NOTICE OF ANNUAL MEETING
To The Stockholders of
Premier Financial Services, Inc.
The Annual Meeting of Stockholders of Premier Financial Services,
Inc. a Delaware corporation (the "Company"), will be held at the Best
Western Stephenson Hotel, 109 South Galena Ave., Freeport, Illinois,
at 10:00 A.M., Freeport time, on Thursday, April 28, 1994 for the
following purposes:
1. To elect three Class III directors for a term of three years.
2. To consider and vote upon a proposal to amend the Certificate of
Incorporation to increase the number of authorized shares of the
Company's Common Stock from 2,500,000 to 15,000,000, which
proposal is more fully described in the Proxy Statement annexed
to this notice.
3. To transact and act upon such other matters or business as may
properly come before said meeting, or any adjournment or adjourn-
ments thereof. The Board of Directors of the Company does not
know of any other matters requiring action by the stockholders to
come before the Annual Meeting.
A complete list of stockholders entitled to vote at the meeting
shall be open for examination by any stockholder for any purpose
germane to the meeting, during ordinary business hours for a period of
ten days prior to the meeting at Premier Financial Services, Inc.'s
corporate office, 27 West Main Street, Suite 101, Freeport, Illinois.
The close of business on February 28, 1994 has been selected by the
Board of Directors as the record date for the determination of
stockholders entitled to notice of and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Michael J. Lester ***IMPORTANT***
Secretary WHETHER OR NOT YOU EXPECT TO
ATTEND THE MEETING IN PERSON,
PLEASE SIGN THE ACCOMPANYING
PROXY AND MAIL IT NOW IN THE
March 25, 1994 ENCLOSED ENVELOPE.
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Premier
Financial Services, Inc. (the "Company") for use at the 1994 Annual
Meeting of Stockholders, (the "Annual Meeting"), and any adjournment
or adjournments thereof, to be held on Thursday, April 28, 1994, at
10:00 A.M., Freeport time, at the Best Western Stephenson Hotel, 109
South Galena Ave., Freeport, Illinois.
Only holders of record of shares of common stock of the Company
(the "Common Stock") at the close of business February 28, 1994 will
be entitled to notice of and to vote at the Annual Meeting, each share
being entitled to one vote. On such date there were 2,163,107 shares
of Common Stock outstanding. The presence at the Annual Meeting,
either in person or by proxy, of the holders of a majority of the
voting powers of the shares outstanding and entitled to vote is
necessary to constitute a quorum for the transaction of business. The
inspectors of election will treat abstentions (including broker non-
votes) as shares present for purposes of determining the existence of
a quorum.
Any stockholder who executes the enclosed proxy may revoke it any
time before it has been exercised by a later dated proxy or by giving
notice of such revocation to the Company in writing or in an open
meeting before such proxy is voted. Attendance at the meeting will
not in and of itself constitute the revocation of a proxy. Otherwise,
all properly executed proxies received at or before the meeting will
be voted in accordance with the instructions contained therein. If no
instructions are given, such proxies will be voted: (1) FOR the
election of directors as stated below, (2) FOR the proposal to
increase the number of shares of Common Stock the Company is
authorized to issue from 2,500,000 to 15,000,000, and (3) in the
discretion of the named proxies, upon such other matters as may
properly come before the meeting.
The cost of solicitation will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by persons
regularly employed by the Company or its subsidiaries, by personal
interview, telephone or telegraph. Arrangements may also be made with
brokerage houses and other custodians, nominees and fiduciaries for
the forwarding of solicitation material to the beneficial owners of
the stock held of record by such persons, and the Company may
reimburse such brokerage houses, custodians, nominees and fiduciaries
for reasonable out-of-pocket expenses incurred by them in connection
therewith.
A copy of the Company's Annual Report for the year ended December
31, 1993, including audited financial statements has previously been
sent to stockholders. The approximate date on which this proxy
statement and form of proxy were first sent to stockholders was March
25, 1994.
PROPOSAL 1: ELECTION OF DIRECTORS
INFORMATION CONCERNING NOMINEES
The Company's Restated Certificate of Incorporation provides that
the Board of Directors shall consist of not fewer than five nor more
than twenty directors, with the specific number to be fixed from time
to time by a resolution adopted by at least a majority of the Board of
Directors. The number of directors is currently fixed at eight. The
Company's Restated Certificate of Incorporation further provides that
the Board of Directors is to be divided into three classes that are to
be as nearly equal in number as possible. The terms of four directors
who are presently serving on the Board, Donald E. Bitz, David L.
Murray, Joseph C. Piland and Harold L. Fenton, expire at the Annual
Meeting. The Board of Directors has renominated Mr. Bitz, Mr. Murray
and Mr. Piland for election as Class III directors for a term ending
at the Annual Meeting in 1997 or until their successors are elected
and qualified. Mr. Fenton intends to retire from the Board of
Directors upon expiration of his term.
