<PAGE> 1
Schedule 14A Information
Proxy Statement
Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
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
200 West Higgins Road
Schaumburg, Illinois 60195
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Dated Filed:
<PAGE> 2
DAMEN FINANCIAL CORPORATION
200 West Higgins Road
Schaumburg, Illinois 60195
847/882-5320
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on February 26, 1999
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Damen Financial Corporation (the "Company") will be held at the
Embassy Suites, located at 1939 North Meacham Road, Schaumburg, Illinois, at
9:30 a.m., Central Standard Time, on February 26, 1999.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of three directors of the Company;
2. The ratification of the appointment of Cobitz, VandenBerg, &
Fennessy as the auditors of the Company for the fiscal year ending
September 30, 1999;
3. A proposal by a stockholder of the Company;
and such other matters as may properly come before the Meeting, or any
adjournment thereof. The Board of Directors is not aware of any other business
to come before the Meeting.
Any action may be taken on the foregoing proposals at the Meeting on
the date specified above, or on any date or dates to which the Meeting may be
adjourned. Stockholders of record at the close of business on January 11, 1999
are the stockholders entitled to vote at the Meeting and any adjournment
thereof. A complete list of stockholders entitled to vote at the Meeting will be
available for inspection by registered stockholders at the main office of the
Company at the address listed above during the ten days prior to the Meeting, as
well as at the Meeting.
You are requested to complete, sign and date the enclosed form of WHITE
proxy card, which is solicited on behalf of the Board of Directors, and to mail
it promptly in the enclosed envelope. The proxy will not be used if you attend
and vote at the Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
Mary Beth Poronsky Stull
Chairman, President and Chief Execution Officer
Schaumburg, Illinois
January ___, 1999
- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE YOUR COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES. PLEASE ACT TODAY.
- --------------------------------------------------------------------------------
<PAGE> 3
PROXY STATEMENT
DAMEN FINANCIAL CORPORATION
200 West Higgins Road
Schaumburg, Illinois 60195
847/882-5320
ANNUAL MEETING OF STOCKHOLDERS
February 26, 1999
This Proxy Statement is furnished in connection with the solicitation
on behalf of the Board of Directors of Damen Financial Corporation (the
"Company"), the parent company of Damen National Bank (the "Bank"), of proxies
to be used at the Annual Meeting of Stockholders of the Company (the
"Meeting"),which will be held at the Embassy Suites, located at 1939 North
Meacham Road, Schaumburg, Illinois, on February 26, 1999, at 9:30 a.m. Central
Standard Time, and all adjournments of the Meeting. The accompanying Notice of
Annual Meeting, this Proxy Statement and form of WHITE proxy card are first
being mailed to stockholders on or about January ___, 1999.
At the Meeting, stockholders of the Company are being asked to consider
and vote upon (i) the election of three directors, (ii) the appointment of
Cobitz, VandenBerg & Fennessy as auditors for the Company for the fiscal year
ending September 30, 1999 and (iii) a proposal by a stockholder, as described
elsewhere herein (the "Stockholder Proposal").
Your Board of Directors considers it important that you be informed of
recent developments regarding the Company. Sections of this Proxy Statement
contain information which your Board believes should be provided to you in
response to criticisms of your Board and your Company's operations contained in
proxy materials which may be circulated as part of a disruptive proxy contest
initiated by dissident stockholders calling themselves the Committee to Enhance
Shareholder Value (the "Committee"). The Committee is soliciting proxies for the
Meeting. In addition, a member of the Committee has initiated litigation against
the Company and members of the Board in an unsuccessful attempt to force the
Company to hold its annual meeting on January 25, 1999. See "CERTAIN
LITIGATION." The Committee filed proxy materials with the Securities and
Exchange Commission on December 22, 1998, and amended such materials on December
31, 1998. The Company's discussion of the criticisms made by the Committee is
based upon these filings with the SEC.
Your Company has just completed its most successful year in its
history, a fact the self-styled "Committee" (which consists solely of Paul
Duggan, two of his friends and entities controlled by Duggan) has chosen to
ignore. In fact, fiscal 1998 net income increased 10.5% when compared with
fiscal 1997, earnings per share increased $.12 or 22.6% for the same period and
the Company's return on average assets increased 10.7% from .75% for fiscal 1997
to .83% for fiscal 1998. In addition, the Company doubled its dividend payment
from $.06 per share per quarter to $.12 per share per quarter paying out
dividends of $.40 per share in fiscal 1998, an increase of 67% from the $.24 per
share paid out in fiscal 1997. The Company's non-performing loans equaled just
.27% of total assets at September 30, 1998, while its ratio of net charge-offs
(totaling only $30,000) to average loans outstanding for fiscal 1998 was a mere
.03%.
The Board believes your Company has made, and continues to make,
significant improvements in its business through a combination of hard work and
disciplined investment of your capital. We believe that with present management
our prospects are bright and that our strategic plan will deliver further
improved operating results. Above all else, your Board is committed to enhancing
the value of your investment in the Company.
Your Board is urging you to vote "FOR" three current directors (Messrs.
Tybor and Caputo and Ms. Poronsky) who collectively have faithfully served the
interests of the Company and its stockholders and depositors for over 60 years.
See discussion below, "PROPOSAL I - ELECTION OF DIRECTORS." Your Board is also
urging you to vote "AGAINST" a proposal supported by the Committee, the
implementation of which your Board believes is unnecessary in light of actions
taken by the Board. See discussion below, "PROPOSAL III - STOCKHOLDER PROPOSAL."
FOR THE REASONS DISCUSSED BELOW, THE BOARD URGES YOU TO SUPPORT YOUR
BOARD BY PROMPTLY SIGNING, DATING AND MAILING THE ENCLOSED WHITE PROXY CARD
INDICATING YOUR VOTE FOR THE COMPANY'S NOMINEES FOR DIRECTORS AND THE SELECTION
OF THE COMPANY'S AUDITORS AND YOUR VOTE AGAINST THE STOCKHOLDER PROPOSAL.
<PAGE> 4
THE BOARD ALSO UNANIMOUSLY AND VIGOROUSLY OPPOSES THE COMMITTEE'S
SOLICITATION OF PROXIES AND URGES YOU NOT TO SIGN ANY PROXY YOU MAY RECEIVE FROM
THE COMMITTEE.
IF YOUR SHARES ARE HELD IN THE NAME OF A BANK, BROKER OR OTHER NOMINEE,
WE URGE YOU TO CONTACT THE PARTY RESPONSIBLE FOR YOUR ACCOUNT AND DIRECT HIM OR
HER TO VOTE "FOR" YOUR COMPANY'S NOMINEES AND "AGAINST" THE STOCKHOLDER PROPOSAL
ON THE COMPANY'S WHITE PROXY CARD.
VOTE REQUIRED AND PROXY INFORMATION
All shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), represented at the Meeting by properly executed proxies
received prior to or at the Meeting, and not revoked, will be voted at the
Meeting in accordance with the instructions thereon. If no instructions are
indicated, properly executed proxies will be voted "FOR" the director nominees
named herein and for the appointment of Cobitz, VandenBerg & Fennessy and
"AGAINST" the Stockholder Proposal. The Company does not know of any matters,
other than as described in the Notice of Annual Meeting, that are to come before
the Meeting. If any other matters are properly presented at the Meeting for
action, the persons named in the enclosed form of proxy and acting thereunder
will have the discretion to vote on such matters in accordance with their best
judgment.
Directors shall be elected by a plurality of the votes cast. The
ratification of the appointment of Cobitz, VandenBerg & 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 Meeting.
Abstentions and broker non-votes are counted for purposes of determining a
quorum.
A proxy given pursuant to the solicitation may be revoked at any time
before it is voted. Proxies may be revoked by: (i) filing with the Secretary of
the Company at or before the Meeting a written notice of revocation bearing a
later date than the proxy, (ii) duly executing a subsequent proxy relating to
the same shares and delivering it to the Secretary of the Company at or before
the Meeting, or (iii) attending the Meeting and voting in person (although
attendance at the Meeting will not in and of itself constitute revocation of a
proxy). Any written notice revoking a proxy should be delivered to Janine M.
Poronsky, Secretary, Damen Financial Corporation, 200 West Higgins Road,
Schaumburg, Illinois 60195.
PROPOSAL I - ELECTION OF DIRECTORS
COMPANY'S NOMINEES
The Company's Board of Directors is currently composed of seven
members, five of whom are not, and have not been, officers of the Company.
Directors of the Company are generally elected to serve for three-year terms or
until their respective successors shall have been elected and shall qualify.
Approximately one-third of the directors are elected annually.
Your Board has unanimously nominated Edward R. Tybor, Janine M.
Poronsky and Charles J. Caputo for election as directors at the Meeting. These
directors have collectively provided over 60 years of service to your Company
and its stockholders, depositors and customers and have extensive knowledge of
the Company's operations.
Your Board of Directors believes that the objectives of the Committee's
nominees (the "Dissident Candidates") principally advance the narrow interests
of takeover speculators and professional traders (such as Duggan) rather than
the long-term interests of your Company and its stockholders. Because the
Dissident Candidates views on the operations of the Company may be different
than those of your current Board, the Board believes the election of the
Dissident Candidates would serve to distract your Board from continuing its
efforts to maximize stockholder value and to represent the interests of all
stockholders.
2
<PAGE> 5
The following table sets forth certain information regarding the Board
of Directors of the Company, including their terms of office and the nominees
for election as director. It is intended that the proxies solicited on behalf of
the Board of Directors (other than proxies in which the vote is withheld as to
the nominee) will be voted at the Meeting for the election of the nominees
identified in the following table. If a nominee is unable to serve, the shares
represented by all such proxies will be voted for the election of such
substitute as the Board of Directors may recommend. At this time, the Board of
Directors knows of no reason why any nominee might be unable to serve if
elected. Except as described herein, there are no arrangements or understandings
between any director or nominee and any other person pursuant to which such
director or nominee was selected.
<TABLE>
<CAPTION>
Shares of Common
Term Stock Beneficially Percent
Director to Owned at of
Name Age Position(s) Held Since(1) Expire January 11, 1999(2) Class
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NOMINEES
--------
Edward R. Tybor 81 Chairman of the Board of 1967 2002 25,608 .91
the Bank and Director or
the Company
Janine M. Poronsky 40 Executive Vice President, 1995 2002 76,105 2.67
Corporate Secretary and
Director
Charles J. Caputo 79 Director 1976 2002 36,108 1.28
DIRECTORS CONTINUING IN OFFICE
------------------------------
Albert C. Balderman 57 Director 1998 2000 2,587 .09
Carol A. Diver 59 Director 1983 2001 16,108 .57
Nicholas J. Raino 66 Director 1997 2001 14,381 .53
Mary Beth Poronsky 51 President, Chief Executive 1990 2000 98,472 3.45
Stull Officer, Chairman of the
Board of the Company and
Director of the Bank
</TABLE>
- ---------------------------------
(1) Includes service as director of the Bank.
(2) Includes shares held directly and vested restricted shares, as well as
shares held in retirement accounts, shares allocated to the ESOP accounts
of certain of the named persons, held by certain members of the named
individuals' families, or held by trusts of which the named individual is a
trustee or substantial beneficiary, with respect to which shares the named
individuals may be deemed to have sole or shared voting and/or investment
power. Amounts include 3,967, 28,652, 3,967, 5,934, 3,967 and 33,734 shares
of Common Stock which Directors Tybor, Poronsky, Caputo, Diver, Raino and
Poronsky Stull have the right to acquire, respectively, pursuant to stock
options which are currently exercisable with respect to such shares or
which will become exercisable with respect to such shares within 60 days of
the Record Date. Does not include unvested restricted shares which are
voted by a trustee.
The business experience of each director and director nominee is set
forth below. All directors have held their present positions for at least the
past five years, except as otherwise indicated.
