SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14 (a) of the
Securities Exchange Act of 1934 (Amendment No.)
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e) (2)
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Peoples Bancorp Inc.
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(Name of Registrant as Specified in its Charter)
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(Name of Person Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ x ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
PEOPLES BANCORP INC.
Marietta, Ohio
March 18, 2005
To the Shareholders of Peoples Bancorp Inc.:
Notice is hereby given that the Annual Meeting of Shareholders (the
"Annual Meeting") of Peoples Bancorp Inc. ("Peoples") will be held at 10:00
A.M., Eastern Daylight Savings Time in Marietta, Ohio, on Thursday, April 14,
2005, in the Ball Room, Holiday Inn, 701 Pike Street, Marietta, Ohio (Interstate
77, Ohio exit 1), for the following purposes:
1. To elect the following directors for terms of three years each:
Nominee Term Expires In
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Mark F. Bradley (for re-election) 2008
Frank L. Christy (for re-election) 2008
Theodore P. Sauber (for re-election) 2008
Joseph H. Wesel (for re-election) 2008
2. To transact any other business which properly comes before the Annual Meeting
or any adjournment.
Shareholders of record at the close of business on February 14, 2005,
will be entitled to receive notice of and to vote at the Annual Meeting.
You are cordially invited to attend the Annual Meeting. The vote of
each shareholder is important, whatever the number of common shares held.
Whether or not you plan to attend the Annual Meeting, please sign, date and
return your proxy card promptly in the enclosed envelope.
Peoples' 2004 Annual Report to Shareholders and Form 10-K for the Year
Ended December 31, 2004, and 2004 Summary Annual Report accompany this notice
and proxy statement.
By Order of the Board of Directors,
/s/ RHONDA L. MEARS
-----------------------------------
Rhonda L. Mears
Corporate Secretary
PEOPLES BANCORP INC.
138 Putnam Street
P.O. Box 738
Marietta, Ohio 45750-0738
(740) 374-6136
www.peoplesbancorp.com
PROXY STATEMENT
This proxy statement is being furnished to shareholders of Peoples
Bancorp Inc., an Ohio corporation ("Peoples"), in connection with the
solicitation of proxies by the Board of Directors of Peoples for use at the
Annual Meeting of Shareholders of Peoples (the "Annual Meeting") called to be
held on Thursday, April 14, 2005, or at any adjournment. The Annual Meeting will
be held at 10:00 A.M., Eastern Daylight Savings Time in Marietta, Ohio, in the
Ball Room, Holiday Inn, 701 Pike Street, Marietta, Ohio (Interstate 77, Ohio
exit 1). This proxy statement and the accompanying proxy card were first sent or
given to shareholders on or about March 18, 2005.
Peoples has four wholly owned subsidiaries, Peoples Bank, National
Association ("Peoples Bank"), Peoples Investment Company, PEBO Capital Trust I
and PEBO Capital Trust II. Peoples Bank also owns an insurance agency subsidiary
and an asset management subsidiary. Peoples Investment Company also owns a
capital management subsidiary.
A proxy card for use at the Annual Meeting accompanies this proxy
statement. Shareholders may use their proxy cards if they are unable to attend
the Annual Meeting in person or wish to have their common shares voted by proxy
even if they do attend the Annual Meeting. Any shareholder appointing a proxy
may revoke it at any time before it is actually voted at the Annual Meeting by
filing with the Corporate Secretary of Peoples, at the address set forth on the
cover page of this proxy statement, written notice of such revocation; by
executing a later-dated proxy card which is received by Peoples prior to the
Annual Meeting; or, if you are the registered shareholder, by attending the
Annual Meeting and giving notice of such revocation in person. Attendance at the
Annual Meeting will not, in and of itself, revoke a previously appointed proxy.
Only shareholders of record at the close of business on February 14,
2005 (the "Record Date"), are entitled to receive notice of and to vote at the
Annual Meeting. At the close of business on the Record Date, 10,508,323 common
shares were outstanding and entitled to vote. Each common share entitles the
holder to one vote on each matter to be submitted to shareholders at the Annual
Meeting. A quorum for the Annual Meeting is a majority of the common shares
outstanding. There is no cumulative voting with respect to the election of
directors.
Shareholders holding common shares in "street name" with a
broker/dealer, financial institution, or other holder of record should review
the information provided to them by such holder of record. This information will
set forth the procedures to be followed in instructing the holder of record how
to vote the "street name" common shares and how to revoke previously given
instructions. Shareholders holding common shares in "street name" may be
eligible to appoint their proxy electronically via the Internet or
telephonically and may incur costs associated with the electronic access.
Peoples will bear the costs of preparing and mailing this proxy
statement, the accompanying proxy card and any other related materials, as well
as all other costs incurred in connection with the solicitation of proxies on
behalf of the Board of Directors other than the Internet access and telephone
usage charges described in the immediately preceding paragraph. Proxies will be
solicited by mail and may be further solicited, for no additional compensation,
by officers, directors or employees of Peoples and its subsidiaries by further
mailing, telephone, facsimile or personal contact. Peoples will also reimburse
its transfer agent, broker/dealers, voting trustees, financial institutions and
other custodians, nominees and fiduciaries, who are record holders of common
shares not beneficially owned by them, for their reasonable costs in sending
proxy materials to the beneficial owners of common shares entitled to vote at
the Annual Meeting.
If a shareholder is a participant in the Peoples Bancorp Inc.
Retirement Savings Plan and common shares have been allocated to such
individual's account in the Retirement Savings Plan, the shareholder is entitled
to instruct the trustee of the Retirement Savings Plan how to vote those common
shares. These shareholders may receive their proxy cards separately. If a
participant gives no instruction to the trustee of the Retirement Savings Plan,
the trustee will not vote those common shares.
The inspectors of election appointed for the Annual Meeting will
tabulate the results of shareholder voting. Common shares represented by
properly executed proxy cards returned to Peoples prior to the Annual Meeting
will be counted toward the establishment of a quorum for the Annual Meeting even
though they are marked "FOR," "WITHHOLD" or "FOR ALL EXCEPT" or not at all.
Broker/dealers who hold common shares in street name may, under the applicable
rules of the exchange and other self-regulatory organizations of which the
broker/dealers are members, sign and submit proxies for such common shares and
may vote such common shares on routine matters such as the election of
directors, but broker/dealers may not vote such common shares on non-routine
matters without specific instructions from the customer who owns such common
shares. Proxies that are signed and submitted by broker/dealers that have not
been voted on certain matters as described in the previous sentence are referred
to as broker non-votes. Broker non-votes count toward the establishment of a
quorum for the Annual Meeting.
The 2004 Annual Report to Shareholders and Form 10-K for the Year Ended
December 31, 2004 (the "2004 Annual Report to Shareholders") and the 2004
Summary Annual Report are being delivered with this proxy statement. Additional
copies of Peoples' Annual Report on Form 10-K for the fiscal year ended December
31, 2004 may be obtained, without charge, upon request to: Rhonda L. Mears,
Corporate Secretary, 138 Putnam Street, P.O. Box 738, Marietta, Ohio 45750-0738.
The Form 10-K is also on file with the Securities and Exchange Commission (the
"SEC") and is available on its' web site at www.sec.gov.
DELIVERY OF PROXY MATERIALS
TO HOUSEHOLDS
Annually, Peoples provides each registered shareholder at a shared
address, not previously notified, with a separate notice of Peoples' intention
to household proxy materials. The record holder notifies beneficial shareholders
(those who hold common shares through a financial institution, broker/dealer or
other record holder) of the householding process. Those registered and
beneficial shareholders who share an address and have not opted-out (as defined
below) of the householding process will receive only one copy of the 2004 Annual
Report to Shareholders, the 2004 Summary Annual Report and this proxy statement.
A separate proxy card and a separate Notice of Annual Meeting of Shareholders
will continue to be included for each shareholder at the shared address.
Registered shareholders who share an address and would like to receive
a separate 2004 Annual Report to Shareholders, a separate 2004 Summary Annual
Report and/or a separate proxy statement (to "opt-out"), or have questions
regarding the householding process, may contact the Corporate Secretary of
Peoples by calling (740) 373-7723 or by a written request addressed to the
Corporate Secretary of Peoples at 138 Putnam Street, P.O. Box 738, Marietta,
Ohio 45750-0738. Promptly upon request, a separate 2004 Annual Report to
Shareholders, a separate 2004 Summary Annual Report and/or a separate proxy
statement will be sent. By contacting the Corporate Secretary, registered
shareholders sharing an address can also (i) notify Peoples that the registered
shareholders wish to receive separate annual reports and/or proxy statements in
the future or (ii) request delivery of a single copy of annual reports and/or
proxy statements in the future if they are receiving multiple copies. Beneficial
shareholders should contact their broker/dealers, financial institutions, or
other record holders for specific information on the householding process as it
applies to those beneficial shareholders.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date (except as
otherwise noted), certain information concerning the beneficial ownership of
common shares by the only persons known to Peoples to be the beneficial owner of
more than 5% of the outstanding common shares:
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class (1)
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Peoples Bank - Trustee
138 Putnam Street
P.O. Box 738 1,050,814 (2) 10.00%
Marietta, OH 45750-0738
Franklin Resources Inc.
Charles B. Johnson
Rupert H. Johnson, Jr.
Franklin Advisory Services, LLC
One Franklin Parkway
San Mateo, CA 94403-1906 829,047 (3) 7.89%
(1) The "percent of class" computation is based on 10,508,323 common
shares outstanding on the Record Date and entitled to vote at the
Annual Meeting.
(2) Includes Peoples Bank's beneficial ownership through Peoples Financial
Advisors group (formerly known as the Investment and Trust Division of
Peoples Bank) in the following manner: 144,507 common shares with
shared investment and sole voting power; 682,986 common shares with
shared investment and voting power; 164,228 common shares with sole
voting and investment power; and 59,093 common shares with sole
investment and shared voting power. The officers and directors of
Peoples Bank and Peoples disclaim beneficial ownership of all of these
common shares by reason of their respective positions.
(3) Based on information contained in a Schedule 13G, dated February 11,
2005, filed with the SEC on behalf of Franklin Resources, Inc.,
Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin Advisory
Services, LLC. These common shares are beneficially owned by one or
more open or closed-end investment companies or other managed accounts
which are advised by Franklin Advisory Services, LLC or Franklin
Templeton Portfolio Advisors, Inc., which are investment advisor
subsidiaries of Franklin Resources, Inc. Such advisory contracts grant
to the respective investment advisor subsidiary all voting and/or
investment power over the common shares owned by the advisory clients.
The Schedule 13G reports that Franklin Advisory Services, LLC had sole
voting power as to 823,347 common shares and sole investment power as
to 826,347 common shares and Franklin Templeton Portfolio Advisors,
Inc. had sole voting and investment power as to 2,700 common shares.
For purposes of the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), Charles B. Johnson and
Rupert H. Johnson, Jr. are control persons of Franklin Resources, Inc.
and together with Franklin Resources, Inc. each is deemed to be the
beneficial owner of these common shares. However, each of Franklin
Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr., Franklin
Advisory Services, LLC and Franklin Templeton Portfolio Advisors, Inc.
expressly disclaim any economic interest or beneficial ownership in
any of the common shares covered by the Schedule 13G.
The following table sets forth, as of the Record Date, certain
information with respect to the common shares beneficially owned by each
current director of Peoples, by each nominee for election as a director of
Peoples, by each executive officer of Peoples named in the Summary
Compensation Table and by all current executive officers and directors of
Peoples as a group:
Amount and Nature of Beneficial Ownership (1)
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Common Shares Which Can Be Acquired Upon
Name of Common Shares Exercise of Options Currently Exercisable or
Beneficial Owner Presently Held Which Will Become Exercisable Within 60 Days Total Percent of Class (2)
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Carl L. Baker, Jr. 24,616 (3) 9,126 33,742 (4)
Mark F. Bradley (5) 4,450 (6) 15,332 19,782 (4)
George W. Broughton 173,456 (7) 9,226 182,682 1.74%
Frank L. Christy 78,864 (8) 4,943 83,807 (4)
John W. Conlon (5) 30,827 (9) 18,367 49,194 (4)
Wilford D. Dimit 42,987 (10) 12,926 55,913 (4)
Robert E. Evans (5) 204,410 (11) 27,370 231,780 2.21%
Richard Ferguson (12) 100 (13) - 100 (4)
Larry E. Holdren (5) 21,915 (14) 18,367 40,282 (4)
Robert W. Price 13,182 (15) 3,465 16,647 (4)
Theodore P. Sauber 128,433 (16) 1,155 129,588 1.23%
Paul T. Theisen 24,853 (17) 13,892 38,745 (4)
Joseph H. Wesel 42,356 (18) 12,090 54,446 (4)
Thomas J. Wolf 23,410 (19) 1,155 24,565 (4)
Joseph S. Yazombek (5) 37,284 (20) 18,367 55,651 (4)
All directors and
executive officers as a
group (numbering 17) 900,140 (21) 202,992 1,098,042 10.45%
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(1) Unless otherwise noted, the beneficial owner has sole voting and
investment power with respect to all of the common shares reflected in
the table. All fractional common shares have been rounded to the nearest
whole common share. The mailing address of each of the current executive
officers and directors of Peoples is 138 Putnam Street, P.O. Box 738,
Marietta, Ohio 45750-0738.
(2) The "percent of class" computation is based on the sum of (i) 10,508,323
common shares outstanding on the Record Date entitled to vote at the
Annual Meeting and (ii) the number of common shares as to which the named
person or group has the right to acquire beneficial ownership upon the
exercise of options which are currently exercisable or will become
exercisable within 60 days of the Record Date.
(3) Includes 6,352 common shares held by B & N Coal, Inc., as to which Carl
L. Baker exercises shared voting and investment power. Also includes
6,943 common shares held by Mr. Baker as Trustee of the Gilbert Baker
Trust, as to which Mr. Baker is Trustee and exercises sole voting and
investment power. Does not include 243 common shares accrued to Mr.
Baker's account under the Peoples Bancorp Inc. Deferred Compensation Plan
for Directors of Peoples Bancorp Inc. and Subsidiaries, as to which Mr.
Baker has no voting or investment power. Does not include 9,733 common
shares held in the Jewell Baker Trust, as to which Mr. Baker is a
beneficiary but has no voting or investment power.