Unless otherwise indicated, proxies will be voted for the
election of the nominees below. If a nominee becomes unable or
unwilling to serve, proxies will be voted for such persons, if any, as
shall be designated by the Board. Each nominee has agreed to serve as
a director, if elected, and the Board of Directors does not presently
know of any circumstances which would render any nominee named herein
unavailable.
The Company's by-laws provide that all elections of directors
shall be decided by a plurality vote. Since three positions are to be
filled on the Board of Directors, the three nominees receiving the
highest number of votes cast at a meeting at which a quorum is present
will be elected as directors. Abstentions (including broker non-
votes) will not be counted in determining the number of votes received
by any nominee.
Class III Nominees (If elected, term will expire in 1997)
Principal Occupation and Year
Name Age First Elected a Director (1)
Donald E. Bitz 65 Retired Chairman of the Board and
Chief Executive Officer, Economy
Fire and Casualty Co. (insurance
company) - 1979
David L. Murray 51 Executive Vice President and Chief
Financial Officer of the Company
- 1981
Joseph C. Piland 60 Educational Consultant and Retired
President, Highland Community
College - 1987
- - - - - - - - - - - - Continuing Directors - - - - - - - - - - - - -
-
Class I (Term expires 1995)
Principal Occupation and Year
Name Age First Elected a Director (1)
Charles M. Luecke 64 President, Luecke Jewelers, Ltd.
(jewelry store) - 1978
H. Barry Musgrove 59 Chairman of the Board & President,
Frantz Manufacturing Company
(manufacturer of overhead doors
and antifriction products) - 1987
Class II (Term expires 1996)
R. Gerald Fox (2) 57 President & Chief Executive
Officer, F.I.A. Financial
Publishing Company (publisher of
financial books and periodicals)
- 1993
Richard L. Geach 52 Chairman of the Board, President &
Chief Executive Officer of the
Company - 1978
Edward G. Maris 58 Vice President - Finance,
Secretary and Treasurer,
Northwestern Steel and Wire
Company (raw steel production and
finished steel/wire products)
- 1990
(1) Each director has engaged in the principal occupation indicated
for at least five years, except as follows:
- Joseph C. Piland has been an Educational Consultant since 1992.
Prior to 1992, he was President, Highland Community College,
for more than five years.
- Donald E. Bitz retired as Chairman of the Board & Chief
Executive Officer, Economy Fire & Casualty Company in 1993, a
position he had held for more than five years.
(2) R. Gerald Fox was named to the Board of Directors in 1993 to
fill the unexpired term of Thomas D. Flanagan, who was unable
to continue for personal reasons.
BOARD AND COMMITTEE MEETINGS
During 1993, the Board of Directors held 9 meetings. Each
Director attended more than 75% of the aggregate of the total number
of meetings of the Board of Directors and the total number of meetings
held by all committees of the Board of Directors on which he served.
The Board of Directors has established an Executive Committee, a
Compensation Committee, and an Audit Committee to assist in the
discharge of its responsibilities in situations where it is
impractical and/or unnecessary to meet as a full Board of Directors.
The current members of the Executive Committee are Messrs. Donald
E. Bitz, Richard L. Geach, Joseph C. Piland and Harold L. Fenton, who
is retiring from the Board of Directors when his term expires on April
28, 1994. Among other functions, the Committee serves as a nominating
committee which selects and nominates members of the Board of
Directors. Nominees recommended by stockholders in writing to the
Secretary of the Company at 27 West Main Street, Suite 101, Freeport,
Illinois 61032, in accordance with the procedures set forth below
under "Notice Provisions for Stockholder Nominations of Directors",
will be considered by the Committee. The Committee did not meet in
1993.
The current members of the Compensation Committee are Messrs.
Donald E. Bitz, Edward G. Maris and H. Barry Musgrove. Among other
functions, the Committee makes recommendations to the Board of
Directors as to the compensation of the Executive Officers and outside
Directors as well as with respect to the Company's Benefit Programs.
The Committee met twice in 1993.
The current members of the Audit Committee are Messrs. Charles
M. Luecke and Joseph C. Piland. The Committee reviews the financial
audits of the Company and its subsidiaries, both internal and
independent, and examines matters relating to the financial statements
of the Company. The Committee met two times in 1993.
DIRECTORS FEES AND COMPENSATION
As of December 31, 1993, Directors who were not employees of the
Company were paid an annual retainer fee of $3,000, directors' fees of
$500 per meeting attended, and $250 per meeting attended for committee
participation.
EXECUTIVE OFFICERS
The following table sets forth the names and ages of the
executive officers of the Company, as well as their respective
positions with the Company and its subsidiaries: (1)
Name Age Position(s) (2)
Richard L. Geach 52 Chairman of the Board, President,
& Chief Executive Officer of the
Company, Premier Acquisition
Company, First Bank North, First
Bank South, First National Bank
of Northbrook, First Security
Bank of Cary-Grove, and a director
of all Subsidiary Companies.
David L. Murray 51 Executive Vice President/Chief
Financial Officer and a Director
of the Company and of all
Subsidiary Companies.