ALBERT C. BALDERMAN. Mr. Balderman served as the Chairman of the Board
and Chief Executive Officer of Southwest Financial Bank & Trust Company, Orland
Park, Illinois, until it was acquired in 1997. Prior to his service with
Southwest Financial, he had served as President of Standard Bank, Hickory Hills,
Illinois. Mr. Balderman is an adjunct professor at local colleges, a director of
a hospital and an advisor to charitable organizations.
CHARLES J. CAPUTO. From 1947 until his retirement in 1996, Mr. Caputo
owned Caputo Southwest Cement, a construction company located in Orland Hills,
Illinois. Mr. Caputo has served as a director of the Bank since 1976. He
currently serves as Chairman of the Company's Audit Committee.
3
<PAGE> 6
CAROL A. DIVER. Ms. Diver has been the Corporate Secretary for the
Chicago Park District since 1991. Prior to that time, Ms. Diver was a legal
secretary and office manager for the law firm of John B. Wheeler & Co. located
in Chicago, Illinois. Ms. Diver has served as a director of the Bank since 1983
and currently serves on the Company's Audit and Strategic Planning Committees.
NICHOLAS J. RAINO. Mr. Raino is the Chairman and former President and
Chief Executive Officer of Dale, Smith & Associates, Inc., a firm that
specializes in financial marketing and communications located in Rosemont,
Illinois. From 1972 to 1975, Mr. Raino served on the Board of Directors and
Executive Committee of American Savings Bank, Schaumburg, Illinois. From 1985 to
1990, Mr. Raino served on the Board of Directors of Riverside Savings Bank,
Riverside, Illinois. From 1990 to 1994, Mr. Raino served on the Board of
Directors of Cragin Federal Bank for Savings, Chicago, Illinois, an institution
with assets of approximately $2.4 billion which was acquired by another
institution in 1994. Mr. Raino is a member of the Board of Trustees of Kendall
College, Evanston, Illinois.
JANINE M. PORONSKY. Ms. Poronsky has served as Vice President
(Compliance, Human Resources and Operations) since 1995, Corporate Secretary
since 1992 and as the Bank's Compliance Officer since 1991, and was promoted to
Executive Vice President in December of 1998. From 1987 to 1991, Ms. Poronsky
was employed as an attorney for the United States Internal Revenue Service. Ms.
Poronsky also serves on the Company's Strategic Planning Committee. Ms. Poronsky
is the sister of President Poronsky Stull.
MARY BETH PORONSKY STULL. Ms. Poronsky Stull joined the Bank in 1965
and has served as the Bank's Chief Executive Officer since 1984 and as its
President since 1992. Ms. Poronsky Stull is currently Chairman, President and
Chief Executive Officer of the Company. Ms. Poronsky Stull is the sister of
Director Janine M. Poronsky, who serves as the Company's Executive Vice
President, Corporate Secretary and Compliance Officer.
EDWARD R. TYBOR. Since 1951, Mr. Tybor has owned and operated the
Kubina-Tybor funeral home located in Chicago, Illinois in one of the Company's
key markets. He has served as a director of the Bank since 1967 and currently
serves as Chairman of the Company's Compensation Committee and as a member of
the Company's Audit and ALCO Committees.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE COMPANY'S
NOMINEES AND "AGAINST" THE STOCKHOLDER PROPOSAL BY EXECUTING THE ENCLOSED WHITE
PROXY CARD. YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE. WE URGE
YOU NOT TO SIGN ANY PROXY YOU RECEIVE FROM THE COMMITTEE.
RECENT DEVELOPMENTS
The Board has unanimously nominated Edward R. Tybor, Charles J. Caputo
and Janine M. Poronsky to serve as directors, three individuals who have served
the Company and the Bank well for over 60 years. A disruptive proxy contest has
been initiated by the Committee against these directors. The Committee is asking
stockholders to reject this slate in favor of the Dissident Candidates (Duggan
and his two friends).
THE BOARD BELIEVES THAT THE DISSIDENT CANDIDATES DO NOT POSSESS THE
MANAGEMENT EXPERIENCE OF THE COMPANY'S CANDIDATES AND ARE ILL-EQUIPPED TO SERVE
AS DIRECTORS OF YOUR COMPANY BECAUSE THEY LACK EXPERIENCE IN MANAGING AND
SUPERVISING FINANCIAL INSTITUTIONS. FURTHERMORE, YOUR BOARD BELIEVES THAT IN AN
ATTEMPT TO SHOW THE COMPANY'S CANDIDATES IN AN UNFAVORABLE LIGHT AND TO SWAY
YOUR VOTE, THE COMMITTEE (ALL THREE DISSIDENT CANDIDATES ARE MEMBERS OF THE
COMMITTEE) HAS MADE WHAT YOUR BOARD BELIEVES ARE MISLEADING STATEMENTS IN ITS
PROXY MATERIALS AND HAS DEMONSTRATED A MADDENING INABILITY TO INTERPRET
CORRECTLY (OR MAY HAVE CHOSEN TO DELIBERATELY MISINTERPRET) FINANCIAL DATA ABOUT
THE COMPANY.
While the Committee states that it believes its candidates have
superior experience in the management and supervision of financial institutions,
by reviewing the information the Committee has provided, a stockholder would
realize that two of the Dissident Candidates have never served as directors or
executive officers of a financial institution. We strongly question their
qualifications. In your Board's view, they are not suitable replacements for
persons who have over 60 years of such experience and extensive knowledge of the
Company's operations such as Messrs. Caputo and Tybor and Ms. Poronsky.
4
<PAGE> 7
The Committee touts its third candidate as having
". . . spent 20 years in the banking business before leaving the
position of chief operating officer of Beverly Bank, the lead bank for
Beverly [Bancorporation], a $600 million institution with 5 branches.
He was a bank director and served as board liaison between the client
banks. During [his] 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 [Bancorporation]
recently merged with St. Paul Bancorp."
The Board believes this statement is misleading. It appears to the
Board that the Committee is trying to create the impression that until the very
recent past the Dissident Candidate was actively involved in the management of
Beverly Bank, that during the time of his involvement Beverly Bank was
significantly larger than the Company ($600 million of assets vs $228 million of
assets for the Company at September 30, 1998) and that this candidate was
somehow involved in the sale of Beverly Bancorporation to St. Paul Bancorp.
As far as the Company has been able to discover, the Committee's
Dissident Candidate left Beverly Bank in 1989 or 1990 at which time Beverly Bank
had $240 million in assets. Public records indicate that a new Chief Operations
Officer was hired by Beverly Bancorporation in 1991. Thus, the Dissident
Candidate has not been actively involved in the management of Beverly Bank, or
any bank for that matter, for about nine years; secondly, Beverly Bank was not a
$600 million institution when he served as an officer for the bank; and finally,
the Dissident Candidate could have had nothing to do with the sale of Beverly
Bancorporation to St. Paul Bancorp which was announced in January of 1998 and
completed in June of 1998, long after he left the bank.
The following information about Beverly Bancorporation appeared in its
Prospectus (released in August of 1996) pursuant to which it offered to sell
1,000,000 shares of its common stock. Although the role the Committee's
candidate played in the problems that plagued Beverly Bancorporation in the late
1980's and early 1990s cannot be determined, the Committee has stated that the
Dissident Candidate was the chief operating officer of Beverly Bank and, as far
as the Company can ascertain, he left Beverly Bank in 1989 or 1990. In the
following quoted passage, Beverly Bancorporation is describing its problems in
the late 1980's and early 1990's:
"Although the acquisitions of the late 1980's increased the
size of the organization, [Beverly Bancorporation] experienced weakened
internal controls and a number of poor quality loans were made.
[Beverly Bancorporation] also incurred losses in its credit card
business and a significant charge-off for loans to a single borrower.
"As a result of these problems, major changes were made in the
management of [Beverly Bancorporation]. The Board of Directors was
reconstituted and new management, including [Beverly Bancorporation's]
current Chief Executive Officer [hired in August of 1989] and Chief
Financial Officer [hired in 1990], were hired. During the next several
years, this new management team strengthened internal controls,
identified and resolved problems within [Beverly Bancorporation] and
took steps to improve [Beverly Bancorporation's] asset quality. .
. .
"Because of the problems [Beverly Bancorporation] experienced,
bank regulatory agencies imposed restrictions on [Beverly
Bancorporation] and its subsidiaries. Between June 1990 and January
1993, the Federal Reserve Board ("FRB") did not permit [Beverly
Bancorporation] to pay dividends on its stock without the FRB's prior
consent or notification. In January 1993, because of [Beverly
Bancorporation's] improved financial condition, the FRB informed
[Beverly Bancorporation] that it could resume paying dividends without
restriction. Additionally, in February 1991, Memoranda of Understanding
were issued by the FDIC for Beverly Bank and Beverly Bank Matteson,
which prohibited these banks from paying dividends without prior FDIC
approval and which required these banks to lessen their respective risk
positions, increase capital, revise loan, liquidity and other operating
policies, improve internal controls and manage growth within specified
limitations. Because of operational improvements, the Memoranda of
Understanding were terminated in March 1993."
5
<PAGE> 8
WHEN ONE REALIZES THAT TWO OF THE DISSIDENT CANDIDATES HAVE NO
EXPERIENCE SERVING AS A DIRECTOR OR EXECUTIVE OFFICER OF A FINANCIAL
INSTITUTION, ONE UNDERSTANDS WHY, IN YOUR BOARD'S OPINION, IT WAS NECESSARY FOR
THE COMMITTEE TO EXAGGERATE THE EXPERIENCE OF ITS THIRD CANDIDATE IN AN ATTEMPT
TO MISLEAD STOCKHOLDERS.
TWO OF THE DISSIDENT CANDIDATES HAVE NO EXPERIENCE MANAGING A FINANCIAL
INSTITUTION. ARE YOU PREPARED TO GIVE THEM ON-THE-JOB-TRAINING? THE THIRD
DISSIDENT CANDIDATE'S EXPERIENCE IS LESS THAN WHAT HAS BEEN TOUTED BY THE
COMMITTEE. AT BEST, WE BELIEVE HE IS A QUESTIONABLE CHOICE TO SERVE ON YOUR
BOARD. FURTHERMORE, IT WOULD APPEAR THAT TWO OF THE DISSIDENT CANDIDATES ARE
FRIENDS OF DUGGAN; THEY WOULD HARDLY BE EXPECTED TO BRING ANY INDEPENDENCE TO
THE BOARD OR TO ACT IN THE BEST INTERESTS OF ALL STOCKHOLDERS. THEIR ELECTION
COULD ONLY SERVE TO DISRUPT THE MANAGEMENT OF YOUR COMPANY AND DIVERT US FROM
OUR GOAL OF BUILDING VALUE FOR YOU.
THE BOARD BELIEVES THAT DUGGAN (ACTING NOW UNDER THE AURA OF A
SELF-STYLED "COMMITTEE") HAS HAD ONLY ONE GOAL FOR THE LAST THREE YEARS; WE
BELIEVE HE IS COMMITTED TO FORCING A SALE OF THE COMPANY REGARDLESS OF WHETHER
SUCH A SALE IS IN YOUR BEST INTERESTS. AS INDICATED IN THE COMMITTEE'S PROXY
MATERIALS, DUGGAN HAS INVESTED IN OVER 150 FINANCIAL INSTITUTIONS, INCLUDING 40
OF WHICH HAVE BEEN ACQUIRED BY OR MERGED WITH OTHER FINANCIAL INSTITUTIONS. THE
BOARD BELIEVES THIS DEMONSTRATES THAT DUGGAN'S INTERESTS (AND THOSE OF HIS TWO
FRIENDS WHO ARE THE OTHER DISSIDENT CANDIDATES) ARE CLOSELY ALIGNED WITH
TAKEOVER SPECULATORS AND PROFESSIONAL TRADERS RATHER THAN THOSE OF THE
STOCKHOLDERS.