(4) Reflects beneficial ownership of less than 1% of the outstanding common
shares of Peoples.
(5) Executive officer of Peoples named in the Summary Compensation Table. Mr.
Evans and Mr. Bradley also serve as directors of Peoples.
(6) Does not include 1,377 common shares accrued to Mark F. Bradley's account
under the Peoples Bancorp Inc. Deferred Compensation Plan for Directors
of Peoples Bancorp Inc. and Subsidiaries, as to which Mr. Bradley has no
voting or investment power. Includes 3,932 common shares allocated to the
account of Mr. Bradley in the Peoples Bancorp Inc. Retirement Savings
Plan, as to which Mr. Bradley has the power to direct the voting and
investment.
(7) Includes 7,665 common shares held by George W. Broughton as custodian for
his children, as to which Mr. Broughton has sole voting and investment
power and claims beneficial ownership. Includes 558 common shares held by
Broughton Commercial Properties, LLC, as to which Mr. Broughton exercises
shared voting and investment power. Includes 16,637 common shares held by
Mr. Broughton as Trustee of the George W. Broughton and Nancy R.
Broughton Retained Annuity Trust, as to which Mr. Broughton has shared
voting and investment power. Includes 13,374 common shares held in an IRA
account by Peoples Bank as custodian, as to which Mr. Broughton exercises
shared voting and investment power. Does not include 16,333 common shares
held of record and beneficially owned by Mr. Broughton's wife, as to
which Mr. Broughton has no voting or investment power and disclaims
beneficial ownership. Does not include 1,203 common shares accrued to Mr.
Broughton's account under the Peoples Bancorp Inc. Deferred Compensation
Plan for Directors of Peoples Bancorp Inc. and Subsidiaries, as to which
Mr. Broughton has no voting or investment power.
(8) Includes 7,770 common shares held in the Frank L. Christy Investment
Agency Account and 70,115 common shares held in the Riverbank Restaurants
Inc. Agency Account at Peoples Bank, as to which Mr. Christy exercises
shared voting and investment power. Also includes 979 common shares held
in an investment account by Mr. Christy, as to which Mr. Christy
exercises sole voting and investment power.
(9) Does not include 10 common shares held of record and beneficially owned
by Mr. Conlon's wife, as to which Mr. Conlon has no voting or investment
power and disclaims beneficial ownership. Does not include 5,090 common
shares allocated to the account of Mr. Conlon's wife in the Peoples
Bancorp Inc. Retirement Savings Plan, as to which Mr. Conlon has no
voting or investment power and disclaims beneficial ownership. Includes
13,966 common shares allocated to the account of Mr. Conlon in the
Peoples Bancorp Inc. Retirement Savings Plan, as to which Mr. Conlon has
the power to direct the voting and investment.
(10) Includes 23,280 shares held jointly by Wilford D. Dimit with his wife, as
to which Mr. Dimit exercises shared voting and investment power. Does not
include 16,697 common shares accrued to Mr. Dimit's account under the
Peoples Bancorp Inc. Deferred Compensation Plan for Directors of Peoples
Bancorp Inc. and Subsidiaries, as to which Mr. Dimit has no voting or
investment power.
(11) Includes 36,370 common shares allocated to the account of Robert E. Evans
in the Peoples Bancorp Inc. Retirement Savings Plan, as to which Mr.
Evans has the power to direct the voting and investment. Does not include
23,353 common shares held of record and owned beneficially by Mr. Evans'
wife as to which common shares Mr. Evans has no voting or investment
power and disclaims beneficial ownership. Does not include 14,659 common
shares accrued to Mr. Evans' account under the Peoples Bancorp Inc.
Deferred Compensation Plan for Directors of Peoples Bancorp Inc. and
Subsidiaries, as to which Mr. Evans has no voting or investment power.
(12) On August 12, 2004, Richard Ferguson was elected as a director of Peoples
to fill the director's office created by the increase in the number of
directors to 12 and to serve in the class whose terms expire in 2006.
(13) Includes 100 common shares allocated to the account of Richard Ferguson
in the Ferguson Consulting LLC, retirement savings plan, as to which Mr.
Ferguson has the power to direct the voting and investment. Does not
include 180 common shares accrued to Mr. Ferguson's account under the
Peoples Bancorp Inc. Deferred Compensation Plan for Directors of Peoples
Bancorp Inc. and Subsidiaries, as to which Mr. Ferguson has no voting or
investment power.
(14) Includes 6,435 common shares held jointly by Larry Holdren and his wife,
as to which Mr. Holdren exercises shared voting and investment power.
Includes 15,481 common shares allocated to the account of Mr. Holdren in
the Peoples Bancorp Inc. Retirement Savings Plan, as to which Mr. Holdren
has the power to direct the voting and investment.
(15) Includes 10,957 common shares held in the Robert W. Price Investment
Account at Peoples Bank, as to which Mr. Price shares investment and
voting power. Does not include 2,359 common shares accrued to Mr. Price's
account under the Peoples Bancorp Inc. Deferred Compensation Plan for
Directors of Peoples Bancorp Inc. and Subsidiaries, as to which Mr. Price
has no voting or investment power.
(16) Includes 56,173 common shares held in the Carol J. Sauber Trust Account
at Peoples Bank, as to which Theodore P. Sauber exercises shared
investment and voting power. Includes 64,139 common shares held in the
Theodore P. Sauber Trust Account at Peoples Bank, as to which Mr. Sauber
exercises shared investment and voting power. Includes 8,121 common
shares held in an IRA account by Peoples Bank as custodian, as to which
Mr. Sauber exercises shared investment and voting power.
(17) Does not include 5,441 common shares accrued to Paul T. Theisen's account
under the Peoples Bancorp Inc. Deferred Compensation Plan for Directors
of Peoples Bancorp Inc. and Subsidiaries, as to which Mr. Theisen has no
voting or investment power.
(18) Does not include 14,879 common shares held in the Luada Wesel Estate Plan
Trust Investment Account at Peoples Bank, as to which Joseph H. Wesel has
no voting or investment power and disclaims beneficial ownership. Does
not include 7,427 common shares accrued to Mr. Wesel's account under the
Peoples Bancorp Inc. Deferred Compensation Plan for Directors of Peoples
Bancorp Inc. and Subsidiaries, as to which Mr. Wesel has no voting or
investment power. Does not include 27,786 common shares in the Joseph and
Lu Wesel Grandchildren's Trust, as to which Peoples Bank has sole
investment and voting power.
(19) Includes 3,410 common shares held in an investment account by Thomas J.
Wolf, as to which Mr. Wolf exercises sole voting and investment power.
(20) Includes 24,031 common shares held jointly by Joseph S. Yazombek and his
wife, as to which Mr. Yazombek exercises shared voting and investment
power. Includes 13,253 common shares allocated to the account of Mr.
Yazombek in the Peoples Bancorp Inc. Retirement Savings Plan, as to which
Mr. Yazombek has the power to direct the voting and investment.
(21) Includes common shares held jointly by directors and executive officers
with other persons, as well as 97,282 common shares allocated to the
accounts of all executive officers of Peoples (and their respective
spouses) in the Peoples Bancorp Inc. Retirement Savings Plan. See notes
(3) and (6) through (20) above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To Peoples' knowledge, based solely on a review of reports furnished to
Peoples and written representations that no other reports were required, during
the fiscal year ended December 31, 2004 (the "2004 fiscal year"), all filing
requirements applicable to officers, directors and greater than 10% beneficial
owners of Peoples' common shares under Section 16(a) of the Exchange Act were
complied with, except that Thomas J. Wolf made a late filing of his Form 3 on
February 25, 2004, to report his becoming a director on February 12, 2004 and
filed late one Form 4 reporting six open market purchases of common shares on
April 20, 2004 (which were reported on May 7, 2004).
TRANSACTIONS INVOLVING MANAGEMENT
On January 26, 2005, Peoples Bank purchased real estate and the
building located on it from First Settlement, Inc., a corporation as to which
Wilford D. Dimit, a director of Peoples, is the President and a controlling
shareholder. The real estate is contiguous to the main office of Peoples Bank in
Marietta, Ohio. The purchase price for the real estate and building of $400,000
was determined through an arms-length negotiation and was acquired to add office
space necessary for continual growth of Peoples' operations. Since the purchase,
Peoples Bank has leased to First Settlement, Inc. space within the building on
the first floor on a month-to-month basis for purposes of continued operation of
a restaurant. These transactions were pre-approved by the Board of Directors of
Peoples Bank and have been approved by the Audit Committee of the Board of
Directors of Peoples.
Paul T. Theisen is Of Counsel to, and an independent contractor with,
TheisenBrock, A Legal Professional Association, which rendered legal services to
Peoples and its subsidiaries during Peoples' 2004 fiscal year and continues to
render legal services to Peoples and its subsidiaries during Peoples' 2005
fiscal year. Since 1998, Mr. Theisen has not been a partner, controlling
shareholder or executive officer or otherwise been related to or held any
interest in TheisenBrock, other than as Of Counsel and an independent contractor
(and has not individually performed services for Peoples or any of its
subsidiaries).
During Peoples' 2004 fiscal year, Peoples Bank entered into banking
transactions, in the ordinary course of business, with certain executive
officers and directors of Peoples, with members of their immediate families, and
with corporations or organizations as to which directors of Peoples serve as
executive officers or beneficially own more than 10% of the equity securities.
It is expected that similar banking transactions will be entered into in the
future. Payments from Peoples Bank to such persons in connection with the
deposit of funds or Peoples Bank's acting in an agency capacity have been made
on substantially the same terms as those prevailing at the time for comparable
transactions with persons not affiliated with Peoples or its subsidiaries. Loans
to such persons have been made on substantially the same terms, including the
interest rate charged and the collateral required, as those prevailing at the
time for comparable transactions with persons not affiliated with Peoples or its
subsidiaries. These loans have been subject to, and are presently subject to, no
more than a normal risk of uncollectibility, and present no other unfavorable
features. The aggregate amount of loans to directors and executive officers of
Peoples, and affiliates of these directors and executive officers, as a group at
December 31, 2004, was $4,261,921. As of the date of this proxy statement, all
of the loans described in this paragraph are performing loans in accordance with
their original terms. All loans were made in compliance with applicable federal
and state laws and regulations.
ELECTION OF DIRECTORS
(Item 1 on Proxy)
As of the date of this proxy statement, there were 12 members of the
Board of Directors - four directors in the class whose terms expire at the
Annual Meeting, four in the class whose terms expire in 2006 and four in the
class whose terms expire in 2007. On August 12, 2004, upon the recommendation of
the Governance and Nominating Committee of the Board of Directors, the Board
increased the number of directors of Peoples to 12 and elected Richard Ferguson
as a director of Peoples to fill the director's office created by the increase.
Mr. Ferguson was recommended to the Governance and Nominating Committee by
shareholders and non-management directors and will serve for a term that expires
in 2006.
The Board of Directors has reviewed, considered and discussed each
director's relationships, both direct or indirect, with Peoples and its
subsidiaries and the compensation and other payments each director has, both
directly or indirectly, received from or made to Peoples and its subsidiaries
and presently expects to receive from or make to Peoples and its subsidiaries in
order to determine whether such director qualifies as an independent director
under the rules applicable to companies whose securities are traded on The
NASDAQ Stock Market, Inc. (the NASDAQ "rules") and has determined that at least
a majority of the directors qualify as independent directors under the
applicable NASDAQ rules and that each of the following directors has no
financial or personal ties, either directly or indirectly, with Peoples or its
subsidiaries (other than compensation as a director of Peoples and its
subsidiaries, banking relationships in the ordinary course of business with
Peoples Bank and ownership of common shares of Peoples as described in this
proxy statement) and thus qualifies as independent: Carl L. Baker, Jr.; George
W. Broughton; Frank L. Christy; Richard Ferguson; Robert W. Price; Theodore P.
Sauber; Paul T. Theisen; Joseph H. Wesel; and Thomas J. Wolf.
While Paul T. Theisen is Of Counsel to, and an independent contractor
with, the law firm of TheisenBrock, Mr. Theisen has not been a partner,
controlling shareholder or executive officer or otherwise been related to or
held any interest in TheisenBrock, other than as Of Counsel and an independent
contractor (and has not individually performed services for Peoples or any of
its subsidiaries), since 1998.
The Board of Directors has determined that Wilford D. Dimit does not
qualify as an independent director under the applicable NASDAQ Rules due to the
transactions between Peoples Bank and First Settlement, Inc. described above in
"TRANSACTIONS INVOLVING MANAGEMENT". The Board of Directors has determined
however, that those transactions do not disqualify Mr. Dimit from being
independent for the purposes of Rule 10A-3 under the Exchange Act, which applies
to directors serving on the Audit Committee.
The Board of Directors proposes that each of the four nominees
identified below be re-elected for a new three-year term and until his successor
is duly elected and qualified or until the earlier of his resignation, removal
from office, or death. The Governance and Nominating Committee recommended each
nominee. The four nominees for election as directors in the class whose terms
expire in 2008 receiving the greatest number of votes will be elected. Common
shares represented by properly executed and returned proxy cards will be voted
FOR the election of the Board of Directors' nominees unless authority to vote
for one or more nominees is withheld. Common shares as to which the authority to
vote is withheld will be counted for quorum purposes but will not be counted
toward the election of directors or toward the election of the individual
nominees specified on the form of proxy.
The following table gives certain information, as of February 14, 2005,
concerning each nominee for re-election as a director of Peoples. Unless
otherwise indicated, each individual has had the same principal occupation for
more than five years.
Director Nominee
Position(s) Held with Peoples and Its Continuously For Term
Nominee Age Principal Subsidiaries and Principal Occupation(s) Since Expiring In
------- --- -------------------------------------------------- ----- -----------
Mark F. Bradley 35 President since June 2004, Chief Operating Officer since 2003 2008
July 2003, Director since February 2003, Executive Vice
President and Chief Integration Officer from April 2002
to July 2003; and Controller from 1997 to 2001, of
Peoples; President and Chief Operating Officer since
2002, Controller from 1997 to 2001 of Peoples Bank;
Director of Peoples Bancorp Foundation Inc. since
December 2003. (1) (2)
Frank L. Christy 57 President of Christy & Associates, Inc., a business 1999 2008
development company located in Marietta, Ohio, since
1991; President of Lafayette Center, Inc., owner and
operator of a retail shopping center located in Marietta,
Ohio since 1988; President of Riverbank Restaurants,
Inc., owner and operator of a lodging facility located in
Charleston, WV since 1975; Chairman of Caron Products and
Services, Inc., a manufacturer and distributor of
chillers and incubators for scientific work, located in
Marietta, Ohio since 1990; and Chairman of Rossi Pasta
Factory, Inc., a manufacturer and distributor of gourmet
pasta located in Marietta, Ohio since 1995.