Kenneth A. Urban 55 Division Head, Non-Bank Products
Division of the Company,
President, Premier Trust Services,
Inc., and a Director of all
Subsidiary Companies.
Michael J. Lester 46 Division Head, Product and Sales
Support Division of the Company,
President, Premier Operating
Systems, Inc. and a Director of
all Subsidiary Companies.
Lan Pinney 54 Division Head, Community Banking
Division of the Company, and a
Director of all Subsidiary
Companies.
Scott Dixon 39 Division Head, Retail Banking
Division of the Company, and a
Director of all Subsidiary
Companies.
Steve E. Flahaven 38 Division Head, Commercial Banking
Division of the Company, and a
Director of all Subsidiary
Companies.
(1) The Company's "subsidiaries" as used herein consist of First
Bank North, First Bank South, First National Bank of Northbrook,
First Security Bank of Cary-Grove, Premier Acquisition Company,
Premier Trust Services, Inc., Premier Insurance Services, Inc.,
and Premier Operating Systems, Inc.
(2) Each executive officer has held the position or office indicated
[or other comparable responsible position(s)] for at least five
years, except that all offices and positions with Premier
Acquisition Company have been held only since 1992 when Premier
Acquisition Company was organized, and all positions with First
National Bank of Northbrook and First Security Bank of Carey-
Grove have been held only since 1993 when such banks were
acquired.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Under regulations of the Securities and Exchange Commission,
persons who have power to vote or dispose of Common Stock, either
alone or with others, are deemed to be beneficial owners of such
Common Stock. Because the voting or dispositive power of certain
shares of Common Stock listed in the following table is shared, the
same shares in such cases are listed opposite more than one name in
the table. The total number of shares of Common Stock stated in the
Table as being
owned, directly or indirectly, as of the date indicated, after
elimination of such duplication is 1,006,626 shares; (40.91 %) of the
outstanding Common Stock.
The following table sets forth the holders of more than 5% of the
voting securities of the Company, as known by the Company as of
February
28, 1994:
Amount &
Title of Name and Address of Beneficial Nature of Per Cent
Class Owner Beneficial of Class
Ownership
Common Premier Trust Services, Inc. 373,275 (1) 15.17%
110 West Main Street
Freeport, IL 61032
Premier Financial Services, Inc. 218,441 (2) 8.88%
Savings and Stock Plan
c/o Premier Trust Services, Inc.
110 W. Main Street
Freeport, IL 61032
NBD Bank N.A. 200,000 (3) 8.13%
Trustee of the Thomas D.
Flanagan Blind Voting Trust
dated 7/15/93
P.O. Box 77975
Detroit, MI 48277
American Midwest Bank & Trust 189,873 (4) 7.72%
Trustee of Trust Number 6486
u/t/a dated 7/15/93
1600 West Lake Street
Melrose Park, IL 60160
Richard L. Geach 149,728 (5) 6.08%
1944 Mesa Drive
Freeport, IL 61032
Harold L. Fenton 124,090 (6) 5.04%
101 East Point Drive
Galena, IL 61036
(1) Includes 218,441 shares listed opposite Premier Financial
Services, Inc. Savings and Stock Plan. ("Savings and Stock
Plan"). The
shares are held in various capacities with Premier Trust Services,
Inc. The trust company had full investment power with regard to
287,609 shares (11.69%), shared investment power with regard to
5,505 shares (.22%), and no investment power with regard to the
remaining 80,161 shares (3.26%). Such Trust Company had no
voting authority with regard to any shares held.
(2) Includes 88,154 shares in the Employee Stock Ownership portion of
the Plan ("ESOP"), and 130,287 shares held in the 401(K) and
profit
sharing portions of the Plan. Investments in shares in the 401(K)
and profit sharing portions of the Plan are discretionary with
individual participants. The Company has no voting authority with
respect to any shares held in the Savings and Stock Plan.
(3) Represents shares of Common Stock issuable within 60 days upon the
conversion of $5,700,000 of the Company's Series B Convertible
(non-
voting) Preferred Stock, which is convertible into Common Stock at
$28.50 per share. Terms of the Trust direct that shares of Common
Stock, (if any) be voted in proportion to all other shares of
Common Stock with respect to any issue requiring a vote of the
holders of the Common Stock.
(4) Includes 181,102 shares of Common Stock and 8,771 shares of Common
Stock, issuable upon the conversion of $250,000 of the Company's
Series B Convertible (non-voting) Preferred Stock, which is
convertible into Common Stock at $28.50 per share. Terms of the
Trust direct that shares of Common Stock be voted in proportion to
all other shares of Common Stock with respect to any issue
requiring a vote of the holders of the Common Stock.
(5) Includes 60,144 shares held by Janice (Mrs. Richard L.) Geach,
20,840 shares held in the Savings and Stock Plan, and 16,761
option shares which are exercisable within 60 days of February 28,
1994. Mr. Geach has full voting power over all shares held in the
Savings and Stock Plan and investment power over the shares held
in the 401(K) and profit sharing portions of the Plan. Mr. Geach
disclaims beneficial ownership of the shares held by his wife.