The Board feels the Committee has engaged in a campaign of providing
misinformation about the Company's operations so as to obtain your vote. The
Board feels the Committee has unfairly criticized the Company's stock repurchase
programs, dividend policy, borrowings from the Federal Home Loan Bank, marketing
strategy, efficiency ratio, and return on its Common Stock. As established
below, the Board believes these criticisms are groundless.
In its proxy materials, the Committee states that by a letter dated
August 24, 1998, Duggan urged the Company to undertake another stock repurchase
program. The Committee then proceeds to criticize the Company for not announcing
a repurchase program until September 11, 1998, thereby missing an opportunity
(in the Committee's words) to support the stock price, redeem shares at prices
far below book value and make effective use of excess capital. As the Committee
is aware (from information provided by the Company to Duggan), the Company has
actively supported its stock price and made effective use of its excess capital
having conducted seven buy-back programs since January 1, 1996, which have
resulted in the purchase of more than 1,160,000 shares in the open market as of
December 9, 1998. In purchasing these shares, the Company has used over $16.89
million of its capital to acquire approximately 29.2% of its outstanding shares
at an average cost of $14.55 per share which is less than the Company's per
share book value at September 30, 1998 ($15.30) and September 30, 1997 ($14.78).
The Board believes that these results demonstrate that it has made effective use
of the Company's excess capital, supported the stock price and purchased shares
for less than book value.
Furthermore, what the Committee conveniently fails to note when
criticizing the Board's alleged inaction in late August of this year is that in
his August 24th letter, Duggan (in urging the Board to implement another
repurchase program) pointed out that the Company's Common Stock was trading at
$15.00 per share, near its 52 week low of $14.00 per share. The Committee
implies in its proxy materials that the Company failed to take advantage of this
low price purchase opportunity. However, the Company advised the Committee
(through Duggan) on December 17, 1998, that under its new stock repurchase
program (the one announced only 18 days after his August 24th letter), the
Company had repurchased through December 9, 1998, 147,000 shares at an average
price of $14.43, which was below the $15.00 price cited in Duggan's letter and
less than the September 30, 1998 book value of $15.30 per share. The Committee's
proxy materials were filed with the SEC after December 17, 1998. As a
consequence, the Committee knew at the time its proxy statement was filed with
the SEC that the repurchase program announced on September 11, 1998 was
successful, having achieved Duggan's goals of purchasing a significant number of
shares (about 5% of the outstanding shares) at less than book value and leading
to the expenditure of over $2.1 million of excess capital by the Company.
The Committee states in its proxy materials that the Dissident
Candidates intend to recommend that dividends be increased to $.25 per share per
quarter. The implication is that the Company is not properly monitoring its
dividend policy. What the Committee fails to point out is that the Company's
dividend in the last 12 months has been increased 100% to $.12 per share per
quarter and that the fiscal 1998 dividend payout was $.40 per share, a 67%
increase over the $.24 per share paid out in fiscal 1997. For the two-year
fiscal period ending September 30, 1998, the Company paid
6
<PAGE> 9
out dividends of $1,921,424 representing more than 52% of the Company's net
income for this period. In addition, the Company repurchased its stock at a cost
of over $12.6 million during the same period.
THE BOARD REGULARLY EXAMINES ITS DIVIDEND POLICY AND STOCK REPURCHASE
PROGRAMS AND IS CONTINUALLY REVIEWING ITS DEPLOYMENT OF THE COMPANY'S EXCESS
CAPITAL. THE COMPANY HAS SPENT OVER $16.89 MILLION TO ACQUIRE SHARES OF ITS
COMMON STOCK AT LESS THAN BOOK VALUE IN THE LAST THREE YEARS AND HAS PAID OUT
$2.347 MILLION IN DIVIDENDS DURING THE SAME PERIOD. DESPITE THE BOARD'S
SUCCESSFUL EFFORTS TO SUBSTANTIALLY INCREASE THE DIVIDEND AND USE EXCESS CAPITAL
TO REDEEM SHARES AT LESS THAN BOOK VALUE, THE COMMITTEE CHOOSES TO CRITICIZE THE
BOARD'S ACTIONS. RATHER THAN BEING SUPPORTIVE OF BOARD POLICIES THAT ARE
CONSISTENT WITH HIS GOALS, DUGGAN CONTINUES TO CRITICIZE THE BOARD'S ACTIONS.
THE BOARD BELIEVES THAT ITS POLICIES WITH RESPECT TO THESE MATTERS HAVE BEEN
IMPLEMENTED IN THE BEST INTERESTS OF ALL STOCKHOLDERS, WITH THE BOARD KEEPING IN
MIND THAT A SIGNIFICANT DECLINE IN THE COMPANY'S CAPITAL OVER A SHORT PERIOD OF
TIME COULD ADVERSELY IMPACT EARNINGS PER SHARE AND RETURN ON ASSETS.
The Committee, for reasons the Board cannot fathom, has expressed
concern in its proxy materials over the increase in the Company's borrowing from
the Federal Home Loan Bank ("FHLB") from $56.5 million at September 30, 1997 to
$61.8 million at September 30, 1998. This "concern" demonstrates the Committee's
inability to analyze the Company's financial statements. The important analysis
is of the average volume of FHLB borrowings, not the year-end totals. The
average balances for these borrowings for fiscal 1997 and 1998, respectively,
were $58.328 million and $59.304 million. Thus, in actuality there was only a
slight increase in the Company's FHLB borrowings between 1997 and 1998.
Furthermore, the Board is aware of the risk presented by such borrowings (as
there are many risks associated with managing a financial institution whose
assets and liabilities are rate sensitive). As a consequence, the Company has
discussed its strategy with consulting firms; all have agreed with this
strategy.
The Committee criticizes the Company's marketing strategy because,
according to the Committee, the Company's three branches are not located within
close proximity to each other, again demonstrating the Committee's lack of
experience in managing financial institutions. The fact that the Company's
branches are not located in close proximity to each other has little impact on
the Company's marketing strategy. The Company competes in the Chicago
metropolitan banking market where the ability to offer competitive products and
competent service and the ability to conduct multi-media ad campaigns are more
important to the Company's profitability then the proximity of its offices to
each other.
The Committee also recommends (without giving any basis for the
recommendation) that the Company's Schaumburg office be sold. Later, however,
the Committee states it would support an evaluation of "the need for, and
potentially closing," the Schaumburg office. This confusion between a sale and a
closing of an office further demonstrates the Committee's lack of experience in
managing financial institutions, for the sale of the Schaumburg branch is a
substantially different transaction (with much different implications) then the
closing of this office. The Board believes that the sale of the Schaumburg
office would not serve any useful purpose, would cripple the remaining
operations of the Company and would significantly reduce the value to a
potential purchaser of what would remain of the Company. The Board questions the
motives of the Committee in recommending such a transaction when the Committee
lacks any relevant information on how this sale would affect the Company. We
would note, too, that in December of 1997, Duggan recommended that the Chicago
branch be sold without offering any factual basis for this recommendation.
The Committee also states that it believes that the salaries and other
expenses paid by the Company are excessive as evidenced by the Company's high
efficiency ratio, which stood at 72.12% at September 30, 1998, and suggests that
officers' salaries be reduced. The Committee's suggestion indicates that the
Committee has not read the Company's Proxy Statements. If Committee members had
read these Proxy Statements, they would know that management of the Company
recommended that the executive officers not be awarded bonuses for fiscal 1997
or 1998 (and no bonuses were awarded) or pay raises for fiscal 1998 and 1999;
the Board, however, did vote to give one officer (Mr. Vanek) a modest salary
increase for 1999. Furthermore, these executive officers took voluntary paycuts
during first quarter of 1997.
According to the Committee, the mean efficiency ratio for banks with
assets of less than $500 million is 62.5%, while the Company's 1998 efficiency
ratio was 72.12%. The Committee (which wishes to place three candidates on
7
<PAGE> 10
the Board who allegedly "have superior experience in the management and
supervision of financial institutions") again demonstrates its inability to
analyze the Company's financial statements.
The efficiency ratio for 1998 was calculated by dividing non-interest
expense by net interest income plus other income except for gains and losses on
investments available-for-sale. What the Committee fails to understand is that
non-interest expense for 1998 has been adversely affected by three items:
amounts amortized in connection with the Company's Recognition and Retention
Plan ("RRP") (totaling $373,032 for 1998); accounting adjustments mandated by
accounting rule SOP 93-6 which is applicable to the Company's ESOP (totaling
$138,947 in 1998); and increased legal fees (totaling $192,116 in 1998) incurred
primarily in dealing with matters raised by Duggan, including his unsuccessful
attempt prior to last year's annual meeting to nominate two persons to serve as
directors and to submit a proposal (similar to the Stockholder Proposal) for the
consideration of the stockholders. By eliminating these items from non-interest
expense, the Company's 1998 efficiency ratio would be 61.95%. The Company's RRP
was approved by the stockholders in 1996 and they were advised at that time that
the Company would incur deductible compensation expense in connection with the
issuance of awards under the RRP. The RRP adjustments will conclude in fiscal
2001. The adjustments related to the RRP and the ESOP have been reflected each
year in the Company's financial statements.
In its proxy materials, the Committee sets forth a table that purports
to compare the returns on the Company's Common Stock against other indexes. The
Board believes this table was prepared by the Committee in a way guaranteed to
show that the Company's Common Stock has been a poor investment.
Although the Committee's preliminary proxy materials were filed with
the SEC on December 22, 1998 and updated on December 31, 1998 and although the
Company's Common Stock traded as high as $16.75 during the period from December
17, 1998 through December 31, 1998 and its closing price on December 30, 1998
was $16.25, the Committee chose to use the closing price for the Company's
Common Stock on December 16, 1998 of $13.75 per share (ITS LOWEST CLOSING PRICE
IN DECEMBER) and compared it against the closing price for the Company's Common
Stock on its first day of trading ($11.50) rather than against its initial
public offering price of $10.00 per share. The Board believes that the selection
of these dates and prices by the Committee was an attempt by the Committee to
sway your votes hoping to show that you have not received a fair return on your
investment.
Comparing the December 30, 1998 closing price of $16.25 per share
against the initial offering price of $10.00 indicates that the return on the
Company's shares has been 62.5% for the period, exclusive of dividends. Adding
in the dividends paid of $.88 per share since January 1, 1996, improves the
return to 71.3%. The Board believes that a 71.3% return on an investment in the
Company's Common Stock, a small bank holding company, which has a thinly-traded
stock, represents a fair return on your investment and is comparable with the
returns garnered by similarly situated financial institutions. The Board would
note that, as reported by the Committee, St. Paul Bancorp, a widely-held,
actively-traded, $4.0 billion financial institution headquartered in Chicago,
had a 67.59% return for the same period, exclusive of dividends.
The Company is a publicly traded company subject to the supervision of
the SEC. The Board believes it is appropriate to advise stockholders how Duggan
(the driving force behind the Committee's actions) has handled his SEC reporting
obligations as a stockholder of the Company. Stockholders should carefully
consider how Duggan has treated his own SEC obligations before deciding whether
to permit him to be involved in the management of a company that is subject to
extensive SEC regulation.
THE BOARD BELIEVES DUGGAN HAS APPROACHED HIS SEC REPORTING OBLIGATIONS
IN A CAVALIER MANNER. THE BOARD FEELS HE HAS BEEN LATE IN FILING CERTAIN REPORTS
WITH THE SEC AND HAS NOT FILED OTHERS.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations adopted thereunder by the SEC,
require a person who beneficially owns more than 10% of the Common Stock of the
Company to file reports on Forms 3, 4 and 5 with the SEC and the Company. Duggan
beneficially owned more than 10% of the Company's Common Stock from April 3,
1997 to December 2, 1998. Under the SEC rules, a Form 3 must be filed with the
SEC within ten days after a person (such as Duggan) becomes the beneficial owner
of 10% of more of the Common Stock of the Company. At the time the Form 3 is
transmitted to the SEC, it must also be sent (by Duggan) to the Company. A Form
4 must be filed with the SEC within ten days of the end of a month in which a
change in beneficial ownership occurs. This Form must be sent to the Company (by
Duggan) on the date it is
8
<PAGE> 11
transmitted to the SEC. A Form 5 must be filed with the SEC within 45 days of
the end of the Company's fiscal year with such Form being sent to the Company
(by Duggan) on the date it is transmitted to the SEC.
