CUSIP No. 235906104
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 6)
DAMEN FINANCIAL CORPORATION
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
235906104
(CUSIP Number)
Paul J. Duggan
Jackson Boulevard Fund, Ltd.
53 W. Jackson
Chicago, Illinois 60604
(312) 294-6440
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 24, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box [ ].
<PAGE>
1 Name of Reporting Person
S.S. or I.R.S. Identification Number of Above Person (optional)
Paul J. Duggan
2 Check The Appropriate Box If a Member of a Group (a)[X]
(b)[ ]
3 SEC Use Only
4 Source of Funds: WC, OO
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
246,400 shares
Number of
Shares 8 Shared Voting Power
Beneficially 116,000 shares
Owned By
Each Reporting 9 Sole Dispositive Power
Person With 246,400 shares
10 Shared Dispositive Power
116,000 shares
11 Aggregate Amount Beneficially Owned by Each Reporting Person
362,400 shares
12 Check Box If The Aggregate Amount in Row (11) Excludes
Certain Shares [ ]
13 Percent of Class Represented By Amount in Row (11)
12.2%
14 Type of Reporting Person
IN
<PAGE>
1 Name of Reporting Person
S.S. or I.R.S. Identification Number of Above Person (optional)
Jackson Boulevard Capital Management, Ltd.
2 Check The Appropriate Box If a Member of a Group (a)[X]
(b)[ ]
3 SEC Use Only
4 Source of Funds: WC, OO
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
Illinois
7 Sole Voting Power
0 shares
Number of
Shares 8 Shared Voting Power
Beneficially 116,000 shares
Owned By
Each Reporting 9 Sole Dispositive Power
Person With 0 shares
10 Shared Dispositive Power
116,000 shares
11 Aggregate Amount Beneficially Owned by Each Reporting Person
116,000 shares
12 Check Box If The Aggregate Amount in Row (11) Excludes
Certain Shares [ ]
13 Percent of Class Represented By Amount in Row (11)
3.9%
14 Type of Reporting Person
CO
<PAGE>
1 Name of Reporting Person
S.S. or I.R.S. Identification Number of Above Person (optional)
Jackson Boulevard Equities, L.P.
2 Check The Appropriate Box If a Member of a Group (a)[X]
(b)[ ]
3 SEC Use Only
4 Source of Funds: WC, OO
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
Illinois
7 Sole Voting Power
0 shares
Number of
Shares 8 Shared Voting Power
Beneficially 56,622 shares
Owned By
Each Reporting 9 Sole Dispositive Power
Person With 0 shares
10 Shared Dispositive Power
56,622 shares
11 Aggregate Amount Beneficially Owned by Each Reporting Person
56,622 shares
12 Check Box If The Aggregate Amount in Row (11) Excludes
Certain Shares [ ]
13 Percent of Class Represented By Amount in Row (11)
1.9%
14 Type of Reporting Person
PN
<PAGE>
1 Name of Reporting Person
S.S. or I.R.S. Identification Number of Above Person (optional)
Jackson Boulevard Investments, L.P.
2 Check The Appropriate Box If a Member of a Group (a)[X]
(b)[ ]
3 SEC Use Only
4 Source of Funds: WC, OO
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) []
6 Citizenship or Place of Organization
Illinois
7 Sole Voting Power
0 shares
Number of
Shares 8 Shared Voting Power
Beneficially 29,578 shares
Owned By
Each Reporting 9 Sole Dispositive Power
Person With 0 shares
10 Shared Dispositive Power
29,578 shares
11 Aggregate Amount Beneficially Owned by Each Reporting Person
29,578 shares
12 Check Box If The Aggregate Amount in Row (11) Excludes
Certain Shares [ ]
13 Percent of Class Represented By Amount in Row (11)
1.0%
14 Type of Reporting Person
PN
<PAGE>
1 Name of Reporting Person
S.S. or I.R.S. Identification Number of Above Person (optional)
Jackson Offshore Fund, Ltd.