(6) Includes 25,685 shares held by Gwen (Mrs. Harold L.) Fenton. Mr.
Fenton disclaims beneficial ownership of the shares held by his
wife.
The following table sets forth the number of shares of Common
Stock owned beneficially, directly or indirectly, by directors and
nominees of the Company, certain executive officers of the Company,
and by directors, nominees and executive officers as a group as of
February 28, 1994:
Title of Name & Address of Amount & Nature of Per Cent
Class Beneficial Owner Beneficial Ownership (1) of Class
Common Richard L. Geach 149,728 (2) (3) 6.08%
Edward G. Maris 772 *
Donald E. Bitz 15,947 *
David L. Murray 18,059 (2) (3) *
Joseph C. Piland 2,444 *
Harold L. Fenton 124,090 5.04%
R. Gerald Fox 500 *
Charles M. Luecke 6,010 *
H. Barry Musgrove 7,819 *
Kenneth A. Urban 22,114 *
All 14 Directors, 431,607 (2) (3) 17.54%
Nominees &
Executive Officers
as a group
* Indicates less than 1% of class.
(1) Includes 89,504 shares held by or for the benefit of wives and
children or by relationship. Directors and officers disclaim
beneficial ownership of such shares.
(2) Includes shares held in the Savings and Stock Plan. Officers
have full voting power over all shares and investment power over
shares held in the 401(K) and profit sharing portions of the
Plan. A
summary of those shares is as follows:
Name Number of Shares
Richard L. Geach 20,840
David L. Murray 1,891
Kenneth A. Urban 7,134
All 7 executive officers as a 51,700
group
(3) Includes shares issuable pursuant to stock options with respect
to which individuals have a right to acquire beneficial
ownership within 60 days of February 28, 1994. A summary of
those shares is as follows:
Name Number of Shares
Richard L. Geach 16,761
David L. Murray 13,770
Kenneth A. Urban 11,778
All 7 executive officers as a 76,642
group
EXECUTIVE COMPENSATION
The following table sets forth a three-year summary of
compensation for the Chief Executive Officer and each of the four most
highly compensated executive officers of the Company whose total
salary and bonus payments exceeded $100,000 in the year ended December
31, 1993. Total salary and bonus payments paid to two of the four
most highly compensated officers of the Company in the year ended
December 31, 1993 did not exceed $100,000.
<TABLE>
Annual Compensation Long Term Compensation
__________________________________________ ___________________________
<CAPTION>
Awards Payouts
____________ ____________
Other Annual Long Term All Other
Name and Compensation Stock Incentive Compensation
Principal Position Year Salary ($) Bonus ($) (1) Options (#) Payouts ($) (2)
____________________ ____ ____________ ____________ ____________ ____________ ____________ ____________
<S> <C> <C> <C> <C> <C> <C> <C>
Richard L. Geach, 1993 173,250.00 .00 4,800.00 4,550.00 .00 10,240.00
President & CEO 1992 157,450.00 55,459.00 4,800.00 .00 .00 14,117.00
of the Company 1991 154,118.00 58,493.00 3,594.00 4,851.00 .00 10,145.00
David L. Murray, 1993 113,940.00 .00 4,800.00 2,385.00 .00 7,050.00
Executive Vice 1992 104,980.00 35,026.00 4,800.00 .00 .00 9,259.00
President & Chief 1991 98,200.00 31,988.00 3,594.00 2,190.00 .00 6,673.00
Financial Officer
of the Company
Kenneth A. Urban, 1993 103,300.00 .00 4,800.00 1,682.00 .00 6,424.00
Division Head, 1992 98,992.00 30,019.00 4,800.00 .00 .00 8,688.00
Non-Bank Services 1991 92,873.00 29,229.00 3,594.00 1,401.00 .00 6,248.00
Division of the
Company
(1) Taxable allowance for use of automobiles owned by the executive
officer for business purposes.
(2) Amounts accrued for the benefit of the named individuals
under the Company's Savings and Stock Plan.
</TABLE>
The following table sets forth information regarding stock
options exercised by each of the named executive officers during the
year ended December 31, 1993, as well as the value of unexercised
stock options outstanding at fiscal year end.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND
FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of Unexercised Value of Unexercised
Options In-The-Money Options
at Fiscal Year End (#) at Fiscal Year End ($)
(1)
Shares ___________________________ ___________________________
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
____________________ ____________ ____________ ____________ _____________ ____________ _____________
<S> <C> <C> <C> <C> <C> <C>
Richard L. Geach - - 16,761 11,523 208,569 74,963
David L. Murray - - 13,770 6,447 174,635 45,372
Kenneth A. Urban - - 11,778 4,587 151,124 32,469
(1) Based on the fair market value (closing bid price) of the
Common Stock of the Company on December 31, 1993, as
reported on the National Association of Securities Dealers
Automated Operations System-National Market System
("NASDAQ-NMS).