Although Duggan was the beneficial owner of more than 10% of the
Company's Common Stock from April 3, 1997 through December 2, 1998, he has
provided only one report to the Company. Under the SEC's rules, Duggan was
obligated to file a Form 3 with the SEC by April 13, 1997 (within ten days of
the date he become a 10% stockholder) and to send a copy of this filing to the
Company. Based upon a review of the SEC's records, no Form 3 has ever been filed
by Duggan with the SEC; obviously, no such form has been filed with the Company.
Furthermore, the Company has searched the SEC's records and has found only one
filing by Duggan, a Form 5 which was filed on February 13, 1998. The Company's
fiscal year ends on September 30. Thus, in order to be deemed timely filed, a
Form 5 filing for the fiscal year ending September 30, 1997 had to be made by
November 14, 1997. As a consequence, this Form 5 was filed 91 days late.
Moreover, based upon information provided in the Committee's proxy materials,
the Company believes that Duggan has failed to file a Form 4 with respect to
transactions conducted in October of 1998 by entities that he controls, which
had to be filed by November 10, 1998, and has failed to timely file a Form 4
with respect to transactions conducted in December of 1998 by Duggan and
entities he controls, which had to be filed by January 11, 1999.
Duggan became the beneficial owner of more than 5% of the Company's
Common Stock on or about October 2, 1995. As a consequence (and as required by
the Exchange Act and the SEC's rules), Duggan filed a Schedule 13D on or about
October 2, 1995 with the SEC. This Schedule 13D has been amended ten times (the
"13D"). One of the Dissident Candidates, who is also a member of the Committee
joined in the filing of Amendment Nos. 7-10 to this 13D, while another Dissident
Candidate and Committee member joined in filing Amendment Nos. 8-10 to the 13D.
As such, they are also required to ensure that these Amendments are accurate and
filed in a timely manner.
The SEC's rules require that amendments to Schedule 13D be filed
"promptly" with the SEC and that a copy of any amendment be sent by certified or
registered mail to the Company's principal executive office. The Company does
not believe that Duggan and the two other Dissident Candidates have promptly
filed with the SEC certain of their Amendments to the 13D. In addition, the
Company believes certain of these Amendments may contain misleading information
or may not have been answered completely.
The SEC has not defined the term "promptly." However, the SEC has
determined in one case that the filing of an amendment five business days after
the event was not "prompt." The SEC has also stated that any "delay beyond the
time the amendment reasonably could have been filed may not be deemed to be
[prompt]." Set forth below is a listing of the filing of: (a) certain Amendments
to the 13D; (b) the date of the event requiring the filing (as reported by
Duggan); (c) the date of filing with the SEC; and (d) the time elapsed between
(b) and (c):
9
<PAGE> 12
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(a) (b) (c) (d)
AMENDMENT DATE OF DATE OF ELAPSED
NO. THE EVENT FILING WITH SEC TIME
--- --------- --------------- ----
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
4 12-5-97 12-15-97 10 days
- --------------------------------------------------------------------------------
5 1-23-98(1) 2-6-98 14 days
- --------------------------------------------------------------------------------
7 11-16-98 11-27-98(2) 11 days
- --------------------------------------------------------------------------------
8 12-2-98(3) 12-14-98 12 days
- --------------------------------------------------------------------------------
9 12-22-98 12-30-98 8 days
- --------------------------------------------------------------------------------
10 12-30-98 1-8-99 9 days
- --------------------------------------------------------------------------------
</TABLE>
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE COMPANY'S
NOMINEES AND "AGAINST" THE STOCKHOLDER PROPOSAL BY EXECUTING THE ENCLOSED WHITE
PROXY CARD, YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
WE URGE YOU NOT TO SIGN ANY PROXY YOU RECEIVE FROM THE COMMITTEE.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
BOARD AND COMMITTEE MEETINGS OF THE COMPANY. Meetings of the Company's
Board of Directors are held at least quarterly. The Board of Directors of the
Company held 21 meetings during fiscal 1998. No incumbent director attended
fewer than 75% of the aggregate of the total number of meetings held by the
Board of Directors and by all committees of the Board of Directors on which he
or she served during the fiscal year.
In order to assist it in discharging its duties, the Board of Directors
of the Company has standing Audit, Compensation, Nominating,
Investment/Asset-Liability and Strategic Planning Committees.
- ------------------------
(1) Duggan filed Amendment No. 4 with the SEC on December 15, 1997.
Immediately thereafter (on December 17, 1997), he took a number of actions that
the Company believes required him to file Amendment No. 5 on or shortly after
December 17, 1997. Among other things, Duggan delivered to the Company on or
about December 17, 1997 a proposal he wished to have submitted to the Company's
stockholders for their review at last year's annual meeting which if approved
would have required the Company to engage an investment banker to sell the
Company and also indicated therein his intent to nominate at last year's meeting
two persons to serve on the Company's Board. Between December 17, 1997 and
January 7, 1998, Duggan or his attorneys were in constant contact with the
Company concerning this and other matters. Yet despite all of this activity,
Duggan chose not to file Amendment No. 5 to the 13D until February 6, 1998. In
this Amendment, it is stated that the date of the event requiring the filing is
January 23, 1998. The Company believes the date of the event which required the
filing of this Amendment was December 17, 1997 when Duggan submitted a notice of
intent to introduce a stockholders' proposal at the annual meeting and to
nominate at this meeting two persons to serve as directors. The Company believes
Duggan was obligated under the SEC's rules to promptly file an amendment to the
13D disclosing his plans on or shortly after December 17, 1997. In the Company's
view, the February 6, 1998 filing date means this Amendment was filed 51 days
late.
(2) The Company received this Amendment only after requesting a copy
from Duggan.
(3) Among other matters reported in this Amendment, Duggan stated
that he and entities he controlled sold 99,800 shares of the Company's Common
Stock (or almost 3.54% of the outstanding shares and more than 27% of his
holdings) on December 2, 1998. Despite this material change in his ownership
position, Duggan did not file Amendment No. 8 for 12 days (or 8 business days).
The SEC has stated that the filing of an amendment to a 13D seven calendar days
after the reporting party had disposed of 1% of the company's common stock was
not "prompt" under the SEC's rules.
10
<PAGE> 13
The Audit Committee reviews audit reports and related matters to ensure
compliance with regulations and internal policies and procedures, and consists
solely of non-employee directors. This Committee also acts as a liaison between
the Company's internal and outside auditors and the Board. Directors Caputo,
Diver and Tybor are the current members of this Committee. This Committee met
two times during fiscal 1998.
The Company has established a Compensation Committee to review and
approve all executive officers compensation plans. The current members of this
Committee are Directors Tybor, Balderman, Diver and Raino, all non-employee
directors. This Committee met one time during fiscal 1998.
The Nominating Committee meets annually in order to nominate candidates
for membership on the Board of Directors. This Committee is comprised of the
entire Board of Directors. While the Board of Directors will consider nominees
recommended by stockholders, the Committee has not actively solicited such
nominations. Pursuant to the Company's Bylaws, nominations by stockholders
generally must be delivered in writing to the Secretary of the Company at least
seventy days before the date of an annual meeting of stockholders.
BOARD AND COMMITTEE MEETINGS OF THE BANK. The Bank's Board of Directors
meets monthly and may hold additional special meetings upon the request of the
Chairman or at least three directors. The Board of Directors met 13 times during
the fiscal year ended September 30, 1998. The Bank also has standing Asset
Classification, Audit, Investment/Asset-Liability and Loan Committees. During
the last fiscal year, no director of the Bank attended fewer than 75% of the
aggregate of the total number of Board meetings and the total number of meetings
held by the committees of the Board of Directors on which he or she served.
DIRECTOR COMPENSATION
Each member of the Board of Directors of the Company is paid a fee of
$500 per Board meeting. Non-employee directors of the Company each receive an
additional fee of $350 for each Committee meeting attended; non-employee
directors of the Company receive $500 for each Strategic Planning Committee
meeting attended if such meeting is not held on the same day as a regular Board
meeting. Edward R. Tybor, Chairman of the Board of the Bank, is paid a fee of
$1,200 and the other non-employee directors of the Bank are each paid a fee of
$1,100 for each regular meeting of the Board of Directors of the Bank.
Non-employee directors of the Bank each receive an additional fee of $350 for
each Committee meeting attended.
Each non-employee director participates in the Company's Recognition
and Retention Plan ("RRP") which was approved by stockholders in 1996. Under the
RRP, each non-employee director has been awarded restricted shares which vest at
the rate of 20% per year. During fiscal year 1998, each of Messrs. Tybor,
Caputo, and Raino and Ms. Diver became vested with respect to: 1,587 shares
which had an aggregate market value of $23,012 based on the closing market price
of $14.50 per share at September 30, 1998. Based on this price, the 4,761 shares
of unvested restricted stock held for the benefit of each of these directors had
an aggregate market value of $69,035 at September 30, 1998.
During fiscal 1998, Director Balderman was awarded 7,935 shares of
restricted stock under the RRP, which are scheduled to vest in five equal annual
installments with the first installment of 1,587 shares, with a market value of
$23,012, vesting in January of 1999. Director Balderman also serves as a
consultant to the Company and the Bank. He will receive a $2,300 per month fee
through January of 1999 and a $1,700 per month fee from February of 1999 through
January of 2000.
The Company adopted a "Director Emeritus Program" during 1998. Under
this program, any current director of the Company who terminates his/her service
as a director of the Company for any reason (other than removal for cause) may
participate as a "Director Emeritus" for up to five years. A Director Emeritus
may attend Board meetings but will not be eligible to vote and will be obligated
to provide limited consulting services to the Board. A Director Emeritus will
receive an annual fee of $1,200 payable in monthly installments of $100. Service
as a Director Emeritus will be counted for purposes of the accrual and the
vesting of benefits under the Company's RRP and its Stock Option Plan. The Bank
operates a "Director Emeritus Program" for any current director of the Bank who
terminates his/her service as a director of the Bank for any reason (other than
removal for cause). A Bank Director Emeritus will receive an annual fee of
$3,000 payable in monthly installments of $250 and may participate in this
program for up to five years.
11
<PAGE> 14
EXECUTIVE COMPENSATION
The Company has not paid any compensation to its executive officers
since its formation and does not presently anticipate paying any compensation to
such persons.
The following table sets forth information concerning the compensation
for services in all capacities to the Company for the three fiscal years ended
September 30, 1998 to: (i) Mary Beth Poronsky Stull, the Company's Chief
Executive Officer, (ii) Gerald J. Gartner, (iii) Janine M. Poronsky and (iv)
Kenneth D. Vanek, each of whose salary and bonus for fiscal 1998 exceeded
$100,000 (the "Named Officers").
