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:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e) (2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-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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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: _________________________________
(2) Form, Schedule or Registration Statement No.: ___________
(3) Filing Party: ___________________________________________
(4) Date Filed: ____________________________________________
March 5, 2004
Dear Peoples Bancorp Shareholder(s):
Enclosed is your Notice of Annual meeting, Proxy Statement and
Revocable Proxy, along with Peoples' Summary Annual Report and Form 10-K. Please
sign the Revocable Proxy and return it in the envelope provided. If you attend
the Annual Meeting, you may withdraw your Proxy at the meeting and vote in
person. Sending your Proxy assures you that your shares will be represented.
Robert E. Evans, Robert W. Price and Paul T. Theisen have been
nominated as Directors for re-election to terms of three years each.
The following is also listed on the Proxy for your vote at this
meeting:
1. To consider and vote on a proposal to adopt amendments to Article THREE
of Peoples' Code of Regulations to designate additional officers to be
elected by the directors and clarify and separate the roles of the
officers.
At this time, we know of no other business to be presented for
Stockholder consideration.
Please take time to review your company's progress, detailed in
Peoples' Summary Annual Report and Form 10-K. We urge you to take advantage of
the many financial services offered by our Bank. Your recommendation of these
services to your associates, friends and neighbors is an excellent way to aid
Peoples Bancorp toward continued progress.
You may access Peoples' home page on the internet at
http://www.peoplesbancorp.com.
Sincerely,
PEOPLES BANCORP, INC.
/S/ RUTH I. OTTO
Ruth I. Otto
Corporate Secretary
Enclosures
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
PEOPLES BANCORP INC.
Marietta, Ohio
March 5, 2004
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 10:30
A.M., local time in Marietta, Ohio, on Thursday, April 8, 2004, 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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Robert E. Evans (for re-election) 2007
Robert W. Price (for re-election) 2007
Paul T. Theisen (for re-election) 2007
2. To consider and vote on a proposal to adopt amendments to
Article THREE of Peoples' Code of Regulations to designate
additional officers to be elected by the directors and clarify
and separate the roles of the officers.
3. 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 16, 2004,
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' 2003 Annual Report to Shareholders and Form 10-K for the Year
Ended December 31, 2003, and 2003 Summary Annual Report accompany this notice
and proxy statement.
By Order of the Board of Directors,
/s/ RUTH I. OTTO
Ruth I. Otto
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 8, 2004, or at any adjournment. The Annual Meeting will
be held at 10:30 A.M., local 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 5, 2004.
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. Without affecting any vote previously
taken, any shareholder appointing a proxy may revoke it at any time before it is
actually voted by filing with the 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, constitute revocation of a previously
appointed proxy.
Only shareholders of record at the close of business on February 16,
2004 (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, 10,709,081 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.
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. 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 pay the standard charges and
expenses of 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 forwarding such materials to, and obtaining
proxies from, 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 instructions 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 proxies 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 "ABSTAIN," "AGAINST" 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 2003 Annual Report to Shareholders and Form 10-K for the Year Ended
December 31, 2003 (the "2003 Annual Report to Shareholders") and the 2003
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, 2003 may be obtained, without charge, upon request to Ruth I. Otto, Peoples'
Corporate Secretary, at P.O. Box 738, 138 Putnam Street, Marietta, Ohio
45750-0738. The Form 10-K is also on file with the Securities and Exchange
Commission (the "SEC").
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 2003 Annual
Report to Shareholders, the 2003 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 2003 Annual Report to Shareholders, a separate 2003 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) 374-6136 or by a written request addressed to the
Corporate Secretary of Peoples at P.O. Box 738, 138 Putnam Street, Marietta,
Ohio 45750-0738. Promptly upon request, a separate 2003 Annual Report to
Shareholders, a separate 2003 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 proxy statements in the
future or (ii) request delivery of a single copy of annual reports or proxy
statements in the future if they are receiving multiple copies. Beneficial
shareholders should contact their broker/dealers, financial institution, 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, certain
information concerning the beneficial ownership of common shares by the only
person 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)
---------------- -------------------- --------------------
Peoples Bank - Trustee
138 Putnam Street
Marietta, OH 45750 1,072,719 (2) 10.02%
(1) The percent of class is based on 10,709,081 common shares outstanding
and entitled to vote on the Record Date.
(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: 154,187 common shares with shared
investment and sole voting power; 687,705 common shares with shared
investment and voting power; 157,665 common shares with sole voting and
investment power; and 73,162 common shares with sole investment and
shared voting power. The officers and directors of Peoples Bank and
Peoples disclaim beneficial ownership of these common shares by reason of
their positions.
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)
---------------------------------------------
Common Shares Which Can Be Acquired Upon
Upon Exercise of Options Currently
Name of Common Shares Exercisable or Will Become Exercisable
Beneficial Owner Presently Held Within 60 Days Total Percent of Class (2)
---------------- -------------- -------------- ----- ----------------
Carl L. Baker, Jr. 23,219(3) 8,213 31,432 (4)
David B. Baker (5) 12,095(6) 35,025 47,120 (4)
Mark F. Bradley (5) 3,625(7) 12,656 16,281 (4)
George W. Broughton 172,893(8) 7,216 180,109 1.68%
Frank L. Christy 79,064(9) 2,633 81,697 (4)
Wilford D. Dimit 41,852(10) 10,616 52,468 (4)
Robert E. Evans (5) 181,909(11) 51,476 233,385 2.17%
Larry E. Holdren (5) 21,158(12) 15,493 36,651 (4)
Robert W. Price 12,911(13) 1,155 14,066 (4)
Paul T. Theisen 24,119(14) 14,945 39,064 (4)
Thomas C. Vadakin (15) 16,235(16) 0 16,235 (4)
Joseph H. Wesel 38,532(17) 12,851 51,383 (4)
Joseph S. Yazombek (5) 29,848(18) 28,025 57,873 (4)
All directors and
executive officers as a
group (numbering 15)
703,040(19) 247,557 950,597 8.68%
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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 upon the sum of (i)
10,709,081 common shares outstanding and entitled to vote on the Record
Date 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 Mr.
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 237 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 32,006 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 ownership of less than 1% of 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) Includes 12,095 common shares held jointly by Mr. Baker and his wife, as
to which Mr. Baker exercises shared voting and investment power.
(7) Does not include 735 common shares accrued to Mr. 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 3,291 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.
(8) Includes 7,463 common shares held by Mr. 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 12,774 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 1,172 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.
(9) Includes 8,670 common shares held in the Frank L. Christy Investment
Agency Account, as to which Mr. Christy exercises shared voting and
investment power. Also includes 70,115 common shares held in the
Riverbank Restaurants Inc. Agency Account, as to which Mr. Christy
exercises shared voting and investment power.