</TABLE>
The following table sets for awards made under the Company'
1988 Non-Qualified Stock Option Plan during the fiscal year ended
December 31, 1993:
<TABLE>
<CAPTION>
STOCK OPTIONS GRANTED IN LAST FISCAL YEAR (1)
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term (2)
________________________________________________________________________________ ___________________________
% of Total
Options
Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Share)(2) Date 5 % ($) 10 % ($)
____________________ ____________ ____________ ____________ ____________ ____________ ____________
<S> <C> <C> <C> <C> <C> <C>
Richard L. Geach 4,550 31.32 21.50 09/28/03 61,516 155,883
David L. Murray 2,385 16.42 21.50 09/28/03 32,245 81,710
Kenneth A. Urban 1,682 11.58 21.50 09/28/03 22,741 57,625
(1) The Company's 1988 non-qualified stock option plan provides that
the Board of Directors may grant options to key employees to
purchase shares of Common Stock. Up to 127,338 shares of Common
Stock have been authorized for issuance pursuant to the Plan.
Options may be granted from time-to-time within 10 years of the
effective date of the Plan (January 28, 1988) for any number of
shares, and upon such terms and conditions, that the Board of
Directors judges desirable. Each option granted under the Plan
is evidenced by an agreement subject to, among others, the
following terms and conditions; 1) the option price may not be
less than the fair market value of the shares on the date of
grant, 2) exercised options must be paid for in full in cash at
the time of exercise, and 3) options granted will expire as
specified in the agreement, but in no case later than 10 years
from date of grant.
(2) The fair market value of the Common Stock of the Company (i.e.,
the closing bid price) as reported on NASDAQ-NMS on September 28,
1993, the date of grant.
</TABLE>
The following table sets forth awards made under the Company's
1990 Performance Unit Plan during the fiscal year ended December 31,
1993:
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Estimated
Future Payouts
Under Non-Stock
Price-Based
Plans
_______________
Performance or
Other Period
Number Until
of Maturation
Name Units (#) or Payout Target ($) (1)
____________________ ____________ _______________ _______________
<S> <C> <C> <C>
Richard L. Geach 345 5 Years 3,140
David L. Murray 321 5 Years 2,921
Kenneth A. Urban 291 5 Years 2,648
(1) Payments under the Plan are based on improvement in weighted
average earnings per share, with the grant year given a weighting
of (1) and the fourth year following the year of grant a weighting
of (5). Each unit is given a value of 10X five year weighted
average earnings per share. There are no "threshold" (i.e.,
minimum) or maximum payout limits provided for by the plan. The
"target" (i.e.,estimated) payout is based upon the following
assumptions;
a) Base weighted average earnings per share - $1.77. (Weighted
average earnings per share for the 5 years ended December 31,
1992).
c) Earnings per share in year one (1993) - $1.64.
d) Assumed annual improvements in earnings per share; year 2,
40%, years 3-5, 10% per year.
</TABLE>
The Company provides a defined benefit Pension Plan for its employees.
Benefits are calculated under a career average formula ba
the highest 25 years of salary. The formula provides that for each year of
service a participant earns a benefit of 1.15% of
compensation plus .65% of compensation in excess of the greater of one half of
the covered compensation or $10,000 for a person reaching
65 in the related calendar year. Such covered compensation level in 1993 was
$11,400. Compensation covered by the Plan includes cash and
other annual compensation exclusive of any cash bonuses. Compensation
covered by the Plan for the year ended December 31, 1993, as shown in
the Executive Compensation Table, included $178,050 for Richard L. Geach,
$118,740 for David L. Murray and $108,100 for Kenneth A. Urban
As of December 31, 1993, Mssrs. Geach, Murray and Urban were credited with
12, 23, and 25 years of service respectively. The following
table sets forth the estimated annual benefits payable upon retirement at age
65 to persons in certain specified compensation and years-of-
service classifications:
Compensation 15 years of 20 years of 25 years of
service service and over
$ 50,000 12,389 16,518 20,648
100,000 25,889 34,518 43,148
150,000 39,389 52,518 65,648
200,000 52,889 70,518 88,148
250,000 66,389 88,518 110,648
300,000 79,889 106,518 133,148
BOARD COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors is responsible
for
establishing the policies and procedures which determine the compensation
of the
Company's Executive Officers. The Committee sets base cash compensation
and
potential bonus compensation annually for the Chief Executive Officer and
other
Executive Officers. In addition, the Committee has exclusive authority to
grant
stock options to Executive Officers. The Committee considers both internal
and
external data in determining officers' compensation, including input from
outside
compensation consultants and independent executive compensation data.
In creating policies and making decisions concerning executive
compensation, the Compensation Committee seeks to:
1. ensure that the executive team has clear goals and
accountability with respect to expected corporate performance;
2. establish pay opportunities that are competitive within the
Company's industry, consistent with it's position in the
marketplace and the markets within which it operates;
3. assess results fairly and regularly in light of expected
Company performance; and
4. align pay and incentives with the long-term interests of the
Company's shareholders.