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
- ------------------------------------------------------------------------------------------------------------------------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL FISCAL OTHER ANNUAL STOCK LTIP UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($) AWARD($) PAYOUTS ($) OPTIONS (#) COMPENSATION($)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mary Beth Poronsky 1998 $195,000 $ ---- $--- $ --- $--- --- $43,906(3)
Stull, Chairman, 1997 203,210 30,000 --- --- --- --- 35,362
President and Chief 1996 200,544 16,150 --- 461,222(2) --- 99,187 31,938
Executive Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Gerald J. Gartner, 1998 $143,000 $ ---- $--- $ --- $--- --- $36,406(3)
Treasurer and Chief 1997 154,347 20,000 --- --- --- --- 31,362
Financial Officer 1996 155,158 15,275 --- 230,605(2) --- 61,496 28,438
- ------------------------------------------------------------------------------------------------------------------------------------
Janine M. Poronsky, Vice 1998 $130,000 $ ---- $--- $ --- $--- --- $43,906(3)
President and Secretary 1997 133,675 20,000 --- --- --- --- 34,787
1996 132,850 14,400 --- 322,850(2) --- 75,382 25,966
- ------------------------------------------------------------------------------------------------------------------------------------
Kenneth D. Vanek 1998 $123,500 $ ---- $--- $ --- $--- --- $35,859(3)
Senior Vice President 1997 127,750 15,000 --- --- --- --- 28,514
1996 131,977 4,400 --- 230,605(2) --- 61,496 23,415
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
(1) Bonuses paid during fiscal year listed are for services performed during
previous fiscal year. No bonuses were awarded for services performed
during fiscal 1997. No bonuses will be awarded for services performed
during fiscal 1998.
(2) Represents the value of 39,675, 19,837, 27,772 and 19,837 shares of
restricted stock granted to Ms. Poronsky Stull, Mr. Gartner, Ms. Poronsky
and Mr. Vanek, respectively, based on the $11.625 closing market price per
share of the Common Stock on June 13, 1996, the date of grant. Twenty
percent of the shares vested on June 13, 1997 and June 13, 1998, with the
remaining 60% scheduled to vest in three equal installments beginning June
13, 1999. Dividends are paid on the restricted shares to the extent and on
the same date as dividends are paid on all other outstanding shares of
Common Stock. Based on the closing market price per share of the Common
Stock on September 30, 1998 of $14.50, the 23,805, 11,903, 16,664 and
11,903 shares of unvested restricted stock held for the benefit of Ms.
Poronsky Stull, Mr. Gartner, Ms. Poronsky and Mr. Vanek, respectively, had
aggregate market values of $345,173, $172,594, $241,628 and $172,594,
respectively.
(3) Includes allocations made during fiscal 1998 for fiscal 1997 to the ESOP
for Ms. Poronsky Stull, Mr. Gartner, Ms. Poronsky and Mr. Vanek, as
follows: $36,406, $36,406, $36,406 and $35,859. Amounts for Ms. Poronsky
Stull and Ms. Poronsky also include $7,500 in fees for service as members
of the Company's Board of Directors. Excluded from amounts listed is an
allocation of $38,169 made during fiscal 1999 for fiscal 1998 to the ESOP
for each of Ms. Poronsky Stull, Mr. Gartner, Ms. Poronsky and Mr. Vanek.
Set forth below is information concerning the number and value of stock
options at September 30, 1998 held by the Named Officers. No stock options or
stock appreciation rights were granted during fiscal 1998.
12
<PAGE> 15
<TABLE>
<CAPTION>
====================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
====================================================================================================================
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
NAME SHARES ACQUIRED VALUE OPTIONS AT FISCAL YEAR-END ($)(1)
UPON EXERCISE REALIZED FISCAL YEAR-END
----------------------------------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mary Beth Poronsky Stull 2,500 $10,470 33,734/62,953 $96,985/$180,990
- --------------------------------------------------------------------------------------------------------------------
Gerald J. Gartner --- --- 24,598/36,898 $70,719/$106,082
- --------------------------------------------------------------------------------------------------------------------
Janine M. Poronsky 1,500 6,282 28,652/45,230 $82,375/$130,036
- --------------------------------------------------------------------------------------------------------------------
Kenneth D. Vanek --- --- 24,598/36,898 $70,719/$106,082
====================================================================================================================
</TABLE>
(1) Represents the difference between the aggregate exercise price of such
options and the aggregate fair market value of the shares of Common Stock
that would be received upon exercise, assuming such exercise occurred on
September 30, 1998, at which date the closing market price per share of the
Common Stock was $14.50.
EMPLOYMENT AGREEMENTS. The Bank has entered into employment agreements
with President Poronsky Stull, Ms. Poronsky, Mr. Gartner and Mr. Vanek providing
for initial terms of three years, three years, two years and two years,
respectively. The employment agreements each provide for an annual base salary
in an amount not less than the employee's respective current salary and provide
for extension subject to the performance of an annual formal evaluation by
disinterested members of the Board of Directors of the Bank. The agreements also
provide for termination upon the employee's death, for cause or in certain other
events specified in the agreements. The employment agreements are also
terminable by the employee upon 90 days notice to the Bank.
The employment agreements provide for payment (in lieu of salary) to
President Poronsky Stull, Ms. Poronsky, Mr. Gartner and Mr. Vanek, respectively,
of an amount equal to 299%, 299%, 200% and 200% of their five-year average base
compensation, respectively, in the event there is a "change-in-control" of the
Bank where employment terminates in connection with such change-in-control or
within twelve months thereafter. If the employment of President Poronsky Stull,
Ms. Poronsky, Mr. Gartner and Mr. Vanek had been terminated as of September 30,
1998 under circumstances entitling such officers to severance pay as described
above, such officers would have been entitled to receive lump sum cash payments
of approximately $561,000, $361,282, $291,736 and $238,581, respectively.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors has
furnished the following report on executive compensation:
The Company's Compensation Committee has responsibility for reviewing
the compensation policies and plans for the Bank and its affiliates. The
policies and plans established are designed to enhance both short-term and
long-term operational performance of the Bank and to build stockholder value
through anticipated appreciation in the Company's Common Stock price.
The Company provides certain benefits to all officers and employees who
meet certain minimum requirements, regardless of position. These benefits
include health, life and long-term disability insurance. They also include
participation in a Profit Sharing Plan and an Employee Stock Ownership Plan. The
Board of Directors also has a policy of paying a bonus to all employees,
including officers, at least annually. This bonus is approximately 5% of annual
salary. The executive officers recommended to the Committee that they should not
be awarded bonuses this year or for the 1997 fiscal year; therefore, no bonuses
were awarded to the executive officers for the 1997 or the 1998 fiscal year.
One of the Committee's primary objectives is to develop and maintain
compensation plans which provide the Bank with the means of attracting and
retaining quality executives at competitive compensation levels and to implement
compensation plans which seek to motivate executives to perform to the full
extent of their abilities and which seek to enhance stockholder value by
aligning closely the financial interests of the Company's executives with those
of its stockholders. In determining compensation levels, plans and adjustments,
the Committee takes into account, among other things, compensation reviews made
by third parties. These studies primarily compare the compensation of the
13
<PAGE> 16
Bank's executive officers to the compensation of executive officers of other
local financial institutions. Although no company is an exact match,
consideration was given by the Committee to salaries and bonuses that are paid
to executives at other similar public companies.
With respect to President Poronsky Stull's compensation for the fiscal
year ended September 30, 1998, the Committee took into account a comparison of
salaries of chief executive officers of local financial institutions. Likewise,
each executive officer's base salary was determined utilizing financial
institution compensation surveys, President Poronsky Stull's base salary for
fiscal year 1998 was not changed by the Committee from the level set by the
Committee for fiscal year 1997 because of President Poronsky Stull's
recommendation that she not receive a salary increase. While the Committee
believed that a bonus for fiscal 1998 and a salary increase for fiscal 1999 for
President Poronsky Stull were warranted, President Poronsky Stull declined an
increase in her base salary and also declined a bonus.
In December 1997, the Committee reviewed several salary studies of
executive officers of other financial institutions. Salaries remained unchanged
from the 1997 levels due to the recommendation of management that the executive
officers not receive a salary increase. It should also be noted that all
officers took voluntary pay reductions during the first quarter of fiscal 1997.
Although the Committee determined that officers should be given salary increases
for fiscal 1999, management recommended that such increases not be implemented.
However, the Board did vote to give one officer (Mr. Vanek) a modest salary
increase for 1999.
The Board of Directors as a whole, and the Compensation Committee in
particular, recognizes that attracting and retaining key executives is critical
to the Company's long-term success. This report reflects the compensation
policies ratified by all outside directors. The Compensation Committee, with
recommendations from the Board of Directors, has set certain guidelines
regarding executive officer compensation, and has also set certain goals which
must be met to achieve all incentives possible. These goals include:
- Maintaining a below average ratio of full-time employees per
million dollars of assets while maintaining good customer service
and high employee morale
- Maintaining a low level of non-performing loans
- Increasing the interest rate spread
- Increasing net income
- Improving the net interest margin
- Maintaining risk-based capital ratios above regulatory
requirements
- Maintaining at least a CAMEL 2 rating by the Bank
Since the mutual to stock conversion of the Bank, the Bank and the
Company have included stock option and restricted stock awards as key elements
in its total compensation package. Equity based compensation provides a
long-term alignment of interests and results achieved for stockholders with the
compensation rewards provided to executive officers by providing those
executives and others on whom the continued success of the Company most depends
with a proprietary interest in the Company. In 1996, a Stock Option and
Incentive Plan and a Recognition and Retention Plan were adopted, allowing for
the grant of equity-based awards, including stock options and restricted stock.
These plans were ratified by the Company's stockholders at a Special Meeting of
Stockholders held during fiscal 1996.
In fiscal year 1996, all of the Bank's executive officers were granted
restricted stock and stock options, generally vesting over a five-year schedule.
Since the initial awards in fiscal year 1996, no additional restricted stock or
stock options have been awarded to executive officers. During fiscal 1998, an
option awarded to President Poronsky Stull with an exercise price of $11.625 per
share vested as to 18,117 shares and 7,935 shares of restricted stock awarded to
President Poronsky Stull vested as well.
Through the compensation programs described above, a significant
portion of the Bank's executive compensation is linked directly to individual
and corporate performance. The Committee will continue to review all elements of
compensation to ensure that the compensation objectives and plans meet the
Company's business objectives and philosophy of linking executive compensation
to stockholder interests of corporate performance as discussed above.
In 1993, Congress amended the Internal Revenue Code of 1986 to add
Section 162(m) to limit the corporate deduction for compensation paid to a
corporation's five most highly compensated officers to $1.0 million per
executive per year, with certain exemptions. The Committee carefully reviewed
the impact of this legislation on the cost of the Bank's current executive
compensation plans. Under the legislation and regulations adopted thereunder, it
is not
14
<PAGE> 17
expected that any portion of the Company's (or subsidiaries') deductions for
employee remuneration will be non-deductible in fiscal 1998 or in future years
by reason of compensation awards granted in fiscal 1998. The Committee intends
to review the Company's (and subsidiaries') executive compensation policies on
an ongoing basis, and propose appropriate modifications, if the Committee deems
them necessary, to these executive compensation plans with a view toward
implementing the Company's compensation policies in a manner that avoids or
minimizes any disallowance of tax deductions under Section 162(m).
The foregoing report is furnished by the Compensation Committee of the
Board of Directors.
EDWARD R. TYBOR ALBERT C. BALDERMAN CAROL A. DIVER NICHOLAS J. RAINO
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The following graph compares the cumulative total stockholder return on
the Company's Common Stock to the NASDAQ U.S. Stock Index (which includes all
NASDAQ traded stocks of U.S. companies) and a bank industry index for the period
from October 2, 1995, the date the Company's Common Stock commenced trading on
the NASDAQ National Market System, through September 30, 1998. The Company
deleted the Savings and Loan Index provided in last year's Proxy Statement
because the Bank converted to a national bank in February 1997. The Board
believes the use of a bank index is more appropriate. The graph assumes that
$100 was invested on October 2, 1995 and that all dividends were reinvested.
