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 1,016,126 shares; (41.40 %) 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) 15.23%
110 West Main Street
Freeport, IL 61032
Premier Financial Services, Inc. 218,441 (2) 8.91%
Savings and Stock Plan
c/o Premier Trust Services, Inc.
110 W. Main Street
Freeport, IL 61032
NBD Bank N.A. 200,000 (3) 8.16%
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) 7.75%
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) 6.11%
1944 Mesa Drive
Freeport, IL 61032
Harold L. Fenton 124,090 (6) 5.06%
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 (11.73%), shared investment power with regard to
5,505 shares (.22%), and no investment power with regard to the
remaining 80,161 shares (3.27%). 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) 6.11%
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 5.06%
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) 17.61%
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 $100,000.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
__________________________________________ ___________________________
Awards Payouts
____________ ____________
Other Annual Long Term All Other
Name and Compensation Stock Incentive Compensation
Principal Position Year Salary ($) 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>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND
FISCAL YEAR-END OPTION VALUES
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 forth awards made under the Company's
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 % ($)
____________________ ____________ ____________ ____________ ____________ ____________ ____________
<S> <C> <C> <C> <C> <C> <C>
Richard L. Geach 4,550 31.32 21.50 09/28/03 61,516 155,883
David L. Murray 2,385 16.42 21.50 09/28/03 32,245 81,710
Kenneth A. Urban 1,682 11.58 21.50 09/28/03 22,741 57,625
</TABLE>
(1) The Company's 1988 non-qualified stock option plan provides that
the Board of Directors may grant options to key employees to
purchase shares of Common Stock. Up to 127,338 shares of Common
Stock have been authorized for issuance pursuant to the Plan.
Options may be granted from time-to-time within 10 years of the
effective date of the Plan (January 28, 1988) for any number of
shares, and upon such terms and conditions, that the Board of
Directors judges desirable. Each option granted under the Plan
is evidenced by an agreement subject to, among others, the
following terms and conditions; 1) the option price may not be
less than the fair market value of the shares on the date of
grant, 2) exercised options must be paid for in full in cash
at the time of exercise, and 3) options granted will expire as
specified in the agreement, but in no case later than 10 years
from date of grant.
(2) The fair market value of the Common Stock of the Company (i.e.,
the closing bid price) as reported on NASDAQ-NMS on September 28,
1993, the date of grant.
The following table sets forth awards made under the Company's
1990 Performance Unit Plan during the fiscal year ended December 31,
1993:
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Estimated
Future Payouts
Under Non-Stock
Price-Based
Plans
_______________
Performance or
Other Period
Number Until
of Maturation
Name Units (#) or Payout Target ($) (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 based upon the
highest 25 years of salary. The formula provides that for each year
of service a participant earns a benefit of 1.15% of covered
compensation plus .65% of compensation in excess of the greater of one
half of the covered compensation or $10,000 for a person reaching age
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 service & 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 annually.
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
Pursuant to Rule 304(d) of Regulation S-T, Premier Financial
Services, Inc. is submitting on paper under cover of Form SE the
performance graph that is to appear in registrant's proxy and
information statements relating to annual meetings of security holders
at which directors will be elected. 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.
Compliance with Section 16 (a) of the Exchange Act
Pursuant to Securities and Exchange Commission regulations, the
Company must disclose the names of persons who failed to file or filed late a
report required unde Section 16 (a) of the Securities Exchange
Act of 1934. Generally, the reporting regulations under Section 16(a)
require directors and executive officers to report changes in ownership
in the Company's equity securities. Prior to May, 1991, reporting of shares
held in benefit plans on behalf of executive officers were not
required to be reported. The Company's executive officers voluntarily
reported ownership of these shares. In the confusion of applying
revised reporting regulations whereby changes in shares held in benefit
plans were required to be reported, the Company's executive officers
(Mssrs. R.L. Geach, D.L. Murray, K.A. Urban, M.J. Lester, L. Pinney, S.
Dixon and S.E. Flahaven) inadvertently failed to report changes in
beneficial ownership for such shares on Forms 5 filed for fiscal years
ended December 31, 1992 and 1993. The filing omissions were subsequently
reported on amended Forms 5 filed in March 1994. On May 16, 1993, Mr. Musgrove
purchased 100 shares of the Company's Common Stock. The purchase was reported
on Form 5 in March, 1994, rather than prior to February 15, 1994 as required.
Mr. R.L. Geach filed Form 4 in October, 1993, reporting his July, 1993 purchase
of shares of the Company's Series A Perpetual Preferred Stock issued concurrent
with the Compnay's acquisition of First Northbrook Bancorp, Inc. The required
filing date for Form 4 was on or before August 10, 1993.
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 127,338 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
