Board. The Board found that
Mr. Garfinkle does not have the corporate or community presence to represent the
Company in Charleston and could not possibly represent the interests of all the
shareholders as an attorney of Mr. Zucker. Jerry Zucker was offered the
opportunity to be a candidate for the Board and rejected that offer because he
"doesn't have the time."
PALFED, Inc. is a South Carolina corporation whose principal subsidiary,
Palmetto Federal Savings Bank of South Carolina, operates 21 banking and eight
mortgage lending offices in South Carolina and one mortgage lending office in
Georgia. At September 30, 1996, PALFED had $659.8 million in total assets and
deposits of $521.4 million. PALFED's common stock is traded on the Nasdaq
National Market under the symbol "PALM."
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EXHIBIT 28.2
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PALFED, INC.
SHAREHOLDER RESOLUTION
1997 ANNUAL MEETING
RESOLVED, that the shareholders hereby inform the board of directors that
it is the desire of the shareholders that the board of directors immediately
take the necessary steps to achieve a sale, merger or other acquisition of the
Company on terms that will maximize shareholder value as promptly as possible.
SUPPORTING STATEMENT OF PROPOSED SHAREHOLDER:
We believe that a prompt sale of the Company will result in the greatest
return to shareholders with the least amount of risk in the near term.
Accordingly, we recommend a vote FOR the proposal to sell the Company.
It is important for the shareholders to tell management what the
shareholders want. Without consulting the shareholders, management formed a
Strategic Alternatives Committee in 1995 to "explore and evaluate the
enhancement of long-term shareholder value". Apparently, the Committee
"concluded that expansion of the Company's franchise coupled with efforts to
increase earnings can best accomplish this goal." Although the decision of the
Committee was reported to the shareholders before the 1996 annual meeting, the
shareholders were not asked to approve this major decision which affects all of
the shareholders. Shareholders also were not advised of the anticipated cost of
pursuing this strategy or whether management also evaluated a sale of the
Company as an alternative strategy. We believe management's expansion strategy
will be expensive, will depress returns on equity, and will drain away current
shareholder value in exchange for an elusive expectation of long-term
shareholder value.
Furthermore, based on historical performance, there is no reason to believe
that the stated goals can realistically be expected to be attained in the near
future. A good measure of earnings performance is the return on shareholder
equity ("ROE"). For fiscal years 1991 through 1995, the Company's ROE's,
respectively, were 1.98%, 6.86%, minus 31.94%, 8.35% and 8.54%. Compared to
other institutions in South Carolina, this is not high performance. For
example, American Federal, an S & L headquartered in Greenville, South Carolina,
reported ROE's of 13.35%, 16.40%, 17.70%, 17.81% and 16.14%, respectively, for
1991-1995.
The Company is principally engaged in the classic savings and loan business
of taking deposits and making mortgage loans. These are very competitive
activities which have been substantially affected by technological changes in
recent years. We believe that the Company's present franchise, i.e., its
customer base, is presently of substantial value to potential acquirors.
Whether this will continue to be true in the future is simply a gamble. It is
very conceivable that technological change could substantially reduce the value
of the Company's franchise over the long-term. It will probably be years before
the Company attains a substantial market share as a result of its planned
expansion in the larger Charleston and Columbia markets. In the meanwhile, the
value of such a share may diminish.
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Simply put, neither we nor management know what the future will hold.
However, we believe that the Company could presently be sold for a substantial
premium over its "go it alone" value. That makes more sense to us than a risky
bet on the long-term future of the Company. The better long-term bet is for a
merger with another financial institution with a proven record of above average
performance and with greater geographic diversity.
Please vote FOR the proposal. This is your Company and your future.
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EXHIBIT 28.3
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Mid-Atlantic Investors
A.S.C. General Partnership Tel. 803-749-7888
P.O. Box 7674 FAX 803-749-7090
Columbia, South Carolina 29202
November 13, 1996
Mr. John C. Troutman
President and CEO
PALFED, Inc.
107 Chesterfield Street South
Aiken, SC 29801-4501 Via FedEx
Dear Mr. Troutman:
Mid-Atlantic Investors has sought to have Mr. Jerry Garfinkle elected to
the Board. Mid-Atlantic Investors and its partners own almost 10% of the
Company's stock and would like for Mr. Garfinkle to be one of the Company's
eleven directors. We believe the Company's response regarding Mr. Garfinkle's
election has been vague and action to elect him unnecessarily slow. Such
inaction has caused us to move ahead with other available alternatives.
In our resolve to maximize shareholder value, today we notified the
Company's Corporate Secretary that we intend to promote a "sell the bank
proposal" at the next annual meeting. Our proposal opens the door for what very
well may be an expensive and time consuming proxy contest. It need not be so;
however, we are up to the task.
Mid-Atlantic Investors is prepared to withdraw its shareholder proposal
provided that 1) Mr. Garfinkle is elected promptly to the Board, 2) a Mergers
and Acquisitions Committee of the Board is formed forthwith with Mr. Garfinkle
as a member, and 3) an advisor skilled in mergers is engaged.
Sincerely,
Jerry Shearer
Managing Partner
cc: Mr. Jerry Zucker