[graph]
PERIOD ENDING
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
INDEX 10/02/95 03/29/96 09/30/96 03/31/97 09/30/97 03/31/98 09/30/98
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Damen Financial Corporation $100.00 $116.25 $122.45 $145.55 $159.90 $177.15 $149.60
S&P Midcap Banking Index 100.00 116.24 125.83 145.56 205.12 247.28 205.44
NASDAQ Index 100.00 107.18 119.40 118.89 164.05 178.64 164.84
</TABLE>
15
<PAGE> 18
CERTAIN TRANSACTIONS
The Bank follows a policy of granting loans to eligible directors,
officers and employees, subject in each case to Board approval. Loans to
employees, officers and directors are made in the ordinary course of business
and on the same terms, including collateral and interest rates, as those
prevailing at the time for comparable transactions and do not involve more than
the normal risk of collectibility at the time of origination. At September 30,
1998, the Bank's loans to directors, officers, employees and members of their
immediate families totaled approximately $212,691, which was .47% of the
Company's stockholders' equity on such date. All of these loans were current at
fiscal year end.
Director Nicholas J. Raino has a greater than 10% equity interest in
Dale, Smith & Associates, Inc. ("Dale Smith"), which has long been utilized by
the Bank and, since its formation, the Company, to provide marketing,
advertising and other services. During fiscal year 1998, the Company and the
Bank paid Dale, Smith $28,786 for its services. During fiscal 1998, the Company
and the Bank also reimbursed Dale, Smith $240,470 for services and products
provided by third party sources, such as newspapers and financial printers.
PROPOSAL II - RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed Cobitz, VandenBerg
& Fennessy, independent accountants, to be the Company's auditors for the fiscal
year ending September 30, 1999. Representatives of Cobitz, VandenBerg & Fennessy
are expected to attend the Meeting to respond to appropriate questions and to
make a statement if they so desire.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF COBITZ, VANDENBERG & FENNESSY AS THE
COMPANY'S AUDITORS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1999.
PROPOSAL III - STOCKHOLDER PROPOSAL
The Company has received from a stockholder, Paul Duggan (a member of
the Committee), for consideration at the Meeting the proposal set forth below.
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.
16
<PAGE> 19
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 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"
FOR THE FOLLOWING REASONS, THE BOARD OF DIRECTORS RECOMMEND THAT YOU
VOTE "AGAINST" THE STOCKHOLDER PROPOSAL AND YOUR PROXY WILL BE SO VOTED UNLESS
YOU SPECIFY OTHERWISE:
Since the Company's inception, your Board of Directors has solicited
the advice of investment bankers and has acted on such advice where appropriate.
The Board of Directors has always recognized its primary duty to be the
maximization of stockholder value and, to that end, has consulted with
investment bankers on an ongoing basis to explore various options available to
the Company to enhance stockholder value. Evaluation of options is a continuing
process, but the Board of Directors has taken a number of specific steps
designed to maximize stockholder value since the Company began publicly trading
its stock in October 1995.
Recently, the Company announced that it had engaged the services of
Keefe Bruyette and Woods, Inc., a leading investment banking firm ("Keefe
Bruyette"), to serve as its financial adviser to assist the Board in considering
the Company's strategic options, including the possible sale of the Company.
Although this announcement was made on December 16, 1998, Keefe Bruyette had
been assisting the Board in reviewing its strategic options, including the
possible sale of the Company, for some time before this announcement.
The Board did not announce its engagement of Keefe Bruyette earlier
because the Board believes that the disclosure of such information would be
disruptive to this review process, could possibly deter prospective buyers who
might be reluctant to become involved or drawn into what they might perceive as
a "bidding" process, and could result in offers being made by parties seeking to
acquire the Company for a bargain price, feeling a bargain might be available
because the Board was being pressured to act by a disgruntled stockholder. The
Board, however, felt that it was necessary to assume these risks now because of
the contentious nature of Duggan's demands, the unfair nature of his criticisms
and the Board's desire to ensure that the stockholders receive all relevant
information prior to voting on the Stockholder Proposal.
The Board of Directors has taken several steps in order to enhance
stockholder value. The Board of Directors evaluates the Company's dividend
policy on a regular basis. The Company's dividend increased from $.06 per share
per quarter to $.10 per share per quarter for the quarter ending December 31,
1997, a 67% increase. The dividend was increased again to $.12 per share per
quarter beginning with the quarter ending March 31,1998, a 20% increase. During
the fiscal year 1998, the Company's dividends paid totaled $.40 per share,
representing 62% of the Company's net income for 1998.
The Board of Directors has also been working on maximizing stockholder
value by taking action intended to increase the overall franchise value of the
Company's major asset, the Bank. The Bank significantly increased its commercial
loan portfolio and began offering new products and services over the past year.
Indicative of the Company's success is that it has reported net income of $1.9
million, or $.65 per share on a fully diluted basis, for the fiscal year, an
increase of $.12 per share over the fiscal year 1997, or 22.6%. The Company's
return on average assets increased 10.7%, from .75% in 1997 to .83% in 1998.
The Board of Directors has taken several steps in order to enhance
stockholder value. Since January 1, 1996, the Company has approved seven stock
repurchase programs, which, as of December 9, 1998, have resulted in the
Company's repurchase of over 1,160,280 shares of its Common Stock. September 11,
1998, the Company announced a stock repurchase program pursuant to which it
intends to acquire up to 10% of the Company's shares. As of December 9, 1998,
the Company has repurchased 147,000 shares at an average price of $14.43.
17
<PAGE> 20
The Board of Directors has taken several steps in order to enhance
stockholder value. The Board of Directors believes the Proponent's emphasis on
the price of the Company's stock in August 1998 is misleading. Although the
Board of Directors is certainly unhappy with the price of the Company's stock, a
one-time snapshot of the Company's stock price does not give a complete picture
of the value of the Company. The stock market in general experienced a drastic
decline this past summer, especially in August. Many companies, including large
and small Midwest banks and thrifts, saw their stock prices drop as their
stockholders followed the market's negative reaction to the economic failure
abroad and excessive leveraged investments. It is unrealistic to expect the
Company's stock price to be unaffected by a turbulent stock market.
The Board of Directors is continually evaluating ways to improve
stockholder value and has consulted with experienced, knowledgeable and
competent investment bankers and legal experts. The Board of Directors takes
seriously its duty to run a safe and sound financial institution while working
towards maximization of stockholder value. It knows that no action occurs in a
vacuum and that prudence requires it to look at the long term, as well as the
short term, effects of a business plan. The Board of Directors and Management
have appropriately consulted with experts regarding the future of the Company
and believe the Company is on the right track for continued successful
operations.
The value of the Company's Common Stock has increased since its initial
public offering on September 30, 1995, and dividends have been declared every
quarter since June 1996. At September 30, 1998, the return on an investment made
at the initial public offering price of $10.00 per share was 52.6%. The Board of
Directors believes a return of 52.6% over a three year period is a good return.
Based upon the closing price of $16.25 on December 31, 1998, this return was
71.3%
The Stockholder Proposal recommends that your Board of Directors
appoint an investment banker to pursue a sale of the Company and to establish a
committee consisting of all outside directors to consider and recommend to the
full Board of Directors for its approval the best available offer to acquire the
Company. In its proxy materials, the Committee states that Duggan has repeatedly
asked the Board to engage the services of an investment banker to explore the
sale of your Company. The Committee also alleges that the reluctance of the
Board to engage an investment banker demonstrates management's influence over
the Board of Directors and the insufficient responsiveness of the Board to
stockholder concerns.
THE BOARD BELIEVES THAT THIS CHARACTERIZATION OF ITS ACTIONS BY THE
COMMITTEE IS FALSE AND MISLEADING. THE BOARD BELIEVES THAT ITS ENGAGEMENT OF
KEEFE BRUYETTE IMPLEMENTS THE RECOMMENDATION SET OUT IN THE FIRST PART OF THE
STOCKHOLDER PROPOSAL THEREBY RENDERING THIS RECOMMENDATION MOOT.
Furthermore, the Board does not believe it is necessary, as the
Committee contends, to appoint a committee consisting of all outside directors
to review the results of the efforts of Keefe Bruyette. The Board of Directors
is fully capable of evaluating any materials submitted by Keefe Bruyette. The
Board of Directors is composed of five outside directors and two employee
directors. The outside directors operate independently of management.
Two of the outside directors (Messrs. Raino and Balderman) have
extensive experience serving as directors of other financial institutions. In
fact, Messrs. Raino and Balderman were serving as directors, respectively, of
Cragin Federal Bank for Savings and Southwest Financial Bank & Trust Company
when these institutions were acquired. The three other outside directors
(Messrs. Tybor and Caputo and Ms. Diver) have faithfully served as directors of
the Company and the Bank and have successfully represented the interests of
depositors, borrowers and stockholders collectively for more than 72 years.
Instead of recognizing the qualities that these five individuals possess, and
their dedication to the Company and its stockholders, the Committee insults
their intelligence by contending that they cannot rationally review any offers
for the Company and exercise their own judgment if the two employee directors
are present at such meetings.
THE BOARD OF DIRECTORS BELIEVES THE FACT THAT FIVE OF THE SEVEN MEMBERS
OF THE BOARD ARE OUTSIDE DIRECTORS WITH SIGNIFICANT EXPERIENCE IN MANAGING
FINANCIAL INSTITUTIONS DEMONSTRATES THAT THERE IS NO NEED TO APPOINT A SPECIAL
BOARD COMMITTEE TO EVALUATE OFFERS AS CONTEMPLATED BY THE STOCKHOLDER PROPOSAL.
IN LIGHT OF THE FOREGOING, THE BOARD OF DIRECTORS FEELS THERE IS NO
REASON TO CONSIDER THE STOCKHOLDER PROPOSAL SET FORTH ABOVE AND, ACCORDINGLY,
THE COMPANY CONTACTED DUGGAN ON DECEMBER 17, 1998 AND REQUESTED THAT HE WITHDRAW
HIS PROPOSAL. UNFORTUNATELY, BUT NOT UNEXPECTEDLY, IN LIGHT OF THE CONTENTIOUS
WAY DUGGAN HAS CONDUCTED HIMSELF, HE HAS ELECTED TO CONTINUE THIS DISRUPTIVE
FIGHT, WASTING THE TIME AND EFFORT OF THE BOARD OF DIRECTORS AND MANAGEMENT AND
THE FUNDS OF THE COMPANY.
18
<PAGE> 21
The Committee states in its proxy materials that the stockholder
proposal submitted at last year's annual meeting (which is similar to the
Stockholder Proposal) was defeated, although receiving 1,180,889 votes "for" and
1,168,000 votes "against," because of a bylaw restriction which reduced the
number of votes "for" by 51,672. This is simply untrue. This proposal would have
failed even if the 51,672 votes (which were cast by Duggan) had been counted.
Under the rules governing the voting on this proposal, in order for the proposal
to pass it had to receive a majority of the votes cast. As indicated in the
instructions for voting at last year's annual meeting (and as the Committee
notes correctly in its own proxy materials), proxies marked to "abstain" have
the same affect as votes "against" the proposal. There were sufficient votes
cast as "abstentions" at last year's annual meeting to defeat the proposal even
if the 51,672 votes had been counted. What is interesting is that the Committee
fails to note that holders of almost 20% of the shares represented at last
year's meeting declined to vote on this proposal, meaning that this proposal
only received 38.6% of the votes eligible to be cast.
It is also interesting to note that the votes rejected were those of
Duggan who apparently had not read the Company's charter which contains the
voting restriction before casting his votes. The Board believes that Duggan and
entities he controls, in anticipation of being unable to vote certain of his
shares, sold 99,800 shares (almost 27% of his holdings) for $14.50 a share on
December 2, 1998, so that his ownership interest would be less than 10% and he
would not run afoul of this charter restriction. Showing its lack of familiarity
with the Company's organizational documents, the Committee describes this voting
restriction as being contained in the bylaws. It is not in the bylaws; it is in
the Company's charter.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" THIS
PROPOSAL, AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
VOTING SECURITIES AND CERTAIN HOLDERS THEREOF
Stockholders of record as of the close of business on January 11, 1999
(the "Record Date") will be entitled to one vote for each share of Common Stock
then held. As of the Record Date, the Company had 2,820,154 shares of Common
Stock issued and outstanding. The following table sets forth, as of the Record
Date, information regarding share ownership of (i) those persons or entities
known by management to beneficially own more than five percent of the
outstanding shares of the Common Stock, (ii) the executive officers of the
Company who are not directors of the Company and whose salary and bonus for
fiscal 1998 exceeded $100,000 and (iii) all directors and executive officers of
the Company as a group. Information concerning share ownership by directors of
the Company is contained elsewhere herein under "PROPOSAL I - ELECTION OF
DIRECTORS."
19
<PAGE> 22
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED AT PERCENT
BENEFICIAL OWNER JANUARY 11, 1999 OF CLASS
- -------------------------------------------------------------------------------
<S> <C> <C>
Paul J. Duggan(1) 273,800 9.71
Jackson Boulevard Capital Management, Ltd.
Jackson Boulevard Equities, L.P.
Jackson Boulevard Investments, L.P.
Jackson Offshore Fund, Ltd.
Jackson Boulevard Partners
Vincent Cainkar
J. Dennis Huffman
Suite 400
53 West Jackson Boulevard
Chicago, Illinois 60604
Damen Financial Corporation Employee Stock 314,902 11.17
Ownership Plan(2)
200 West Higgins Road
Schaumburg, Illinois 60195
Gerald J. Gartner(3)(4) 83,288 2.83
200 West Higgins Road
Schaumburg, Illinois 60195
Kenneth D. Vanek(3)(4) 54,276 1.82
200 West Higgins Road
Schaumburg, Illinois 60195
Directors and executive officers of the Company
and the Bank, as a group (10 persons)(4)(5) 416,757 14.09
</TABLE>
- --------------------------------------------
(1) As reported by Paul J. Duggan, Jackson Boulevard Capital Management, Ltd.
("Jackson Capital"), Jackson Boulevard Equities, L.P. ("Jackson
Equities"), Jackson Boulevard Investments, L.P. ("Jackson Investments"),
Jackson Offshore Fund, Ltd. ("Jackson Offshore"), Jackson Boulevard
Partners ("Jackson Partners"), Vincent Cainkar and J. Dennis Huffman in
Amendment No. 10 to a Schedule 13D, dated January 8, 1999, filed with the
SEC pursuant to the Exchange Act. Vincent Cainkar joined in Amendment Nos.
7-10 to said Schedule 13D and Jackson Partners and J. Dennis Huffman
joined in Amendment Nos. 8-10 said Schedule 13D as members of a group
consisting of Duggan, Jackson Capital, Jackson Equities, Jackson
Investments, Jackson Offshore, Jackson Partners, Cainkar and Huffman. Of
the shares listed, Mr. Duggan reported sole voting and dispositive powers
as to 400 shares and shared voting and dispositive powers as to 266,200
shares. Jackson Capital, Jackson Equities, Jackson Investments and Jackson
Offshore reported shared voting and dispositive powers as to 92,200
shares, 60,622 shares, 31,578 shares and -0- shares, respectively. Jackson
Partners reported sole voting and dispositive powers with respect to
174,000 shares. Mr. Duggan is the sole stockholder and a director and
officer of Jackson Capital, which is the sole general partner of Jackson
Equities and Jackson Investments. Mr. Duggan through Jackson Capital
controls all decisions regarding voting and investment of the shares held
by Jackson Offshore. Mr. Duggan and his spouse are the general partners of
Jackson Partners. Mr. Cainkar reported sole voting and dispositive powers
with respect to 100 shares and shared voting and dispositive powers with
respect to 4,100 shares. Mr. Huffman reported sole voting and dispositive
powers with respect to 3,000 shares.
(2) The amount reported represents shares held by the Company's Employee Stock
Ownership Plan ("ESOP"), of which 80,982 shares have been allocated to
accounts of participants. Suburban Bank and Trust Company, the trustee of
the ESOP, may be deemed to beneficially own the shares held by the ESOP
which have not been allocated to accounts of participants. Participants in
the ESOP are entitled to instruct the trustee as to the voting of shares
allocated to their accounts under the ESOP. Unallocated shares held in the
ESOP's suspense account or allocated shares for which no voting
instructions are received are voted by the trustee in the same proportion
as allocated shares voted by participants.
20
<PAGE> 23
(3) Amount includes 24,598 shares subject to stock options which are currently
exercisable with respect to such shares or which will become exercisable
with respect to such shares within 60 days of the Record Date.
(4) Amount includes shares held directly and vested restricted shares, as well
as shares held jointly with family members, shares held in retirement
accounts, held in a fiduciary capacity or by certain family members, with
respect to which shares the named individual or group members may be
deemed to have sole or shared voting and/or investment power; amount does
not include unvested restricted shares which are voted by a trustee.
(5) Amount includes an aggregate of 137,351 shares which directors and
executive officers as a group have the right to acquire pursuant to stock
options which are currently exercisable with respect to such shares or
which will become exercisable with respect to such shares within 60 days
of the Record Date.
STOCKHOLDER PROPOSALS - NEXT ANNUAL MEETING
In order 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 meeting must be received at the Company's office located at 200
West Higgins Road, Schaumburg, Illinois 60195, no later than September ___,
1999. Any such proposal shall be subject to the requirements of the proxy rules
adopted under the Exchange Act.
CERTAIN LITIGATION
On December 21, 1998, management of the Company, after consulting with
legal counsel, recommended to the Board of Directors that it would be in the
best interests of the Company and its stockholders if the 1998 annual meeting
were to be delayed from January 25, 1999 to February 26, 1999 and the record
date for the meeting were to be changed from December 9, 1998 to January 11,
1999. At a meeting held on December 21, 1998, the Board of Directors, after
reviewing the relevant facts, decided to reset the annual meeting and record
dates.
The Committee filed its preliminary proxy materials with the SEC on
December 22, 1998 on which date the Company was notified of the filing. On
December 30, 1998, Duggan filed a lawsuit in the Delaware Court of Chancery
against the Company and each of its directors. The suit alleged that the meeting
and record dates for this year's annual meeting were changed by the Board
because of a challenge to their incumbency by Duggan's solicitation of proxies
for this year's meeting. Duggan asked the Court to force the Company to hold the
annual meeting on January 25, 1999 and to reset the record date to December 9,
1998.
THE BOARD OF DIRECTORS AND THE COMPANY BELIEVES THERE IS NO MERIT TO
DUGGAN'S CLAIMS AND INTENDS TO DEFEND THEMSELVES VIGOROUSLY. The basic fact is
that the Board of Directors elected on December 21, 1998, for reasons unrelated
to Duggan's solicitations, to postpone the annual meeting for only one month to
February 26, 1999. The record date was changed, not for any nefarious reasons as
suggested by Duggan, but because the Company's bylaws provide that the record
date for a meeting cannot be set more than 60 days prior to the meeting date.
The Board of Directors changed the meeting date for valid reasons and not
because of concerns over a possible proxy contest being conducted by Duggan.
THE COMPANY HAS HAD TO EXPEND SUBSTANTIAL FUNDS AND WASTE THE TIME OF
ITS OFFICERS AND DIRECTORS IN DEFENDING WHAT THE BOARD BELIEVES IS A FRIVOLOUS
LAWSUIT. AGREEING WITH THE COMPANY'S POSITION, THE DELAWARE COURT OF CHANCERY
DENIED DUGGAN'S REQUEST ON JANUARY 12, 1999. AS A CONSEQUENCE, THE MEETING WILL
BE HELD ON FEBRUARY 26, 1999 WITH A RECORD DATE OF JANUARY 11, 1999, THE DATES
ESTABLISHED BY THE BOARD.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the SEC reports of ownership and
reports of changes in ownership of common stock and other equity securities of
the Company. Officers, directors and greater than 10% stockholders are required
by SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 1998, all
Section 16(a) filing requirements applicable to the Company's officers,
directors and greater than 10 percent beneficial owners were met, with the
exception of filings made by Paul Duggan. See "PROPOSAL I - ELECTION OF
DIRECTORS," for discussion of Duggan's compliance with his Section 16(a) filing
requirements.
21
<PAGE> 24
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matter should properly come before the Meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.
CERTAIN INFORMATION CONCERNING PARTICIPANTS
The directors of the Company are participants in the solicitation of
proxies on behalf of the Company. Certain information with respect to such
participants is set forth in Annex A hereto. For additional information
concerning each director, see the Proxy Statement.
SOLICITATION OF PROXIES
In addition to the solicitation of proxies by use of the mails, proxies
may also be solicited by the Company and its directors, officers and employees
(who will receive no compensation therefor in addition to their regular
salaries) by telephone, telegram, facsimile transmission or other electronic
communication methods or personal interview.
The Company has retained D.F. King & Co., Inc. ("D.F. King") to assist
in the solicitation of proxies. Pursuant to the Company's agreement, D.F. King
will provide various advisory and proxy solicitation services on behalf of the
Company at a fee estimated not to exceed $30,000, plus reasonable out-of-pocket
expenses. It is expected that D.F. King will utilize approximately 25 persons in
such solicitation, which may be made by use of the mails and by telephone,
telegram, facsimile transmission and other electronic communication methods, and
in-person interviews. In addition, the Company may reimburse banks and brokers
who hold shares of the Company's stock in their name or custody or in the name
of nominees for others, for their out-of-pocket expenses incurred in forwarding
copies of the proxy materials to those persons for whom they hold such shares.
Although no precise estimate can be made at this time, the Company
estimates that the aggregate amount to be spent by the Company in connection
with the solicitation of proxies by the Company (including costs of litigation)
will be approximately $__________. This amount includes fees payable to D.F.
King, legal fees related to the solicitation and printing and mailing costs, but
excludes amounts normally expended in the event of an uncontested election of
directors and the salaries and fees of regular officers, directors and employees
of the Company. To date, the Company knows it has incurred significant fees and
expenses, but has not been billed for such services. The actual aggregate amount
to be spent by the Company will vary depending on, among other things, the
nature and extent of any litigation that may arise relating to the proxy contest
initiated by the Committee.
Schaumburg, Illinois
January ___, 1999
22
<PAGE> 25
ANNEX A
CERTAIN INFORMATION REGARDING PARTICIPANTS
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED PERCENT OF
NAME AND BUSINESS ADDRESS (1) AS OF JANUARY 11, 1999 (1) CLASS
- -------------------------------------------------------------------------------
<S> <C> <C>
Albert C. Balderman............... 2,587 .09
Charles J. Caputo................. 36,108 1.28
Carol A. Diver.................... 16,108 .57
Janine A. Poronsky................ 76,105 2.67
Nicholas J. Raino................. 14,381 .53
Mary Beth Poronsky Stull. ........ 98,472 3.45
Edward R. Tybor .................. 25,608 .91
</TABLE>
None of the foregoing persons is a record owner of shares in addition
to those noted above and none beneficially owns securities of the subsidiary of
the Company. To the knowledge of the Company, none of the associates of the
foregoing persons beneficially own additional shares of the Company's Common
Stock. None of the foregoing persons or their associates has any understanding
or arrangement with any person with respect to any future employment by the
Company or its affiliates (except for the employment agreements of Ms. Poronsky
and Ms. Poronsky Stull as described in the Proxy Statement) or with respect to
any future transaction to which the Company or any of its affiliates will or may
be a party. None of the foregoing persons is, or was within the past year, a
party to any contract, arrangement or understanding with any person with respect
to securities of the Company, except with respect to the stock options described
above and vested restricted shares and unvested restricted shares granted under
the Company's Recognition and Retention Plan.