Theodore P. Sauber 71 Vice President of T.C.K.S., Inc., a holding company for 2004 2008
McDonald's restaurants in Ohio and West Virginia.
Trustee of Rio Grande University since 1988; a member of
the Ohio University Trustees Academy since 1973; and past
chairman of the Athens (Ohio) Chamber of Commerce;
Director of Peoples Bancorp Foundation Inc. since
December 2003. (1)
Joseph H. Wesel 75 President of W.D.A., Inc., Marietta, Ohio, a real estate 1980 2008
holding company; Chairman and Chief Executive Officer of
Marietta Automotive Warehouse, Inc., Marietta, Ohio, an
automotive parts wholesaler, from 1978 until 2001;
Chairman of the Board from 1991 until July 2003,
Leadership Director since April 2004, and Vice Chairman
and Leadership Director since July 2003, of Peoples. (1)
---------------------
(1) Also a director of Peoples Bank.
(2) On February 11, 2005, Peoples announced that, effective June 30,
2005, Mr. Bradley has been appointed to the position of Chief
Executive Officer of each of Peoples and Peoples Bank effective
June 30, 2005, upon the retirement of Robert E. Evans.
While it is contemplated that all nominees will stand for re-election, if
one or more nominees at the time of the Annual Meeting should be unavailable or
unable to serve as a candidate for re-election as a director, the individuals
designated as proxy holders reserve full discretion to vote the common shares
represented by the proxies they hold for the election of the remaining nominees
and for the election of any substitute nominee or nominees designated by the
Board of Directors. The Board of Directors knows of no reason why any of the
nominees named above will be unavailable or unable to serve if elected to the
Board.
The following table gives certain information, as of February 14, 2005,
concerning the current directors who will continue to serve after the Annual
Meeting. Unless otherwise indicated, each individual has had the same principal
occupation for more than five years.
DirectoR
Position(s) Held with Peoples and Its Continuously Term
Name Age Principal Subsidiaries and Principal Occupation(s) Since Expiring In
---- --- -------------------------------------------------- ----- -----------
Carl L. Baker, Jr. 42 President and Chief Executive Officer, B & N Coal, Inc., a 2000 2006
mining, reclamation and construction concern in Southeastern
Ohio; Co-Owner of Sharon Stone Company, a limestone and slag
producer in Noble and Washington Counties, Ohio; Owner of
Dexter Hardwoods, Inc., a hardwood sawmill located in Noble
County, Ohio. Partner in Belpre Sand & Gravel Company, a sand
and gravel operation located in Little Hocking, Washington
County, Ohio, since 2002.
George W. Broughton 47 President of GWB Specialty Foods, LLC, an ice cream, frozen 1994 2006
food, and coffee service distributor, since 2000; President of
Broughton Commercial Properties, LLC, a commercial properties
rental company, since 2000; Chairman of Broughton Foundation,
a nonprofit charitable foundation, and Broughton Park, a park
facility owned by the Broughton Foundation and made available
to the public, since 1998; and President and Controller of
George Broughton Family LLP, an asset management company,
since 1998. All of these entities are based in Marietta,
Ohio. Director of Peoples Bancorp Foundation Inc. since
December 2003. (1)
Wilford D. Dimit 70 President of First Settlement, Inc., Marietta, Ohio, a 1993 2006
corporation operating a retail-clothing store for men and
women, a family shoes store, a cosmetic studio and public
alteration shop from July 1983 to November 2004 and a
restaurant since March 1983. (1)
Robert E. Evans 64 Chairman of the Board since July 2003, Chief Executive Officer 1980 2007
since 1980, and President from 1980 until
June 2004, of Peoples; Chairman of the Board
since 1999, Chief Executive Officer since
1987, and President from 1987 to 2002 of
Peoples Bank; Director of Peoples Bancorp
Foundation Inc. since
December 2003. (1) (2)
Richard Ferguson 58 Owner of Ferguson Consulting LLC, a Columbus, Ohio based 2004 2006
professional practice that focuses on
business valuations and forensic accounting
services, since 1999; Certified Public
Accountant, since 1976 and Certified
Valuation Analyst since 1996.
Robert W. Price 41 Operations Manager, Shelly Materials, Inc. Columbus District, 2000 2007
a division of The Shelly Company, since 2002. The Shelly
Company is an asphalt and construction materials company
headquartered in Thornville, Ohio, and a wholly owned
subsidiary of Oldcastle Materials Group, a division of CRH,
plc. Formerly President of Smith Concrete and related
companies.
Paul T. Theisen 74 Attorney-At-Law. Currently active as a mediator and 1980 2007
arbitrator. For more than 40 years, was a
litigator with TheisenBrock, A Legal
Professional Association, Marietta, Ohio, and
has been Of Counsel to, and an independent
contractor with, that firm since 1998. (1)
Thomas J. Wolf 58 Principal shareholder of six holding companies for 13 2004 2007
McDonald's restaurants in Kentucky and West Virginia; Board
member of each of Our Lady of Bellefonte Hospital in Ashland,
Kentucky, since 2002; the Ashland Alliance (chamber of
commerce for Boyd and Greenup Counties, Kentucky), since 2002;
the Ronald McDonald House in Huntington, West Virginia, since
1998; and the David School based in David, Kentucky, since
1999.
----------------------
(1) Also a director of Peoples Bank.
(2) On February 11, 2005, Peoples announced the retirement of Mr. Evans as
Chief Executive Officer of each of Peoples and Peoples Bank, effective
June 30, 2005.
Meetings of the Board
---------------------
The Board of Directors held a total of 12 meetings during Peoples' 2004
fiscal year. Each incumbent director attended 75% or more of the aggregate of
the total number of meetings held by the Board of Directors and the total number
of meetings held by all committees on which he served, in each case during his
period of service, other than Carl L. Baker, Jr. who attended 69%.
Peoples encourages all incumbent directors and director nominees to
attend each annual meeting of shareholders. Attendance at the 2004 annual
meeting of shareholders, held on April 8, 2004, included all but one of the then
incumbent directors and director nominees, who were also directors at the time
of the 2004 annual meeting.
Communications with the Board of Directors
------------------------------------------
Although Peoples has not to date developed formal processes by which
shareholders may communicate directly with directors, it believes that the
informal process, in which any communication sent to the Board of Directors
either generally or in care of the Chief Executive Officer, the Corporate
Secretary or another corporate officer is forwarded to all members of the Board,
has served the needs of the Board and Peoples' shareholders. There is no
screening process, and all shareholder communications that are received by
officers for the Board's attention are forwarded to the Board.
Not having found any problems with shareholder communications with
directors under the existing process, the Governance and Nominating Committee
has not found it necessary to develop more specific procedures. Until other
procedures are developed and posted on the "Corporate Governance and Code of
Ethics and Ethics Hotline" page of Peoples' website at www.peoplesbancorp.com,
any communication to the Board of Directors or to individual directors may be
mailed to the Board or individual director, in care of Peoples' Corporate
Secretary, at Peoples' headquarters in Marietta, Ohio. The mailing envelope must
contain a clear notation indicating that the enclosed letter is a
"Shareholder-Board Communication" or "Shareholder-Director Communication." In
addition, communication via Peoples' website may be used. Correspondence through
the "Investor Relations - Shareholder Contacts" page of the website is also
directed to the Corporate Secretary. All such communications, whether via mail
or the website, must identify the author as a shareholder and clearly state
whether the intended recipients are all members of the Board or just certain
specified individual directors. The Corporate Secretary will make copies of all
such communications and circulate them to the appropriate director or directors
without any screening.
Committees of the Board
-----------------------
The Board of Directors has four standing committees: the Audit
Committee, the Compensation Committee, the Executive Committee, and the
Governance and Nominating Committee.
AUDIT COMMITTEE
The Audit Committee is organized and conducts its business
pursuant to a written charter adopted by the Board of Directors, which is
attached to this proxy statement as Appendix A. A current copy of the charter of
the Audit Committee is also posted on the "Corporate Governance and Code of
Ethics and Ethics Hotline" page of Peoples' website at WWW.PEOPLESBANCORP.COM.
At least annually, the Audit Committee reviews and reassesses the adequacy of
its charter and recommends any proposed changes to the full Board for approval.
The Audit Committee is responsible for:
o overseeing the accounting and financial reporting processes of
Peoples;
o overseeing the audits of the consolidated financial statements of
Peoples;
o appointing, compensating and overseeing the work of the independent
registered public accounting firm employed by Peoples for the purpose
of preparing or issuing an audit report or performing related work;
o pre-approving all audit and non-audit services provided by the
independent registered public accounting firm;
o establishing procedures for the receipt, retention and treatment of
complaints received by Peoples regarding accounting, internal
accounting controls or auditing matters; and
o assisting the Board of Directors in the oversight of:
o the performance of Peoples' internal auditors and independent
registered public accounting firm,
o the independent registered public accounting firm's
qualifications and independence; and
o Peoples' compliance with ethics policies and legal and regulatory
requirements.
The Audit Committee will also carry out such other responsibilities as may be
delegated to the Audit Committee by the full Board. The Audit Committee held six
meetings during the 2004 fiscal year. The Audit Committee's report relating to
Peoples' 2004 fiscal year appears on pages 26 through 27.
The members of the Audit Committee are Richard Ferguson, Chairman,
Wilford D. Dimit, Vice Chairman, Carl L. Baker, Jr., George W. Broughton, Frank
L. Christy, Theodore P. Sauber, and Thomas J. Wolf. Each member of the Audit
Committee qualifies as independent for purposes of Rule 10A-3 under the Exchange
Act. Further, each member of the Audit Committee, with the exception of Wilford
D. Dimit, qualifies as an independent director under the applicable NASDAQ
Rules. In connection with Mr. Dimit, current NASDAQ Rules permit, under
exceptional and limited circumstances, one member of the Audit Committee to be a
director who does not meet the independence requirements of the applicable
NASDAQ Rules, if (a) that director (i), meets the criteria of SEC Rule 10A-3 and
(ii) is not a current officer or employee of Peoples or any of its subsidiaries
(or a family member of such an officer or employee), and (b) the Board has
determined that such director's committee membership is required by the best
interests of the company and its shareholders. The Board of Directors has made
such a determination with regard to Mr. Dimit.
Prior to the transactions between Peoples Bank and First Settlement,
Inc. described above in "TRANSACTIONS INVOLVING MANAGEMENT," Mr. Dimit had
qualified as an independent director under the applicable NASDAQ Rules. However,
the $400,000 purchase price for the real estate and building represented more
than 5% of the consolidated gross revenues of First Settlement, Inc. for its
last fiscal year and is expected to be more than 5% of the consolidated gross
revenues for its current fiscal year. Accordingly, this non-compensatory payment
causes Mr. Dimit not to qualify as independent under the NASDAQ Rules. The Board
of Directors has determined that the continued membership of Mr. Dimit on the
Audit Committee is in the best interests of Peoples and its shareholders due to
Mr. Dimit's experience as Chairman of the Audit Committee from April 1997 to
February 2005, and a member of the Audit Committee since January 1993, during
which time he has been instrumental to the conduct of the business of the Audit
Committee.
Each member of the Audit Committee has substantial background and
experience as the chief executive officer or active leader of his respective
business or professional interest. Under rules adopted by the SEC, Peoples is
required to disclose whether it has an "audit committee financial expert"
serving on its Audit Committee. The Board of Directors has determined that,
while the Board believes that each of the members of the Audit Committee is
highly qualified to discharge his duties, it was appropriate to identify Richard
Ferguson as a particular member of the Audit Committee qualifying as an "audit
committee financial expert" under the SEC's rules. In February 2005, upon
recommendation of the Governance and Nominating Committee, the Board of
Directors determined that Richard Ferguson's background, knowledge,
qualifications and experience, professional and otherwise, qualify him as an
audit committee financial expert. The Board further determined that Mr. Ferguson
qualifies as "financially sophisticated" for purposes of the applicable NASDAQ
Rules.
The Board of Directors has also determined that each of the other
members of the Audit Committee is capable of (i) understanding accounting
principles generally accepted in the United States ("US GAAP") and financial
statements, (ii) assessing the general application of US GAAP in connection with
the accounting for estimates, accruals and reserves, (iii) analyzing and
evaluating Peoples' consolidated financial statements, (iv) understanding
internal control over financial reporting, and (v) understanding audit committee
functions, all of which are attributes of an "audit committee financial expert"
under the SEC's rules.
None of the members of the Audit Committee is an affiliated person of
Peoples or any of its subsidiaries other than in his capacity as a member of the
Board of Directors of Peoples (and committees thereof) and, in the case of
Messrs. Dimit, Broughton, and Sauber, a member of the Board of Directors of
Peoples Bank (and committees thereof). None of the members of the Audit
Committee has received or accepted, directly or indirectly, any consulting,
advisory, or other compensatory fee from Peoples or any of its subsidiaries
other than ordinary fees received in his capacity as a director of Peoples (and
committee member) and, in the case of Messrs. Dimit, Broughton, and Sauber, as a
director of Peoples Bank (and committee member).
COMPENSATION COMMITTEE
The Compensation Committee is comprised of four directors who qualify
as independent directors under the applicable NASDAQ Rules, an outside director
for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), and a non-employee director for purposes of Rule
166-3 under the Exchange Act: Joseph H. Wesel, Chairman; Carl L. Baker, Jr.;
Frank L. Christy; and Robert W. Price. In addition, Wilford D. Dimit had served
as a member of the Compensation Committee prior to the transactions between
First Settlement, Inc. and Peoples Bank described above in "TRANSACTIONS
INVOLVING MANAGEMENT."
The Compensation Committee is organized and conducts its business
pursuant to a written charter adopted by the Board of Directors. A current copy
of the charter of the Compensation Committee is posted on the "Corporate
Governance and Code of Ethics and Ethics Hotline" page of Peoples' website at
www.peoplesbancorp.com. The Compensation Committee periodically reviews and
reassesses the adequacy of its charter and recommends any proposed changes to
the full Board for approval.