(10) Includes 22,665 shares held jointly by Mr. Dimit with his wife, as to
which Mr. Dimit exercises shared voting and investment power. Does not
include 15,134 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 35,395 common shares allocated to the account of Mr. 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
23,204 common shares held of record and owned beneficially by Mr. Evans'
wife, nor 4,200 common shares held jointly by Mr. Evans' wife and their
son, as to which common shares Mr. Evans has no voting or investment
power and disclaims beneficial ownership. Does not include 13,682 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) Includes 6,264 common shares held jointly by Mr. Holdren and his wife, as
to which Mr. Holdren exercises shared voting and investment power.
Includes 14,894 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.
(13) Includes 10,745 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 1,826 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.
(14) Does not include 5,300 common shares accrued to Mr. 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.
(15) Under Section 2.01 of Peoples' Code of Regulations, Mr. Vadakin is not
eligible for nomination and re-election as a director. He will retire as
a director upon the expiration of his term at the Annual Meeting.
(16) Includes 15,703 common shares in the Thomas C. Vadakin Investment Account
at Peoples Bank, as to which Mr. Vadakin shares investment and voting
power.
(17) Does not include 16,474 common shares held of record and beneficially
owned by Mr. Wesel's wife, as to which Mr. Wesel has no voting or
investment power and disclaims beneficial ownership. Does not include
7,234 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 36,939 common shares in the Joseph and Lu Wesel
Grandchildren's Trust, as to which Peoples Bank has sole investment and
voting power.
(18) Includes 16,950 common shares held jointly by Mr. Yazombek and his wife,
as to which Mr. Yazombek exercises shared voting and investment power.
Includes 12,899 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.
(19) Includes common shares held jointly by directors and executive officers
with other persons, as well as 92,310 common shares allocated to the
accounts of all executive officers of Peoples in the Peoples Bancorp Inc.
Retirement Savings Plan. See notes (3) and (5) through (18) 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, 2003 (the "2003 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 Securities Exchange
Act of 1934, as amended (the "Exchange Act"), were complied with, except as
noted below:
1. Donald J. Landers made a late filing of his Form 3 on August 26, 2003
to report his becoming chief accounting officer on June 30, 2003 and
filed amended Forms 3 on August 27, 2003 and September 12, 2003 to
report the correction of the event date.
2. John W. Conlon filed two late Forms 4. One Form 4 reported one option
grant of both incentive stock options ("ISOs") and non-qualified stock
options ("NQSOs") made to him on March 27, 2003 (which was reported on
April 11, 2003), and the other reported two option exercises and two
sales of common shares on July 30, 2003 (which were reported on August
5, 2003).
3. Robert E. Evans filed two late Forms 4. One Form 4 reported one option
grant of both ISOs and NQSOs made to him on March 27, 2003 (which was
reported on April 11, 2003), and the other reported one transaction
involving the allocation of deferred compensation occurring on July 1,
2003 (which was reported on July 10, 2003).
4. Mark F. Bradley filed two late Forms 4. One Form 4 reported one option
grant of both ISOs and NQSOs made to him on March 27, 2003 (which was
reported on April 11, 2003), and the other reported one transaction
involving the allocation of deferred compensation occurring on July 1,
2003 (which was reported on July 10, 2003).
5. Each of David B. Baker, Larry E. Holdren, Carol A. Schneeberger and
Joseph S. Yazombek filed one late Form 4 reporting one option grant of
both ISOs and NQSOs made to each executive officer on March 27, 2003
(which was reported on April 11, 2003).
6. Each of Carl L. Baker, Jr., George W. Broughton, Wilford D. Dimit, Rex
E. Maiden, Robert W. Price, Paul T. Theisen and Joseph H. Wesel filed
one late Form 4 reporting one transaction involving the allocation of
deferred compensation occurring on July 1, 2003 (which was reported on
July 10, 2003).
TRANSACTIONS INVOLVING MANAGEMENT
Paul T. Theisen is Of Counsel to and an independent contractor with the
law firm of TheisenBrock which rendered legal services to Peoples and its
subsidiaries during Peoples' 2003 fiscal year and is expected to render legal
services to Peoples and its subsidiaries during Peoples' 2004 fiscal year.
During Peoples' 2003 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 for which directors of Peoples serve as executive officers. It
is expected that similar banking transactions will be entered into in the
future. 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, 2003, was $1,869,242. This
does not include the aggregate amount of $17,620,259 in loans to individuals
acting in the sole capacity as directors or executive officers of subsidiaries
of Peoples, and affiliates of these directors and executive officers. 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.
ELECTION OF DIRECTORS
(Item 1 on Proxy)
Pursuant to Peoples' Code of Regulations, the Board of Directors has
fixed the number of directors at 11, divided into three classes with regular
three-year staggered terms. Four directors are to be in the class whose terms
expire in 2004, (and are to be elected for new terms expiring in 2007) four in
the class whose terms expire in 2005 and three in the class whose terms expire
in 2006. The election of each class of directors is a separate election.
Rex E. Maiden, who was in the class of directors whose terms expire in
2005, died on January 5, 2004. Under Section 2.01 of Peoples' Code of
Regulations, Thomas C. Vadakin, who is in the class of directors whose terms
expire in 2004, is not eligible for nomination and re-election as a director and
will retire upon the expiration of his term at the Annual Meeting. As a result
of Mr. Maiden's death and Mr. Vadakin's retirement following the annual meeting,
one vacancy will exist in each of the class of directors whose terms expire in
2005 and the class of directors whose terms expire in 2007. The Board of
Directors has not named nominees in this proxy statement for election to the
Board to succeed Messrs. Maiden and Vadakin. The Governance and Nominating
Committee is in the process of identifying and evaluating qualified candidates,
and it is expected that the process will be completed after the Annual Meeting.
Upon the Board's acceptance of recommendations from the Governance and
Nominating Committee, the Board will appoint an additional director to serve for
a term expiring at the Annual Meeting in 2005 and an additional director to
serve for a term expiring at the Annual Meeting in 2007. The proxies cannot be
voted at the Annual Meeting for more than three nominees for election as
directors in the class whose terms expire in 2007.
The Board of Directors has reviewed, considered and discussed each
director's relationships, either directly or indirectly, with Peoples and its
subsidiaries and the compensation each director receives, directly or
indirectly, from Peoples and its subsidiaries in order to determine whether such
director meets the current independence requirements of The NASDAQ Stock Market,
Inc. ("NASDAQ") Corporate Governance Standards, and has determined that the
Board has at least a majority of independent directors. The Board of Directors
has determined 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; Wilford D. Dimit; Robert W. Price; Paul T. Theisen; and Joseph H.
Wesel.
The Board of Directors proposes that each of the three nominees
identified below be re-elected for a 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 three nominees for election as directors in the class
whose terms expire in 2007 receiving the greatest number of votes will be
elected. Common shares represented by properly executed and returned proxies
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 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
---------------- --- ------------------------------------------------------ ------------ -----------
Robert E. Evans 63 Chairman of the Board since July 2003, and President, 1980 2007
and Chief Executive Officer since 1980, of Peoples;
Chief Executive Officer and Chairman of the Board of
Peoples Bank. (1)
Robert W. Price 40 Operations Manager, Shelly Materials, Inc. Columbus 2000 2007
District, 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 (2) 73 Attorney-At-Law. Currently active as a mediator and 1980 2007
arbitrator. For more than 40 years, was a
litigator with TheisenBrock, Attorneys at Law
Marietta, Ohio, and has been Of Counsel with that
firm since 1998. (1)
---------------------
(1) Also a director of Peoples Bank. Mr. Evans also served as President of
Peoples Bank from 1987 until 2002.