2 Check The Appropriate Box If a Member of a Group (a)[X]
(b)[ ]
3 SEC Use Only
4 Source of Funds: WC, OO
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) []
6 Citizenship or Place of Organization
Tortolla, British Virgin Islands
7 Sole Voting Power
0 shares
Number of
Shares 8 Shared Voting Power
Beneficially 29,800 shares
Owned By
Each Reporting 9 Sole Dispositive Power
Person With 0 shares
10 Shared Dispositive Power
29,800 shares
11 Aggregate Amount Beneficially Owned by Each Reporting Person
29,800 shares
12 Check Box If The Aggregate Amount in Row (11) Excludes
Certain Shares [ ]
13 Percent of Class Represented By Amount in Row (11)
1.0%
14 Type of Reporting Person
CO
<PAGE>
This is Amendment No. 6 to the Schedule 13D filed jointly by
Paul J. Duggan, Jackson Boulevard Capital Management, Ltd. (formerly known
as Jackson Boulevard Fund, Ltd.) ("Jackson Capital"), Jackson Boulevard
Equities, L.P. ("Jackson Equities"), Jackson Boulevard Investments, L.P.
("Jackson Investments") and (as of this Amendment No. 6) Jackson Offshore
Fund, Ltd. ("Jackson Offshore") (collectively, the "Group") on October 10,
1995 (as earlier amended, the "Original 13D"), and relates to the common
stock, $.01 par value (the "Common Stock"), of Damen Financial Corporation
(the "Issuer"). The following items in the Original 13D are amended to
read in their entirety as follows:
Item 1. Security and Issuer
This Schedule 13D is being filed jointly by Paul J. Duggan,
Jackson Capital, Jackson Equities and Jackson Investments and relates to
the Common Stock of the Issuer. The address of the principal executive
offices of the Issuer is 200 West Higgins Road, Schaumburg, Illinois
60195.
Item 2. Identity and Background
(a)-(c) Jackson Capital and Jackson Offshore are Illinois
corporations. Jackson Equities and Jackson Investments are Illinois
limited partnerships. Jackson Offshore is a Tortolla, British Virgin
Islands, corporation. The address of the principal business and the
principal office of Jackson Capital, Jackson Equities, and Jackson
Investments is 53 West Jackson Boulevard, Suite 400, Chicago, Illinois
60604. The address of the principal business and the principal office of
Jackson Offshore is 31 Kildare Street, Dublin 2, Ireland.
The principal business of Jackson Capital is serving as the
general partner of Jackson Equities, Jackson Investments and other
investment-oriented limited partnerships. The principal business of
Jackson Equities, Jackson Investments and Jackson Offshore is buying and
selling securities for investments, including in particular securities
related to financial industries (including banks and thrifts).
Jackson Capital is the sole general partner of Jackson Equities
and Jackson Investments. Mr. Duggan is the sole stockholder, sole
executive officer and sole director of Jackson Capital. Mr. Duggan
controls (through Jackson Capital) all decisions regarding voting and
investment of the shares of the Issuer held by Jackson Offshore. Mr.
Duggan, David Blair and Peter Poole are the directors of Jackson Offshore;
Mr. Blair is the managing director of Jackson Offshore. The business
address of Mr. Blair and Mr. Poole is 31 Kildare Street, Dublin 2,
Ireland. Mr. Blair's principal occupation is that of certified public
accountant. Mr. Poole's principal occupation is that of money manager
with Rathbone Management Services, a British Virgin Islands corporation.
Mr. Duggan's principal occupation is money manager (through Jackson
Capital) and his business address is 53 West Jackson Boulevard, Suite 400,
Chicago, Illinois 60604.
Jackson Capital has a 7.7% ownership interest in Jackson
Equities and a 5.1% ownership interest in Jackson Investments. Duggan is
a limited partner of both Jackson Equities and Jackson Investments.
The joint filing agreement of the members of the Group is filed
herewith as Exhibit 1.
(d)-(e) During the past five years, none of Mr. Duggan,
Jackson Capital, Jackson Equities, Jackson Offshore or Jackson Investments
has been convicted in a criminal proceeding (excluding traffic
violations), and none of Mr. Duggan, Jackson Capital, Jackson Equities,
Jackson Offshore or Jackson Investments has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction
as a result of which any of them were or are subject to a judgment, decree
or final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) Mr. Duggan is a citizen of the United States.
Item 4. Purpose of Transaction
The Group's goal is to profit from appreciation in the market
price of the Common Stock. The Group expects to actively assert
shareholder rights, in the manner described below, with the purpose to
influence the policies of the Issuer, in particular with the intent of
influencing a business combination involving the Issuer.