- ---------------------------
(1) Includes shares held directly and vested restricted shares, as well as
shares held in retirement accounts, shares allocated to the ESOP
accounts of certain of the named persons, held by certain members of
the named individuals' families, or held by trusts of which the named
individual is a trustee or substantial beneficiary, with respect to
which shares the named individuals may be deemed to have sole or shared
voting and/or investment power. Amounts include 3,967, 5,934, 28,652,
3,967, 33,734 and 3,967 shares of Common Stock which Directors Caputo,
Diver, Poronsky, Raino, Poronsky Stull and Tybor have the right to
acquire, respectively, pursuant to stock options which are currently
exercisable with respect to such shares or which will become
exercisable with respect to such shares within 60 days of the Record
Date. Does not include unvested restricted shares which are voted by a
trustee.
A-1
<PAGE> 26
TRADING INFORMATION
The following table sets forth information with respect to all
purchases and sales of shares by the Company's directors during the past two
years.
<TABLE>
<CAPTION>
Name Trade Date Number of Shares Bought/(Sold)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Albert C. Balderman ......................... 1/6/98 7,935 (1)
1/16/98 1,000 (2)
Charles J. Caputo ......................... 12/11/97 3,967 (3)
Carol A. Diver ......................... 12/11/97 2,000 (3)
Janine M. Poronsky ......................... 1/10/97 2,438.565 (4)
11/4/97 3,100 (2)
12/11/97 1,500 (3)
12/12/97 2,329.978 (5)
1/21/98 400 (2)
1/30/98 600 (2)
2/11/98 110 (2)
12/2/98 2,632.35 (6)
Nicholas J. Raino ....................... 4/1/97 7,935 (1)
4/30/97 4,000 (2)
Mary Beth Poronsky Stull..................... 1/10/97 2,487.107 (4)
12/11/97 2,500 (3)
12/12/97 2,329.978 (5)
1/21/98 1,000 (2)
2/11/98 4,674 (2)
12/2/98 2,632.35 (6)
Edward R. Tybor.............................. 1/8/98 3,967 (3)
</TABLE>
- ----------------------------
(1) Grant of shares under the Company's RRP.
(2) Purchase.
(3) Purchase made pursuant to the exercise of options.
(4) 1996 ESOP allocation.
(5) 1997 ESOP allocation.
(6) 1998 ESOP allocation.
ADDITIONAL INFORMATION REGARDING PARTICIPANTS
The following table sets forth the name and principal business address
of each director. (Their principal occupations are set forth in the Proxy):
Albert C. Balderman -- Damen Financial Corporation, 200 West Higgins Road,
Schaumburg, Illinois 60195
Charles J. Caputo -- Damen Financial Corporation, 200 West Higgins Road,
Schaumburg, Illinois 60195 (Mr. Caputo is retired)
Carol A. Diver -- Chicago Park District, 425 East McFedridge Drive,
Chicago, Illinois 60605
Janine M. Poronsky -- Damen Financial Corporation, 200 West Higgins Road,
Schaumburg, Illinois 60195
A-2
<PAGE> 27
Nicholas J. Raino -- Damen Financial Corporation, 200 West Higgins Road,
Schaumburg, Illinois 60195 (Mr. Raino is retired)
Mary Beth
Poronsky Stull -- Damen Financial Corporation, 200 West Higgins Road,
Schaumburg, Illinois 60195
Edward R. Tybor -- Kubina-Tybor Funeral Home, 1938 West 47th Street,
Chicago, Illinois 60609
A-3
<PAGE> 28
------------------------------------------------------------------------
IMPORTANT
Your vote is important, no matter how many shares you
own. Please support your Board of Directors by signing, dating
and promptly mailing your enclosed WHITE proxy card. Remember,
only your latest dated card will count. DO NOT SIGN ANY CARD
SENT TO YOU BY THE SO-CALLED COMMITTEE.
If you have already submitted a proxy to the Committee,
you may change your vote to a vote "FOR" the election of the
Company's nominees and "AGAINST" the Stockholder Proposal by
signing, dating and returning the WHITE proxy card, which must
be dated after the proxy you submitted to the Committee. Only
your latest dated proxy for the Meeting will count at the
Meeting.
If your shares are held in a brokerage firm, bank, bank
nominee or other institution, only it can vote your shares and
only after receiving specific instructions. Accordingly, please
call the person responsible for your account and instruct that
person to execute the WHITE card on your behalf.
If you have any questions or need assistance, please call
us at 847-882-5320 and ask to speak to Janine Poronsky or Mary
Beth Poronsky Stull. You may also call D.F. King, which is
assisting us, toll-free at:
D.F. KING & CO., INC.
77 WATER ST.
NEW YORK, NY 10005
1-800-628-8538
------------------------------------------------------------------------
<PAGE> 29
[logo]
- -------------------------------------------
DAMEN FINANCIAL CORPORATION
January ___, 1999
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Damen Financial
Corporation, I cordially invite you to attend the Company's Annual Meeting of
Stockholders. The meeting will be held at 9:30 a.m. Central Standard Time on
February 26, 1999 at the Embassy Suites, located at 1939 North Meacham Road,
Schaumburg, Illinois.
Your Board of Directors considers it important that you be informed of
recent developments regarding your Company. A disruptive proxy contest has been
initiated by dissident stockholders calling themselves the Committee to Enhance
Shareholder Value (the "Committee"). The enclosed Proxy Statement provides you
with important information about matters discussed in the Committee's proxy
materials, which your Board believes will be distributed shortly.
Your Company has just completed its most successful year in its
history, a fact the self-styled "Committee" (which consists solely of three
stockholders and entities controlled by one of these stockholders) has chosen to
ignore, electing instead to wage a wasteful, time consuming and disruptive proxy
contest. In fact, fiscal 1998 net income increased 10.5% when compared with
fiscal 1997, earnings per share increased $.12 or 22.6% for the same period and
the Company's return on average assets increased 10.7% from .75% for fiscal 1997
to .83% for fiscal 1998. In addition, the Company doubled its dividend payment
from $.06 per share per quarter to $.12 per share per quarter paying out
dividends of $.40 per share in fiscal 1998, an increase of 67% from the $.24 per
share paid out in fiscal 1997. The Company's non-performing loans equaled just
.27% of total assets at September 30, 1998, while its ratio of net charge-offs
(totaling only $30,000) to average loans outstanding for fiscal 1998 was a mere
.03%.
The Board believes your Company has made, and continues to make,
significant improvements in its business through a combination of hard work and
disciplined investment of your capital. We believe that with present management
our prospects are bright and that our strategic plan will deliver further
improved operating results. Above all else, your Board is committed to enhancing
the value of your investment in the Company.
Your Board is urging you to vote "FOR" three current directors (Messrs.
Tybor and Caputo and Ms. Poronsky) who collectively have faithfully served the
interests of the Company and its stockholders, depositors and customers for over
60 years. Your Board is urging you to vote "AGAINST" a proposal supported by the
Committee, the implementation of which your Board believes is unnecessary in
light of actions taken by the Board.
THE BOARD URGES YOU TO SUPPORT YOUR BOARD BY PROMPTLY SIGNING, DATING
AND MAILING THE ENCLOSED WHITE PROXY CARD INDICATING YOUR VOTE FOR THE COMPANY'S
NOMINEES FOR DIRECTORS AND THE SELECTION OF THE COMPANY'S AUDITORS AND YOUR VOTE
AGAINST THE STOCKHOLDER PROPOSAL.
THE BOARD ALSO UNANIMOUSLY AND VIGOROUSLY OPPOSES THE COMMITTEE'S
SOLICITATION OF PROXIES AND URGES YOU NOT TO SIGN ANY PROXY YOU MAY RECEIVE FROM
THE COMMITTEE.
It is unfortunate that this costly and disruptive proxy contest has
arisen at a time when the efforts of your Board and management should be devoted
exclusively to the business affairs of the Company. We will continue every
effort to protect and maximize stockholder value and we are committed to keeping
you informed.
<PAGE> 30
In addition to the stockholder vote on corporate business items, the
meeting will include management's report to you on Damen Financial Corporation's
1998 financial and operating performance.
I encourage you to attend the meeting in person. WHETHER OR NOT YOU
ATTEND THE MEETING, HOWEVER, PLEASE READ THE ENCLOSED PROXY STATEMENT AND THEN
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE POSTAGE
PREPAID ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE. This will save the Company
additional expense in soliciting proxies and will ensure that your shares are
represented. Please note that you may vote in person at the meeting even if you
have previously returned the proxy.
IF YOUR SHARES ARE HELD IN THE NAME OF A BANK, BROKER OR OTHER NOMINEE,
WE URGE YOU TO CONTACT THE PARTY RESPONSIBLE FOR YOUR ACCOUNT AND DIRECT HIM OR
HER TO VOTE "FOR" YOUR COMPANY'S NOMINEES AND "AGAINST" THE STOCKHOLDER PROPOSAL
ON THE COMPANY'S WHITE PROXY CARD.
Thank you for your prompt attention to this important matter.
Sincerely,
Mary Beth Poronsky Stull
Chairman, President and Chief Executive Officer
---------------------------------------------------
200 WEST HIGGINS ROAD - SCHAUMBURG, IL 60195
PHONE: 847/882-5320
<PAGE> 31
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IS THIS EXAMPLE DAMEN FINANCIAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 26, 1999
The undersigned hereby appoints the Board of Directors of Damen Financial
Corporation (the "Company"), and its survivor, with full powers of substitution,
to act as attorneys and proxies for the undersigned to vote all shares of
capital stock of the Company which the undersigned is entitled to vote at the
Company's Annual Meeting of Stockholders (the "Meeting"), to be held at the
Embassy Suites, located at 1939 North Meacham Road, Schaumburg Illinois on
February 26, 1999 at 9:30 a.m., Central Standard Time, and at any and all
adjournments and postponements thereof.
1. The Election as Directors of all nominees listed (except as marked to the
contrary below):
[ ] [ ] [ ]
FOR WITHHOLD FOR ALL
EXCEPT
EDWARD R. TYBOR, JANINE M. PORONSKY AND CHARLES J. CAPUTO
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
"FOR ALL EXCEPT" AND WRITE NOMINEE'S THAT NAME IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
LISTED IN ITEM 1 ABOVE.
2. The ratification of the appointment of Cobitz, VandenBerg & Fennessy as
auditors for the Company for the fiscal year ending September 30, 1999:
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF AUDITORS NAMED IN ITEM 2 ABOVE.
3. A proposal by a stockholder of the Company, as described in the accompanying
Proxy Statement:
[ ] [ ] [ ]
AGAINST FOR ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE PROPOSAL SET FORTH
ABOVE IN ITEM 3.
In their discretion, the proxies are authorized to vote on such other
matters as may properly come before the Meeting or any adjournments or
postponements thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<PAGE> 32
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE NOMINEES FOR ELECTION AS DIRECTORS LISTED IN ITEM 1
ABOVE AND FOR THE RATIFICATION OF THE APPOINTMENT OF AUDITORS NAMED IN ITEM 2
ABOVE AND AGAINST THE PROPOSAL SET FORTH IN ITEM 3 ABOVE. IF ANY OTHER BUSINESS
IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS
PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS
OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
Please
------------------------------
Sign
------------------------------
Dated: , 1999 Here
-------------- ------------------------------
DAMEN FINANCIAL CORPORATION
This Proxy may be revoked at any time before it is voted by: (i) filing with the
Secretary of the Company at or before the Meeting a written notice of revocation
bearing a later date than this Proxy; (ii) duly executing a subsequent proxy
relating to the same shares and delivering it to the Secretary of the Company at
or before the Meeting; or (iii) attending the Meeting and voting in person
(although attendance at the Meeting will not in itself constitute revocation of
this Proxy). If this Proxy is properly revoked as described above, then the
power of such attorneys and proxies shall be deemed terminated and of no further
force and effect.
The above signed acknowledges receipt from the Company, prior to the execution
of this proxy, of notice of the Meeting, a Proxy Statement and an Annual Report
to Stockholders.
Please sign exactly as your name(s) appear(s) on this proxy. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