(2) Thomas C. Vadakin and Paul T. Theisen are brothers-in-law.
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 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 Term
Position(s) Held with Peoples and Its Continuously Expires
Name Age Principal Subsidiaries and Principal Occupation(s) Since In
---------------- --- ------------------------------------------------------ ------------ ---------
Carl L. Baker, Jr. 41 President and CEO, B & N Coal, Inc., a mining, reclamation, 2000 2006
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.
Mark F. Bradley 34 Director of Peoples since February 2003 and Chief Operating 2003 2005
Officer of Peoples since July 2003; Executive Vice President
and Chief Integration Officer of Peoples from April 2002 to
July 2003; President and Chief Operating Officer of Peoples
Bank since 2002; Controller of Peoples and Peoples Bank from
1997 to 2001; Director of Peoples Insurance Agency Inc. from
January 2004 to present. (1)
George W. Broughton 46 President of GWB Specialty Foods, LLC, an ice cream, frozen 1994 2006
food, and coffee service distributor; President of Broughton
Commercial Properties, LLC, a commercial properties rental
company; 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; and President and Controller of George Broughton
Family LLC, an asset management company, all based in
Marietta, Ohio. (1)
Frank L. Christy 56 President of Christy & Associates, Inc., a business 1999 2005
development company located in Marietta, Ohio; President of
Lafayette Center, Inc. and Riverbank Restaurants, Inc.;
Chairman of Caron Products and Services, Inc., and Rossi
Pasta Factory, Inc.
Wilford D. Dimit 69 President of First Settlement, Inc., Marietta, Ohio, a 1993 2006
retail clothing store, shoe store and restaurant. (1)
Joseph H. Wesel 74 President of W.D.A., Inc., Marietta, Ohio, a real estate 1980 2005
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 and Vice Chairman
since July 2003, of Peoples. (1)
----------------------
(1) Also a director of Peoples Bank.
The Board of Directors held a total of twelve meetings during Peoples'
2003 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.
Peoples encourages all incumbent directors and director nominees to
attend each annual meeting of shareholders. All of the incumbent directors and
director nominees attended Peoples' last annual meeting of shareholders held on
April 10, 2003.
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 either generally
or in care of the Chief Executive Officer, Corporate Secretary, or another
corporate officer is forwarded to all members of the Board, has served the
Board's and Peoples' shareholders' needs. There is no screening process, and all
shareholder communications that are received by officers for the Board's
attention are forwarded to the Board.
In view of recently adopted SEC disclosure requirements related to this
issue, the Governance and Nominating Committee may consider development of more
specific procedures. Until any 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 may be mailed
to the Board, 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
information 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.
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 independent auditors
employed by Peoples for the purpose of preparing or issuing an audit
report or performing related work;
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
auditors,
o the independent auditors' 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 2003 fiscal year.
The members of the Audit Committee are Wilford D. Dimit, Chairman, and
Carl L. Baker, Jr., George W. Broughton, Frank L. Christy, Robert W. Price,
Thomas C. Vadakin and Joseph H. Wesel. Each member of the Audit Committee
qualifies as independent under the NASDAQ Corporate Governance Standards and
Rule 10A-3 promulgated under Section 10A(m)(3) of the Exchange Act. 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,
Vadakin and Wesel, 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 and benefits received in his capacity as a director of Peoples (and
committee member) and, in the case of Messrs. Dimit, Broughton, Vadakin and
Wesel, as a director of Peoples Bank (and committee member).
Each member of the Audit Committee has substantial background and
experience as the chief executive officer of his respective business or
profession. Collectively, the members have 43 years of service on the Audit
Committee of Peoples and 96 years of service on the Audit Committee of Peoples
Bank. 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 is appropriate to disclose that the Board has not designated any particular
member of the Audit Committee as qualifying as an "audit committee financial
expert" under the SEC's rules. The Board of Directors has determined that each
of the 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. As the Board of Directors, and more specifically the
Governance and Nominating Committee, consider new directors of Peoples, one of
the criteria to be strongly considered will be the financial background and
expertise of prospective Board members. It is Peoples' long-term intention to
continue to strengthen the financial expertise of the Board of Directors through
the normal course of adding new directors.
Compensation Committee
----------------------
The Compensation Committee is comprised of five directors who satisfy
the independence requirements of the NASDAQ Corporate Governance Standards and
applicable rules and regulations of the SEC: Joseph H. Wesel, Chairman; Carl L.
Baker, Jr.; Frank L. Christy; Wilford D. Dimit; and Thomas C. Vadakin. Rex E.
Maiden served as a member of the Compensation Committee until his death on
January 5, 2004. 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 six meetings during the 2003 fiscal year.
Executive Committee
-------------------
The Executive Committee is comprised of the six directors: Mark F.
Bradley, Robert E. Evans, Robert W. Price, Paul T. Theisen, Thomas C. Vadakin,
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 no meetings of the Executive Committee during the 2003 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
George W. Broughton, Wilford D. Dimit, Robert W. Price, Paul T. Theisen, and
Joseph H. Wesel. Mr. Wesel serves as the Chairman of the Governance and
Nominating Committee. The Board of Directors has determined that all of the
Governance and Nominating Committee members meet the current independence
requirements of NASDAQ Corporate Governance Standards and applicable rules and
regulations of the SEC. 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 other 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 one meeting during the 2003 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 on the proceeding 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.
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee meets periodically to review and recommend
for approval by the Board of Directors salaries, bonuses, employment agreements
and employee benefits plans for officers and employees, including executive
officers of Peoples. The Compensation Committee also supervises the operation of
Peoples' compensation plans, selects those eligible employees who may
participate in each plan (where selection is permitted) and prescribes (where
permitted under the terms of the plan) the terms of any options granted under
any stock option plan of Peoples. In addition to evaluating the effectiveness
and competitiveness of compensation plans through the use of available peer
data, the Compensation Committee seeks the advice of an outside compensation
consulting firm as needed. On January 8, 2004, the Board of Directors adopted a
charter that formally outlines the duties of the Compensation Committee. The
Compensation Committee met six times during the 2003 fiscal year.
Section 162(m) of the Internal Revenue Code of 1986, as amended,
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 acting 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 of Peoples 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 performance goals such as those provided in the Performance
Compensation Program ("Program") discussed below. The 1995 Stock Option Plan,
1998 Stock Option Plan, and 2002 Stock Option Plan 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 advice of Peoples' General
Counsel regarding the appropriateness of presenting the Program, or any similar
non-equity plan, to shareholders.