The purpose of the Compensation Committee is to review and approve, on
behalf of the Board of Directors, management recommendations regarding all forms
of compensation, including stock-based compensation, to be provided to the
executive officers and directors of Peoples and its subsidiaries and all bonus
and stock-based compensation, incentives, perquisites, employee benefits, salary
programs and human resources policies and procedures for all employees of
Peoples and its subsidiaries. The Compensation Committee is responsible for
reviewing and approving goals and objectives relevant to the compensation of
Peoples' executive officers and other officers designated by the Board of
Directors, evaluating such officers' performance in light of those goals and
objectives and determining compensation based on that evaluation. The
Compensation Committee acts as the administrator of Peoples' Amended and
Restated 1993 Stock Option Plan, 1995 Stock Option Plan, 1998 Stock Option Plan
and 2002 Stock Option Plan and approves awards as required to comply with
applicable tax laws. The Compensation Committee also advises the Board on
management succession and development matters. The Compensation Committee will
undertake such other responsibilities as the full Board may prescribe.
The Compensation Committee held eleven meetings during the 2004 fiscal
year. The Compensation Committee's report on executive compensation appears on
pages 15 through 18.
EXECUTIVE COMMITTEE
The Executive Committee is comprised of six directors: Robert E. Evans,
Chairman; Mark F. Bradley; Wilford D. Dimit; Robert W. Price; Paul T. Theisen;
and Joseph H. Wesel. The Executive Committee is authorized to act in the
intervals between meetings of the directors on matters delegated by the full
Board. There were three meetings of the Executive Committee during the 2004
fiscal year.
GOVERNANCE AND NOMINATING COMMITTEE
In 2003, the Board of Directors formally developed a Governance and
Nominating Committee. The members of the Governance and Nominating Committee are
Joseph H. Wesel, Chairman, George W. Broughton, Wilford D. Dimit, Robert W.
Price, Paul T. Theisen. The Board of Directors has determined that each of the
members of the Governance and Nominating Committee, with the exception of Mr.
Dimit, qualifies as an independent director under applicable NASDAQ Rules.
Current NASDAQ Rules permit, under exceptional and limited circumstances, one
member of the Governance and Nominating Committee to be a director who does not
meet the independence requirements of the applicable NASDAQ Rules if (a) that
director is not a current officer or employee of Peoples or any of its
subsidiaries (or a family member of such an officer or employee) and (b) the
Board has determined that such director's committee membership is required by
the best interests of the company and its shareholders. The Board of Directors
has made such a determination with regard to Mr. Dimit due to his experience as
a member of the Executive Committee since 2004 and a member of the Governance
and Nominating Committee since its inception in 2003.
The Governance and Nominating Committee is organized and conducts its
business pursuant to a written charter adopted by the Board of Directors. The
purposes of the Governance and Nominating Committee are:
o to identify qualified candidates for election, nomination or
appointment to the Board and recommend to the full Board a slate
of director nominees for each annual meeting of the shareholders
of Peoples or as vacancies occur;
o to make recommendations to the full Board and the Chairman of the
Board regarding assignment and rotation of members and chairs of
committees of the Board;
o to oversee matters of corporate governance, including the
evaluation of Board performance and processes;
o to review with the Chairman of the Board, or another director
designated by the full Board, issues involving potential
conflicts of interest and/or any change of status of directors
pursuant to applicable law and the applicable provisions of
Peoples' Code of Ethics for Directors, Officers and Employees or
Peoples' Code of Regulations;
o to recommend the number of members to serve on the Board;
o to periodically review Peoples' Code of Ethics for Directors,
Officers and Employees and recommend to the full Board changes,
as necessary; and
o to undertake such other responsibilities as may be referred to
the Governance and Nominating Committee by the full Board or the
Chairman of the Board.
The charter of the Governance and Nominating Committee is posted on the
"Corporate Governance and Code of Ethics and Ethics Hotline" page of Peoples'
website at www.peoplesbancorp.com. The Governance and Nominating Committee
periodically reviews and reassesses the adequacy of its charter and recommends
any proposed changes to the full Board for approval. The Governance and
Nominating Committee held three meetings during the 2004 fiscal year.
Nominating Procedures
---------------------
As described above, Peoples has a standing Governance and Nominating
Committee that has the responsibility to identify and recommend individuals
qualified to become directors. Each candidate must satisfy the eligibility
requirements set forth in Peoples' Code of Regulations. To be eligible for
election as a director, an individual must be a shareholder of Peoples. In
addition, the individual must either (i) serve as chief executive officer or in
another position of active leadership with a business or professional interest
located within the geographic area served by Peoples and its subsidiaries or
(ii) serve as an executive officer of Peoples or one of its subsidiaries.
However, the qualification in the preceding sentence does not apply to
individuals elected as initial directors of Peoples in 1980. An individual will
not be eligible for nomination and re-election as a director after five years
has passed since the individual ceased to hold the executive or leadership
position satisfying the eligibility requirement. This five-year limitation does
not apply, however, to an individual who retires from service as the Chairman of
the Board or the Chief Executive Officer of Peoples.
When considering potential candidates for the Board, the Governance and
Nominating Committee strives to assure that the composition of the Board, as
well as its practices and operation, contribute to value creation and to the
effective representation of Peoples' shareholders. The Governance and Nominating
Committee may consider those factors it deems appropriate in evaluating director
candidates including judgment, skill, diversity, strength of character,
experience with businesses and organizations comparable in size or scope to
Peoples, experience and skill relative to other Board members, and specialized
knowledge or experience. Depending upon the current needs of the Board, certain
factors may be weighed more or less heavily by the Governance and Nominating
Committee.
In considering candidates for the Board, the Governance and Nominating
Committee evaluates the entirety of each candidate's credentials and, other than
the eligibility requirements set forth in Peoples' Code of Regulations, does not
have any specific minimum qualifications that must be met by a Governance and
Nominating Committee-recommended nominee. However, the Governance and Nominating
Committee does believe that all members of the Board should have the highest
character and integrity; a reputation for working constructively with others;
sufficient time to devote to Board matters; and no conflict of interest that
would interfere with performance as a director.
The Governance and Nominating Committee considers candidates for the
Board from any reasonable source, including shareholder recommendations. The
Governance and Nominating Committee does not evaluate candidates differently
based on who has made the recommendation. The Governance and Nominating
Committee has the authority under its charter to hire and pay a fee to
consultants or search firms to assist in the process of identifying and
evaluating candidates. No such consultants or search firms have been used to
date and, accordingly, no fees have been paid to consultants or search firms.
Shareholders may recommend director candidates for consideration by the
Governance and Nominating Committee by writing to the Corporate Secretary of
Peoples at Peoples' executive offices in Marietta, Ohio, giving the candidate's
name, age, business address, residence address, principal occupation or
employment and number of common shares beneficially owned. The recommendation
should also describe the qualifications, attributes, skills or other qualities
of the recommended director candidate. A written statement from the candidate
consenting to be named as a director candidate and, if nominated and elected, to
serve as a director should accompany any such recommendation.
Shareholders who wish to nominate an individual for election as a
director at an annual meeting of the shareholders of Peoples must comply with
Peoples' Code of Regulations regarding shareholder nominations. Shareholder
nominations must be made in writing and delivered or mailed to the Corporate
Secretary of Peoples not less than 14 days nor more than 50 days prior to any
meeting of shareholders called for the election of directors. However, if less
than 21 days' notice of the meeting is given to the shareholders, the nomination
must be mailed or delivered to the Corporate Secretary not later than the close
of business on the seventh day following the day on which the notice of the
meeting was mailed to the shareholders. Each nomination must contain the
following information to the extent known by the nominating shareholder: (a) the
name, age, business address and residence address of each proposed nominee; (b)
the principal occupation or employment of each proposed nominee; (c) the number
of common shares beneficially owned by each proposed nominee and by the
nominating shareholder; and (d) any other information required to be disclosed
with respect to a nominee for election as a director under the proxy rules
promulgated under the Exchange Act. Each such notification must be accompanied
by the written consent of the proposed nominee to serve as a director of Peoples
if elected. Nominations not made in accordance with Peoples' Code of Regulations
will not be considered.
Code of Ethics
--------------
In accordance with applicable NASDAQ Rules and rules of the SEC, the
Board of Directors has adopted the Code of Ethics for Directors, Officers and
Employees of Peoples Bancorp Inc. and its affiliates, which is available on the
"Corporate Governance and Code of Ethics and Ethics Hotline" page of Peoples'
website at www.peoplesbancorp.com.
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Policy
------
Peoples' cash compensation package for its executive officers consists
of two components: (1) base salary; and (2) annual performance-based bonuses.
Peoples also grants options to its executive officers as a means to promote
ownership in Peoples.
The Compensation Committee is composed of four independent,
non-employee directors and operates under a charter approved by the Board of
Directors. The Compensation Committee is responsible for the review, approval,
and administration of the base salary level and annual bonus compensation
programs as well as the stock option program for executive officers. In
determining compensation levels, the Compensation Committee considers: salary
and bonus levels which will attract and retain qualified executives when
considered with the other components of Peoples' compensation structure;
specific annual performance criteria; and rewarding executive officers for
continuous improvement in their respective areas which contribute to increases
in shareholder value. The Compensation Committee met eleven times during
Peoples' 2004 year.
Peoples' philosophy for granting options is based on the principles of
encouraging key employees to remain with Peoples and to encourage ownership by
providing them with a long-term interest in Peoples' overall performance and
incenting those executive officers to manage with a view toward maximizing
long-term shareholder value creation.
During the 2004 fiscal year, the Compensation Committee engaged the
services of Clark Consulting, a compensation-consulting firm, to perform a
competitive peer analysis of executive compensation. In conjunction with
Peoples, Clark Consulting identified a group of 15 peer financial institution
holding companies based on market capitalization, geographic location,
performance, and similarity in lines of business. The peer group represents
publicly - traded holding companies with total asset size from slightly over
$900 million to slightly under $3.5 billion. The information gathered from the
analysis was used to evaluate the competitiveness of compensation for Peoples'
executive officers relative to other financial institution holding companies of
comparable size and overall performance.
Section 162(m) of the Internal Revenue Code prohibits Peoples from
claiming a deduction on its federal income tax return for compensation in excess
of $1 million paid for a given fiscal year to the Chief Executive Officer (or
person serving in that capacity) at the close of Peoples' fiscal year and the
four most highly compensated officers of Peoples, other than the Chief Executive
Officer, at the end of Peoples' fiscal year. The $1 million compensation
deduction limitation does not apply to "performance-based compensation". Due to
the fact that all executive officers receive compensation at levels
substantially below the $1 million deductibility limit, the Compensation
Committee does not propose at this time to present for shareholder approval the
performance goals established for bonuses under the Performance Compensation
Program as described below. The design and administration of Peoples' 1995 Stock
Option Plan, 1998 Stock Option Plan, and 2002 Stock Option Plan are intended to
comply with Section 162(m) so that any compensation, which may be received by
executive officers of Peoples under those plans, will qualify as
"performance-based". The Compensation Committee will rely, from time to time,
upon the guidance of Peoples' General Counsel regarding the appropriateness of
presenting the Performance Compensation Program, or any similar plan, to
shareholders.
Base Salary
-----------
Executive officers' base salaries are determined by evaluating the most
recent comparative peer data and the role and responsibilities of their
positions. During 2004, the Compensation Committee engaged the services of Clark
Consulting, a compensation-consulting firm, to perform competitive peer analysis
of executive compensation.
Individual salary increases are reviewed annually and are based on
Peoples' overall performance and the executive's attainment of specific
individual business objectives during the preceding year.
Annual Bonuses
--------------
Executive officers are eligible to earn annual bonuses. On March 11,
2004, the Compensation Committee established a bonus matrix, for the 2004 fiscal
year, comprised of three financial components: (1) Earnings Per Share; (2)
Return on Equity; and (3) Non-interest Income Leverage Ratio which is a measure
of non-interest income relative to operating non-interest expense. The
performance goals established for each of these financial components, if
attained, make available an incentive pool of bonus payments. On January 13,
2005, the Compensation Committee established a bonus matrix, for the 2005 fiscal
year, comprised of the same financial components.
Annual performance goals were established for the Chairman of the Board
and Chief Executive Officer and for the President and Chief Operating Officer
directly related to the above-mentioned financial performance measurements, all
of which are quantitative in nature and are designed to promote shareholder
value. The annual bonus is weighted 90% for attainment of the financial goals
and 10% for individual performance goals. These individuals can receive a
maximum payout of up to 100% of their annual base salary.
Annual performance goals are also established for each other executive
officer, the nature of which differs depending upon the executive officer's job
responsibilities. Goals are both quantitative in nature, such as sales and
revenue goals and cost containment; and also qualitative in nature, such as the
development and retention of key staff, assessment and development of quality
products and services, and management effectiveness. Annual bonuses for the
other executive officers are weighted 75% weighting for attainment of the
previously mentioned financial goals and the remaining 25% based on the
attainment of specific individual goals. The maximum payout is up to 70% of
annual base salary.
At the end of each year, the extent to which Peoples' financial goals
and each executive officer's individual goals are actually achieved is measured.
If all goals are completely met, the executive officer receives a target bonus
amount. To the extent goals are partially met, then only that portion as
expressed in the bonus matrix is paid out. If goals are exceeded, a higher
portion of the bonus matrix is paid out up to the maximum established amount.
Executive officers are required to defer 25% of their incentive compensation
otherwise payable for a period of three years and have the option to defer any
remaining incentive compensation until they reach retirement age. Interest is
accrued on the cumulative amount deferred at a rate equal to 50% of Peoples'
return on average equity achieved during each calendar year during the deferral
period.
The objective of the bonus program is to promote shareholder value. In
that regard, in 2003, the Compensation Committee implemented a requirement that
if 85% of the Earnings Per Share minimum, defined as one penny in earnings per
share improvement over the previous fiscal year, was not achieved there would be
no annual bonus payment to executive officers, regardless of the level of
achievement in respect of their individual performance goals. The Compensation
Committee waived the absolute minimum requirement in respect of the 2004 fiscal
year, on an exception basis, due to the fact nonrecurring charges related to
repositioning of Peoples' investment portfolio caused 2004 Earnings Per Share to
be lower than results from normal operations. Peoples' believes the
repositioning promotes long-term shareholder value enhancement. The Compensation
Committee believed that individual incentive bonuses should be paid because many
successful results were achieved through normal operations. This waiver allowed
the named executive officers to receive the individual portion, but not the
portion related to Peoples' corporate results. Incentive bonuses earned for
individual performance in the 2004 fiscal year were determined by the Committee
and paid to the named executive officers in February 2005 in the total amount of
$91,557.