The Chief Executive Officer (CEO) and all Executive Officers are included
in a
salary program adopted for all employees of the Company. The objective
of the
Company's salary program is to help ensure that the organization is able to
attract,
retain and motivate the employees necessary to achieve its goals while doing
so in
the most cost-effective way possible.
It is our policy that a salary range be established for each position
within the
Company, and that these ranges be (a) internally equitable (i.e., fair in
comparison
to ranges established for other positions within the Company), and (b)
competitive
when compared with the rates paid and ranges utilized by other
employers for
comparable positions. Each range is divided into quartiles, with the
midpoint
approximating the average salary paid for comparable positions within the
Industry.
In determining Industry averages, the Committee reviews a number of external
surveys,
including surveys provided by banking industry trade groups as well as private
firms
specializing in compensation. Comparisons focus primarily on Banks
and/or Bank
Holding Companies of similar size and with similar geographic/market
characteristics.
It is also our policy that each employee will receive a rate of pay that falls
within
the range that has been established for his or her position. The placement
of each
employee's salary within the range that has been established for his or her
position
is based upon a formal evaluation of the employee's job performance. The
committee
reviews the internal equitability and external competitiveness of salary
ranges
anually.
Performance Incentives
The Company utilizes both a Short Term Incentive Program (i.e., Bonuses)
and a
Long Term Incentive Program (i.e., a combination of Stock Options and
Performance
Units). These programs are utilized to motivate the CEO and other executive
officers
to manage towards improved shareholder return.
The Short Term Incentive Program rewards executive officers with cash
bonuses
for surpassing the annual financial plan with regard to earnings. Each
year, a
financial plan is approved by the Board of Directors. The executive bonus
program is
then approved based upon that plan, and provides for bonuses only if the
financial
plan is exceeded. The size of any bonus, which may range from 10.00% -
40.00% of
salary, is dependent upon the amount by which actual financial performance
exceeds
the plan.
The Long Term Incentive Program combines the use of Stock Options
and
Performance Units. Each executive officer may be granted a combination of
options
and performance units based upon a formula tied to salary. The maximum award
ranges
from 40.00% - 60.00% of salary depending upon salary range established for his
or her
position.
Options: Options are granted at the current bid price of the
Company's Common Stock at the time of the award. Executives are
allowed to exercise the options on a vesting formula of 20% per
year, and all options must be exercised within ten years or they
expire.
Performance Units: Performance Units provide for a cash bonus
to participating executive officers. Payments for units, if
any, represent the increase in their value over a five year
period. The initial value (at time of issuance) and ending
value of the units are determined by the average of five years
earnings per share of the Company's Common Stock.
CEO Compensation
The compensation for the Chief Executive Officer is determined under
the same
policies and programs as outlined above for all executive officers. The
maximum
award under the Company's Short Term Incentive Program for the CEO is
40.00% of
salary. The CEO may be awarded a combination of Options and Performance Units
under
the Long Term Incentive Program up to an aggregate of 60.00% of salary.
The Board Compensation Committee assesses the CEO's performance with
regard to
Board Policies and goals, and evaluates the Company's performance versus
peers and
its financial plan. Salary is then determined as provided for under the
Company's
salary program. Total compensation, including incentives, is directly related
to the
Company's financial performance.
COMPENSATION COMMITTEE:
Donald E. Bitz
Edward G. Maris
H. Barry Musgrove
The cumulative total return to shareholders performance graph is
furnished to
the Commission in paper form under cover of Form SE. The following table
presents
year-end cumulative total returns for the Company, U.S. stocks traded on the
NASDAQ
over-the-counter market and all Bank stocks traded on the NASDAQ over-
the-counter
market assuming $100.00 was invested on January 1, 1989 and all dividends
were
reinvested for the five year period ended December 31, 1993.
Index 1989 1990 1991 1992 1993
Premier 128 102 161 238 254
U.S. NASDAQ
Stocks 121 103 165 192 219
NASDAQ Bank
Stocks 111 81 134 194 221
The Company's cumulative total return to shareholders has exceeded the
cumulative
total return of all Bank stocks traded on the NASDAQ over-the-counter market
for the
years 1989 through 1993. In 1989, 1992 and 1993 the Company's cumulative
total
return exceeded that of the U.S. NASDAQ stock market index and
performed
approximately the same as the U.S. NASDAQ stock market index in 1990 and 1991.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee is an officer,
employee or
former employee of the Company. Members of the Compensation Committee or
their
associates may have loans or loan commitments from the Company's subsidiary
banks,
but all such loans or loan commitments were made on substantially the same
terms,
including interest rates and collateral, as those prevailing at the time
for
comparable transactions with other persons and did not involve more than the
normal
risk of collectability or present other unfavorable features.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors and executive officers of the Company and their associates
were
customers of, and have had transactions with, the Company and in particular
its
subsidiary banks from time to time in the ordinary course of business.
Additional
transactions may be expected to take place in the ordinary course of business
in the
future. All loans and loan commitments included in such transactions were
made on
substantially the same terms, including interest rates and collateral, as
those
prevailing at the time for comparable transactions with other persons and
did not
involve more than normal risk of collectability or present other
unfavorable
features.
PROPOSAL 2: AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK
At present, the Company's Restated Certificate of Incorporation authorizes
the
issuance of a total of 3,500,000 shares of stock, of which 1,000,000
shall be
preferred stock of the par value of $1.00 per share and 2,500,000 shares
shall be
Common Stock of the Par Value of $5.00 per share. The Board of Directors
unanimously
approved and recommends that the stockholders adopt, an amendment to the
Certificate
of Incorporation to increase the total number of authorized shares to
16,000,000, of
which 1,000,000 shares shall be preferred stock of the par value of $1.00
per share
and 15,000,000 shares shall be Common Stock of the par value of $5.00 per share.
If the proposed amendment is adopted, the first paragraph of the Article
Fourth
of the Restated Certificate of Incorporation of the Company, as amended, will
read, in its entirety, as follows:
"ARTICLE FOURTH. Authorized Stock. The total number
of shares of Stock which the Corporation shall have
authority to issue is Sixteen Million (16,000,000)
shares, of which One Million (1,000,000) shares shall
be shares of Preferred Stock of the par value of $1.00
per share (hereinafter sometimes referred to as
"Preferred Stock"), and Fifteen Million (15,000,000)
shares shall be shares of Common Stock of the par value
of $5.00 per share (hereinafter sometimes referred to
as "Common Stock")."
As of February 28, 1994, 2,163,107 shares of Common Stock were
issued and
outstanding, 208,771 shares of Common Stock were reserved for issuance
upon the
conversion of 5,950 issued and outstanding shares of Series B Perpetual
Preferred
Stock of the Company (the "Series B Preferred Stock"), and 137,094 shares of
Common
Stock were reserved for issuance upon the exercise of outstanding options to
acquire
shares of Common Stock. As of that same date, a total of 16,200 shares of
Preferred
Stock were issued and outstanding, consisting of 5,000 shares of Series A
Perpetual
Preferred Stock, 5,950 shares of Series B Preferred Stock, 1,950 shares of
Series C
Perpetual Preferred Stock, and 3,300 shares of Series D Perpetual
Preferred stock
(the "Series D Preferred Stock"). An additional 1,300 shares of Series B
Preferred
Stock were reserved for issuance upon the conversion of shares of Series D
Preferred
Stock into shares of Series B Preferred Stock in accordance with the terms
of the
Certificate of Designations of the Series D Preferred Stock.
The purpose of the proposed amendment is as follows:
1. To make available additional shares of Common Stock for
possible use as stock dividends.
2. To enable the Company to convert up to $1,300,000 of currently
outstanding shares of Series D Preferred Stock into Series B
Preferred Stock.
3. To make available additional shares of Common Stock for use in
connection with any other proper corporate purpose, including, for
example, the
issuance of such shares for cash or in connection with possible
future
acquisitions or other forms of business combinations, or for issuance
with
respect to Plans adopted by the Company such as the 1988 Non-qualified
Stock Option Plan.
The Board of Directors has awarded options for all 127,338 shares of
Common
Stock reserved for issuance under the Company's 1988 Non-qualified Stock Option
Plan.
The Board is currently contemplating alternatives for a Plan under which
additional
options may be granted in the future. If such a Plan is adopted by the
Board of
Directors, it will be subject to approval by Stockholders, including the
number of
shares of Common Stock for such purpose.
It is uncertain as of the date hereof as to the timing or extent of any
possible
stock dividend, but adoption of the proposed increase in the number of
authorized
shares of the Corporation's Common Stock will provide the Board of Directors
with
greater flexibility in considering such timing and extent.
The Board of Directors believes it is in the best interests of the
Company to
convert $1,300,000 of currently outstanding shares of Series D Preferred Stock
into
$1,300,000 of Series B Preferred Stock. Series D Preferred Stock is perpetual
with a
current and projected dividend rate of 9.00%. Series B Preferred
Stock is
convertible into Common Stock at $28.50 per share, with a current and
projected
dividend rate of 7.50%. Under the terms of the Certificate of Designations
of the
Series D Preferred Stock, the Company is obligated to convert 1,300 of the
currently
outstanding shares of Series D Preferred Stock into Series B Preferred Stock
as of
the last day of the calendar quarter in which the Company files an amendment
to its
Certificate of Incorporation increasing the number of authorized shares of
Common
Stock to a number sufficient to permit the Company to reserve the number of
shares of
Common Stock that the Company would be required to issue upon the conversion
of an
additional 1,300 shares of Series B Preferred Stock at a conversion rate of
$28.50
per share. If the proposed increase in the number of shares of stock the
Company is
authorized to issue is adopted, the Board of Directors intends to convert
1,300
shares of Series D Preferred Stock into the same number of shares of
Series B
Preferred Stock as of June 30, 1994. A total of 45,614 shares of Common Stock
would
be reserved for issuance upon the conversion of such additional shares of
Series B
Preferred Stock.
If the proposed increase in the Company's authorized stock is
adopted, the
additional authorized shares will be available for issuance by the
Board of
Directors, for such consideration as the Board of Directors in its discretion
deems
adequate, without further approval by the Company's stockholders (unless
such
approval is required by law or as a condition to continued inclusion in NASDAQ-
NMS or
listing on any stock exchange on which the Company's stock may in the
future be
listed). NASDAQ rules currently require stockholder approval as a
condition of
continued eligibility for designation as a National Market System security in
several
instances, including the issuance of shares in an acquisition transaction where
the
number of shares of Common Stock outstanding, as the result of such
transaction,
could increase by 20% or more.
Although the decision of the Board of Directors to propose an
amendment
increasing the number of shares of Common Stock authorized for issuance did
not
result from any effort by any person to accumulate the Company's stock or to
effect a
change in control of the Company, one result of an increase may be to help the
Board
of Directors discourage or render more difficult a change in control. The
additional
shares could be used under certain circumstances to dilute the voting power
of,
create voting impediments for, or otherwise frustrate the efforts of persons
seeking
to effect a takeover or gain control of the Company, whether or not the
change of
control is favored by a majority of unaffiliated stockholders. For example,
such
shares of Common Stock could be privately placed with purchasers who might side
with
the Board of Directors in opposing a hostile takeover bid. The issuance of
any
additional shares of Common Stock could also have the effect of diluting the
equity
of existing holders and the earnings per share of existing shares of stock.
As promptly as practicable following stockholder approval of the
proposed
amendment, the Company will cause a Certificate of Amendment of its
Restated
Certificate of Incorporation, with respect to such amendment, to be filed
with the
Secretary of State of the State of Delaware. The amendment will become
effective on
the date of such filing.
The affirmative vote of the holders of a majority of the outstanding
shares of
Common Stock, whether or not present or voting at the Annual Meeting, is
required to
approve the proposed amendment to the Company's Certificate of Incorporation.
Shares
abstaining and shares for which brokers do not authorize a vote by proxy
on the
proposed amendment because they lack authority will have the same effect as if
voted
against the proposed amendment. The Board of Directors unanimously recommends a
vote
FOR the adoption of the proposed amendment to the Company's
Certificate of
Incorporation.
AUDITORS
KPMG PEAT MARWICK, independent certified public accountants, have served
as the
Company's public accountants for the fiscal year ended December 31, 1993, and
prior
years, and have been selected to serve in that capacity again for the fiscal
year
ending December 31, 1994. Representatives of KPMG PEAT MARWICK, are expected
to be
present at the meeting with the opportunity to make a statement if they desire
to do
so and are expected to be available to respond to appropriate questions.
NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS OF DIRECTORS
The Company's Restated Certificate of Incorporation establishes an
advance
notice procedure with respect to the nomination of directors, other than by
or on
behalf of the Board of Directors. Under such nomination procedure, any
stockholder
of the Company who is entitled to vote for the election of directors and who
wishes
to nominate a candidate for election as a director must give advance written
notice
to the Company of such nomination. Such notice must be delivered or mailed by
first
class United States mail, postage prepaid, to the Secretary of the Company, not
fewer
than 14 days nor more than 60 days prior to any meeting of the stockholders
called
for the election of directors. In the event that fewer than 21 days' notice
of the
meeting is given to stockholders, such written notice must be delivered or
mailed in
accordance with the preceding sentence not later than the close of business
on the
7th day following the day on which notice of the meeting was mailed to
the
stockholders. Each such notice must set forth (i) the name, age, business
address
and, if known, residence address of each nominee proposed in the notice,
(ii) the
principal occupation or employment of each such nominee, and (iii) the
number of
shares of stock of the Company beneficially owned by each such nominee and
by the
nominating stockholder. The chairman of a meeting at which directors are
to be
elected may, if the facts so warrant, determine that a nomination was not
made in
accordance with the foregoing procedure, and, if he should so determine, he
shall so
declare to the meeting and the defective nomination shall be disregarded.
OTHER BUSINESS
Management does not intend to present, and does not have reason to
believe
others will present, any items of business at the Annual Meeting other than
those
mentioned in the Notice of the Meeting. However, if any other matters are
properly
presented for a vote, the proxies will be voted on such matters according to
the
judgment of the persons named as proxies therein.
STOCKHOLDER PROPOSALS
Stockholders desiring to submit proposals to be voted upon by
stockholders at
the 1995 Annual Meeting must submit their proposals to the Company's
Secretary no
later than November 25, 1994.
BY ORDER OF THE BOARD OF DIRECTORS,
Michael J. Lester
Secretary
Dated: March 25, 1994