The Compensation Committee operates under the principle that the
compensation of executive officers should be directly and significantly related
to the financial performance of Peoples. The compensation philosophy of Peoples
reflects a commitment to reward executive officers for performance through cash
compensation and through plans designed to enhance the long-term commitment of
officers and employees to Peoples and its subsidiaries. Peoples seeks to attract
and retain quality talent, which is key to the short and long-term success of
Peoples. In order to accomplish this goal, Peoples seeks to pay its executive
officers base salaries that are competitive and generally comparable to the
mid-range of salaries for similar positions of other financial institutions with
similar demographics.
The cash compensation program for executive officers consists of two
elements, a base salary component and an incentive component payable under the
Program. As previously described, the base salary is generally comparable to the
mid-range of salaries for comparable positions of peer financial institutions.
Incentive compensations plans are designed to provide a range of compensation
that is comparable to peers also, but in which payouts vary based upon the
performance of Peoples and the individual executive officer. The Compensation
Committee reviewed comparative salary data for the executive officers from
various sources of information including the 2002 SNL Executive Compensation
Review for Banks & Thrifts prepared by SNL Securities for the publicly traded
bank and thrift peer groups with assets between $1 and $5 billion; the 2002 Bank
Compensation Survey as prepared by Crowe, Chizek and Company LLP for Midwestern
banks; the 2002 Bank Cash Compensation Survey as prepared by The Delves Group;
and the 2002 Compensation Survey and Benefits Survey as prepared by the Ohio
Bankers League, the Indiana Bankers Association and the Michigan Bankers
Association. The Compensation Committee approved a base salary increase of 3.45%
for Mr. Evans for 2003 fiscal year to $300,000. The Compensation Committee was
of the opinion the adjustments made were necessary and appropriate to provide
reasonably competitive compensation.
In late 1996, Peoples established the Program in which all employees of
Peoples and its subsidiaries are eligible to participate. The Program is
designed to reward all employees for balanced growth and increased
profitability. The amount of the award available for distribution is based upon
Peoples' performance with regard to specified performance goals. In 2003, the
incentive payout for certain officers, including executive officers, was based
on Peoples' consolidated financial results and individual performance as it
related to certain individual qualitative and quantitative incentive objectives
specifically related to their areas of responsibility and aligned with overall
corporate objectives. The incentive payout for all other employees was equally
based on Peoples' consolidated financial results and an assessment of their
performance based on their individual job requirements. The allocation of the
bases for the payout percentage may be adjusted on an annual basis.
In 2003, the corporate performance goals focused equally on earnings
per share, return on average equity, and the non-interest income leverage ratio,
which is a measure of non-interest income relative to operating expense. Under
the Program, current year performance was compared to the immediately prior year
and rewarded employees for incremental growth in the key performance goals
previously listed. Enhanced performance in relation to the performance goals
results in higher incentive bonuses. During the 2003 fiscal year, minimum
corporate performance goals were not met resulting in no payout in 2004, for the
2003 fiscal year, to Mr. Evans and the other executive officers.
Peoples' long-term compensation program consists primarily of options
granted under Peoples' stock option plans. The Compensation Committee believes
that stock ownership by members of Peoples' management and stock-based
performance compensation arrangements are important in aligning the interests of
management with those of shareholders, generally in the enhancement of
shareholder value. Options are granted with an exercise price equal to the fair
market value of Peoples' common shares on the date of grant. If there is no
appreciation in the fair market value of Peoples' common shares, the options are
valueless. In the past several years, the Compensation Committee granted options
based upon its subjective determination of the relative current and future
contribution each officer has or may make to the long-term welfare of Peoples,
however, beginning in 2002, option grants were based on the same criteria as the
cash incentive component previously described, except when used as a part of
recruitment packages. During the 2003 fiscal year, minimum corporate performance
goals were not met and it is expected that no stock option grants will be made
in 2004, for the 2003 fiscal year, to Mr. Evans and the other executive
officers.
In order to further enhance Mr. Evans' long-term commitment to Peoples
Bank, Peoples Bank entered in a Deferred Compensation Agreement with him in
1976. 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 to Peoples Bank until he reaches normal
retirement age.
At various times in the past, Peoples has adopted broad-based employee
benefit plans in which Peoples' executive officers are permitted to participate
on the same terms as non-executive officer employees who meet applicable
eligibility criteria, subject to legal limitations on the amounts that may be
contributed or the benefits that may be payable under the plans.
To enhance the long-term commitment of the officers and employees of
Peoples and its subsidiaries, Peoples established the Peoples Bancorp Inc.
Retirement Savings Plan (the "Peoples 401(k) Plan"). All officers and employees
of Peoples and its subsidiaries may participate in the Peoples 401(k) Plan, upon
satisfying applicable eligibility criteria. Peoples' matching contributions and
participant contributions may be invested in common shares providing each
participant with motivation toward safe and sound long-term growth of Peoples.
Peoples' matching contributions may vary at the discretion of the Board of
Directors.
The Compensation Committee will continue to monitor compensation issues
to ensure adequate and appropriate compensation of Peoples' executive officers
while creating a mutuality of interest between executive officers and
shareholders through compensation structures that share the rewards and risks of
strategic decision-making.
SUBMITTED BY THE COMPENSATION COMMITTEE OF PEOPLES' BOARD OF DIRECTORS:
Joseph H. Wesel, Chairman; Frank L. Christy; Wilford D. Dimit;
and Thomas C. Vadakin, 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, the 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
Salary Awards All Other Compensation
----------------- ------------- -----------------------
Common Interest on
Shares Deferred
Base Directors' Underlying Incentive
Name and Principal Position Year Salary Fees (1) Bonus (2) Options (3) Payment All Other (4)
--------------------------- ---- -------- ---------- --------- ------------ ------------ -------------
Robert E. Evans 2003 $300,000 $16,600 - 18,187 $2,843 $13,000
President, Chief Executive Officer 2002 $290,000 $17,800 $139,000 11,729 $1,915 $10,272
and Chairman of the Board 2001 $273,160 $15,850 $86,592 - - $11,800
Mark F. Bradley 2003 $165,000 $15,750 - 5,797 $969 $8,000
Chief Operating Officer 2002 $142,500 - $52,298 2,828 $553 $5,252
2001 $100,000 - $25,000 - - $4,223
Joseph S. Yazombek 2003 $156,000 - - 6,679 $3,860 $7,118
Executive Vice President - 2002 $150,000 - $59,700 4,875 $2,310 $6,377
Chief Lending Officer 2001 $145,600 - $41,787 - - $6,211
David B. Baker 2003 $153,000 - - 5,302 $3,914 $6,885
Executive Vice President 2002 $150,000 - $48,600 3,086 $2,576 $6,000
2001 $147,040 - $29,120 - - $6,269
Larry E. Holdren 2003 $153,000 - - 6,666 $4,873 $8,000
Executive Vice President 2002 $150,000 - $59,550 4,215 $3,284 $5,500
2001 $145,634 - $37,128 - - $6,219
(1) Includes fees received by Mr. Evans and Mr. Bradley for services
rendered as a director of Peoples and its subsidiaries.