Option Grants
-------------
Options to purchase common shares are granted annually to executive
officers. Grants are made to executive officers with an exercise price of 100%
of the fair market value of the underlying common shares on the date of grant.
Grants are made with a three-year vesting requirement in order more fairly to
align the benefits to the executive officer with the benefits to the
shareholder.
Peoples' philosophy in granting options is to increase executive
ownership in the Peoples common shares. Peoples' therefore believes the
executive officers will have an incentive to manage with a view toward
maximizing long-term shareholder value. In determining the total number of
options to be granted annually to all recipients, including executive officers,
the Compensation Committee considers the executive officer's individual
performance as well as the performance of Peoples during the fiscal year.
The Compensation Committee establishes guidelines for the number of
common shares subject to options granted to each executive officer based on:
individual job performance; Peoples' financial performance; and evaluation of
competitive peer data for similar grants. These option grants provide incentive
for the creation of shareholder value since the full benefit of the grant to
each executive officer can only be realized with an appreciation in the price of
Peoples common shares. The Compensation Committee believes the options granted
to executive officers mutually align the interests of the executive officers
with those of the shareholders.
The objective of the stock option program is to promote shareholder
value. In that regard, in 2003 the Compensation Committee implemented a
restriction that if 85% of the Earnings Per Share minimum for the prior fiscal
year was not achieved there would be no option grant to executive officers. The
Compensation Committee waived the absolute minimum requirement in 2004, on an
exception basis, due to the fact nonrecurring charges related to repositioning
of Peoples' investment portfolio caused 2004 Earnings Per Share to be lower than
results from normal operations. Peoples' believes the repositioning promotes
long-term shareholder value enhancement. The Compensation Committee believed
that individual incentive bonuses should be paid because many successful results
were achieved through normal operations. This waiver allowed the named executive
officers to receive their individual portion, but not the Peoples' portion.
Accordingly, stock option grants earned in 2004 were granted by the Compensation
Committee and paid to named executive officers in February 2005 totaled 4,734
common shares.
Executive Officer Perquisites
-----------------------------
Based on business need, on a case-by-case basis, the Compensation
Committee grants the use of a company-paid automobile and country club
membership to selected executive officers to further business development on
behalf of Peoples. Personal use of such perquisites are either reimbursed to
Peoples' or paid by the executive officer.
Chief Executive Officer's Compensation
--------------------------------------
The Compensation Committee considered the following factors in
determining the base salary for the 2004 fiscal year for Robert E. Evans,
Chairman of the Board and Chief Executive Officer of Peoples: Peoples' success
in achieving its established financial targets for the 2004 fiscal year and the
level of compensation paid to the highest paid executive at financial
institution holding companies selected for peer comparison. Based on these
factors, the Committee determined Mr. Evans' base salary effective January 1,
2003, should remain unchanged at $300,000. This placed Mr. Evans' base salary
slightly below the median of base salaries paid by those financial holding
companies selected for peer comparison.
For 2004, Mr. Evans was eligible to earn a cash bonus ranging up to
100% of his base salary and options up to 140% of base salary based on the
attainment of established financial and individual performance goals. The
Compensation Committee waived the absolute minimum requirement in 2004, on an
exception basis, due to the fact nonrecurring charges related to repositioning
of Peoples' investment portfolio caused 2004 EPS to be lower than results from
normal operations. Peoples' believes the repositioning promotes long-term
shareholder value enhancement. The Compensation Committee believed that
individual incentive bonuses should be paid because many successful results were
achieved through normal operations. This waiver allowed Mr. Evans to receive his
individual portion, but not the Peoples' portion. The Compensation Committee
determined that based on Mr. Evans' individual performance in 2004, he earned a
bonus of $24,300. Likewise, he also earned options totaling 1,238 common shares.
Both the bonus and options were earned in 2004, but paid and granted in February
2005.
In recognition of Mr. Evans' role and importance to Peoples' success
and promotion of shareholder value, Peoples provided him with an automobile and
country club membership in 2004. These perquisites will continue to be available
to Mr. Evans in 2005.
In order to further enhance Mr. Evans' long-term commitment to Peoples
Bank, in 1976, Peoples Bank entered into a Deferred Compensation Agreement with
him. Under this agreement, Mr. Evans agreed to serve Peoples Bank as an employee
until he reaches age 65 or until his earlier retirement, disability or death and
agreed not to engage in activities in competition with Peoples Bank. The amount
of $5,000 is automatically accrued to Mr. Evans' account upon the completion of
each year of service with Peoples Bank until he reaches normal retirement age
(65).
Change in Control Agreements
----------------------------
In 2004, the Compensation Committee engaged the services of Clark
Consulting to explore whether change in control agreements would be appropriate
for executive officers. Based upon a recommendation from Clark Consulting, the
Compensation Committee supported the development and implementation of change in
control agreements for all executive officers to provide further incentive to
promote shareholder value should a change in control occur. In August of 2004,
Peoples entered into change in control agreements with Robert E. Evans, Mark F.
Bradley, John W. Conlon, Carol A. Schneeberger, David B. Baker, and Larry E.
Holdren to encourage those executive officers to continue their employment with
Peoples in the event Peoples is acquired by another entity. The agreements were
not undertaken in the belief a change in control was imminent or expected.
Generally, the agreements provide for severance compensation to those
executive officers if their employment is terminated by Peoples or its
successors for any reason other than cause within six months prior to or within
24 months after a defined change in control occurs. In addition, compensation
will be paid if the executive officer voluntarily terminates employment during
the same periods because of a decrease in the executive officer's base salary
without the executive officer's consent; a material reduction in the importance
of the executive officer's job responsibilities without the executive officers
consent, other than by reason of termination for cause or by reason of
disability, retirement or death; geographical relocation of the executive
officer without executive officer's consent to an office more than 50 miles from
the executive officer's current office location; or failure by Peoples to obtain
assumption of the contract by its successor.
Under the agreements, a change in control is deemed to occur in the
event of a change of ownership of Peoples which must be reported to the SEC as a
change of control, including but not limited to the acquisition by any person,
entity, or group of 25% or more of Peoples' voting power of Peoples' outstanding
securities or all or substantially of the assets of Peoples.
Under the agreements, severance provisions include: (1) lump sum cash
payment of two and one-half times base annual compensation for Mr. Evans and Mr.
Bradley and of two times base salary for each of Mr. Conlon, Ms. Schneeberger,
Mr. Baker, and Mr. Holdren, in each case payable within 30 days following the
termination date; (2) continuing participation in life, medical, and dental
insurance for twelve months substantially in the form and expense to the
executive officer on the date of termination; and (3) the executive officer
entered into a non-compete agreement for twelve months immediately following the
date of termination. In the case of Mr. Evans and Mr. Bradley, the duration of
the non-compete agreement and the continuing participation in life, medical and
dental insurance is fifteen months immediately following the date of
termination.
Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------
Each of Joseph H. Wesel (Chairman), Carl L. Baker, Jr., Frank L.
Christy and Wilford D. Dimit served as a member of the Compensation Committee
for the entire 2004 fiscal year. Thomas C. Vadakin also served on the
Compensation Committee from January 1, 2004 until he retired as a director of
Peoples on April 8, 2004. Robert W. Price succeeded Mr. Vadakin as a member of
the Compensation Committee, serving from April 8, 2004, through the end of the
2004 fiscal year. None of these individuals has been an officer or employee of
Peoples or any of its subsidiaries. In addition, no executive officer of Peoples
has served on any board of directors or compensation committee of any entity
that compensates any member of the Compensation Committee.
On January 26, 2005, Peoples Bank purchased real estate and the
building located on it from First Settlement, Inc., a corporation as to which
Wilford D. Dimit is the President and the controlling shareholder. The purchase
price for the real estate and building was $400,000 and was determined by an
arms-length negotiation. Since the purchase, Peoples Bank has leased to First
Settlement, Inc. space within the building on a month-to-month basis for
purposes of continued operation of a restaurant. Mr. Dimit resigned from the
Compensation Committee effective February 9, 2005 and did not participate in
discussions or deliberations of the Compensation Committee from and after
January 26, 2005.
The Compensation Committee will continue to monitor compensation issues
to ensure appropriate and competitive compensation of the executive officers
while creating a mutual interest between the executive officers and shareholders
through compensation structures promoting shareholder valuation creation.
SUBMITTED BY THE COMPENSATION COMMITTEE OF PEOPLES' BOARD OF DIRECTORS:
Joseph H. Wesel, Chairman; Carl L. Baker, Jr., Frank L. Christy, Wilford D.
Dimit (Member until February 9, 2005), and Robert W. Price, Members
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary of Cash and Other Compensation
--------------------------------------
The following table shows, for the last three fiscal years, the cash
compensation paid by Peoples and its subsidiaries, as well as other compensation
paid or accrued for those years, to Robert E. Evans, Chairman and Chief
Executive Officer of Peoples, and the four other most highly compensated
executive officers of Peoples.
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
Long Term
Compensation All Other
Salary Awards Compensation
------------------------ ------------- ------------------------
Common Shares Deferred
Directors' Underlying Incentive All Other
Name and Principal Position Year Base Salary Fees (1) Bonus (2) Options (3) Payment (4) (5)
--------------------------- ---- ---------- --------- --------- ----------- ------------ ---------
Robert E. Evans 2004 $300,000 $ 16,600 $ 24,300 1,238 $ 3,253 $ 13,200
Chairman of the Board and 2003 $300,000 $ 16,600 - - $ 2,843 $ 13,000
Chief Executive Officer (6) 2002 $290,000 $ 17,800 $139,000 18,187 $ 1,915 $ 10,272
Mark F. Bradley 2004 $169,950 $ 16,850 $ 9,007 459 $ 1,109 $ 6,798
President and 2003 $165,000 $ 15,750 - - $ 969 $ 8,000
Chief Operating Officer (7) 2002 $142,500 $ 2,750 $ 52,298 5,796 $ 553 $ 5,252
Joseph S. Yazombek 2004 $160,680 - $ 23,299 1,215 $ 4,417 $ 9,474
Executive Vice President/ 2003 $156,000 - - - $ 3,860 $ 6,598
Chief Lending Officer 2002 $150,000 - $ 59,700 6,679 $ 2,310 $ 6,377
John W. Conlon 2004 $153,000 - $ 23,715 1,235 $ 2,483 $ 6,120
Chief Financial Officer and Treasurer 2003 $150,000 - - - $ 2,170 $ 7,083
2002 $141,000 - $ 54,144 6,039 $ 1,417 $ 5,953
Larry E. Holdren 2004 $156,060 - $ 11,236 587 $ 5,577 $ 6,242
Executive Vice President 2003 $153,001 - - - $ 4,873 $ 6,120
2002 $150,000 - $ 59,550 6,666 $ 3,284 $ 5,500
(1) Represents the aggregate fees received by Mr. Evans and Mr. Bradley for
services rendered as a director of Peoples and its subsidiaries.
(2) Represents incentive bonuses earned under the Performance Compensation
Program, and are reported for the fiscal year for which the incentive bonuses
were earned. Incentive bonuses are traditionally paid during the first quarter
of the following fiscal year; however, executive officers of Peoples are
required to defer 25% of their incentive bonus otherwise payable for a period of
three years and have the option to defer any remaining incentive bonus until
they reach retirement age. The amounts shown include the deferred portion of
each executive officer's incentive bonus.
(3) All numbers have been adjusted for a 5% stock dividend issued on August 29,
2003. Options are reported for the fiscal year for which they were earned.
Options are traditionally granted during the first quarter of the following
fiscal year.
(4) Represents the amount of interest accrued during the fiscal year in respect
of the cumulative amount of incentive bonus deferred by each executive officer
under the terms of the Incentive Compensation Program. Interest is accrued at a
rate equal to 50% of Peoples' return on average equity achieved during each
calendar year during the deferral period. As of December 31, 2004, interest in
the following aggregate amounts had been accrued for the benefit of the named
executive officers and will be payable in accordance with the terms of the
Incentive Compensation Program: (a) Mr. Evans - $8,011; (b) Mr. Bradley -
$2,631; (c) Mr. Yazombek - $10,587; (d) Mr. Conlon - $6,070; and (e) Mr. Holdren
- $13,734.
(5) "All other" includes contributions by Peoples to the Peoples Bancorp Inc.
Retirement Savings Plan on behalf of each of the named executive officers to
match their pre-tax elective deferral contributions (included under "Salary").
For Mr. Evans, "All Other" also includes for each year the amount of $5,000,
which was accrued pursuant to the terms of a Deferred Compensation Agreement
between Mr. Evans and Peoples Bank. See the discussion under "Deferred
Compensation Agreement" below. "All Other" also includes country club dues paid
on behalf of Mr. Yazombek of $3,046.42.
(6) Mr. Evans has served as Chairman of the Board since July 2003, and as Chief
Executive Officer since 1980. He also served as President from 1980 until June
2004.
(7) Mr. Bradley has served as President since June 2004 and as Chief Operating
Officer since July 2003. He served as Executive Vice President and Chief
Integration Officer from April 2002 until July 2003.
Grant of Options
----------------
There were no options granted to the named executive officers during
the 2004 fiscal year. Options were granted on February 10, 2005 based on the
individual performance of each executive officer during the 2004 fiscal year.
The following table summarizes information concerning the individual grants of
options made to each of the named executive officers in respect of the 2004
fiscal year. Peoples has never granted stock appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR (1)
Potential Realizable Value
at Assumed Annual Rates
of Share Price Appreciation
Number of % of Total for
Common Shares Options Granted Option Term (3)
Underlying to Employees Exercise Price Expiration ----------------------------
Name Options Granted (2) in Fiscal Year ($/Share) Date 5% 10%
---- ------------------- -------------- --------- ---- -- ---
Robert E. Evans 1,238 2.68% $27.38 2/10/2015 $21,317 $54,022
Mark F. Bradley 459 0.99% $27.38 2/10/2015 $ 7,904 $20,029
Joseph S. Yazombek 1,215 2.63% $27.38 2/10/2015 $20,921 $53,019
John W. Conlon 1,235 2.67% $27.38 2/10/2015 $21,266 $53,891
Larry E. Holdren 587 1.27% $27.38 2/10/2015 $10,108 $25,615
---------------------
(1) Reflects individual grants of options made to each of the named executive
officers in respect of the 2004 fiscal year.