By letter dated February 3, 1997, Mr. Duggan expressed to the
Issuer his disappointment with the Issuer's business situation and
suggested courses of action, including the addition of a specific
individual as a member of the Issuer's Board of Directors. A copy of that
letter is attached as Exhibit 2. By letter dated December 5, 1997, Mr.
Duggan wrote to the members of the Issuer's Board of Directors to advise
the Issuer of his continued disappointment with the financial performance
of the Issuer. The letter listed certain steps that the Issuer should
implement. A copy of that letter is attached as Exhibit 3.
By letter dated December 17, 1997, Mr. Duggan submitted a notice
of intent to introduce a stockholders' proposal at the 1998 annual meeting
of stockholders of the Issuer and to nominate two persons for election as
directors at that meeting. A copy of that letter is attached as Exhibit
4. By letter dated December 23, 1997, the Issuer refused to allow Mr.
Duggan to present the stockholder's proposal or to nominate candidates for
election to the Board of Directors. A copy of that letter is attached as
Exhibit 5.
By letter dated December 30, 1997, Mr. Duggan suggested an
alternative stockholders' proposal. A copy of that letter is attached as
Exhibit 6. Also by letter dated December 30, 1997, Mr. Duggan requested
that the Issuer provide him with a stockholder list and certain other
related materials. A copy of that letter is attached as Exhibit 7. After
additional discussion and correspondence, the Issuer provided Mr. Duggan
with access to stockholder list materials. Prior to the annual meeting of
stockholders, Mr. Duggan also corresponded and held discussions with the
Issuer regarding the inability of Mr. Duggan to vote shares held in excess
of the 10% voting limitation contained in the Issuer's Certificate of
Incorporation.
By letter dated December 30, 1997, Mr. Duggan gave notice of his
intent to nominate two persons for election to the Board of Directors of
the Issuer. A copy of that letter is attached as Exhibit 8. By letter
dated January 2, 1998, the Issuer refused to permit the presentation of a
stockholder proposal by Mr. Duggan or the nomination of candidates for
election to the Board of Directors. A copy of that letter is attached as
Exhibit 9. By letter of his counsel dated January 5, 1998, Mr. Duggan
responded to the Issuer. A copy of that letter is attached as Exhibit 10.
By letter dated January 7, 1998, the Issuer responded to the letter of Mr.
Duggan's counsel. A copy of that letter is attached as Exhibit 11. The
Issuer, Mr. Duggan and the other individual Mr. Duggan intended to
nominate for election to the Board of Directors discussed circumstances
under which Mr. Duggan would withdraw his notice of intent to nominate. A
copy of a letter written by counsel to the Issuer regarding those
discussions, dated January 8, 1998, is attached as Exhibit 12.
By letter dated August 18, 1998, Mr. Duggan submitted a notice
of intent to introduce a stockholders' proposal at the 1999 annual meeting
of stockholders of the Issuer. A copy of that letter is attached as
Exhibit 13. By letter dated August 24, 1998, Mr. Duggan expressed to the
Issuer his disappointment with the Issuer's business situation and
suggested courses of action. A copy of that letter is attached as Exhibit
14.
The Group intends to continue to evaluate the Issuer and its
business prospects and intends to consult with management of the Issuer,
other shareholders of the Common Stock or other persons to further its
objectives. The Group may make further purchases of shares of the Common
Stock or may dispose of any or all of its shares of the Common Stock at
any time. At present, and except as disclosed herein, the Group has no
specific plans or proposals that relate to, or could result in, any of the
matters referred to in paragraphs (a) through (j), inclusive, of Item 4 of
Schedule 13D. The Group intends to continue to explore the options
available to it. The Group may, at any time or from time to time, review
or reconsider its position with respect to the Issuer and may formulate
plans with respect to matters referred to in Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer
(a) By virtue of his control over the stock personally owned by
him and that owned by Jackson Capital, Jackson Equities, Jackson
Investments and Jackson Offshore, Mr. Duggan beneficially owns all of the
362,400 shares of the Common Stock owned by members of the Group,
constituting approximately 12.2% of the issued and outstanding shares of
the Common Stock, based on the number of outstanding shares (2,967,154)
reported on the Issuer's Quarterly Report on Form 10-Q filed on August 14,
1998. Jackson Capital beneficially owns only the 116,000 shares held in
the names of Jackson Equities, Jackson Investments and Jackson Capital,
constituting approximately 3.9% of the issued and outstanding shares of
the Common Stock. Jackson Equities beneficially owns only the 86,422
shares of the Common Stock it holds in its own name, constituting
approximately 1.9% of the issued and outstanding shares of the Common
Stock. Jackson Investments beneficially owns only the 29,578 shares of
the Common Stock it holds in its own name, constituting approximately 1.0%
of the issued and outstanding shares of the Common Stock. Jackson
Offshore beneficially owns only the 29,800 shares of the Common Stock it
holds in its own name, constituting approximately 1.0% of the issued and
outstanding shares of the Common Stock. None of Mr. Duggan, Jackson
Capital, Jackson Equities, Jackson Investments or Jackson Offshore
otherwise beneficially owns any shares of the Common Stock.
(b) With respect to the shares described in (a) above, Mr.
Duggan has sole voting and investment power with regard to the 246,400
shares held by Mr. Duggan. Mr. Duggan, Jackson Capital, Jackson Equities,
Jackson Investments and Jackson Offshore have shared voting and investment
power with regard to the 116,000 shares held by Jackson Equities, Jackson
Investments and Jackson Offshore.
(c) On August 18, 1998, 29,800 shares of the Common Stock were
distributed from Jackson Equities to Jackson Offshore.
Item 7. Material to be Filed as Exhibits
No. Description
1 Joint Filing Agreement
2 Letter from Paul J. Duggan to Mary Beth Poronsky Stull,
dated February 3, 1997.*
3 Letter from Paul J . Duggan to the Board of Directors of
the Issuer, dated December 5, 1997.*
4 Letter from Paul J . Duggan to Janine M. Poronsky, dated
December 17, 1997.*
5 Letter from Janine M. Poronsky to John M. Klimek, dated
December 23, 1997.*
6 Letter from Paul J . Duggan to Janine M. Poronsky, dated
December 30, 1997.*
7 Letter from Paul J . Duggan to Janine M. Poronsky, dated
December 30, 1997.*
8 Letter from Paul J . Duggan to Janine M. Poronsky, dated
December 30, 1997.*
9 Letter from Janine M. Poronsky to John M. Klimek, dated
January 2, 1998.*
10 Letter from John M. Klimek to Janine M. Poronsky, dated
January 5, 1998.*
11 Letter from Janine M. Poronsky to John M. Klimek, dated
January 7, 1998.*
12 Letter from Kip A. Weissman, P.C. to Vincent Cainkar, dated
January 8, 1998.*
13 Letter from Paul J . Duggan to Janine M. Poronsky, dated
August 18, 1998.
14 Letter from Paul J . Duggan to Mary Beth Poronsky Stull,
dated August 24, 1998.
_________________
*Filed as part of the Original 13D.
<PAGE>
SIGNATURES
After reasonable 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.
Date: August 25, 1998
/s/ Paul J. Duggan
Paul J. Duggan, an individual
Jackson Boulevard Fund, Ltd.
By: /s/ Paul J. Duggan
Paul J. Duggan, President
Jackson Boulevard Equities, L.P.
By: Jackson Boulevard Fund, Ltd.,
General Partner
By: /s/ Paul J. Duggan
Paul J. Duggan, President
Jackson Boulevard Investments, L.P.
By: Jackson Boulevard Fund, Ltd.,
General Partner
By: /s/ Paul J. Duggan
Paul J. Duggan, President
Jackson Offshore Fund, Ltd.
By: /s/ Paul J. Duggan
Paul J. Duggan
EXHIBIT 1
JOINT FILING AGREEMENT
Pursuant to Rule 13d-1(f)(1) under the Securities Exchange Act of
1934, as amended, the undersigned hereby agree that the Schedule 13D to
which this Joint Filing Agreement is being filed as an exhibit shall be a
joint statement filed on behalf of each of the undersigned.
Date: August 25, 1998
/s/ Paul J. Duggan
Paul J. Duggan, an individual
Jackson Boulevard Fund, Ltd.
By: /s/ Paul J. Duggan
Paul J. Duggan, President
Jackson Boulevard Equities, L.P.
By: Jackson Boulevard Fund, Ltd.,
General Partner
By: /s/ Paul J. Duggan
Paul J. Duggan, President
Jackson Boulevard Investments, L.P.
By: Jackson Boulevard Fund, Ltd.,
General Partner
By: /s/ Paul J. Duggan
Paul J. Duggan, President
Jackson Offshore Fund, Ltd.
By: /s/ Paul J. Duggan
Paul J. Duggan
EXHIBIT 13
PAUL DUGGAN
53 W. JACKSON BLVD-SUITE 400
CHICAGO, ILLINOIS 60604
(312) 294-6440
(312) 294-6449 FAX
August 18, 1998
Damen Financial Corporation
200 West Higgins Road
Schaumburg, Illinois 60195-3788
Attn: Janine M. Poronsky, Secretary
Re: Stockholders Proposal
Dear Ms. Poronsky:
I am the record owner of 400 shares and the beneficial owner of
362,400 shares of the common stock, par value $.01 per share (the "Common
Stock") of Damen Financial Corporation (the "Company"). My address of
record, as it appears on the Company's books, is 53 West Jackson
Boulevard, Chicago, Illinois 60604. As shown by the attached Schedule 13D
(including amendments), I have continuously held at least $2,000 in market
value of the Common Stock for more than one year, as of the date of this
letter. I intend to continue ownership of at least $2,000 in market value
of the Common Stock through the date of the Company's 1999 annual meeting.
I hereby give notice of my intent to introduce the attached
stockholders resolution (the "Proposal") at the 1999 annual meeting of
stockholders of the Company pursuant to Article I, Section 6(b) of the
Company's By-laws. I have no material interest in the Proposal aside from
my interest as a stockholder in the Company. I request, pursuant to Rule
14a-8 promulgated under the Securities Exchange Act of 1934, as amended,
that the Proposal and the accompanying Supporting Statement be included in
the Company's proxy materials and identified in the Company's form of
proxy for the 1999 annual meeting.
Please do not hesitate to call should you have any questions.
Very truly yours,
/s/ Paul Duggan
Paul Duggan
<PAGE>
RESOLUTION
RESOLVED, that the stockholders of the Company, believing that
the value of their investment in the Company can best be maximized through
a sale or merger of the Company, hereby request that the Board of
Directors promptly proceed to effect such a sale or merger by (i)
retaining a leading qualified investment banking firm for the specific
purpose of soliciting offers to acquire the Company by sale or merger and
(ii) establishing a committee of the Board of Directors consisting of all
directors, who are not current or former officers or employees of the
Company or related by blood or marriage to a current or former officer or
employee of the Company, to consider and recommend to the full Board of
Directors for approval the best available offer to acquire the Company by
sale or merger.
SUPPORTING STATEMENT
This Resolution and Supporting Statement were written with facts
available to this writer (Paul Duggan) as of August 18, 1998. Results of
the company's fiscal year will not be available until December of 1998. A
similar proposal was on last year's ballot and failed to carry by a narrow
margin.
Damen went public in October of 1995. On its first day of trading, I
paid $12.00 for Damen stock. In the 34 months since that point, Damen's
stock has risen to $15.25 per share (current bid). This represents a 27%
increase in the price of Damen stock. During the same time frame, the
value of the Dow Jones Industrial Average has grown at the rate of 76.64%
and the NASDAQ Bank Index has grown 97.21%. The stock of Damen has
underperformed its peer group, ignoring the dividends that have been paid
by Damen (as does the performance of all the Dow Jones Industrial Average
and NASDAQ Bank Index quoted).
I believe there are a number of reasons for the miserable performance
of Damen stock; failure to properly carry out a stock buy-back program,
mismanagement of a dividend program, mismanagement of excess capital and
failure to pay special dividends. I also feel that the Corporation may
have suffered from poor legal advice from its outside counsel.
Ultimately, the blame must fall on management. Management has chosen
its financial advisors and lawyers. Management should explore other
alternatives including the marketing of the company for the sale, the sale
of specific branches or the payment of a large dividend. Since Management
was given a warning by its shareholders last year, the stock has gone
down.
Management bragged that the stock price increased to $15.75 during
the 1997 fiscal year. The stock price is down in the ensuing period of
time. It is time to do something different. A No vote is a vote for
management and mediocre performance. A Yes vote for the shareholder
proposal is a vote to move forward and a vote for change. I urge you to
consider voting Yes for the proposal.
VOTE YES
EXHIBIT 14
PAUL DUGGAN
53 W. JACKSON BLVD-SUITE 400
CHICAGO, ILLINOIS 60604
(312) 294-6440
(312) 294-6449 FAX
August 24, 1998
Ms. Mary Beth Poronsky-Stull
Damen Financial Corp.
200 West Higgins Road
Schaumburg, IL 60195-3780
Dear Mary Beth:
You should be in receipt of my shareholder proposal. In recent weeks, the
market price of stock at Damen Financial (Damen) has gone down
dramatically. It currently trades at $15 per share, which is down from
its 52 week high of 19-1/4 and near its 52 week low of $14.
I am in receipt of management's letter to shareholders (accompanying the
dividend check) which discusses how well things are going. The market
obviously sees the performance of Damen's stock in a fashion other than
the way you and management look at it. If the market was excited, this
stock would be setting new highs not nearing new lows. The stock has been
down since the annual meeting and now trades at around book value.
I believe the time has come to sell the company. There are a number of
things that can be done to add value now while you market the company for
sale. I offer the following outline as a possible way for you to enhance
the price of your stock and the ultimate sellout value of the company.
1. Initiate a new buyback program. Approve and announce a buyback
program for up to 20% of the stock of Damen Financial. Indicate that
the program will be in place over the next year. This approach,
which would be consistent with your change to a national bank charter
(the benefits of which you have not availed yourself of) would have
the following advantages.
a. For every share of stock Damen purchased, Damen would not
have to pay a 48 cent annual dividend on those shares.
b. With the stock currently trading at/or below book value,
stock purchases in this range would be accretive to earnings per
share and to book value.
c. All stock repurchases would help your excess capital
problems.
d. Rather than having Mr. Gartner handle this buyback, I would
use the services of Sandler O'Neill & Partners or Robert Baird &
Company. I think an outside advisor would be helpful.
When looking at buybacks, Damen should assess the impact on earnings.
Net interest margin is only 2.95% (pre-tax). This would be about
1.77% after tax. Dividends currently cost 48 cents per year with
after-tax money. This is a 3.2% cost (after tax) on a $15 buyback.
It clearly is cheaper to use excess capital to do buybacks than to
invest in marginal investments with a 1.77% after tax yield.
2. Dividend Increase. Your current dividend is 12 cents per quarter or
48 cents per year. Consider an instant increase of 25% to 15 cents
per quarter and 60 cents per year based on the following thoughts:
a. A 60 cent dividend would infer a 4% yield on a $15 stock
price (a strong support for the stock).
b. A dividend in excess of current earnings would help reduce
your excess capital.
c. There is no reason a dividend cannot exceed earnings per
share. I refer you to the recently sold Southwest Financial (SWBI).
SWBI paid 25 cents per quarter in dividends as a way to reduce their
excess capital.
d. You can pay a 60 cent per share dividend on 80% of current
shares with the same amount of money as a 48 cent dividend on 100% of
shares. Current shares outstanding are 2,967,154, with an inferred
annual dividend cost of $1,424,234. If 20% of the shares are
repurchased before the next dividend, you could go to a 60 cent
annual rate and have the same annual dividend cost.
3. Reconfigure your Board of Directors. You currently have 3 directors
up for re-election at the next annual meeting. Why not have your two
senior directors retire early and appoint two outside directors now.
This would have a number of advantages.
a. Adding Board of Directors with financial expertise would
assist you in considering strategies such as dividend increases and
buybacks.
b. A change in the Board would be a signal to outside
investors that you are making a move forward.
c. In conjunction with the appointment of Mr. Baldermann, you
would have added strong financial advisors to your core group. I
could give you a list of quality advisors with banking, lending, and
financial experience. I think you and your board should be receiving
better advice.
4. Consider changing your option programs. Does your current option
program provide for acceleration of vesting upon change in control?
Does your current option program call for a reduction of the option
strike prices in the event the special dividend is paid? If your
current plan does not have these provisions, you should add them to
the agenda for your annual meeting and you should question the legal
advice that you are currently receiving.
I think you have a tremendous opportunity to enhance shareholder value,
retire shares at book value or a discount to book value and increase short
term and long term shareholder value. You must take advantage of these
market conditions. You must move quickly to do so.
Please feel free to call me at (312) 294-6440 if you wish to discuss the
issues outlined in this letter.
Very truly yours,
/s/ Paul J. Duggan
Paul J. Duggan, an individual shareholder
53 West Jackson Boulevard, Suite 400
Chicago, IL 60604