(2) All bonuses were earned under the Performance Compensation Program,
and are reported for the fiscal year for which they were earned.
Bonuses are traditionally paid during the first quarter of the
following fiscal year.
(3) All numbers have been adjusted for 10% stock dividends issued on
September 12, 2001 and June 28, 2002, and a 5% stock dividend issued
on August 29, 2003. Options shown have been granted in respect of the
prior year's performance. It is anticipated that no options will be
granted to the named executive officers during the 2004 fiscal year in
respect of performance for the 2003 fiscal year.
(4) This number 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, this number also includes
the amount of $5,000, which was accrued pursuant to the terms of a
Deferred Compensation Agreement between Mr. Evans and Peoples. See the
discussion under "Deferred Compensation Agreement".
GRANT OF OPTIONS
The following table sets forth information concerning individual grants
of options made under Peoples' 2002 Stock Option Plan during the 2003 fiscal
year to the named executive officers. Peoples has never granted stock
appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates
Number of % of Total of Share Price Appreciation
Common Shares Options Granted for
Underlying to Employees Exercise Price Expiration Option Term (2)
Name Options Granted (1) in Fiscal Year ($/Share) Date 5% 10%
---- --------------- -------------- --------- -------- ------- --------
Robert E. Evans 18,187 16.84% $22.324 3/27/2013 $255,335 $647,070
Mark F. Bradley 5,797 5.37% $22.324 3/27/2013 $81,387 $206,250
Joseph S. Yazombek 6,679 6.19% $22.324 3/27/2013 $93,769 $237,630
David B. Baker 5,302 4.91% $22.324 3/27/2013 $74,437 $188,638
Larry E. Holdren 6,666 6.17% $22.324 3/27/2013 $93,587 $237,168
-------------------
(1) All numbers have been adjusted for a 5% stock dividend issued on
August 29, 2003.
(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 standard retirement policies of Peoples or its subsidiaries,
vesting is accelerated and the option becomes exercisable in full
until the earlier of 12 months from the date of termination of
employment or the expiration date of the option. If employment is
voluntarily terminated, only those options exercisable on the date of
termination are exercisable until the earlier of 12 months from the
date of termination or the 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 optionee 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 2003 fiscal year by
each of the named executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of
Number of Common Shares Underlying Value of Unexercised
Common Shares Unexercised Options In-the-Money Options
Underlying at Fiscal Year End (1) at Fiscal Year End (2)
------------------------------- ------------------------------
Name Options Value
Exercised Realized Exercisable UnExercisable Exercisable Unexercisable
------------------------------------------------------------------------------------ ------------------------------
Robert E. Evans 1,245 $2,922 47,242 49,712 $831,619 $456,835
Mark F. Bradley 300 $2,677 10,734 16,278 $135,697 $175,194
Joseph S. Yazombek 7,000 $146,069 26,103 18,256 $428,701 $178,482
David B. Baker 1,540 $22,755 33,103 15,090 $576,590 $158,001
Larry E. Holdren 9,765 $192,123 13,571 17,583 $163,938 $174,483
---------------------
(1) These numbers have been adjusted to reflect stock dividends issued by
Peoples since the respective grant dates of the options.
(2) "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, 2003 ($29.51) less the exercise price of in-the-money options at
the end of the 2003 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 $31,888 $42,517 $53,146 $63,775 $63,775
$150,000 $39,013 $52,017 $65,021 $78,025 $78,025
$175,000 $46,138 $61,517 $76,896 $92,275 $92,275
$200,000 $53,263 $71,017 $88,771 $106,525 $106,525
and over
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 2003 fiscal year, "covered compensation" for Mr. Evans was $48,492, Mr.
Bradley $86,940, Mr. Yazombek $74,136, Mr. Baker $61,152, and Mr. Holdren
$63,132. 2003 annualized average monthly compensation, to the extent
determinable, for purposes of the Pension Plan, for Mr. Evans was $200,000, Mr.
Bradley $200,000, Mr. Yazombek $164,955, Mr. Baker $153,000, and Mr. Holdren
$153,000. As of the end of the 2003 fiscal year, credited years of service for
Mr. Evans were 33, Mr. Bradley 12, Mr. Yazombek 20, Mr. Baker 29, and Mr.
Holdren 22.
DEFERRED COMPENSATION AGREEMENT
On November 18, 1976, Peoples Bank entered into a Deferred Compensation
Agreement with Mr. Evans. 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. Under this 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' 2003 fiscal year, the amount of $5,000 was accrued for Mr. Evans'
account pursuant to his Deferred Compensation Agreement and as of December 31,
2003, a total of $135,000 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.
DIRECTORS' COMPENSATION
Each director of Peoples received $850 per calendar quarter and $600
per meeting attended during the 2003 fiscal year. Each director of Peoples also
serving on a Board committee received $100 for attending each committee meeting
of less than one hour duration, or $150 for attending each committee meeting in
excess of one hour. 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
2003 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.
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 funds 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 paid only in common shares and the
cash account will be paid only in cash.
Pursuant to their respective terms, non-qualified stock options have
been automatically granted 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"), and 1998 Stock Option
Plan (the "1998 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. All options were granted with 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 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 Stock Option Plan (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 1155 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 three years service), or retirement
(with five years service), such options immediately vest and may be exercised
until the earlier of 12 months after ceasing to so serve and 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 Stock Market (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, 2003.
(ACTUAL NUMBERS PLOTTED ON A GRAPH)
NASDAQ STOCKS
Year Ended Peoples Bancorp Inc. U.S. Companies NASDAQ Bank Stocks
---------- -------------------- -------------- ------------------
12/31/1998 $100.00 $100.00 $100.00
12/31/1999 99.23 $185.43 $96.15
12/31/2000 77.79 $111.83 $109.84
12/31/2001 109.78 $88.77 $118.92
12/31/2002 171.38 $61.37 $121.74
12/31/2003 212.66 $91.75 $156.62
Notes:
1. Total return assumes reinvestment of dividends.
2. Fiscal year ending December 31.
3. Return based on $100 invested on December 31, 1998, in Peoples' common
shares, an index for NASDAQ Stock Market (U. S. Companies), and an
index for NASDAQ Bank Stocks.
PROPOSED AMENDMENT OF CODE OF REGULATIONS
TO DESIGNATE ADDITIONAL OFFICERS TO BE ELECTED BY THE DIRECTORS AND
TO CLARIFY AND SEPARATE THE ROLES OF THE OFFICERS
-------------------------------------------------
(Item 2 on Proxy)
PURPOSE OF PROPOSAL
Section 3.01 of Peoples' Code of Regulations currently provides that
the officers of Peoples to be elected by the directors are the president, the
secretary, the treasurer and, if desired, one or more vice presidents and such
other officers and assistant officers as the directors may from time to time
elect. The directors may elect a chairman of the board, who must be a director.
Under Section 3.04 of Peoples' Code of Regulations, the president of Peoples
must also be the chief executive officer.
To better assign management responsibilities, the Board of Directors
needs the flexibility to assign titles to senior management of Peoples that more
accurately describe the separate areas of responsibility assigned.