(2) All options were granted under the 2002 Stock Option Plan, and become
exercisable as to 100% of the common shares on the third anniversary of the
grant date. If employment with Peoples and its subsidiaries is terminated
by reason of death, disability, or retirement in accordance with the
standard retirement policies of Peoples or its subsidiaries, vesting is
accelerated and the option becomes exercisable in full for a period of 12
months from the date of termination of employment, subject to the stated
expiration date of the option. If employment is voluntarily terminated,
only those options exercisable on the date of termination remain
exercisable and may be exercised for a period of 12 months from the date of
termination, subject to the stated expiration date of the option. No option
may be exercised after the date of termination if termination is for
"cause". In the event of a "change in control" (as defined in the 2002
Stock Option Plan), the options will automatically vest and become
exercisable in full.
(3) The dollar amounts reflected in this table are the result of calculations
at the 5% and 10% annual appreciation rates set by the SEC for illustrative
purposes, and assume the options are held until their respective expiration
dates. Such dollar amounts are not intended to forecast future financial
performance or possible future appreciation in the price of Peoples' common
shares. Shareholders are therefore cautioned against drawing any
conclusions from the appreciation data shown, aside from the fact the
holders of the options will only realize value from the option grants shown
if the price of Peoples' common shares appreciates, which benefits all
shareholders commensurately.
Option Exercises and Holdings
-----------------------------
The following table summarizes information concerning options exercised
during, and unexercised options held as of the end of, the 2004 fiscal year by
each of the named executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES (1)
Number of
Number of Common Shares Underlying Value of Unexercised
Common Unexercised Options In-The-Money Options
Shares at Fiscal Year End (2) at Fiscal Year End (3)
Underlying ------------------------------- ------------------------------
Options Value
Name Exercised Realized Exercisable Unexercisable Exercisable Unexercisable
------------------------------------------------------------------------------------ ------------------------------
Robert E. Evans 29,296 $108,686 23,133 44,525 $232,546 $296,243
Mark F. Bradley 516 $ 5,034 13,411 13,085 $150,939 $ 99,675
Joseph S. Yazombek 12,532 $218,119 16,446 15,381 $172,966 $103,253
John W. Conlon 9,689 $165,843 16,446 13,960 $172,966 $ 96,989
Larry E. Holdren - $ - 16,446 14,708 $172,966 $100,655
---------------------
(1) The information included in this table does not reflect the options granted
on February 10, 2005 in respect of the 2004 fiscal year since these options
were not outstanding on December 31, 2004.
(2) These numbers have been adjusted to reflect stock dividends issued by
Peoples since the respective grant dates of the options.
(3) "Value of Unexercised In-the-Money Options at Fiscal Year End" is based
upon the fair market value of Peoples' common shares on December 31, 2004
($27.43) less the exercise price of options that were in the money at the
end of the 2004 fiscal year.
Pension Plan
------------
The following table shows the estimated annual pension benefits payable
upon retirement at age 65 on a lifetime annuity basis under the Peoples Bancorp
Inc. Retirement Plan, a funded, noncontributory pension plan (the "Pension
Plan"), to a covered participant in specified compensation and years of service
classifications.
PENSION PLAN TABLE
Years of Service at Normal Retirement
-------------------------------------
Annualized Average
Monthly Compensation 15 20 25 30 35
-------------------- ------- ------- ------- -------- ---------
$125,000 $31,691 $42,254 $52,818 $ 63,382 $ 63,382
$150,000 $38,816 $51,754 $64,693 $ 77,632 $ 77,632
$175,000 $45,941 $61,254 $76,568 $ 91,882 $ 91,882
$200,000 $53,066 $70,754 $88,443 $106,132 $106,132
and over (1)
---------------------
(1) Applicable provisions of the Internal Revenue Code currently limit the
amount of annual compensation used to determine plan benefits under a
defined benefit pension plan, such as the Pension Plan, and the amount
of plan benefits payable annually under such a plan. The Pension Plan
is operated in compliance with these provisions.
Benefits listed in the Pension Plan Table are not subject to deduction
for Social Security benefits or other amounts and are computed on a lifetime
annuity basis.
Monthly benefits upon normal retirement (age 65) are based upon 40% of
"average monthly compensation" plus 17% of the excess, if any, of "average
monthly compensation" over "covered compensation". For purposes of the Pension
Plan, "average monthly compensation" is based upon the monthly compensation
(including regular salary and wages, overtime pay, bonuses and commissions) of
an employee averaged over the five consecutive credited years of service which
produce the highest monthly average within the last ten years preceding
retirement and "covered compensation" is the average of the 35 years of social
security wage bases prior to social security retirement age. As of the end of
the 2004 fiscal year, annualized "covered compensation" for Mr. Evans was
$48,576, Mr. Bradley $87,780, Mr. Yazombek $74,580, Mr. Conlon $59,352, and Mr.
Holdren $63,396. 2004 annualized average monthly compensation, to the extent
determinable, for purposes of the Pension Plan, for Mr. Evans was $205,000, Mr.
Bradley $169,950, Mr. Yazombek $160,680, Mr. Conlon $153,000, and Mr. Holdren
$156,060. As of the end of the 2004 fiscal year, credited years of service for
Mr. Evans were 34, Mr. Bradley 13, Mr. Yazombek 21, Mr. Conlon 22, and Mr.
Holdren 23.
Deferred Compensation Agreement
-------------------------------
On November 18, 1976, Peoples Bank entered into a Deferred Compensation
Agreement with Mr. Evans. Under the Deferred Compensation Agreement, Mr. Evans
agreed to serve Peoples Bank as an employee until he reaches age 65 or until his
earlier retirement, disability or death, and agreed not to engage in activities
in competition with Peoples Bank. Under the Deferred Compensation Agreement, Mr.
Evans or his beneficiaries are entitled to receive specified amounts upon Mr.
Evans' retirement, disability or death, which amounts are payable monthly for
ten years with interest or in one lump sum at the election of Peoples Bank. The
principal amount payable to Mr. Evans is based upon the sum of the amounts
accrued for his account during his years of employment with Peoples Bank. During
Peoples' 2004 fiscal year, the amount of $5,000 was accrued for Mr. Evans'
account pursuant to his Deferred Compensation Agreement and as of December 31,
2004, a total of $140,000 had been accrued for his account. The amount of $5,000
will be accrued for Mr. Evans' account upon the completion of each year of
service to Peoples Bank until he reaches normal retirement age.
Change in Control Arrangements
------------------------------
In order to further motivate executive officers to act in the best
interests of the shareholders and to remain competitive in its executive
compensation package, Peoples offered Change in Control Agreements to executive
officers and entered into agreements with Robert E. Evans, Mark F. Bradley,
David B. Baker, John W. Conlon, Larry E. Holdren and Carol A. Schneeberger
during early August 2004. Each agreement provides that, if the executive officer
is terminated by Peoples or its successors for any reason other than cause or by
the executive officer for good reason, within six months prior to or within 24
months after a change in control, Peoples will pay the following benefits:
o As to each of Robert E. Evans and Mark F. Bradley, Peoples will (i)
pay to the executive officer, in a lump sum within 30 days following
the termination date, an amount equal to two and one-half (2.5) times
the amount of his base annual compensation and (ii) provide life,
medical and dental insurance substantially in the form and expense to
the executive officer as received prior to the termination date for a
period of one year and three months from the date of termination of
employment; and
o As to David B. Baker, John W. Conlon, Larry E. Holdren and Carol A.
Schneeberger, Peoples will (i) pay to the executive officer, in a lump
sum within 30 days following the termination date, an amount equal to
two (2) times the amount of his or her base annual compensation and
(ii) provide life, medical and dental insurance substantially in the
form and expense to the executive officer as received prior to the
termination date for a period of one year from the date of termination
of employment.
An executive officer's base annual compensation for purposes of his or
her agreement is the average annualized compensation paid by Peoples which was
includible in the executive officer's gross income prior to any deferred
arrangements during the most recent five taxable years ending before the date of
the change in control.
Change in control is defined in the agreements and includes (i) the
acquisition of beneficial ownership of 25% or more of Peoples' voting securities
by a person or entity or group of affiliated persons or entities; (ii) the
acquisition of all or substantially all of the assets of Peoples by any person
or entity or group of affiliated persons or entities; (iii) execution of an
agreement by Peoples to merge, consolidate or combine with an unaffiliated
entity if the Board of Directors of Peoples immediately prior to the transaction
will constitute less than the majority of the Board of Directors of the
surviving, new or combined entity or less than 75% of the outstanding voting
securities of the outstanding voting securities of the surviving, new or
combined entity will be beneficially owned by the shareholders of Peoples
immediately prior to the transaction; or (iv) a change in the majority of the
directors of Peoples to individuals who were not members of the Board of
Directors in August, 2004 and were not nominated by a vote of the Board of
Directors which included the affirmative vote of a majority of such members or
other individuals so nominated.
An executive officer will be deemed terminated for cause in the event
of gross negligence or neglect of duties; commission of a felony or a gross
misdemeanor involving moral turpitude; fraud, disloyalty, dishonesty or willful
violation of any law or significant policy of Peoples; or issuance of an order
by the banking regulators of Peoples for removal of the executive officer.
An executive officer will be deemed to have terminated his or her
employment for good reason if, without the executive officer's consent, (i) the
executive officer is assigned material duties or responsibilities inconsistent
with the executive officer's positions, or the executive officer's reporting
responsibilities, titles, or offices are reduced other than by reason of
termination for cause or by reason of disability, retirement or death; (ii) the
executive officer's base salary is reduced; (iii) the executive officer's
benefits under any benefit plans are reduced; (iv) Peoples failed to obtain the
assumption of, or the agreement to perform, the executive officer's agreement by
any successor; (v) the executive officer is reassigned to an office location 50
miles or more form the current office location of the executive officer; or (vi)
the executive officer consents to any relocation and Peoples fails to pay for
all reasonable moving expenses and to indemnify the executive officer against
any loss realized on the sale of the executive officer's principal residence in
connection with any such change of residence.
If the executive officer receives a change in control benefit as
previously described, he or she is subject to a non-compete agreement as
follows.
o As to each of Robert E. Evans and Mark F. Bradley, for a period of
fifteen months, the executive officer is not permitted to engage in
the business of banking, or any other business in which Peoples
directly or indirectly engages during the term of the executive
officer's agreement in the geographic market of Peoples on the
termination date.
o As to David B. Baker, John W. Conlon, Larry E. Holdren and Carol A.
Schneeberger, for a period of one year, the executive officer is not
permitted to engage in the business of banking, or any other business
in which Peoples directly or indirectly engages during the term of the
executive officer's agreement in the geographic market of Peoples on
the termination date.
Directors' Compensation
-----------------------
Each director of Peoples received $850 per calendar quarter and $600
per meeting attended during the 2004 fiscal year. Each director of Peoples also
serving on the Compensation Committee, Executive Committee, and Governance and
Nominating Committee received $100 for attending each committee meeting of less
than 30 minutes duration, or $200 for attending each committee meeting of at
least 30 minutes. Each director of Peoples also serving on the Audit Committee
received $100 for attending each committee meeting of less than 30 minutes
duration, or $400 for attending each committee meeting of at least 30 minutes.
Each director of Peoples, other than Robert E. Evans and Mark F. Bradley, who
also served as a director of Peoples Bank received $600 per calendar quarter and
$400 for each regular monthly meeting attended during the 2004 fiscal year. Mr.
Evans and Mr. Bradley received no quarterly compensation as a director of
Peoples Bank and $250 for each regular monthly meeting attended. Furthermore,
each director of Peoples who also served as a Peoples Bank committee member
received $200 for attending each Audit Committee, Information Systems Committee
and Investment Committee and $100 for attending each Executive Committee meeting
during the 2004 fiscal year. In addition to fees received for service to Peoples
as a director, Mr. Wolf received $150 for each meeting of the Peoples Bank
Kentucky/Huntington Leadership Advisory Board he attended during the 2004 fiscal
year.
Beginning with the meetings held in January 2004, directors who travel
a distance of fifty miles or more to attend a board or committee meeting of
Peoples or Peoples Bank receive a $50 travel fee. A single travel fee of $50 is
paid for multiple meetings occurring on the same day.
Since 1991, Peoples has maintained the Peoples Bancorp Inc. Deferred
Compensation Plan for Directors of Peoples Bancorp Inc. and Subsidiaries (the
"Directors' Plan"). Voluntary participation in the Directors' Plan enables a
director of Peoples, or of one of its subsidiaries, to defer all or a part of
his or her directors' fees, including federal income tax thereon. Since January
2, 1998, directors have been permitted to allocate their deferrals between a
cash account (earning interest equal to Peoples Bank's three-year CD interest
rate) and a stock account (credited with common shares of Peoples based on the
amount deferred and cash dividends on such common shares). The only right a
participant has with respect to his cash account and/or stock account is to
receive distributions upon retirement from service as a director. Distribution
of the deferred amounts is made in a lump sum or annual installments, at the
election of the director, beginning in the first year in which the person is no
longer a director. The stock account will be distributed only in common shares
and the cash account will be distributed only in cash.
Pursuant to their respective terms, non-qualified stock options have
been automatically granted on an annual basis to non-employee directors of
Peoples ("Non-Employee Directors") under Peoples' Amended and Restated 1993
Stock Option Plan (the "1993 Plan"), 1995 Stock Option Plan (the "1995 Plan"),
1998 Stock Option Plan (the "1998 Plan") and 2002 Stock Option Plan (the "2002
Plan"). No options have been granted to Non-Employee Directors under the 1993
Plan since April 10, 1997; no options have been granted to Non-Employee
Directors under the 1995 Plan since April 15, 1999; and no options have been
granted to Non-Employee Directors under the 1998 Plan since March 10, 2000.
Options granted under the 1993 Plan, the 1995 Plan and the 1998 Plan have had an
exercise price equal to 100% of the fair market value of the underlying common
shares on the date of grant and a ten-year term.
