<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
DAMEN FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
PRELIMINARY PROXY MATERIALS DATED DECEMBER 31, 1998
The information included herein is as it is expected to be when the
definitive proxy statement is mailed to stockholders of Damen Financial
Corporation. This proxy statement will be revised to reflect actual facts at
the time of the filing of the definitive proxy statement.
1999
ANNUAL MEETING OF STOCKHOLDERS
OF
DAMEN FINANCIAL CORPORATION
PROXY STATEMENT OF
PAUL J. DUGGAN
AND THE COMMITTEE TO ENHANCE SHAREHOLDER VALUE
--------------
IMPORTANT INFORMATION ABOUT THE ANNUAL MEETING
WHY YOU WERE SENT THIS PROXY STATEMENT
This Proxy Statement and the enclosed BLUE proxy card are first
being furnished to you on or about January 4, 1999 by Paul J. Duggan and the
Committee to Enhance Shareholder Value (the "Committee") in connection with
the solicitation of proxies for the 1999 Annual Meeting of Stockholders of
Damen Financial Corporation ("Damen" or the "Company"), whenever held, and
any adjournment(s) or postponement(s) thereof (the "Annual Meeting"). On
August 12, 1998, the Company announced that the next Annual Meeting would be
held on January 25, 1999 at 9:30 a.m. (local time) at the Holiday Inn,
located at 3405 Algonquin Road, Rolling Meadows, Illinois.
On December 24, 1998, Damen announced that it intended to delay the
Annual Meeting until February 26, 1999. It is the Committee's understanding
that Damen intends to change the record date of the Annual Meeting from
December 9, 1998 to January 11, 1999. It is the Committee's position that the
attempt to delay the Annual Meeting and to change the record date is invalid
and in violation of the law. These issues are the subject of litigation filed
by Paul J. Duggan in Delaware Chancery Court on December 30, 1998.
Specifically, in order to preserve the stockholders' right to elect directors
and vote on the stockholder proposal on January 25, 1999, Mr. Duggan has
petitioned the court to enjoin the delay in the Annual Meeting date and the
change in the record date.
Mr. Duggan and the Committee are soliciting proxies in the
anticipation that the Annual Meeting will be held on January 25, 1999, and we
request that shareholders complete, sign, date and mail the endorsed BLUE
proxy card with this anticipated Annual Meeting date in mind. We note that
the Company may advise you to consider its proxy materials and request that
you return proxy materials to the Company's representatives or proxy
solicitors in accordance with a different schedule, and that the Delaware
Chancery Court may fail to enjoin the delay in the Annual Meeting. If the
Annual Meeting is held on the date other than January 25, 1999, the enclosed
materials should still be considered applicable to the Annual Meeting.
We request Damen shareholders to read and consider these materials
and return the BLUE Proxy Card promptly in the event the Annual Meeting takes
place on the originally scheduled meeting date of January 25, 1999.
MR. DUGGAN AND THE COMMITTEE RECOMMEND A VOTE FOR PAUL J. DUGGAN,
VINCENT CAINKAR AND J. DENNIS HUFFMAN AS DIRECTORS AND A VOTE "FOR" THE
STOCKHOLDER PROPOSAL TO APPOINT AN INVESTMENT BANKER AND ESTABLISH AN
INDEPENDENT COMMITTEE TO EVALUATE PROPOSALS TO SELL OR MERGE THE COMPANY.
<PAGE>
Paul Duggan is a Damen stockholder and Manager of Jackson Boulevard
Partners ("Jackson Partners"), an investment consulting firm in Chicago,
Illinois, and President of Jackson Boulevard Equities, Ltd., ("Jackson
Equities"), an investment fund with an emphasis on securities of savings and
loans, banks and other companies in the banking field. The members of the
Committee are Paul Duggan, Vincent Cainkar, a Damen stockholder and bond
attorney who has represented many financial institutions, J. Dennis Huffman,
a Damen stockholder and a former chief operating officer of Beverly Bank, and
Jackson Partners, Jackson Equities, Jackson Boulevard Investments, L.P.
("Jackson Investments"), Jackson Boulevard Capital Management Ltd. ("Jackson
Fund"), and Jackson Offshore Fund, Ltd. ("Jackson Offshore"), which are
investment funds of which Paul Duggan serves as Manager or President. The
members of the Committee have beneficial ownership of a total of 273,800
shares of Common Stock, par value $.01 per share, of the Company ("Damen
Common Stock"), representing approximately 9.7% of issued and outstanding
Damen Common Stock.
WHAT YOU ARE VOTING ON
At the Annual Meeting, among other things, the stockholders of the
Company will be asked to vote to:
- elect three directors;
- ratify the appointment of Cobitz, VandenBerg & Fennessy as the
auditors of the Company for the fiscal year ending September 30,
1999; and
- approve a stockholder proposal directing the Board of Directors
of the Company to appoint an investment banker to pursue merger
or acquisition candidates for the Company and to establish a
committee consisting of all directors who are not current or
former officers or employees or relatives of current or former
officers or employees of the Company in order to consider and
recommend to the full Board of Directors for approval the best
available offer to acquire the Company by sale or merger.
On December 16, 1998 Damen announced that it engaged Keefe Bruyette
and Woods, Inc. to serve as its financial advisor to assist it in reviewing
its strategic options, including a possible sale of the Company. As discussed
in more detail under the caption "Stockholder Proposal to Appoint an
Investment Banker," Mr. Duggan and the Committee believe that these actions
do not constitute substantial implementation of the stockholder proposal
discussed above.
WHO CAN VOTE AT THE ANNUAL MEETING
Stockholders who owned shares of Damen Common Stock at the close of
business on the record date set by the Board of Directors of the Company
("the "Record Date") are entitled to vote at the Annual Meeting. It is the
Committee's understanding that the Damen Board of Directors originally set
December 9, 1998 as the Record Date, but have attempted to redesignate the
Record Date as January 11, 1999 in connection with its attempted delay in the
Annual Meeting. The Committee's position is that the redesignation of the
Record Date is invalid and in violation of the law and has filed litigation
against the Company and the Damen Board of Directors seeking an injunction
against the redesignation of the Record Date. On December 9, 1998, according
to the Company's annual report on Form 10-K filed by the Company with the
U.S. Securities and Exchange Commission (the "SEC") on December 30, 1998,
there were 2,820,154 issued and outstanding shares of the Company's Common
Stock. Each share of Damen Common Stock held on the Record Date is entitled
to one (1) vote at the Annual Meeting.
HOW TO VOTE BY PROXY
To elect Mr. Duggan's nominees to the Board, and to vote in favor of
the stockholder proposal set forth in this Proxy Statement promptly complete,
sign, date and mail the enclosed BLUE proxy card in the enclosed postage-paid
envelope. Whether you plan to attend the annual or meeting or not, we urge
you to complete and return the enclosed BLUE proxy card.
Properly executed proxies will be voted in accordance with the
directions indicated thereon. If you sign the BLUE proxy card but do not make
any specific choices, your proxy will vote your shares as follows:
-2-
<PAGE>
- "FOR" the election of Mr. Duggan's three nominees to the Board of
Directors, Paul J. Duggan, Vincent Cainkar and J. Dennis Huffman.