Proposal
It is proposed that shareholders adopt amendments to Peoples' Code of
Regulations to create the office of chief executive officer and to clarify the
duties of each of the chairman of the board and the president. It is further
proposed that shareholders adopt amendments to Peoples' Code of Regulations to
allow the directors to elect executive vice presidents as well as vice
presidents and to clarify that the executive vice presidents and the vice
presidents will perform the duties and exercise the powers assigned to them by
the Board of Directors, and to permit the Board of Directors to assign certain
leadership responsibilities to a non-executive member of the Board of Directors
as a leadership director.
Specifically, the Board of Directors proposes that Article THREE of
Peoples' Code of Regulations be amended to: (i) delete current Section 3.01 and
replace it in its entirety with the following Section 3.01; (ii) delete current
Sections 3.03, 3.04 and 3.05 and replace them in their entirety with the
following Sections 3.03, 3.04, 3.05, 3.06, 3.07 and 3.08; (iii) add the
following Section 3.11; and (iv) renumber existing Sections 3.06, 3.07 and 3.08
as Sections 3.09, 3.10 and 3.12, respectively.
The text of new Sections 3.01, 3.03, 3.04, 3.05, 3.06, 3.07, 3.08 and
3.11 would read as follows:
Section 3.01. Officers.
-----------------------
The officers of the corporation to be elected by the directors shall be a
chairman of the board, a chief executive officer, a president, a
leadership director if the chairman of the board is the chief executive
officer or the president, one or more executive vice presidents, one or
more vice presidents, a secretary, a treasurer, and such other officers
and assistant officers as the directors may, from time to time, elect.
Any person or persons holding the office of chairman of the board,
leadership director, chief executive officer or president must be a
director of the corporation. The other officers of the corporation may or
may not be directors of the corporation. Officers need not be
shareholders of the corporation unless they are also directors of the
corporation, and may be paid such compensation as the board of directors
(or a committee thereof) may determine. Any two or more offices may be
held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity if such instrument is
required by law, the Articles, the Regulations or the By-Laws to be
executed, acknowledged or verified by two or more officers.
Section 3.03. Duties of the Chairman of the Board.
--------------------------------------------------
The chairman of the board shall preside at all meetings of the directors.
Except as otherwise provided by law, the Articles, the Regulations or
resolution of the directors, the chairman of the board shall have the
same power as the president to sign all certificates evidencing shares of
the corporation. The chairman of the board shall perform such other
duties and exercise such other powers as the directors may, from time to
time, assign to the chairman of the board.
Section 3.04. Duties of the Leadership Director.
-------------------------------------------------
The board of directors may elect one of its non-executive members to the
position of leadership director to preside at meetings of the board in
executive session when the chairman of the board is also holding an
executive officer position.
Section 3.05. Duties of the Chief Executive Officer.
----------------------------------------------------
The chief executive officer of the corporation shall have, subject to the
control of the directors, general supervision and management over the
business of the corporation and over its officers and employees. Except
as otherwise provided by law, the Articles, the Regulations or resolution
of the directors, the chief executive officer shall have the same power
as the president to sign all deeds, mortgages, bonds, contracts, notes
and other instruments of the corporation. During the absence or
disability of the president, the chief executive officer shall exercise
all of the powers and perform all of the duties of the president except
as otherwise provided by law. The chief executive officer shall preside
at all meetings of the shareholders. The chief executive officer shall
perform such other duties and exercise such other powers as the directors
may, from time to time, assign to the chief executive officer.
Section 3.06. Duties of the President.
--------------------------------------
The president of the corporation shall have, subject to the control of
the directors and, if there be one, the chief executive officer, general
and active supervision and management over the business of the
corporation and over its officers and employees. The president shall be
the principal operating and administrative officer of the corporation. If
there is no chief executive officer, the president shall exercise all of
the powers and perform all of the duties of the chief executive officer.
Except as otherwise provided by law, the Articles, the Regulations or
resolution of the directors, the president shall have the power to sign
all certificates evidencing shares of the corporation and all deeds,
mortgages, bonds, contracts, notes and other instruments of the
corporation. The president shall, in the absence of the chief executive
officer, preside at all meetings of the shareholders. The president shall
perform such other duties and exercise such other powers as the directors
may, from time to time, assign to the president.
Section 3.07. Duties of Executive Vice Presidents.
--------------------------------------------------
The executive vice presidents shall perform such duties and exercise such
powers as the directors may, from time to time, assign to them.
Section 3.08. Duties of Vice Presidents.
----------------------------------------
The vice presidents shall perform such duties and exercise such powers as
the directors may, from time to time, assign to them.
Section 3.11. Other Officers.
------------------------------
Other elected officers shall perform such duties and exercise such powers
as the directors may, from time to time, assign to them under the officer
titles designated.
RECOMMENDATION AND VOTE
The affirmative vote of the holders of shares entitling them to
exercise not less than a majority of the voting power of Peoples is required to
adopt the proposed amendments to Article THREE of the Code of Regulations. As of
February 16, 2004, Peoples' executive officers and directors, their respective
associates and Peoples Bank, through Peoples Financial Advisors group, held
common shares representing approximately 16.58% of the voting power of Peoples.
The effect of an abstention or a broker non-vote on the proposed
amendments to Article THREE of the Code of Regulations is the same as a "no"
vote. If adopted by the shareholders, the proposed amendments to Article THREE
would become effective immediately without any additional action.
The Board of Directors recommends that shareholders vote for the
adoption of the proposed amendments to Article THREE of Peoples' Code of
Regulations.
All valid proxies received prior to the Annual Meeting which do not
specify how common shares should be voted (other than proxies which constitute
broker non-votes) will be voted for the adoption of the proposed amendments to
Article THREE of the Code of Regulations.
SHAREHOLDER PROPOSALS
FOR 2005 ANNUAL MEETING
Proposals by shareholders intended to be presented at the 2005 Annual
Meeting of Shareholders must be received by the Corporate Secretary of Peoples
no later than November 5, 2004, 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 2005
Annual Meeting of Shareholders, and does not notify the Corporate Secretary of
Peoples of the proposal by January 19, 2005, the proxies solicited by the Board
of Directors for use at the 2005 Annual Meeting may be voted on the proposal,
without discussion of the proposal in Peoples' proxy statement for the 2005
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 2005 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,
2003
In accordance with the SEC's rules, the Audit Committee has issued the
following report for the 2003 fiscal year:
Role of the Audit Committee, Independent Auditors and Management
----------------------------------------------------------------
The Audit Committee consists of seven directors who qualify as
independent under the NASDAQ Corporate Governance Standards and Rule 10A-3 under
the Exchange Act, and operates under a written charter adopted by the Board of
Directors. The Audit Committee appoints the independent auditors employed by
Peoples.
The Audit Committee oversees Peoples' accounting and financial
reporting processes on behalf of the Board of Directors. Management has the
primary responsibility for the consolidated financial statements and the
accounting and financial reporting processes, including the establishment and
maintenance of adequate internal control over financial reporting for Peoples.
In fulfilling its oversight responsibilities, the Audit Committee reviewed and
discussed the audited consolidated financial statements for the 2003 fiscal year
with management, including a discussion of the quality, and not just the
acceptability, of the accounting principles applied, the reasonableness of
significant judgments, and the clarity of disclosures in the consolidated
financial statements.
Ernst & Young LLP ("E&Y") served as independent auditors for Peoples
for the 2003 fiscal year. E&Y is responsible for performing an audit of Peoples'
consolidated financial statements in accordance with US GAAP. The Audit
Committee reviewed with E&Y their judgments as to the quality, not just the
acceptability, of Peoples' accounting principles as applied in its financial
reporting and the other matters required to be discussed with the Audit
Committee under generally accepted auditing standards, including Statement on
Auditing Standards No. 61 (Communication With Audit Committees), as modified. In
addition, the Audit Committee discussed with E&Y the auditors' independence from
management and Peoples including the matters in the written disclosures required
by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees), as modified. The Audit Committee considered the non-audit
services rendered by E&Y to be compatible with maintaining E&Y's independence.
The Audit Committee discussed with Peoples' internal auditors and E&Y
the overall scope and plans for their respective audits. The Audit Committee met
with the internal auditors and E&Y, with and without management present, to
discuss the results of their respective audits, their evaluations of Peoples'
system of internal control over financial reporting, and the overall quality of
Peoples' financial reporting.
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, 2003, were prepared in accordance with US GAAP and the Audit Committee has
reviewed and discussed the audited consolidated financial statements with
management and the independent auditors. In reliance on the reviews and
discussions referred to above, the Audit Committee recommended to the Board of
Directors (and the Board of Directors has approved) that the audited
consolidated financial statements be included in Peoples' Annual Report on Form
10-K for the fiscal year ended December 31, 2003 to be filed with the SEC.
SUBMITTED BY THE AUDIT COMMITTEE OF PEOPLES' BOARD OF DIRECTORS:
Wilford D. Dimit, Chairman; Carl L. Baker, Jr., George W. Broughton,
Frank L. Christy, Robert W. Price, Thomas C. Vadakin, and Joseph H. Wesel,
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
auditors in order to assure that they do not impair the auditors' independence
from Peoples. The SEC's rules specify the types of non-audit services that an
independent auditor may not provide to its audit client and establish the Audit
Committee's responsibility for administration of the engagement of the
independent auditors. 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 auditors 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 auditors 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 auditors. 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 auditors. 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 auditors without obtaining
specific pre-approval from the Audit Committee. The Audit Committee will add or
subtract to 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 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 auditors.
Requests or applications to provide services that require specific
approval by the Audit Committee will be submitted to the Audit Committee by both
the independent auditors 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 AUDITOR FOR THE 2003 FISCAL YEAR
In March 2003, upon recommendation of the Audit Committee, the Board of
Directors of Peoples appointed the accounting firm of E&Y to serve as
independent auditors of Peoples for the 2003 fiscal year. Fees billed for
services rendered by E&Y for each of the 2003 fiscal year and the 2002 fiscal
year were:
A. Pre-Approved Audit Services
---------------------------
Service
------- Actual 2003 Actual 2002
Fees and Expenses Fees and Expenses
----------------- -----------------
Statutory audits or financial audits for subsidiaries or affiliates of $194,350 $154,445
Peoples' including quarterly reviews, review of Forms 10-Q and 10-K
Services associated with SEC registration statements, periodic reports $7,500 $107,500
and other documents filed with the SEC or other documents issued in
connection with securities offerings (e.g., comfort letters, consents),
and assistance in responding to SEC comment letters
Attestation of management reports on internal controls under FDICIA $17,000 $16,000
Expanded procedures for attestation of management reports on internal $17,060 $0
controls under FDCIA following requirements of Section 404 of the
Sarbanes-Oxley Act of 2002
---------------------- ----------------------
Total $235,910 $277,945
B. Pre-Approved Audit-Related Services
-----------------------------------
Service
------- Actual 2003 Actual 2002
Fees and Expenses Fees and Expenses
----------------- -----------------
Due diligence services pertaining to potential business $3,500 $69,000
acquisitions/dispositions
Consultations by Peoples' management as to the accounting or disclosure $9,000 $9,500
treatment of transactions or events and/or the actual or potential impact
of final or proposed rules, standards or interpretations by the SEC,
FASB, or other regulatory or standard-setting bodies
Statutory, subsidiary or equity investee audits incremental to the audit $7,200 $0
of the consolidated financial statements
General assistance with implementation of the requirements of SEC rules $11,000 $0
or listing standards promulgated pursuant to the Sarbanes-Oxley Act of
2002
---------------------- ---------------------
Total $30,700 $78,500
C. Pre-Approved Tax Services
-----------------------------
Service
------- Actual 2003 Actual 2002
Fees and Expenses Fees and Expenses
----------------- -----------------
U.S. federal, state and local tax planning and advice (including tax $35,825 $90,000
services related to private foundation in 2003)
U.S. federal, state and local tax compliance $28,325 $29,850
Assistance with tax audits and appeals before the IRS and similar state, $5,000 $5,500
local and foreign agencies
Tax services related to mergers and acquisitions $18,450 $21,375
Tax advice and assistance regarding statutory, regulatory or $24,360 $0
administrative developments including low income housing and business
owned life insurance tax matters
---------------------- ---------------------
Total $111,960 $146,725
D. Pre-Approved All Other Services
Service
------- Actual 2003 Actual 2002
Fees and Expenses Fees and Expenses
----------------- -----------------
Risk management advisory services, e.g. assessment and testing of $0 $74,866
security infrastructure controls, record keeping issues related to
empoloyee benefit plans, etc.
---------------------- ---------------------
Total $0 $74,866
NOTIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Pursuant to the appointment by the Audit Committee, E&Y will
serve as independent auditors of Peoples for the 2004 fiscal year. As previously
noted, in March 2003, upon recommendation of the Audit Committee, the full Board
of Directors appointed E&Y to serve as independent auditors of Peoples for the
2003 fiscal year. E&Y has served as Peoples' independent auditors 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
President, Chief Executive Officer and Chairman of the Board
PEOPLES BANCORP INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 8, 2004
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 8, 2004 in the Ball Room,
Holiday Inn, 701 Pike Street, Marietta, Ohio (Interstate 77, Ohio exit 1) at
10:30 A.M., local 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
Robert E. Evans (for re-election) 2007
Robert W. Price (for re-election) 2007
Paul T. Theisen (for re-election) 2007
[ ] FOR [ ] AGAINST [ ] FOR ALL EXCEPT
*(INSTRUCTION: To withhold authority to vote for any individual
nominee, mark "FOR ALL EXCEPT" and write the name of that nominee in
the space provided below.)
---------------------------------------------------------------------
2. To adopt amendments to Article THREE of Peoples' Code of Regulations
to designate additional officers to be elected by the directors and
clarify and separate the roles of the officers.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. 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 AND FOR
PROPOSAL NO. 2. 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
8, 2004 meeting and the Summary Annual Report and Form 10-K of Peoples for the
fiscal year ended December 31, 2003.