Under the 1993 Plan, if a Non-Employee Director ceases to be a director
for reasons other than his death, such options may be exercised for a period of
three months, subject to their stated term. If a Non-Employee Director dies,
those options may be exercised for a period of one year following the date of
death, subject to their stated term.
Under the 1995 Plan and the 1998 Plan, if a Non-Employee Director
ceases to be a director for any reason other than his death or for "cause", such
options may be exercised in full until the expiration of the term of the
options. However, if the former Non-Employee Director dies prior to the
expiration of the term of his options, those options may only be exercised for a
period of two years following his death, subject to the stated term of the
options. If a Non-Employee Director ceases to be a director for cause, all
options will immediately terminate.
Pursuant to the terms of the 2002 Plan, each individual then serving as
a Non-Employee Director receives an annual grant, on the date of each annual
meeting of shareholders, of options to purchase 1,155 common shares (as adjusted
for the 10% stock dividend issued on June 28, 2002 and the 5% stock dividend
issued on August 29, 2003 and as may be further adjusted for future changes in
the number of outstanding common shares of Peoples). All options become 100%
exercisable on the first anniversary of the grant date. Under the 2002 Plan, if
a Non-Employee Director ceases to be a director due to death, disability (with
at least three years service), or retirement (with at least five years service),
such options immediately vest and may be exercised until the earlier of 12
months after ceasing to so serve or the expiration date of the options. If a
Non-Employee Director voluntarily ceases service as a director, only those
options exercisable on the date of termination may be exercised during the
period described in the preceding sentence. If a Non-Employee Director ceases to
be a director for cause, all options will terminate immediately.
PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in
Peoples' cumulative total shareholder return (as measured by dividing (i) the
sum of (A) the cumulative amount of dividends for the measurement period,
assuming dividend reinvestment, and (B) the difference between the price of
Peoples' common shares at the end and the beginning of the measurement period;
by (ii) the price of Peoples' common shares at the beginning of the measurement
period) against the cumulative return for an index comprised of all domestic
common shares traded on the NASDAQ National Market and the NASDAQ Small Cap
Market ("NASDAQ Stocks (U.S. Companies)"), and an index comprised of all
depository institutions (SIC Code #602) and depository institutions holding
companies (SIC Code #671) that are traded on the NASDAQ National Market and the
NASDAQ Small Cap Market ("NASDAQ Bank Stocks") for the five-year period ended
December 31, 2004.
(ACTUAL NUMBERS PLOTTED ON A GRAPH)
NASDAQ Stocks
Peoples Bancorp Inc. U.S. Companies NASDAQ Bank Stocks
-------------------- -------------- ------------------
12/31/1999 $100.00 $100.00 $100.00
12/31/2000 $ 78.39 $ 60.31 $114.24
12/31/2001 $110.63 $ 47.84 $123.68
12/31/2002 $173.72 $ 33.07 $126.65
12/31/2003 $215.56 $ 49.45 $162.92
12/31/2004 $201.65 $ 53.81 $186.45
Notes:
1. Total return assumes reinvestment of dividends.
2. Fiscal year ending December 31.
3. Return based on $100 invested on December 31, 1999, in Peoples' common
shares, an index for NASDAQ Stocks (U. S. Companies), and an index for
NASDAQ Bank Stocks.
SHAREHOLDER PROPOSALS
FOR 2006 ANNUAL MEETING
Proposals by shareholders intended to be presented at the 2006 Annual
Meeting of Shareholders must be received by the Corporate Secretary of Peoples
no later than November 18, 2005, to be included in Peoples' proxy, notice of
meeting and proxy statement relating to that meeting. Upon receipt of a
shareholder proposal, Peoples will determine whether or not to include the
proposal in the proxy materials in accordance with applicable rules and
regulations promulgated by the SEC. The SEC has promulgated rules relating to
the exercise of discretionary voting authority under proxies solicited by the
Board of Directors. If a shareholder intends to present a proposal at the 2006
Annual Meeting of Shareholders, and does not notify the Corporate Secretary of
Peoples of the proposal by February 1, 2006, the proxies solicited by the Board
of Directors for use at the 2006 Annual Meeting may be voted on the proposal,
without discussion of the proposal in Peoples' proxy statement for the 2006
Annual Meeting. In each case, written notice must be given to Peoples' Corporate
Secretary, at the following address: Peoples Bancorp Inc., 138 Putnam Street,
P.O. Box 738, Marietta, Ohio 45750-0738.
Shareholders desiring to nominate candidates for election as directors
at the 2006 Annual Meeting must follow the procedures described in "ELECTION OF
DIRECTORS - Nominating Procedures".
AUDIT COMMITTEE MATTERS
Audit Committee Report to Shareholders for the Fiscal Year Ended
December 31, 2004
ROLE OF THE AUDIT COMMITTEE, INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM AND MANAGEMENT
The Audit Committee consists of seven directors and operates under a
written charter adopted by the Board of Directors. The Audit Committee oversees
Peoples' accounting and financial reporting processes on behalf of the Board of
Directors. During the 2004 fiscal year, the Audit Committee met six times, and
the Audit Committee discussed the interim financial and other information
contained in each quarterly earnings announcement and periodic filings with the
SEC with management and the independent registered public accounting firm
employed by Peoples prior to public release. The Audit Committee appoints the
independent registered public accounting firm employed by Peoples. Ernst & Young
LLP ("E&Y") served as the independent registered public accounting firm for
Peoples for the 2004 fiscal year.
Management has the primary responsibility for the consolidated
financial statements and the accounting and financial reporting processes of
Peoples, including the establishment and maintenance of adequate internal
control over financial reporting for Peoples. Management has the responsibility
for the preparation of Peoples' consolidated financial statements and their
report on the establishment and maintenance of, and assessment of the
effectiveness of, Peoples' internal control over financial reporting. E&Y is
responsible for performing an audit of Peoples' consolidated financial
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and issuing its' report on the consolidated
financial statements and its' attestation report on management's assessment of
the effectiveness of Peoples' internal control over financial reporting.
In discharging its oversight responsibility as to the audit process,
the Audit Committee obtained from E&Y a formal written statement describing all
relationships between E&Y and Peoples and its subsidiaries that might bear on
E&Y's independence consistent with Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), discussed with E&Y any
relationships that may impact that firm's independence and objectivity,
including the non-audit services rendered by E&Y, and satisfied itself as to
E&Y's independence. The Audit Committee also discussed with management, Peoples'
internal auditors and E&Y the adequacy and effectiveness of Peoples' internal
control over financial reporting and related accounting and financial controls,
and the internal audit organization, responsibilities, budget and staffing. The
Audit Committee reviewed with both E&Y and the internal auditors their
respective audit plans, audit scope and identification of audit risks.
The Audit Committee discussed and reviewed with E&Y all communications
required by the standards of the Public Company Accounting Oversight Board
(United States), including those described in Statement on Auditing Standards
Nos. 61, 54 and 99 (Communication with Audit Committees) and, with and without
management present, discussed and reviewed the results of E&Y's audit of
Peoples' consolidated financial statements. The Audit Committee also discussed
the results of the internal audit examinations, with and without management
present.
MANAGEMENT'S REPRESENTATIONS AND AUDIT COMMITTEE RECOMMENDATIONS
Management has represented to the Audit Committee that the audited
consolidated financial statements as of and for the fiscal year ended December
31, 2004, were prepared in accordance with US GAAP and the Audit Committee has
reviewed and discussed the audited consolidated financial statements with
management and E&Y. Based on the Audit Committee's discussions with management
and E&Y and the Audit Committee's review of the report of E&Y to the Audit
Committee, the Audit Committee recommended to the Board of Directors that the
audited consolidated financial statements be included in Peoples' Annual Report
on Form 10-K for the fiscal year ended December 31, 2004, for filing with the
SEC.
Submitted by the Audit Committee of Peoples' Board of Directors:
Richard Ferguson, Chairman; Wilford D. Dimit, Vice Chairman; Carl L. Baker, Jr.,
George W. Broughton, Frank L. Christy, Theodore P. Sauber, and Thomas J. Wolf,
Members.
Pre-Approval Policy
-------------------
Under applicable SEC rules, the Audit Committee is required to
pre-approve the audit and non-audit services performed by the independent
registered public accounting firm in order to assure that they do not impair
that firm's independence from Peoples. The SEC's rules specify the types of
non-audit services that an independent registered public accounting firm may not
provide to its client and establish the Audit Committee's responsibility for
administration of the engagement of the independent registered public accounting
firm. Accordingly, the Audit Committee has adopted, and the Board of Directors
has ratified, an Audit and Non-Audit Services Pre-Approval Policy (the
"Pre-Approval Policy"), which sets forth the procedures and the conditions
pursuant to which services proposed to be performed by the independent
registered public accounting firm may be pre-approved.
The purpose of the Pre-Approval Policy is to set forth the procedures
by which the Audit Committee intends to fulfill its responsibilities. It does
not delegate the Audit Committee's responsibilities to pre-approve services
performed by the independent registered public accounting firm to management.
Consistent with the SEC's rules, the Pre-Approval Policy provides two
different approaches to pre-approving services. Proposed services may either be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("general pre-approval") or require the specific pre-approval of
the Audit Committee ("specific pre-approval"). The combination of these two
approaches in the Pre-Approval Policy results in an effective and efficient
procedure to pre-approve services performed by the independent registered public
accounting firm. As set forth in the Pre-Approval Policy, unless a type of
service has received general pre-approval, it will require specific pre-approval
by the Audit Committee if it is to be provided by the independent registered
public accounting firm. Any proposed services exceeding pre-approved cost levels
or budgeted amounts will also require specific pre-approval by the Audit
Committee.
The Audit Committee may delegate either type of pre-approval authority
to one or more of its members. The member to whom such authority is delegated
must report, for informational purposes only, any pre-approval decisions to the
Audit Committee at its next scheduled meeting.
Appendices to the Pre-Approval Policy describe the Audit,
Audit-related, Tax and All Other services that have the general pre-approval of
the Audit Committee. The term of any general pre-approval is 12 months from the
date of pre-approval, unless the Audit Committee considers a different period
and states otherwise. The Audit Committee will annually review and pre-approve
the services that may be provided by the independent registered public
accounting firm without obtaining specific pre-approval from the Audit
Committee. The Audit Committee will add to or subtract from the list of general
pre-approved services from time to time, based on subsequent determinations.
All requests or applications for services to be provided by the
independent auditors that do not require specific pre-approval by the Audit
Committee will be submitted to the Chief Financial Officer and must include a
detailed description of the services to be rendered. The Chief Financial Officer
will determine whether such services are included within the list of services
that have received the general pre-approval of the Audit Committee. The Audit
Committee will be informed on a timely basis of any such services rendered by
the independent registered public accounting firm.
Requests or applications to provide services that require specific
pre-approval by the Audit Committee will be submitted to the Audit Committee by
both the independent registered public accounting firm and the Chief Financial
Officer, and must include a joint statement as to whether, in their view, the
request or application is consistent with the SEC's rules on auditor
independence.
The Audit Committee has designated the head internal auditor of Peoples
to monitor the performance of all services provided by the independent auditors
and to determine whether such services are in compliance with the Pre-Approval
Policy. The head internal auditor will report to the Audit Committee on a
periodic basis on the results of this monitoring. Both the head internal auditor
and management will immediately report to the chairman of the Audit Committee
any breach of the Pre-Approval Policy that comes to the attention of the head
internal auditor or any member of management.
The Audit Committee will also review the head internal auditor's annual
internal audit plan to determine that the plan provides for the monitoring of
the independent auditors' services.
Services of the Independent Registered Public Accounting Firm
Fees billed for services rendered by E&Y for each of the 2004 fiscal
year and the 2003 fiscal year were:
2004 2003
------------- ------------
Audit Fees(1) $753,146 $255,910
Audit-Related Fees (2) 19,007 30,700
Tax Fees (3) 127,340 111,960
All Other Fees (4) 63,340 -
------------- ------------
Total $962,833 $398,570
============= ============
(1) "Audit Fees" for the 2004 fiscal year also included internal control testing
for compliance with Section 404 of the Sarbanes-Oxley Act.
(2) "Audit-Related Fees" included services pertaining to due diligence and
statutory and subsidiary audits.
(3) "Tax Fees" for 2004 and 2003 included services for tax planning and advice,
tax compliance, assistance with tax audits and appeals and tax services
related to mergers and acquisitons. The amount for the 2003 fiscal year also
included tax advice pertaining to low income housing and business owned life
insurance matters.
(4) "Other Fees" paid in the 2004 fiscal year related to treasury and asset
liability risk management services. No "Other Fees" were paid to E&Y in the
2003 fiscal year.
None of the services described under Audit-Related Fees, Tax Fees or
All Other Fees above were approved by the Audit Committee pursuant to the waiver
procedure set forth in 17 CFR 210.2-01(c)(7)(i)(C).
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
While Peoples is not currently considering appointment of any
independent registered public accounting firm other than E&Y, the Audit
Committee has not yet made such an appointment for the 2005 fiscal year. The
Audit Committee intends to appoint an independent registered public accounting
firm as soon as practicable. As previously noted, the Audit Committee had
appointed E&Y to serve as the independent registered public accounting firm of
Peoples for the 2004 fiscal year. E&Y has served as Peoples' principal
independent accountants since 1995. The Board of Directors expects
representatives of E&Y will be present at the Annual Meeting. They will have the
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors knows of
no business to be presented for action by the shareholders at the Annual Meeting
other than that discussed in this proxy statement. However, if any other matter
requiring a vote of the shareholders is properly presented at the Annual
Meeting, or at any adjournment, the individuals acting under the proxies
solicited by the Board of Directors will vote and act according to their best
judgments in light of the conditions then prevailing.
It is important that proxies be voted and returned promptly; therefore,
shareholders who do not expect to attend the Annual Meeting in person are urged
to fill in, sign and return the enclosed proxy card in the self-addressed
envelope furnished herewith.
By Order of the Board of Directors,
/s/ ROBERT E. EVANS
----------------------------------------
Robert E. Evans
Chairman of the Board and
Chief Executive Officer
APPENDIX A
Audit Committee Charter as adopted by the full Board of Directors on
February 10, 2005
CHARTER OF THE AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS
OF
PEOPLES BANCORP INC.