- "FOR" the ratification of the appointment of Cobitz, VandenBerg &
Fennessy as the auditors of the Company for the fiscal year ending
September 30, 1999
- "FOR" the stockholder proposal directing the Board of Directors
of the Company to appoint an investment banker to pursue merger
or acquisition candidates for the Company and to establish a
committee consisting of all directors who are not current or
former officers or employees or relatives of current or former
officers or employees of the Company in order to consider and
recommend to the full Board of Directors for approval the best
available offer to acquire the Company by sale or merger.
If any other matter is presented at the Annual Meeting, your proxy
will vote in accordance with his best judgment. At the time this Proxy
Statement was mailed, we knew of no matters which needed to be acted on at
the Annual Meeting, other than those discussed in this Proxy Statement.
If any of your shares are held in the name of a brokerage firm,
bank, bank nominee or other institution on the record date, only that entity
can vote your shares and only upon its receipt of your specific instructions.
Accordingly, please contact the person responsible for your account at such
entity and instruct that person to execute and return the BLUE proxy card on
your behalf. You should also sign, date and mail the voting instruction form
your broker or banker sends you when you receive it. Please do this for each
account you maintain to ensure that all of your shares are voted.
HOW YOU CAN REVOKE A PROXY
IF YOU HAVE EXECUTED THE BOARD OF DIRECTORS' PROXY CARD
BEFORE RECEIVING MR. DUGGAN'S PROXY STATEMENT, YOU HAVE EVERY RIGHT TO CHANGE
YOUR VOTE BY COMPLETING, SIGNING, DATING AND RETURNING THE ENCLOSED BLUE
PROXY CARD. ONLY YOUR LATEST DATED PROXY WILL COUNT AT THE ANNUAL MEETING.
ANY PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED BY (i) SUBMITTING A
DULY EXECUTED PROXY CARD BEARING A LATER DATE TO THE SECRETARY OF THE COMPANY
OR TO MR. DUGGAN, (ii) FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN
REVOCATION, OR (iii) ATTENDING AND VOTING AT THE ANNUAL MEETING IN PERSON.
WHO YOU CAN CALL IF YOU HAVE QUESTIONS
If you have any questions concerning this Proxy Statement or need
assistance in voting your shares, please call Paul J. Duggan at (888) 522-5332
or Mr. Duggan's proxy solicitor:
THE ALTMAN GROUP, INC.
60 East 42nd Street,
Suite 1241
New York, NY 10165
(212) 681-9600
ANNUAL MEETING PROPOSALS
At the Annual Meeting, the Company's stockholders will be asked to
vote on the following matters: the election of three directors; the
ratification of the appointment of Cobitz, VandenBerg & Fennessy as the
auditors of the Company; and a stockholder proposal directing the Company to
appoint an investment banker to pursue merger or acquisition candidates for
the Company and establish a committee composed of independent directors to
evaluate proposals to sell or merge the Company. As discussed in more detail
below, we believe that the current Board of Directors as a group have not
been acting in your best interests as stockholders of the Company. The
election of the directors nominated by Mr. Duggan and the approval of the
stockholder proposal is, in our opinion, in your best interest as a
stockholder.
-3-
<PAGE>
1. ELECTION OF THREE DIRECTORS
Damen's Board of Directors consists of seven directors, who serve
three-year terms. Three of the seven directors are being elected at this
year's Annual Meeting. Mr. Duggan and the Committee are proposing three
nominees for election as directors of Damen: Mr. Duggan himself, Vincent
Cainkar and J. Dennis Huffman.
We are asking you to elect the three directors nominated by Mr.
Duggan and supported by the Committee, instead of the directors nominated by
the Company. We believe it is in your best interest as a stockholder to do so
because we believe that the performance of the current Board of Directors has
been inadequate in the areas of increasing stockholder value, increasing the
profitability of the Company and taking advantage of opportunities available
to the Company.
We believe that Mr. Duggan's nominees have superior experience in
the management and supervision of financial institutions and the successful
sales of financial institutions, are more independent and will be more
dedicated to enhancing stockholder value than the Company's anticipated
nominees and the current membership of the Company's Board of Directors.
In addition, Mr. Duggan and the Committee have concluded that Damen
should seriously explore whether it can be acquired or merged. Mr. Duggan's
three nominees for director, Mr. Duggan, Mr. Cainkar and Mr. Huffman, will
recommend that the Board engage an investment banker and aggressively pursue
the acquisition or merger of Damen as an alternative for increasing the value
of Damen to stockholders. In this respect, if elected, Mr. Duggan's nominees
will constitute only three of seven directors and therefore cannot compel the
Board to act and can only advise that Damen seriously consider proposals of
acquisition or merger.
HOW WE DISAGREE WITH CURRENT DIRECTORS ON OPERATION OF THE COMPANY - OUR
OBJECTIVES
We believe that the current management and Board of Directors of the
bank have failed to maximize stockholder value and the profitability of the
Company and that this is evident in the performance of the Company as
compared to other financial institutions in the following areas: stock price,
capital ratio, and efficiency ratio.
STOCK PRICE
Over the three years since Damen's Common Stock commenced trading on
the NASDAQ National Market System, the return on Damen's Common Stock has
underperformed each of the NASDAQ Bank Index (an index of U.S. banks stock
traded on NASDAQ published by NASDAQ), the SNL Thrift Index (an index of
savings and loans institutions published by SNL Securities) and the SNL Bank
& Thrift Index (an index of bank and thrift institutions published by SNL
Securities). A table comparing the returns of Damen's Common Stock to these
indices as well as to the Dow Jones Industrial Average and S&P 500 is set
forth below.
-4-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name 10/02/95 12/16/98 % Change
- ------------------------------------------------------------------------------
DAMEN FINANCIAL CORPORATION (1) 11.500 13.750 19.57%
NASDAQ BANK INDEX 962.090 1,751.490 82.05%
SNL THRIFT INDEX 361.100 650.900 80.25%
SNL BANK & THRIFT INDEX 189.400 387.300 104.49%
DOW JONES INDUSTRIAL AVERAGE 4,761.260 8,790.600 84.63%
S&P 500 581.720 1,161.940 99.74%
- ------------------------------------------------------------------------------
</TABLE>
(1) Damen converted from a mutual to stock form of ownership in
1995. Damen issued its initial stock on October 2, 1995. The price shown for
Damen is its closing price on the first day of trading.
CAPITAL RATIO, DIVIDENDS AND STOCK BUYBACKS
The Company's capital ratio (tangible equity divided by assets) is
significantly higher than that of many other profitable financial
institutions. According to the April 17, 1998 issue of Sandler O'Neill Bank
Stock Monthly, the mean tangible equity to asset ratio for banks with assets
of less than $500 million was 10.46% as of December 31, 1997. Damen's equity
to asset ratio as of December 31, 1997, according to the same publication,
was 19.88%. Additionally, Damen's capital ratio is significantly higher than
the capital required by The Office of the Controller of the Currency ("OCC").
The OCC requires minimum capital ratios between 3 and 5% of adjusted total
assets (according to Damen's report on Form 10-Q for the quarter ended June
30, 1998 filed with the SEC on August 14, 1998 (the "Form 10-Q")). Despite
the lower OCC minimum, we believe that the optimum capital ratio for a
financial institution such as the Company is in the range of 8-10%.
According to the Form 10-Q, the Company's current Tier 1 Capital (as defined
in the Form 10-Q) is 17.8%. We believe that through more aggressive use of a
stock buyback program or declaration of dividends, the Company could decrease
its excess capital and enhance stockholder value.
Management contends they are addressing the problem of excess capital.
However, for the first nine months of fiscal year ended September 30,1998 the
Company earned $.51 per share and only distributed $.28 to shareholders. We
believe we can influence management through our Board of Directors'
participation to increase dividends. Given the high capital ratio the
Company enjoys currently, we believe that dividends can be raised immediately
to $1.00 per year or higher until such time as the excess capital ratio is
reduced to a figure closer to the industry average. This move not only would
help reduce the excess capital but also support the stock price of the
Company. A dividend of $1.00 would give the stockholders a current yield of
more than 7% based on the stock price of $13.75.
A formal, well-planned stock buyback program is an important cornerstone
in management of the Company's excess capital. We have been a consistent
proponent of stock buybacks. Although the Company had in place a stock
buyback program earlier this year, that program terminated in early August
and the Company did not immediately enact a new stock program. Throughout
much of the month of August, the stock price of the Company fell along with
the broad stock market. Because management did not have a formal stock
buyback plan in place, the Company could not take advantage of the falling
stock price to repurchase share at prices below book value. Members of the
Committee made repeated phone calls to members of the Company's management
and Board of Directors in an effort to initiate another stock buyback, and in
a letter to the Company dated August 24,1998, a copy of which is attached as
Exhibit 1, proposed a 20% stock buyback. Management failed to respond
promptly to our suggestion.
-5-
<PAGE>
The Company's Board of Directors did not announce a new stock buyback
program until September 11, 1998. The action in the stock market in late
August had given the Company opportunities, but the failure of management and
the Company's Board of Directors to have a program in place cost the Company
and all its stockholders. The Company had missed an opportunity to support
the stock price, redeem shares at prices far below book value and make
effective use of the excess capital. During the period of time between the
Company's buybacks, over 200,000 shares of the Company's stock were traded.
Most shares traded below book value. The Committee believes it can help the
Company by implementing an open stock buyback program, which will reduce
excess capital issue and be accretive to book value and ultimately franchise
value.
The Board of Directors takes credit for seven buyback programs, yet did
not promptly put in place a stock buyback program when the Company's stock
was at 52 week lows. Our director nominees will attempt to insure that stock
buybacks are handled more aggressively and are continually in place in order
to reduce excess capital. Ironically, the Company's management claimed they
moved to an OCC charter to take advantage of the buybacks allowed under OCC
regulations, yet when the market and the Company's stock suffered in late
August, the Company had no program in place.
In the Company's response to the stockholder proposal of Mr. Duggan that
is set forth below in this Proxy Statement, the Company asserts that "it is
unrealistic to expect the Company's stock price to be unaffected by a
turbulent stock market." While Mr. Duggan and the Committee acknowledge
that the stock price of the Company can be expected to be affected by the
broader market, we believe that given the Company's excess capital ratio, it
is clearly the responsibility of the Company's Board of Directors and
management to have in place an open stock buyback program to take advantage
of those instances when the Company's stock price does fall below its book
value.
EFFICIENCY RATIO AND LEVERAGE
We also believe that the salaries and other expenses paid by the
Company are excessive as evidenced by the Company's high efficiency ratio,
which measures the amount of capital expended by the Company to earn each
dollar of profit. The higher the efficiency ratio, the more money the Company
is expending per dollar of profit. Many financial institutions have a lower
efficiency ratio than Damen's. According to the April 17, 1998 edition of
issue of Sandler O'Neill Bank Stock Monthly, as of December 31, 1997, the
mean efficiency ratio for banks with assets of less than $500 million was
62.5%. According to the same publication, Damen's efficiency ratio as of
December 31, 1997 was 70.8%. Moreover, the Company's efficiency ratio is
increasing, not decreasing, from 61.11% for the fiscal year ended September
30, 1996 to 72.12% for the fiscal year ended September 30, 1998, and
increased again to 75.53% for the three months ended September 30, 1998. We
believe that we can reduce the Company's efficiency ratio by reducing
officers' salaries and other related compensation costs. The Company's
conversion from a thrift charter under the Office of Thrift Supervision to a
national bank charter under the OCC brings with it increased costs. A merger
or sale of the Company would save the Company and its stockholders from
experiencing a period of increasing costs as the Company tries to become a
bank. It should be noted that as of the last annual meeting and a year after
converting to a bank charter, the Company still was not open for business on
Wednesday and did not have a full-time commercial loan officer on its payroll.
-6-
<PAGE>
The increased borrowings of the Company from the Federal Home Loan
Board (from $56,500,000 for the fiscal year ended September 30, 1997 to
$61,800,000 for the fiscal year ended September 30, 1998) also may pose a
danger to the Company if interest rates increase. The use of borrowings
(essentially a margin loan) allows the Company to leverage its investment
portfolio. We believe, in light of recent incidents in which other
financial institutions incurred substantial losses as a result of the use of
leverage in their investment portfolio, that most stockholders would not
favor the Company increasing its borrowings for speculation in the purchase
of a bond portfolio.
In addition, the Company does not have an adequate market strategy
because its three branches are not located within close proximity to each other.
For example, the Schaumburg branch is approximately 24 miles from Burbank branch
and 26 miles from the Chicago branch. The Committee supports sale of the
Schaumburg branch in order to maximize stockholder value and reduce expenses.
To maximize share values, Mr. Duggan and the Committee have
concluded that Damen should seriously explore the feasibility of being
acquired by or merging with another institution. If elected, our nominees
will recommend that the Board engage an investment banker and aggressively
pursue the acquisition of Damen as an alternative for increasing share
values, although these nominees will be open minded and will consider all
recommendations from other stockholders or directors. Mr. Duggan and the
Committee, therefore, support the stockholder proposal set forth in the
Damen Board of Directors Proxy Statement that recommends the appointment of
an investment banker. If you share this view, then you should vote for our
nominees. If elected, our nominees would constitute only three of seven
directors and could not compel action by the Board. However, by electing our
candidates, we believe you will be sending a message to the remaining Board
members that you wish them to focus on enhancing share values.
None of the members of the Committee know of any agreements or
understandings concerning the possible acquisition of Damen and there can be
no assurance that an acquisition can be effected at prices materially above
the current market value for Damen Common Stock.
SUMMARY OF OUR OBJECTIVES
Mr. Duggan's nominees, if elected, intend to take all reasonable actions
necessary to increase shareholder value. These actions may include one or
more of the following:
1. Utilizing an investment banker to solicit bids for the sale of the
Company at the highest price available to shareholders;
2. Immediately increasing dividends in order to reduce the Company's excess
capital;
3. Initiating and maintaining a stock buyback program in order to purchase
shares if Damen's stock price falls below its book value again;
4. Reducing operating expenses, including a potential decrease in management
salaries, in order to bring Damen's efficiency ratio more in line with
Damen's competitors;
5. Evaluating and potentially replacing Damen's officers, management and
advisers in order to ensure competent management of the operations of the
Company and a greater dedication to maximization of shareholder value; and
6. Evaluating the need for, and potentially closing, Damen's Schaumburg
branch.
However, because our nominees, if elected, would constitute only
three of seven directors and could not compel action by the Board of
Directors, there can be no assurance that any of the above-listed actions
would be taken.
WHY THE DIRECTORS NOMINATED BY PAUL DUGGAN WILL BETTER SERVE INVESTORS THAN
DAMEN'S ANTICIPATED NOMINEES
Mr. Duggan and the other members of the Committee have collectively
invested more than $3,000,000 in shares of Damen Common Stock, and as of
December 15, 1998, Mr. Duggan himself beneficially owned 266,600 shares of
Damen Common Stock. Mr. Duggan and the Committee believe that this
significant investment entitles Mr. Duggan to representation on the Board of
Directors and uniquely qualifies him to represent stockholders who are
concerned about enhancing stock values. All of the shares purchased by Mr.
Duggan and other members of the Committee have been purchased at market price
and not at favorable option prices, as is the case with many of the shares
held by the Directors supported by management. In our opinion, Mr. Duggan's
significant stockholdings in the Company more closely align his interests
with your interests as stockholders as compared to current members of the
Board of Directors.
Mr. Duggan has over 20 years of experience in investing in
securities of banks and financial institutions. Since 1993, Mr. Duggan has
served as Managing General Partner of Jackson Equities, which was organized
as a limited partnership for the purpose of investing in marketable
securities with an emphasis on securities of savings and loans, banks and
other companies in the banking field. Mr. Duggan is also President of Jackson
Fund, a hedge fund management firm. Jackson Fund offers money management and
venture capital activities in addition to managing hedge funds which
concentrate in investing in the thrift and small cap bank areas. In this
position, Mr. Duggan has invested in over 150 financial institutions,
including over 40 financial institutions that have been acquired or that have
merged with other financial institutions.
-7-
<PAGE>
Vincent Cainkar is a nationally recognized bond counsel and has
rendered legal opinions on bond issues in excess of $200 million and has
rendered legal advice to several Chicago area banking institutions. Mr. Cainkar
is an independent investor and founder of several real estate entities that have
developed Chicago area commercial and residential projects, including the
172-unit Burbank Manors Senior Citizen Apartments.
J. Dennis Huffman spent 20 years in banking before leaving the
position of chief operating officer of Beverly Bank, the lead bank for
Beverly Bancorp, a $600 million institution with 5 branches. He was a bank
director and served as board liaison between the client banks. During Mr.
Huffman's term at Beverly, the bank merged with Matteson Richton Bank, opened
branches in Orland Park and West Beverly, as well as acquired a bank in
Wilmington, Illinois. Beverly Bancorp. recently merged with St. Paul Bancorp.
Information with respect to these nominees is set forth under the
caption "Paul Duggan's Nominees".
As of the date of this Proxy Statement, Damen has not publicly
announced the nominees selected by the Board of Directors' Nominating
Committee for the three director positions to be elected at the 1999 Annual
Meeting. The three directors whose terms expire this year include
Edward R. Tybor, who since 1951 has owned and operated the Kubina-Tybor funeral
home, Charles J. Caputo, who from 1947 until his retirement in 1996, owned
Caputo Southwest Cement, a construction company located in Orland Hills,
Illinois, and Janine M. Poronsky, the sister of Damen's President, Mary Beth
Poronksy Stull, who until joining Damen as a compliance officer in 1991 was
employed as an attorney for the United States Internal Revenue Service.
The biographies for Messrs. Tybor and Caputo contained in the proxy
statement filed by Damen with the SEC on January 13, 1998 do not describe the
existence of any experience in the operation or supervision of any financial
institutions other than such individuals' service on Damen's Board of Directors.
In addition, the biography for Ms. Poronsky does not describe the existence of
any experience with any other financial institution other than Damen.
None of Messrs. Duggan, Cainkar or Huffman have served as officers
or directors of Damen, are related to any current or former officers or
directors of Damen, or have received any direct or indirect compensation by
Damen. Mr. Duggan and the Committee believe that the shareholders might best
be served by outside directors that do not have familial or financial ties to
Damen and its management and that have not served on the Damen Board of
Directors for long periods of time. Of the seven current directors of Damen,
two are officers of the Company, and of the five outside directors, one
director, Nicholas J. Raino, has a greater than 10% equity interest in a firm
(Dale Smith & Associates, Inc.) that has long been utilized by the Company to
provide marketing, advertising and other services. During the Company's 1997
fiscal year, this firm was paid $89,225 by the Company for its services and
reimbursed $326,551 for services and products provided by third party
sources, according to the Company's Proxy Statement filed on January 13,
1998. Moreover, three of the remaining outside directors, Carol A. Diver,
Charles J. Caputo and Edward R. Tybor have served on the board for 15, 22 and
31 years, respectively, and thus have extensive relationships with the
Company's management that extend prior to the Company's conversion into a
public company.
PAUL DUGGAN'S NOMINEES
The table set forth below identifies our three nominees for election as
new directors of Damen and provides information concerning each of these
nominees.
<TABLE>
<CAPTION>
<S> <C> <C>
NAME AGE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------
Paul Duggan 48 Manager/Owner, Duggan & Associates; Manager, Jackson
(Nominee) Boulevard Partners; President, Jackson Boulevard
Capital Management, Ltd.
- --------------------------------------------------------------------------------
Vincent Cainkar 49 Attorney for the City of Burbank, Village of Evergreen
(Nominee) Park, City of Hickory Hills, Village of McCook, and
Stickney Township
- --------------------------------------------------------------------------------
J. Dennis Huffman 55 Partner, DHK Development Corp.; Trader, Chicago Board
(Nominee) of Trade; Senior Loan Workout Agent, Resolution Trust
Corporation
- --------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
Further biographical information about Paul Duggan's nominees is set
forth below:
PAUL J. DUGGAN, a life long resident of Chicago, is a licensed CPA
in the State of Illinois. Mr. Duggan owns and has managed a consulting firm,
Duggan and Associates, which specializes in litigation consulting, since
1976, and has managed Jackson Partners, an investment consulting firm in
Chicago, since 1991. Mr. Duggan has served as an expert witness in commercial
litigation issues, in damages analysis areas and has testified in federal and
state courts on issues concerning business valuation, intellectual property,
unjust enrichment, and various damages areas. Mr. Duggan is also President of
Jackson Fund, a hedge fund management firm. Jackson Fund offers money
management and venture capital activities in addition to managing hedge funds
which concentrate in investing in the thrift and small cap bank areas.
Mr. Duggan currently manages portfolios with investments in thrifts in excess
of $70 million as well as over $50 million in venture capital and private
real estate partnerships. Mr. Duggan serves on the Boards of Directors of
Marinette Marine Corporation in Marinette, Wisconsin (a manufacturer of ocean
going vessels for the U.S. Coast Guard, U.S. Navy, and commercial customers),
Marigold Services of Chicago, Illinois (a dry and liquid sugar storage
terminal) and Napleton St. Louis Honda in St. Peters, Missouri (a retail
Honda dealer). Mr. Duggan received his B.B.A. in business administration from
Loyola University of Chicago in 1974 and his CPA in the State of Illinois in
1975.
VINCENT CAINKAR, a life long resident of the Chicago area, is a
licensed attorney in the States of Illinois and Florida and a licensed real
estate broker in the State of Illinois. He has been in private legal practice
since 1974 and currently serves as an attorney for the City of Burbank, Village
of Evergreen Park, City of Hickory Hills, Village of McCook, Stickney Township
and other local governmental entities. He is a nationally recognized bond
counsel and rendered legal opinions on bond issues in excess of $200 million and
has rendered legal advice to several Chicago area banking institutions.
Mr. Cainkar is an independent investor and founder of several real estate
entities that have developed Chicago area commercial and residential
projects, including the 172-unit Burbank Manors Senior Citizen Apartments.
Mr. Cainkar received his B.A. in Chemistry from St. Louis University in 1971
and his J.D. from the DePaul University College of Law in 1974.
J. DENNIS HUFFMAN graduated from DePauw University and holds an MBA
from Northwestern University's Kellogg Graduate School of Management.
Mr. Huffman spent 20 years in the banking business before leaving the
position of chief operating officer of Beverly Bank, the lead bank for
Beverly Bancorp. He was a bank director and served as board laison between
the client banks. Mr. Huffman also served as a Senior Loan Workout Agent for
Resolution Trust Corporation. He is currently a partner in DHK Development
Corp, developer and leasing agent for commercial and residential real estate
and an active trader of U.S. Treasury Bond contracts on the floor of the
Chicago Board of Trade. DHK controls over $5,000,000 of commercial and
residential real estate.
There are no arrangements or understandings between Mr. Duggan's
nominees and any other person pursuant to which they were selected as
nominees, except that the nominees named above have consented to serve as
directors if elected. Mr. Duggan and the Committee do not expect that the
nominees will be unable to stand for election; but, in the event that any
nominee should be unable to stand for election, the Common Stock represented
by the enclosed BLUE proxy card will be voted for a substitute candidate
selected by Mr. Duggan.
-9-
<PAGE>
COMPENSATION OF DIRECTOR NOMINEES
None of the persons nominated by Paul Duggan to serve as directors of
the Company is or has been a director or officer of the Company nor have any of
them received any compensation from the Company. No discussions have been held
and, except as indicated in the Proxy Statement, there are no understandings
with respect to any proposed remuneration from any source for these nominees in
connection with serving as a director of Damen if elected. However, if our
nominees are elected as directors of Damen, it is anticipated they will receive
the same compensation as other directors. According to the Proxy Statement filed
by the Company with the SEC dated on January 13, 1998, each member of the Board
of Directors of the Company is paid a fee of $500 per Board meeting.
2. STOCKHOLDER PROPOSAL TO APPOINT AN INVESTMENT BANKER AND TO
ESTABLISH AN INDEPENDENT COMMITTEE
At the Annual Meeting, the stockholders will be asked to vote to
approve or disapprove a stockholder proposal directing the Company's Board of
Directors to appoint an investment banker and establishing a committee
consisting of all directors who are not current or former officers or
employees or relatives of current or former officers or employees of the
Company in order to consider and recommend to the full Board of Directors for
approval the best available offer to acquire the Company by sale or merger.
The specific resolution reads as follows:
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.
Mr. Duggan and the Committee have concluded that Damen should
seriously explore whether it can be acquired or merged to take advantage of
opportunities currently existing in the banking industry. Accordingly, on
numerous occasions, Mr. Duggan requested the Company to consider appointing
an investment banking firm for the purposes of evaluating and soliciting
offers to acquire the Company. See letters of Mr. Duggan dated August 24,
1998 and December 5, 1997, which are attached hereto as Exhibits 1 and 2.
On December 16, 1998, Damen announced that it engaged Keefe Bruyette
and Woods, Inc. ("Keefe") to serve as its financial advisor to assist it in
reviewing its strategic options, including a possible sale of the Company. We
believe that although the appointment of Keefe is a positive step, it does
not constitute substantial implementation of the stockholder proposal. The
stockholder proposal specifically requests the Board of Directors to promptly
proceed to effect a sale or merger of the Company, not merely to review
strategic options, one of which may be a sale of the Company. Damen has not
disclosed publicly whether it has specifically directed Keefe to solicit
offers for the sale of the Company. Accordingly, we believe that approval of
the stockholder proposal is necessary to ensure that the Board of Directors
will specifically direct Keefe, or any other investment banking firm
appointed by the Company to not only to review its strategic options, but to
solicit offers for the sale of the Company.
-10-
<PAGE>
In addition, we believe the appointment of a committee of
independent 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 evaluate and recommend an offer is necessary to
ensure the selection of the best possible offer.
We believe that the reluctance of the current Board of Directors to
appoint an investment banker until less than 45 days prior to a stockholder
vote requiring such action, despite repeated stockholder requests to take
such action, is evidence of the influence of management over the Board of
Directors' and the insufficient responsiveness of the Board of Directors to
the concerns of stockholders.
For these reasons, we believe that it is necessary to appoint an
committee of independent directors to evaluate acquisition proposals, and to
direct the investment bank retained by the Company to solicit offers for the
purchase of the Company.
At the annual meeting of stockholders held on January 27, 1998 a
similar proposal was made. The majority of votes cast at the meeting were in
favor of hiring an investment banker. The vote count was 1,180,889 cast in
favor of the proposal and 1,168,000 votes against. However, the Company's
bylaws restrict voting of shares (by one individual or group) in excess of
10% of total votes outstanding. Accordingly, the number of votes for the
proposal was reduced by 51,672 shares. Such reduction allowed the proposal to
fail.
Although management knew that if not for the bylaw restriction
described above the stockholder proposal would have passed, the Company did
not announce the appointment of an investment banker until December 16, 1998.
The appointment of the investment banker does not make this issue moot and
does not lessen the need for passage of the stockholder proposal. The
current stockholder proposal directs the Board to appoint an investment
banking firm for the specific purpose of soliciting offers to acquire the
Company, not merely to evaluate its strategic options. Moreover, the current
stockholder proposal calls for the recommendations of the investment bankers
to be reviewed by only outside independent directors. This outside review
protects all stockholders, not just stockholder employees.
None of the members of the Committee have any agreement or
understanding concerning the possible acquisition of Damen and there can be
no assurance that an acquisition can be effected at prices materially above
the current market value of Damen Common Stock. We are not aware of any
proposals for acquisition of Damen.
-11-
<PAGE>
REQUIRED VOTES AND OTHER MATTERS
By signing and returning the enclosed BLUE proxy card, you can vote to
elect Paul J. Duggan, Vincent Cainkar and J. Dennis Huffman as directors of
Damen and vote for the stockholder proposal included in the Board of Directors'
Proxy Statement.
According to the Company's bylaws, directors shall be elected by a
plurality of the votes cast. The ratification of the appointment of Cobitz,
VanderBerg & Fennessy as auditors and approval of the stockholder proposal
each require the affirmative vote of a majority of the votes cast on the
matter. Proxies marked to abstain with respect to a proposal have the same
effect as votes against the proposal. Votes withheld (for election of
directors) and broker non-votes will have no effect on the vote. One-third of
the shares of the Common Stock, present in person or represented by proxy,
shall constitute a quorum for purposes of the Annual Meeting. Abstentions and
broker non-votes are counted for purposes of determining a quorum.
OTHER INFORMATION
HOW PROXIES WILL BE SOLICITED
We may solicit proxies for the Annual Meeting by mail, advertisement,
telephone, telecopier or in person. The persons identified on Schedule 1 to this
Proxy Statement also may make solicitations. None of these persons will receive
additional compensation for participating in the solicitation. We have requested
banks, brokerage houses and other custodians, nominees and fiduciaries to
forward all of our solicitation materials to the beneficial owners of the Damen
Common Stock they hold.
IMPORTANT INSTRUCTIONS FOR "STREET NAME" STOCKHOLDERS
If any of your shares are held in the name of a brokerage firm, bank,
bank nominee or other institution on the record date, only that entity can vote
your shares and only upon its receipt of your specific instructions.
Accordingly, please contact the person responsible for your account at such
entity and instruct that person to execute and return the BLUE proxy card on
your behalf. You should also sign, date and mail the voting instruction form
your broker or banker sends you when you receive it. Please do this for each
account you maintain to ensure that all of your shares are voted.
INFORMATION ABOUT THE PROXY SOLICITOR
Mr. Duggan and the Committee have retained The Altman Group, Inc.
("Altman") to assist in the solicitation of proxies. Mr. Duggan and the
Committee have agreed to pay Altman a fee of $ _____________ and to reimburse
it for its reasonable out-of-pocket expenses. Approximately ______________
persons will be used by Altman in its solicitation efforts.
COSTS OF SOLICITING PROXIES
The entire expense of preparing, assembling, printing and mailing
this Proxy Statement and related materials and the cost of soliciting proxies
pursuant to this Proxy Statement will be borne by Mr. Duggan, Jackson
Equities and certain other members of the Committee. Mr. Duggan and the
Committee estimate that the total expenditures relating to the solicitation
of proxies will be approximately $______________. To date, approximately
$________________ of expenses have been incurred. Mr. Duggan, Jackson
Equities and certain other members of the Committee will pay the costs of
soliciting proxies. Mr. Duggan and the Committee intend to seek approval from
the Board of Directors for the reimbursement of the Committee's cost of
soliciting proxies. In the event that the Board of Directors does not approve
the reimbursement, Mr. Duggan and the Committee intend to seek reimbursement
from the Company through any other available means, including if necessary
submitting a Stockholder Proposal for consideration at the next meeting of
Damen's stockholders that would direct Damen's Board of Directors to reimburse
Mr. Duggan and the Committee for their solicitation expenses.
-12-
<PAGE>
INFORMATION ABOUT STOCKHOLDER PROPOSALS - NEXT ANNUAL MEETING
To be eligible for inclusion in the Company's proxy materials for
the next annual meeting of stockholders, any stockholder proposal to take
action at such annual meeting must be received at the Company's office
located at 200 West Higgins Road, Schaumburg, Illinois 60195, no later than
the date set forth in the Company's definitive proxy statement. Any such
proposal shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.
INFORMATION ABOUT PAUL J. DUGGAN AND THE COMMITTEE TO ENHANCE SHAREHOLDER VALUE
Certain information about persons who may participate in the
solicitation of proxies is set forth in Schedule 1 to this Proxy Statement.
Schedule 2 to this Proxy Statement sets forth certain information relating to
beneficial ownership of shares of Damen Common Stock by such persons
(including our nominees and persons involved in this solicitation known to us
to beneficially own more than five percent of Damen Common Stock), and
Schedule 3 lists all transactions in Damen Common Stock effected by such
persons in the two years prior to the date of this proxy statement.
MR. DUGGAN AND THE COMMITTEE STRONGLY RECOMMEND A VOTE FOR PAUL J.
DUGGAN, VINCENT CAINKAR AND J. DENNIS HUFFMAN AS DIRECTORS AND A VOTE "FOR"
THE STOCKHOLDER PROPOSAL TO APPOINT AN INVESTMENT BANKER AND APPOINT A
COMMITTEE COMPOSED OF INDEPENDENT DIRECTORS TO EVALUATE PROPOSALS TO SELL OR
MERGE THE COMPANY.
IT IS IMPORTANT THAT YOU RETURN YOUR PROXY PROMPTLY. PLEASE SIGN AND
DATE YOUR BLUE PROXY CARD PROMPTLY AND RETURN IT IN THE ENCLOSED ENVELOPE TO
AVOID UNNECESSARY EXPENSE AND DELAY. NO POSTAGE IS NECESSARY.
Sincerely,
Paul J. Duggan
Chairman, Committee to Enhance Shareholder Value
January 4, 1999
-13-
<PAGE>
SCHEDULE 1
PARTICIPANTS IN THE SOLICITATION
The following table identifies and provides certain information as of
December 15, 1998 about individuals and entities that might be deemed
participants in this proxy solicitation within the meaning of Rule
14a-11(b) promulgated under the Securities Exchange Act of 1934,
as amended:
1. Paul J. Duggan
53 West Jackson Boulevard, Suite 400
Chicago, IL 60604
Paul Duggan, an individual, is Manager/Owner of Duggan & Associates,
a consulting firm specializing in litigation consulting, since 1976,
and has managed Jackson Partners, an investment consulting firm in
Chicago, since 1991. Mr. Duggan is also President of Jackson Fund, a
hedge fund management firm.
Mr. Duggan, together with reporting group members Jackson Boulevard
Capital Management, Ltd., Jackson Boulevard Equities, L.P., Jackson
Boulevard Investments, L.P., Jackson Offshore Fund, Ltd., Jackson
Boulevard Partners, Vincent Cainkar and J. Dennis Huffman, has filed a
Schedule 13D and will make amendments as required by law with respect
to beneficial ownership of Common Stock.
2. Jackson Boulevard Capital Management, Ltd.
53 West Jackson Boulevard, Suite 400
Chicago, IL 60604
Jackson Fund is an Illinois corporation and hedge fund management
firm. Jackson Fund offers money management and venture capital
activities in addition to managing hedge funds which concentrate in
investing in the thrift and small cap bank areas. Jackson Fund is
the sole General Partner of Jackson Equities and Jackson Investments.
3. Jackson Boulevard Equities, L.P.
53 West Jackson Boulevard, Suite 400
Chicago, IL 60604
Jackson Equities is an Illinois limited partnership. Jackson
Equities invests in marketable securities with an emphasis on
securities of savings & loans, banks and of other companies in the
banking field.
<PAGE>
4. Jackson Boulevard Investments, L.P.
53 West Jackson Boulevard, Suite 400
Chicago, IL 60604
Jackson Investments is an Illinois limited partnership. Jackson
Investments specializes in buying and selling securities for
investments, particularly securities related to the financial
industry (including banks and thrifts).
5. Jackson Offshore Fund
31 Kildare Street
Dublin 2
IRELAND
Jackson Offshore is an Illinois corporation and Tortolla, British
Virgin Island corporation. Jackson Offshore specializes in buying and
selling securities for investments, particularly securities related to
the financial industry (including banks and thrifts).
6. Jackson Boulevard Partners
53 West Jackson Boulevard, Suite 400
Chicago, IL 60604
Jackson Partners is an Illinois general partnership and an
investment consulting firm.
7. Vincent Cainkar
6215 West 79th Street, Suite 2A
Burbank, IL 60459
Vincent Cainkar, an individual, is an attorney for the City of
Burbank, Village of Evergreen Park, City of Hickory Hills, Village
of McCook, and Stickney Township.
8. J. Dennis Huffman
10549 South Talman Avenue
Chicago, IL 60655
J. Dennis Huffman, an individual, is a Partner of DHK Development
Corp. and a trader with the Chicago Board of Trade.
Except as described in this Proxy Statement, none of the above-listed
participants in the solicitation is now, or was within the last two years, a
party to any contract, arrangement or understanding with any person with respect
to any securities of Damen, future employment by Damen or future transactions
involving Damen.
<PAGE>
SCHEDULE 2
BENEFICIAL OWNERSHIP OF SHARES BY PARTICIPANTS IN THE SOLICITATION
The following table shows, as of December 15, 1998 (except as otherwise
noted), the shares of Damen Common Stock beneficially owned by the
participants in the solicitation of proxies pursuant to this Proxy Statement.
Unless otherwise indicated, each participant has sole voting and investment
power over the shares beneficially owned.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AT PERCENT
BENEFICIAL OWNER DECEMBER 15, 1998 OF CLASS
- ------------------------------ -------------------- --------
<S> <C> <C>
Paul J. Duggan(1) 266,600 9.5%
Jackson Boulevard Capital Management, Ltd.(2) 92,200 3.3%
Jackson Boulevard Equities, L.P. 60,622 2.1%
Jackson Boulevard Investment, L.P. 31,578 1.1%
Jackson Offshore Funds 0 0%
Jackson Boulevard Partners 174,000 6.2%
Vincent Cainkar(3) 4,200 0.1%
J. Dennis Huffman 3,000 0.1%
</TABLE>
- ----------
1 Includes 400 shares held in Mr. Duggan's own name, 174,000 shares held
by Jackson Partners, 60,622 shares held by Jackson Equities and 31,578 shares
held by Jackson Investments. Mr. Duggan is one of two general partners of
Jackson Partners and shares voting and investment power concerning the shares
held by Jackson Partners with Deborah Duggan, Mr. Duggan's spouse. Mr. Duggan
is the sole stockholder and a director and officer of Jackson Boulevard
Capital Management, Ltd. which is the sole general partner of Jackson
Equities and Jackson Investments. Mr. Duggan, Jackson Capital, Jackson
Equities, and Jackson Investments have shared voting and investment power
with regard to the 92,200 shares held by Jackson Equities and Jackson
Investments.
2 All 92,000 shares are beneficially owned as sole General Partner of
Jackson Equities and Jackson Investments.
3 Mr. Cainkar has sole voting and investment power with regard to
100 shares held in his own name and has shared voting and investment power with
respect to the 4,100 shares held jointly by him and Cathy Cainkar,
Mr. Cainkar's wife.
<PAGE>
SCHEDULE 3
The following table sets forth all shares of Damen Common Stock purchased or
sold during the two years ended January 4, 1999 by participants in the
solicitations of proxies pursuant to this Proxy Statement.
<TABLE>
<CAPTION>
SHARES
PURCHASED /
DATE (SOLD)
- ------------------------------------------------------------------------------
<S> <C> <C>
JACKSON BOULEVARD EQUITIES, L.P.
01/01/98 transferred (1) (12,749)
01/01/98 transferred (1) (5,100)
01/01/98 transferred (1) (1,351)
01/01/98 transferred (1) (5,278)
01/01/98 transferred (1) (5,100)
08/01/98 distribution (2) (5,529)
08/01/98 distribution (2) (4,014)
08/01/98 distribution (2) (5,529)
08/01/98 distribution (2) (4,014)
08/01/98 distribution (2) (5,357)
08/01/98 distribution (2) (5,357)
10/12/98 6,100
10/30/98 (6,100)
12/02/98 4,000
(1) Transferred to Jackson Boulevard Investments, L.P. pursuant to
partnership reorganization.
(2) Certain Jackson Boulevard Equities, L.P. investors received stock in
lieu of cash for a distribution of their interests.
JACKSON BOULEVARD INVESTMENTS, L.P.
01/01/98 transferred (1) 12,749
01/01/98 transferred (1) 5,100
01/01/98 transferred (1) 1,351
01/01/98 transferred (1) 5,278
01/01/98 transferred (1) 5,100
10/12/98 500
10/30/98 (500)
12/02/98 2,000
(1) Transferred from Jackson Boulevard Equities, L.P. pursuant to
partnership reorganization.
JACKSON OFFSHORE FUND, LTD.
08/01/98 distribution (1) 5,529
08/01/98 distribution (1) 4,014
08/01/98 distribution (1) 5,529
08/01/98 distribution (1) 4,014
08/01/98 distribution (1) 5,357
08/01/98 distribution (1) 5,357
12/02/98 (2,000)
12/02/98 (4,000)
12/02/98 (23,800)
(1) Certain Jackson Offshore Fund, Ltd. investors received stock in lieu of
cash for a distribution from Jackson Boulevard Equities, L.P. of their
interests.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHARES
PURCHASED /
DATE (SOLD)
- ------------------------------------------------------------------------------
<S> <C> <C>
JACKSON BOULEVARD PARTNERS, L.P.
01/30/97 (300)
01/30/97 (1,700)
02/18/97 (1,000)
02/19/97 (3,400)
08/01/97 transfer (1) (246,400)
12/02/98 transfer (2) 174,000
(1) Transferred into Paul J. Duggan personal stock account.
(2) Transferred into partnership from a partner of Jackson Boulevard
Partners, L.P.
VINCENT CAINKAR
10/27/97 5,000
10/28/97 5,000
12/12/97 (1,800)
01/27/98 (3,000)
02/06/98 (3,000)
08/21/98 2,000
DENNIS HUFFMAN
01/24/97 (1,000)
02/05/97 (2,000)
05/22/97 (400)
07/24/97 (300)
08/20/97 (300)
09/18/97 (1,000)
09/03/98 1,000
12/03/98 1,000
12/03/98 1,000
PAUL J. DUGGAN
08/01/97 transfer (1) 246,400
12/02/98 (72,000)
12/02/98 transfer (2) (174,000)
(1) Transferred to Paul J. Duggan stock account from Jackson Boulevard
Investments, L.P.
(2) Transferred into Jackson Boulevard Investments, L.P.
</TABLE>
<PAGE>
EXHIBIT 1
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
EXHIBIT 2
[ON JACKSON BOULEVARD FUND, LTD. LETTERHEAD]
December 5, 1997
The Board of Directors
Damen Financial Corp.
200 West Higgins Road
Schaumburg, IL 60195-3780
To the Board:
I am in receipt of your press release of October 23, 1997 regarding
Damen Financial Corporation. My attitude is one of continued disappointment.
I have recently been approached by several southside banks who are
interested in acquiring Damen. I have also had corporate activists and other
funds inquire about my shares. I have resisted all overtures to date in an
effort to let Damen find it's own style and/or niche in the public market.
Damen recently became a two-year-old public institution. Jackson
Boulevard Fund has been very patient with its investment and given Damen
adequate time to find its own style. However at this point we have lost
patience with management and its Board of Directors.
I have gone through the exercises of comparing Damen to many of its
contemporaries in the Chicago area. My simple analysis is as follows: When
compared to the competition at Hemlock, Preferred, and Park Federal, Damen
has the highest efficiency ratio, the lowest interest margin, the lowest
return on equity, the lowest return on assets and the lowest percentage price
increase during 1997. As they say, ""the proof is in the pudding'', Damen
Financial's Management and it's Board of Directors has failed terribly.
It appears to me that the company is clearly going backwards. Net
earnings per share (exclusive of the SAIF special assessment) were 17 cents
per share for the quarter ended September 30, 1996 and now, a year later, are
only 16 cents per share.
The efficiency ratio for the twelve months ended September 1997 has gone
to 70.84% up from the previous years 61.11%.
The Modified Dutch Auction obviously was not the answer. The investing
community is amazed that Damen would have turned down an opportunity to
repurchase shares in price ranges from $11.50 to $12.00 a share so they could
later convert to a national bank and buy shares back at $14.75. This makes
no sense at all, upsets the investment community, and is indicative of poor
financial advice and management.
<PAGE>
Damen has now admitted what I have understood to be a fact all along,
i.e. Damen will not be granted the right to pay a one time special return of
capital (tax free dividend). The IRS has failed to approve Damen's
application because Damen filed consolidated tax returns.
I remind you of our first meeting in the Fall of 1995. I asked Mr.
Gartner not to file a consolidated return, but to file an extension and seek
advice on that issue. Mr. Gartner indicated at that time that he was anxious
to file a tax return. Apparently, he did so without seeking advice of
competent counsel and, accordingly, has caused Damen to lose an opportunity
to deal with its excess capital.
This single act has caused Damen to lose its best chance to reduce
capital and enhance shareholder value. Who is responsible? Mr. Gartner?
Your CPA firm? Your law firm?
I have previously requested that Damen add two seats to its board in
order to add people with sophisticated financial backgrounds. Management and
Damen's Board of Directors has ignored the suggestion to add two seats. I
feel Damen currently suffers from an excess of outside advice from lawyers
and poor inside advice from directors and management.
Ultimately, the Board of Directors is responsible and liable for the
actions of its elected officers. The Board is also compensated in part with
options which are tied to the price of the stock. The advice offered by
Jackson Boulevard Fund, e.g. re: buybacks and dividends, would have helped
the share price and enhanced the value of management's and directors stock
and stock options as well as all outside shareholders. All the advice to
date has been ignored to the detriment of all shareholders.
I feel Damen's stock should trade at 130% of book value or $19.00 or
more per share. This would put Damen at parity with its peer group (over
capitalized thrifts with 16 to 20% capital). This valuation change will only
come with drastic changes.
Based on the continuing poor operating results, poor return on equity,
and failure to increase the shareholder's value using any yardstick, I think
it is now time for Damen to take drastic measures.
I feel the Board of Directors should implement or instruct management to
take the following steps:
1) Immediate reduction in all management salaries.
2) Consideration of an immediate decision to hire an investment banker
to market the company for sale.
3) Look to find an immediate merger partner among Chicago area thrifts
such as Alliance or Park Federal.
4) Consider selling out to a local or regional bank in a stock
transaction.
5) Pay a one-time dividend of $1.00. This should be a substantially
tax-free return of capital.
6) Increase the dividend to 20 cents per quarter (as a method to deal
with excess capital).
<PAGE>
7) Move for immediate sale of the Schaumburg facility.
8) Sell the original Damen branch.
9) Obtain competent advice to manage a stock buy back program. The
stock buy back program continues to be a dismal failure.
10) Streamline operations to bring Damen efficiency ratio in line with
its competitors.
11) Increase the Board of Directors by 2 or more individuals to add
financial sophistication.
I look forward to meeting with you to discuss these issues.
Very truly yours,
/s/ Paul J. Duggan
Paul J. Duggan, President
Jackson Boulevard Fund, Ltd.
PJD/sr
cc: Ms. Mary Beth Stull
Ms. Carol Diver
Mr. Nick Raino
Mr. Edward Tybor
Ms. Janine Poronsky
Mr. Charles Caputo
Mr. Gerald Gartner
<PAGE>
[Face of Proxy Card]
PROXY
DAMEN FINANCIAL CORPORATION
1999 ANNUAL MEETING OF STOCKHOLDERS
The undersigned appoints Paul J. Duggan and Vincent Cainkar, and each of
them, each with full power to act without the other, and each with full power
of substitution, proxies for the undersigned, to represent and vote, as
designated below, all shares of Common Stock of Damen Financial Corporation
(the "Company") which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of the Company to be held as originally scheduled on
January 25, 1999 at 9:30 a.m. (local time) or such other date and time as may
be determined by the Company or a court of competent jurisdiction, and at any
adjournments or postponements thereof, at the Holiday Inn, located at 3405
Algonquin Road, Rolling Meadows, Illinois.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF PAUL J. DUGGAN, VINCENT CAINKAR AND J. DENNIS
HUFFMAN AS DIRECTORS OF THE COMPANY, FOR THE RATIFICATION OF THE APPOINTMENT
OF COBITZ, VANDENBERG & FENNESSY AS THE AUDITORS OF THE COMPANY FOR THE
FISCAL YEAR ENDING SEPTEMBER 30, 1999, AND FOR THE STOCKHOLDER PROPOSAL
DIRECTING THE BOARD OF DIRECTORS TO APPOINT AN INVESTMENT BANKER TO PURSUE
MERGER OR ACQUISITION CANDIDATES FOR THE COMPANY AND TO ESTABLISH A COMMITTEE
CONSISTING OF ALL DIRECTORS WHO ARE NOT CURRENT OR FORMER OFFICERS OR
EMPLOYEES OR RELATIVES OF SUCH PERSONS IN ORDER TO RECOMMEND TO THE BOARD OF
DIRECTORS THE BEST AVAILABLE OFFER TO ACQUIRE THE COMPANY.
THIS PROXY IS SOLICITED ON BEHALF OF PAUL J. DUGGAN AND THE COMMITTEE TO
ENHANCE SHAREHOLDER VALUE.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
[Reverse of Proxy Card]
THE COMMITTEE TO ENHANCE SHAREHOLDER VALUE RECOMMENDS THAT YOU VOTE FOR
THE ELECTION OF PAUL J. DUGGAN, VINCENT CAINKAR AND J. DENNIS HUFFMAN AS
DIRECTORS OF THE COMPANY, FOR THE RATIFICATION OF THE APPOINTMENT OF COBITZ,
VANDENBERG & FENNESSY AS THE AUDITORS OF THE COMPANY FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 1999, AND FOR THE STOCKHOLDER PROPOSAL DIRECTING THE
BOARD OF DIRECTORS TO APPOINT AN INVESTMENT BANKER TO PURSUE MERGER OR
ACQUISITION CANDIDATES FOR THE COMPANY AND TO ESTABLISH A COMMITTEE
CONSISTING OF ALL DIRECTORS WHO ARE NOT CURRENT OR FORMER OFFICERS OR
EMPLOYEES OR RELATIVES OF SUCH PERSONS IN ORDER TO RECOMMEND TO THE BOARD OF
DIRECTORS THE BEST AVAILABLE OFFER TO ACQUIRE THE COMPANY.
1. To elect three nominees as directors of the Company.
/ / FOR all nominees listed below / / WITHHOLD authority to vote
(except as marked to the contrary for all nominees listed
below) below
PAUL J. DUGGAN, VINCENT CAINKAR AND J. DENNIS HUFFMAN
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME IN THE SPACE BELOW.)
____________________________________________
2. To ratify the appointment of Cobitz, VandenBerg & Fennessy as the auditors
of the Company for the fiscal year ending September 30, 1999.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
3. To approve the stockholder proposal directing the Board of Directors to
appoint an investment banker to pursue merger or acquisition candidates
for the Company and to establish a committee consisting of all directors
who are not current or former officers or employees or relatives of such
persons in order to recommend to the Board of Directors the best available
offer to acquire the Company.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
/ / FOR / / AGAINST / / ABSTAIN
Please sign your name exactly as it appears on
this card. If you are a joint owner, each owner
should sign. When signing as executor,
administrator, attorney, trustee, or guardian, or
as custodian for a minor, please give your full
title as such. If you are signing for a
corporation, please sign the full corporate name
and indicate the signer's office. If you are a
partner, sign in the partnership name.
-------------------------------------------------
Shareholder sign here Date
-------------------------------------------------
Co-owner sign here Date
If you need assistance in voting your shares, please call Paul J. Duggan at
(888) 522-5332 or The Altman Group, Inc., which is assisting the Committee in
its solicitation of your proxy for the Annual Meeting, at (212) 681-9600.