Dated: _______________________________________, 2004
-------------------------------------------------
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
APPENDIX A
Audit Committee Charter to be presented and adopted by the full
Board of Directors on February 12, 2004
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, and
potential shareholders of the Company, the investment community and others
relating to the integrity of the accounting of the Company's financial
statements and accounting and financial reporting processes; 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 auditors; the independent auditors' 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, the independent
auditors, Auditor of the Company (the "Auditor"), General Counsel of the Company
(the "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 or otherwise within the scope of
its duties and responsibilities, with full access to all books, records,
facilities, and personnel of the Company and its subsidiaries; to engage
independent counsel and other advisers as the Committee determines necessary to
carry out its duties and responsibilities; and to demand and receive funding by
the Company for the payment of compensation to the independent auditors engaged
by the Committee for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company or any of its
subsidiaries; compensation to any advisors employed by the Committee; and
ordinary administrative expenses of the Committee that are necessary or
appropriate in carrying out the Committee's duties and responsibilities.
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");
o meet the independence criteria set forth in Rule 10A-3(b)(1) under the
Securities and Exchange Act of 1934 (the "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, of the Company or of
its subsidiaries, 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 responsibilities, which results in the
individual's financial sophistication.
Duties and Responsibilities:
----------------------------
The primary responsibility of the Committee is to oversee the Company's
accounting and financial reporting processes on behalf of the Board and report
the results of their activities to the Board. While the Committee has the
oversight responsibilities and authority set forth in this Charter, it is not
the duty of the Committee to prepare the Company's financial statements, 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
and for the establishment and maintenance of systems of disclosure controls and
procedures and internal control over financial reporting. The independent
auditors are responsible for auditing the Company's financial statements and
issuing an attestation report on management's assessment of the Company's
internal control over financial reporting, 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 auditors, 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 auditors and shall not engage the independent auditors to perform
the specific non-audit services proscribed by law, rule or regulation,
including, without limitation, the rules and regulations implemented by the
Securities and Exchange Commission (the "SEC") or the Public Company Accounting
Oversight Board.. 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.
The Company must disclose the following in each annual proxy statement and
Annual Report on Form 10-K:
o the Committee's Audit and Non-Audit Services Pre-approval Policy;
o the percentage of total fees paid to the independent auditors where
the de minimus exception in section 2-01(C)(7)(i)(C) of SEC Regulation
S-X to the pre-approval requirements was used; and
o the amounts of "audit fees", "audit-related fees," "tax fees" and "all
other fees" paid by the Company to the independent auditors for each
of the two most recently completed fiscal years.
At least annually, the Committee shall obtain and review separate reports by the
independent auditors and Auditor describing:
o The independent auditors' or Auditor'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 independent auditors
or Auditor, and any steps taken to deal with any such issues.
o Any difficulties the independent auditors or Auditor encountered in
the course of their audits, including any restrictions on the scope of
their work or access to required information.
The Committee shall be responsible for ensuring that the independent auditors
submit on a periodic basis to the Committee a formal written statement
delineating all relationships between the independent auditors and the Company,
consistent with Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, as modified or supplemented. The Committee
shall also be responsible for actively engaging in a dialogue with the
independent auditors with respect to any disclosed relationships or services
that may impact the objectivity and independence of the independent auditors and
for taking, or recommending that the full Board take, appropriate action to
oversee the independence of the independent auditors.
The Committee shall assure the regular rotation of the lead audit partner and
independent review partner of the independent auditors as required by applicable
laws, rules and regulations. In addition, the committee shall set clear hiring
policies for employees or former employees of the independent auditors that
comply with applicable laws, rules and regulations, including the rules and
regulations of the SEC and Nasdaq.
The Committee shall discuss with the Auditor and the independent auditors
annually, before each audit begins, 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 Auditor, and the independent
auditors the adequacy and effectiveness of the Company's systems of disclosure
controls and procedures and internal control over financial reporting and
related 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 Auditor or independent auditors.
The Committee shall receive regular reports from the independent auditors on the
critical accounting 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 Auditor, the scope of the internal audit, the
internal audit budget and staffing, internal audit charter and the Auditor's
compliance with the Institute of Auditor Standards for Professional Practice of
Internal Auditing.
The Committee shall review management's assessment of the effectiveness of
internal controls as of the end of the most recent fiscal year and the
independent auditors' attestation report on management's assessment.
Additionally, the Committee shall review with the Chief Executive Officer and
the Chief Financial Officer of the Company the quality of earnings of the
Company.
The Committee shall receive General Counsel's reports of (i) evidence of a
material violation of an applicable United States federal or state securities
law, material breaches of fiduciary duty arising under United States federal or
state law, or a similar material violation of any United States federal or state
law; and (ii) 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
auditors and review with the full Board any proposed discharge of the
independent auditors.
The Committee shall perform an evaluation of its performance at least annually
to determine whether the Committee 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 the disclosures
to be made under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" with management and the independent auditors 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 auditors 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 auditors the
financial statements and disclosures to be made 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 the independent
auditors' judgment about the quality, not just the acceptability, of accounting
principles as applied in its financial reporting, the consistency of the
Company's, the reasonableness of accounting estimates, and the clarity and
completeness 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 auditors under generally
accepted auditing standards.
The Committee shall recommend to the Board whether the Company's audited
financial statements should be included in the Annual Report on Form 10-K.
The Committee shall review disclosures made by the Chief Executive Officer and
the Chief Financial Officer of the Company during the certification process in
respect of each Quarterly Report on Form 10-Q and each Annual Report on Form
10-k, about significant deficiencies and material weaknesses in the design or
operation of the Company's internal control over financial reporting and any
fraud that involves management or other employees who have a significant role in
the Company's internal control over financial reporting. The Committee shall
also discuss any changes in the Company's internal control over financial
reporting which occurred during the last fiscal quarter.
The Committee shall prepare the Audit Committee Report to be integrated in the
Company's annual proxy statement, as required by SEC rules and regulations, as
well as review any other information related to the duties and responsibilities
of the Committee required to be disclosed under applicable laws, rules and
regulations, including the rules and regulations of the SEC and Nasdaq.
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, the Auditor, General Counsel, the
independent auditors or others to attend the meetings and provide pertinent
information as necessary.
The Committee shall conduct executive sessions with the independent auditors,
the Chief Executive Officer, the Chief Operating Officer, the Chief Financial
Officer, the Controller, the Auditor, the General Counsel or anyone else as
desired by the Committee.
Code of Ethics and Related Party Transactions:
The Committee shall review with the 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 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, internal accounting controls, or auditing matters that may be
submitted by any person, as well as review each such complaint 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 each such
submission received, its current status or resolution.
The Committee shall conduct a review and approve each related party transaction
(any transaction required to be disclosed pursuant to Item 404 of SEC Regulation
S-K) for potential conflict of interest situations on an ongoing basis.