Purpose:
-------
Acting pursuant to Section 2.10 of the Code of Regulations of Peoples Bancorp
Inc. (the "Company"), the Board of Directors (the "Board") has established an
Audit Committee (the "Committee") whose purpose is to provide assistance to the
Board in fulfilling their oversight responsibility to the shareholders,
potential shareholders, the investment community, and others relating to: the
integrity of the accounting of the Company's financial statements; the financial
reporting process; the systems of internal accounting and financial controls;
the audits of the financial statements of the Company; the performance of the
Company's internal audit function and independent registered public accounting
firm; the independent auditor's qualifications and independence; and the
Company's compliance with ethics policies and legal and regulatory requirements.
In so doing, it is the responsibility of the Committee to maintain free and open
communication between the Committee, independent registered public accounting
firm, the internal auditors, general counsel, and management of the Company.
Authority:
---------
In discharging its oversight role, the Committee is empowered and authorized to
investigate any matter brought to its attention with full access to all books,
records, facilities, and personnel of the Company; to engage independent counsel
and other advisers as it determines necessary to carry out its duties; and to
demand and receive funding by the Company for the payment of ordinary
administrative expenses of the Committee that are necessary or appropriate in
carrying out the Committee's duties.
Membership:
----------
The Committee shall consist of a minimum of three members of the Board of
Directors, each of whom shall be recommended by the Governance and Nominating
Committee and appointed by and serve at the pleasure of the Board. Each member
of the Committee shall be free of any relationship, which, in the opinion of the
Board, may interfere with the exercise of his or her independent judgment in
carrying out the responsibilities of a Director of the Company. All Committee
members must:
o satisfy the independence requirements prescribed by the
applicable rules of The Nasdaq Stock Market, Inc. ("Nasdaq")
addressing corporate governance standards (the "Nasdaq Corporate
Governance Rules"); provided, however, that as permitted by Rule
4350(d)(2) of the Nasdaq Corporate Governance Rules, one director
who (a) is not independent as defined in Rule 4200 of the Nasdaq
Corporate Governance Rules and (b) meets the criteria set forth
in Section 10A(m)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules promulgated hereunder and (c) is
not a current officer or employee of the Company or any of its
subsidiaries or a Family Member (as defined in Rule 4200) of such
an officer or employee, may be appointed to the Committee
provided the Board, under exceptional and limited circumstances,
has determined that such individual's membership on the Committee
is required by the best interests of the Company and its
shareholders. Any member of the Committee who is appointed under
the exception provided in the immediately preceding sentence may
not serve longer than two years and may not chair the Committee.
o meet the independence criteria set forth in Rule 10A-3(b)(1)
under the Securities and Exchange Act in that, other than in his
or her capacity as a member of the Committee, the Board of
Directors, or any other Board Committee, he or she may not accept
directly or indirectly any consulting, advisory, or other
compensatory fee from the Company or its subsidiaries or be an
affiliated person of the Company or its subsidiaries;
o be able to read and understand fundamental financial statements,
including the Company's balance sheet, income statement, and cash
flow statement; and
o not have participated in the preparation of the financial
statements of the Company or any current subsidiary of the
Company at any time during the past three years.
In addition, at least one member of the Committee shall have past employment
experience in finance or accounting, requisite professional certification in
accounting, or any other comparable experience or background, including being or
having been a chief executive officer, chief financial officer, or other senior
officer with financial oversight responsibility, which results in the
individual's financial sophistication.
Duties and Responsibilities:
---------------------------
The primary responsibility of the Committee is to oversee the Company's
financial reporting process on behalf of the Board and report the results of
their activities to the Board. While the Committee has the oversight
responsibilities and powers set forth in this Charter, it is not the duty of the
Committee to plan or conduct audits or to determine that the Company's financial
statements are complete and accurate and are in accordance with generally
accepted accounting principles. Management is responsible for the preparation,
presentation, and integrity of the Company's financial statements and for the
appropriateness of the accounting principles and reporting policies that are
used by the Company. The independent registered public accounting firm is
responsible for auditing the Company's financial statements and for reviewing
the Company's unaudited interim financial statements.
The Committee, in carrying out its responsibilities, believes its policies and
procedures should remain flexible, in order to best react to changing conditions
and circumstances. The Committee should take appropriate actions to set the
overall corporate "tone" for quality financial reporting, sound business risk
practices, and ethical behavior. The following shall be the principal duties and
responsibilities of the audit Committee. These are set forth as a guide with the
understanding that the Committee may supplement them as appropriate.
The Committee shall be directly responsible for the appointment and termination,
compensation, and oversight of the work of the independent registered public
accounting firm, including resolution of disagreements between management and
the auditor regarding financial reporting. The Committee, pursuant to the Audit
and Non-Audit Services Pre-approval Policy, as adopted from time to time by the
Board and the Committee, shall pre-approve all audit and non-audit services
provided by the independent registered public accounting firm and shall not
engage the independent registered public accounting firm to perform the specific
non-audit services proscribed by law or regulation. The Committee may delegate
pre-approval authority to a member of the Committee. The decisions of any
Committee member to whom pre-approval authority is delegated must be presented
to the full Committee at its next scheduled meeting.
At least annually, the Committee shall obtain and review separate reports by the
independent and internal auditors describing:
o The firm's internal quality control procedures.
o Any material issues raised by the most recent internal quality
control review, including computerized information systems
controls and security, by any inquiry or investigation by
governmental or professional authorities, within the preceding
five years, respecting one or more independent audits carried out
by the firm, and any steps taken to deal with any such issues.
o Any difficulties the auditors encountered in the course of their
audits, including any restrictions on the scope of their work or
access to required information.
The Committee shall review all relationships between the independent auditor and
the Company (to assess the auditor's independence), including, but not limited
to, determining that the lead independent audit partner serves in that capacity
for no more than five fiscal years of the Company. In addition, the Committee
shall set clear hiring policies for employees or former employees of the
independent registered public accounting firm that meet the SEC regulations and
stock exchange listing standards.
The Committee shall discuss with the internal auditors and the independent
registered public accounting firm the overall scope and plans for their
respective audits, including the adequacy of staffing and compensation. Also,
the Committee shall address the coordination of the audit efforts to assure best
completeness of coverage, reduction of redundant efforts, and the effective use
of audit resources.
The Committee shall discuss with management, the internal auditors, and the
independent registered public accounting firm the adequacy and effectiveness of
the accounting and financial controls, including the Company's policies and
procedures to assess, monitor, and manage business risk, and legal and ethical
compliance programs as well as assess the steps taken by management or proposed
by management, to minimize such risks. Further the Committee shall consider any
significant findings and recommendations including any management letter or
schedule of unadjusted differences from the internal or independent registered
public accounting firm.
The Committee shall receive regular reports from the independent auditor on the
critical policies and practices of the Company, and all alternative treatments
of financial information within generally accepted accounting principles that
have been discussed with management.
The Committee shall review and concur in the appointment, replacement,
reassignment or dismissal of the internal Auditor, the scope of the internal
audit, the internal audit budget and staffing, internal audit charter and the
internal auditor's compliance with the Institute of Internal Auditors Standards
for Professional Practice of Internal Auditing.
The Committee shall review management's assertion on its assessment of the
effectiveness of internal controls as of the end of the most recent fiscal year
and the independent registered public accounting firm' report on management's
assertion. Additionally, the Committee shall review with the Chief Executive
Officer and the Chief Financial Officer the quality of earnings of the Company.
The Committee shall receive general counsel's reports of evidence of a material
violation of securities laws, breaches of fiduciary duty and asserted and
unasserted claims and liabilities.
The Committee shall review and reassess this Charter at least annually and
obtain the approval of the Board regarding any recommended changes.
The Committee shall review and evaluate the performance of the independent
registered public accounting firm and review with the full Board any proposed
discharge of the independent registered public accounting firm.
The Committee shall perform an evaluation of its performance at least annually
to determine whether it is functioning effectively.
Reporting:
---------
The Committee shall review and discuss earnings press releases, as well as
financial information and earnings guidance provided to analysts and rating
agencies.
The Committee shall review the interim financial statements and disclosures
under Management's Discussion and Analysis of Financial Condition and Results of
Operations with management and the independent registered public accounting firm
prior to the filing of the Company's Quarterly Report on Form 10-Q. Also, the
Committee shall discuss the results of the quarterly review and any other
matters required to be communicated to the Committee by the independent
registered public accounting firm under generally accepted auditing standards.
The chair of the Committee may represent the entire Committee for the purposes
of this review.
The Committee shall review with management and the independent registered public
accounting firm the financial statements and disclosures under Management's
Discussion and Analysis of Financial Condition and Results of Operations to be
included in the Company's Annual Report on Form 10-K (or the annual report to
shareholders if distributed prior to the filing of Form 10-K), including their
judgment about the quality, not just the acceptability, of accounting
principles, the reasonableness of significant judgments, and the clarity of the
disclosures in the financial statements. Also, the Committee shall discuss the
results of the annual audit and any other matters required to be communicated to
the Committee by the independent registered public accounting firm under
generally accepted auditing standards.
The Committee also prepares its report to be included in the Company's annual
proxy statement, as required by SEC regulations.
Meetings and Minutes:
--------------------
The Committee shall hold regular meetings at least four times each year each
time the Company proposes to issue a press release with its quarterly or annual
earnings information and such special meetings as the Chair of the Committee or
the Chairman of the Board may direct. The Committee shall be chaired by one of
its members nominated by the Governance and Nominating Committee and appointed
by the Board. All members of the Committee are expected to attend each meeting,
in person or via teleconference or other means of electronic communications
permitted under applicable law and the Company's Amended Articles of
Incorporation and Code of Regulations. The Committee shall maintain written
minutes of its meetings, which minutes shall be filed with the minutes of the
meetings of the Board. The Committee may act by a majority of its members at a
meeting or without a meeting if all members consent to the action in writing or
by any means of electronic transmission permitted under applicable law. At each
regularly scheduled meeting of the Board, the Chair of the Committee shall
provide the Board with a report of the Committee's activities and proceedings.
The Committee may ask members of management or others to attend the meetings and
provide pertinent information as necessary.
The Committee shall conduct executive sessions with the independent registered
public accounting firm, the Chief Executive Officer, the Chief Operating
Officer, the Chief Financial Officer, the Controller, the Auditor, the General
Counsel or anyone as desired by the Committee.
Code of Ethics and Related Party Transactions:
---------------------------------------------
The Committee shall review with the internal auditor and general counsel legal
and regulatory matters that may have a material impact on the financial
statements, related Company compliance policies, and programs and reports
received from regulators.
The Committee shall periodically review with the internal auditor and general
counsel the Company's Code of Ethics to ensure that it is adequate and
up-to-date as well as review results of the Auditor's and General Counsel's
monitoring of compliance with the Code of Ethics.
The Committee shall establish and review the procedures for the receipt,
retention, and treatment of complaints received by the Company regarding
accounting controls, or auditing matters that may be submitted by any person, as
well as review any such complaints received, its current status or resolution.
The Committee shall establish and review procedures for the confidential,
anonymous submission by employees of the Company or its subsidiaries of concerns
regarding questionable accounting or audit matters, as well as review any such
submissions that have been received, its current status or resolution.
The Committee shall conduct a review and approve all related party transactions
(any transaction required to be reported pursuant to Item 404 of SEC Regulation
S-K) for potential conflict of interest situations on an ongoing basis.
PEOPLES BANCORP INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 14, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of common shares of Peoples Bancorp Inc.
("Peoples") hereby constitutes and appoints Robert E. Evans and Joseph H. Wesel,
and each of them, the proxy or proxies of the undersigned, with full power of
substitution in each, to attend the Annual Meeting of Shareholders of Peoples
(the "Annual Meeting") to be held on Thursday, April 14, 2005, in the Ball Room,
Holiday Inn, 701 Pike Street, Marietta, Ohio (Interstate 77, Ohio exit 1) at
10:00 A.M., Eastern Daylight Savings Time in Marietta, Ohio, and any adjournment
thereof, and to vote all of the common shares of Peoples which the undersigned
is entitled to vote at such Annual Meeting or at any adjournment thereof, as
follows:
1. To elect the following directors for terms of three years each*
Nominee Term Expires In
Mark F. Bradley (for re-election) 2008
Frank L. Christy (for re-election) 2008
Theodore P. Sauber (for re-election) 2008
Joseph H. Wesel (for re-election) 2008
[ ] FOR [ ] WITHHOLD [ ] FOR ALL EXCEPT
*(INSTRUCTION: To withhold authority to vote for any individual
nominee, mark "FOR ALL EXCEPT" and write the name of that nominee on
the line provided below.)
2. In their discretion, the individuals designated to vote this proxy are
authorized to vote upon any other matter (none known at the time of
solicitation of this proxy), which properly comes before the Annual
Meeting, or any adjournment thereof.
WHERE A CHOICE IS INDICATED, THE COMMON SHARES REPRESENTED BY THIS PROXY,
WHEN PROPERLY EXECUTED, WILL BE VOTED OR NOT VOTED AS SPECIFIED. IF NO CHOICE IS
INDICATED, THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES LISTED IN ITEM NO. 1 AS DIRECTORS OF PEOPLES. IF ANY
OTHER MATTERS ARE PROPERLY BROUGHT BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT
THEREOF OR IF A NOMINEE FOR ELECTION AS A DIRECTOR NAMED IN THE PROXY STATEMENT
IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, THE COMMON SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE INDIVIDUALS
DESIGNATED TO VOTE THIS PROXY, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON
SUCH MATTERS OR FOR SUCH SUBSTITUTE NOMINEE(S) AS THE DIRECTORS MAY RECOMMEND.
All proxies previously given or executed by the undersigned are hereby
revoked. The undersigned acknowledges receipt of the accompanying Notice of
Annual Meeting of Shareholders and a copy of the Proxy Statement for the April
14, 2005 Annual Meeting and the Peoples' 2004 Annual Report to Shareholders and
Form 10-K for the year ended December 31, 2004, and 2004 Summary Annual Report.
Dated: _______________________________________, 2005
_______________________________________
Shareholder
_______________________________________
Shareholder
Please sign exactly as your name appears hereon. When common shares are
registered in two names, both shareholders MUST sign. When signing as executor,
administrator, trustee, guardian, attorney or agent, please give full title as
such. If shareholder is a corporation, please sign in full corporate name by
President or other authorized officer. If shareholder is a partnership or other
entity, please sign that entity's name by authorized person. (Please note any
change of address on this proxy.)
PLEASE FILL IN, DATE, SIGN AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE