-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DvOKhrKUQZLgjhLHndiai36tOve3JcYfJur/PI45v8FnyBDpuKrT096r/gDcFMTF 5ukWHhYmX1BHhLUNJGnJMg== 0000318300-96-000003.txt : 19960402 0000318300-96-000003.hdr.sgml : 19960402 ACCESSION NUMBER: 0000318300-96-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEOPLES BANCORP INC CENTRAL INDEX KEY: 0000318300 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 310987416 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-16772 FILM NUMBER: 96542520 BUSINESS ADDRESS: STREET 1: 138 PUTNAM ST STREET 2: P O BOX 738 CITY: MARIETTA STATE: OH ZIP: 45750 BUSINESS PHONE: 6143746163 10-K 1 ACTUAL FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ____ to ____ Commission file number 0-16772 PEOPLES BANCORP INC. ------------------------------------------------------ (Exact name of Registrant as specified in its charter) Ohio 31-0987416 - ------------------------------ ------------------- (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification No.) 138 Putnam Street, P. O. Box 738, Marietta, Ohio 45750 - -------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (614) 373-3155 -------------- Securities registered pursuant to Section 12(b) of the Act: None ----------- Securities registered pursuant to Section 12(g) of the Act: Common Shares, No Par Value (3,118,334 outstanding at February 29, 1996) ---------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] Based upon the closing price of the Common Shares of the Registrant on the The NASDAQ National Market as of February 29, 1996, the aggregate market value of the Common Shares of the Registrant held by nonaffiliates on that date was $69,057,264. For this purpose, certain executive officers and directors are considered affiliates. Documents Incorporated by Reference: 1) Portions of Registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1995, are incorporated by reference into Parts I and II of this Annual Report on Form 10-K. 2) Portions of Registrant's Definitive Proxy Statement relating to the annual meeting to be held April 9, 1996 are incorporated by reference into Part III of this Annual Report on Form 10-K. Exhibit Index Appears on Pages 14 through 16 Page 1 of 228 Pages PART I ITEM 1. BUSINESS. - ------------------ Introduction - ------------ Peoples Bancorp Inc. (the "Company") was incorporated under the laws of the State of Delaware on April 1, 1980. The Company was merged, following Shareholder approval, into the Peoples Bancorp Inc., an Ohio corporation, effective April 6, 1993, pursuant to a reincorporation proceeding. Its principal business is to act as a multi-bank holding company. Its wholly-owned subsidiaries are The Peoples Banking and Trust Company, Marietta, Ohio ("Peoples Bank"), The First National Bank of Southeastern Ohio ("First National Bank") and The Northwest Territory Life Insurance Company, an Arizona corporation ("Northwest Territory"). At December 31, 1995, Peoples Bancorp Inc. (parent company only) had 31 full-time equivalent employees. The Peoples Banking and Trust Company - ------------------------------------- Peoples Bank was chartered as an Ohio banking corporation under its present name in Marietta, Ohio, in 1902. At December 31, 1995, it had assets of $468,804,000; deposits of $375,643,000; and net loans of $326,811,000. Peoples Bank is a full-service commercial bank. It provides checking accounts, NOW accounts, Super NOW accounts, money market deposit accounts, savings accounts, time certificates of deposit, commercial loans, installment loans, commercial and residential real estate mortgage loans, credit cards, automatic teller machines, banking by phone, lease financing, corporate and personal trust services and safe deposit rental facilities. Peoples Bank also sells travelers checks, money orders and cashier's checks. Services are provided through ordinary walk-in offices, automated teller facilities called "SuperTeller", and automobile drive-in facilities called "Motor Bank". At December 31, 1995, the Trust Department of Peoples Bank held approximately $390 million (market value) in trust and custodial accounts apart from the assets of the Bank. With all of its offices located in Ohio, Peoples Bank serves principally Washington, Athens and Meigs Counties, together with portions of Hocking, Perry and Vinton Counties in Ohio and adjacent parts of Northern West Virginia. The business production office in Newark-Granville, Ohio, serves that immediate area in Licking County. Peoples Bank provides services to its customers at its principal banking office in downtown Marietta and through SuperTeller and other banking facilities. A full-service office, Motor Bank and SuperTeller are located at the Frontier Shopping Center in Marietta. Also, a full-service office and SuperTeller are located inside a grocery store at Pike and Acme Streets in Marietta. A full-service office, two Motor Banks and a SuperTeller are operated in Belpre, Ohio. Full-service offices with Motor Banks are located in Lowell, Reno and Nelsonville, Ohio. A full-service branch and SuperTeller are located at One North Court Street in downtown Athens, Ohio. A full-service office, Motor Bank and SuperTeller are located at the Athens Mall. Also, three SuperTeller machines are located on the campus of Ohio University in Athens, Ohio. A full-service bank is located at Middleport, Ohio. On December 18, 1995, the Company announced that Peoples Bank had reached a definitive agreement to purchase three full-service banking offices from an unrelated financial institution. In the transaction, Peoples Bank will assume approximately $75 million in deposits. The offices are located in Gallipolis, Pomeroy, and Rutland, Ohio. The Gallipolis office is located downtown in Gallipolis and currently operates a full-service office, Motor Bank, and an automated teller machine. A full-service office and separate Motor Bank are located in downtown Pomeroy. An automated teller machine is also located in Pomeroy outside a local convenience store. The Rutland office is a full-service and Motor Bank facility. At December 31, 1995, Peoples Bank had 190 full-time equivalent employees. The First National Bank of Southeastern Ohio - -------------------------------------------- First National Bank is a national banking association chartered in 1900. It provides banking services and products that are substantially the same as those of Peoples Bank. First National Bank operates a commercial bank and Motor Bank at one location at 415 Main Street, Caldwell, Ohio. It also has a full-service office and Motor Bank on Marion Street in Chesterhill, Ohio. It also operates a full-service office on Kennebec Street, McConnelsville, Ohio. First National Bank's market area is comprised of Caldwell, Chesterhill, McConnelsville and the surrounding area in Noble and Morgan Counties, Ohio. At December 31, 1995, it had assets of $70,004,000, deposits of $54,077,000 and net loans of $45,993,000. At December 31, 1995, First National Bank had 29 full-time equivalent employees. First National Bank also operates two insurance agency subsidiaries, Northwest Territory Life Insurance Agency, Inc. and Northwest Territory Property & Casualty Insurance Agency, Inc. (the "Agencies"). The Agencies were created in compliance with federal regulations allowing insurance powers to national banks in communities with populations of 5,000 people or less. On December 22, 1995, each Agency received a Certificate of Qualification (license) to operate the Agency from the Ohio Department of Insurance, thereby allowing the Agencies the ability to engage in the insurance agency business, subject to the regulations of the Ohio Department of Insurance and the Comptroller of the Currency. These are the first insurance agencies in Ohio associated with a financial institution to receive licenses to conduct a broad-based insurance business. At December 31, 1995, the Agencies had 4 full-time equivalent employees. The Northwest Territory Life Insurance Company - ---------------------------------------------- Northwest Territory was organized under Arizona law in 1983 and was issued a Certificate of Authority to act as a reinsurance company by the State of Arizona on February 8, 1984. Northwest Territory reinsures credit life and disability insurance issued to customers of banking subsidiaries of the Company by the issuing insurance company. At November 30, 1995, Northwest Territory had total assets of $1,327,000 and had gross premium income of $244,000 in 1995, $238,000 in 1994 and $231,000 in 1993. Northwest Territory reinsures risks (currently not exceeding $15,000 per insured on a present value basis) within limits established by governmental regulations and management policy. Northwest Territory has no employees. Customers and Markets - --------------------- The Company's service area has a diverse economic structure. Principal industries in the area include metals, plastics and petrochemical manufacturing; oil, gas and coal production and related support industries. In addition, tourism, education and other service-related industries are important and growing industries. Consequently, the Company is not dependent upon any one industry segment for its business opportunities. Competition - ----------- The banking subsidiaries of the Company experience significant competition in attracting depositors and borrowers. Competition in lending activities comes principally from other commercial banks in the lending areas of the banks and, to a lesser extent, from savings associations, insurance companies, governmental agencies, credit unions, brokerage firms and pension funds. The primary factors in competing for loans are interest rate and overall lending services. Competition for deposits comes from other commercial banks, savings associations, money market funds and credit unions as well as from insurance companies and brokerage firms. The primary factors in competing for deposits are interest rates paid on deposits, account liquidity, convenience of office location and overall financial condition. The Company believes that its size, overall banking services and financial condition place it in a favorable competitive position. Northwest Territory operates in the highly competitive industry of credit life and disability insurance. The principal methods of competition in the credit life and disability insurance industry are the availability of coverages and premium rates. The Company believes Northwest Territory has a competitive advantage due to the fact that the business of Northwest Territory is limited to the accepting of life and disability reinsurance ceded in part to Northwest Territory from the credit life and disability insurance purchased by loan customers of Peoples Bank and First National Bank. The Agencies operate in the extremely competitive life insurance and property and casualty insurance industries, due mostly to the large number of companies and agents located within the southeastern Ohio market. The Agencies intend to provide several insurance product options to consumers, including traditional life insurance and property and casualty insurance, as well as investments in mutual funds, variable and fixed annuities and securities. The Agencies' future competitive advantage will be based on their ability to provide products to consumers efficiently with sensitivity to customer service and cost price issues. Supervision and Regulation - -------------------------- The following is a summary of certain statutes and regulations affecting the Company and its subsidiaries. The summary is qualified in its entirety by reference to such statutes and regulations. The Company is a bank holding company under the Bank Holding Company Act of 1956, as amended, which restricts the activities of the Company and the acquisition by the Company of voting stock or assets of any bank, savings association or other company. The Company is also subject to the reporting requirements of, and examination and regulation by, the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). Subsidiary banks of a bank holding company are subject to certain restrictions imposed by the Federal Reserve Act on transactions with affiliates, including any loans or extensions of credit to the bank holding company or any of its subsidiaries, investments in the stock or other securities thereof and the taking of such stock or securities as collateral for loans to any borrower; the issuance of guarantees, acceptances or letters of credit on behalf of the bank holding company and its subsidiaries; purchases or sales of securities or other assets; and the payment of money or furnishing of services to the bank holding company and other subsidiaries. A bank holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with extensions of credit and/or the provision of other property or services to a customer by the bank holding company or its subsidiaries. Bank holding companies are prohibited from acquiring direct or indirect control of more than 5% of any class of voting stock or substantially all of the assets of any bank holding company without the prior approval of the Federal Reserve Board. In addition, acquisitions across state lines are limited to acquiring banks in those states specifically authorizing such interstate acquisitions. However, since September 1995, federal law has permitted interstate acquisitions of banks, if the bank acquired retains its separate charter. As a national bank, First National Bank is supervised and regulated by the Comptroller of the Currency. As an Ohio state-chartered bank, Peoples Bank is supervised and regulated by the Ohio Division of Banks and the Federal Deposit Insurance Corporation ("FDIC"). The deposits of First National Bank and Peoples Bank are insured by the FDIC and those entities are subject to the applicable provisions of the Federal Deposit Insurance Act. A subsidiary of a bank holding company can be liable to reimburse the FDIC if the FDIC incurs or anticipates a loss because of a default of another FDIC-insured subsidiary of the bank holding company or in connection with FDIC assistance provided to such subsidiary in danger of default. In addition, the holding company of any insured financial institution that submits a capital plan under the federal banking agencies' regulations on prompt corrective action, guarantees a portion of the institution's capital shortfall, as discussed below. Various requirements and restrictions under the laws of the United States and the State of Ohio affect the operations of Peoples Bank and First National Bank, including requirements to maintain reserves against deposits, restrictions on the nature and amount of loans which may be made and the interest that may be charged thereon, restrictions relating to investments and other activities, limitations on credit exposure to correspondent banks, limitations on activities based on capital and surplus, limitations on payment of dividends, and limitations on branching. Pursuant to recent federal legislation, First National Bank may branch across state lines, if permitted by the law of the other state. In addition, effective June 1997, such interstate branching by First National Bank will be authorized, unless the law of the other state specifically prohibits the interstate branching authority granted by federal law. The Federal Reserve Board has adopted risk-based capital guidelines for bank holding companies and for state member banks, such as Peoples Bank and First National Bank. The risk-based capital guidelines include both a definition of capital and a framework for calculating weighted-risk assets by assigning assets and off-balance sheet items to broad risk categories. The minimum ratio of total capital to weighted-risk assets (including certain off-balance sheet items, such as standby letters of credit) is 8%. At least 4.0 percentage points is to be comprised of common stockholder's equity (including retained earnings but excluding treasury stock), noncumulative perpetual preferred stock, a limited amount of cumulative perpetual preferred stock, and minority interests in equity accounts of consolidated subsidiaries, less goodwill and certain other intangible assets ("Tier 1 capital"). The remainder ("Tier 2 capital") may consist, among other things, of mandatory convertible debt securities, a limited amount of subordinated debt, other preferred stock and a limited amount of allowance for loan and lease losses. The Federal Reserve Board also imposes a minimum leverage ratio (Tier 1 capital to total assets) of 4% for bank holding companies and state member banks that meet certain specified conditions, including no operational, financial or supervisory deficiencies and including having the highest regulatory rating. The minimum leverage ratio is 1.0 - 2.0% higher for other bank holding companies and state member banks based on their particular circumstances and risk profiles and those experiencing or anticipating significant growth. National bank subsidiaries, such as First National Bank, are subject to similar capital requirements adopted by the Comptroller of the Currency, and state non-member bank subsidiaries, such as Peoples Bank, are subject to similar capital requirements adopted by the FDIC. Under an outstanding proposal of the Comptroller and the FDIC to establish an interest rate risk component, First National Bank and Peoples Bank may be required to have additional capital if their interest rate risk exposure exceeds acceptable levels provided for in the regulation as when adopted. The Company and its subsidiaries currently satisfy all capital requirements. Failure to meet applicable capital guidelines could subject a banking institution to a variety of enforcement remedies available to federal and state regulatory authorities, including the termination of deposit insurance by the FDIC. The federal banking regulators have established regulations governing prompt corrective action to resolve capital deficient banks. Under these regulations, institutions which become undercapitalized become subject to mandatory regulatory scrutiny and limitations, which increase as capital continues to decrease. Such institutions are also required to file capital plans with their primary federal regulator, and their holding companies must guarantee the capital shortfall up to 5% of the assets of the capital deficient institution at the time it becomes undercapitalized. The ability of a bank holding company to obtain funds for the payment of dividends and for other cash requirements is largely dependent on the amount of dividends which may be declared by its subsidiary banks and other subsidiaries. However, the Federal Reserve Board expects the Company to serve as a source of strength to its subsidiary banks, which may require it to retain capital for further investment in subsidiaries, rather than for dividends for shareholders of the Company. Peoples Bank and First National Bank may not pay dividends to the Company if, after paying such dividends, they would fail to meet the required minimum levels under the risk-based capital guidelines and the minimum leverage ratio requirements. Peoples Bank and First National Bank must have the approval of their respective regulative authorities if a dividend in any year would cause the total dividends for that year to exceed the sum of the current year's net profits and the retained net profits for the preceding two years, less required transfers to surplus. First National Bank may not pay a dividend either in an amount greater than its net profits then on hand, after deducting its losses and bad debts, or if less than 1/10th of net profits for the preceding six months, for a quarterly or semi-annual dividend, or the preceding year, for an annual dividend, was transferred to surplus. Payment of dividends by the bank subsidiaries may be restricted at any time at the discretion of the regulatory authorities, if they deem such dividends to constitute an unsafe and/or unsound banking practice. These provisions could have the effect of limiting the Company's ability to pay dividends on its outstanding common shares. Northwest Territory is chartered by the State of Arizona and is subject to regulation, supervision and examination by the Arizona Department of Insurance. The powers of regulation and supervision of the Arizona Department of Insurance relate generally to such matters as minimum capitalization, the grant and revocation of certificates of authority to transact business, the nature of and limitations on investments, the maintenance of reserves, the form and content of required financial statements, reporting requirements and other matters pertaining to life and disability insurance companies. The Agencies are incorporated in the State of Ohio and licensed by the Ohio Department of Insurance, which regulates, supervises and has authority to examine the Agencies. Monetary Policy and Economic Conditions - --------------------------------------- The commercial banking business is affected not only by general economic conditions, but also by the policies of various governmental regulatory agencies, including the Federal Reserve Board. The Federal Reserve Board regulates money and credit conditions and interest rates in order to influence general economic conditions primarily through open market operations in U.S. Government securities, changes in the discount rate on bank borrowings, and changes in the reserve requirements against bank deposits. These policies and regulations significantly affect the overall growth and distribution of bank loans, investments and deposits, and the interest rates charged on loans, as well as the interest rates paid on deposits and accounts. The monetary policies of the Federal Reserve Board have had a significant effect on the operating results of commercial banks in the past and are expected to continue to have significant effects in the future. In view of the changing conditions in the economy and the money markets and the activities of monetary and fiscal authorities, no definitive predictions can be made as to future changes in interest rates, credit availability or deposit levels. Statistical Financial Information Regarding the Company - ------------------------------------------------------- The following listing of statistical financial information, which is included in the Company's Annual Report to Shareholders for the fiscal year ended December 31, 1995 (the "Company's 1995 Annual Report") and incorporated herein by reference, provides comparative data for the Company over the past three and five years, as appropriate. These tables should be read in conjunction with "Management's Discussion and Analysis" and the Consolidated Financial Statements of the Company and its subsidiaries found at pages 35 through 43 and 14 through 29, respectively, of the Company's 1995 Annual Report. Average Balances and Analysis of Net Interest Income: Please refer to page 31 of the Company's 1995 Annual Report. Rate Volume Analysis: Please refer to page 32 of the Company's 1995 Annual Report. Loan Maturities: Please refer to page 32 of the Company's 1995 Annual Report. Average Deposits: Please refer to page 31 of the Company's 1995 Annual Report. Maturities Schedule of Large Certificates of Deposit: Please refer to page 32 of the Company's 1995 Annual Report. Loan Portfolio Analysis: Please refer to pages 33 and 34 of the Company's 1995 Annual Report. Securities Analysis: Please refer to pages 20 through 22 and page 41 of the Company's 1995 Annual Report. Return Ratios: Please refer to page 11 of the Company's 1995 Annual Report. Effect of Environmental Regulation - ---------------------------------- Compliance with federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a material effect upon the capital expenditures, earnings or competitive position of the Company and its subsidiaries. The Company believes that the nature of the operations of its subsidiaries has little, if any, environmental impact. The Company, therefore, anticipates no material capital expenditures for environmental control facilities for its current fiscal year or for the foreseeable future. The Company's subsidiaries may be required to make capital expenditures for environmental control facilities related to properties which they may acquire through foreclosure proceedings in the future; however, the amount of such capital expenditures, if any, is not currently determinable. ITEM 2. PROPERTIES - ------------------- The principal office of the Company and Peoples Bank is located at 138 Putnam Street, Marietta, Ohio. This location consists of a five-story, stone-block building and one other smaller building attached by interior corridors. In 1993, Peoples Bank completed construction of a five-story addition to its primary facility in downtown Marietta. Peoples Bank also owns several nearby vacant lots for parking and a nearby Motor Bank. Peoples Bank owns property on which three additional full-service and two additional Motor Banks are located, leases the land on which one full-service branch is located and leases its other full-service branch. Peoples Bank's business production office in Newark-Granville is also leased. Peoples Bank also owns a two-story, block building on the Public Square in Nelsonville, Ohio, an additional office in Nelsonville, together with an office consisting of a two-story concrete structure at One North Court Street, Athens, Ohio, and a brick full-service office in the Athens Mall. The building in the Mall is owned by Peoples Bank on leased real property. The office located in The Plains is operated under a lease which expires in June, 2001. First National Bank owns a three-story office building of brick and stone at 415 Main Street in Caldwell, Ohio, and a one-story masonry and brick building located on Marion Street in Chesterhill, Morgan County, Ohio, together with a two-story brick structure in McConnelsville, Morgan County, Ohio, located on Kennebec Street. The Agencies headquarters are also located in the Caldwell office of First National Bank. All other properties occupied by the Company and its subsidiaries are owned by the Company or its subsidiaries. The Company and its subsidiaries own other real property which, when considered in the aggregate, is not material to their operations. Management believes that all of the properties described above are in satisfactory condition for their intended use. ITEM 3. LEGAL PROCEEDINGS. - --------------------------- There are no pending legal proceedings to which the Company or its subsidiaries are a party or to which any of their property is subject other than ordinary routine litigation incidental to their business, none of which is material. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - ------------------------------------------------------------- Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. - ---------------------------------------------------------- Please refer to pages 12 and 13 of the Company's 1995 Annual Report, which are incorporated by reference herein. ITEM 6. SELECTED FINANCIAL DATA. - --------------------------------- The table of Selected Financial Data on page 11 of the Company's 1995 Annual Report is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. - ---------------------------------------------------------- Please refer to pages 35 through 43 of the Company's 1995 Annual Report, which are incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. - ----------------------------------------------------- The Consolidated Financial Statements of Peoples Bancorp Inc. and it subsidiaries, included on pages 14 through 29 of the Company's 1995 Annual Report, and the Report of Ernst & Young LLP included therein at page 30 are incorporated herein by reference. Following is an index to the financial statements included in the Company's 1995 Annual Report: 1995 Annual Report Financial Statements: Pages - --------------------------------------------------------- ----------- Peoples Bancorp Inc. and Subsidiaries: Report of Independent Auditors 30 Consolidated Balance Sheets as of December 31, 1995 and 1994 14 Consolidated Statements of Income for the Three Years Ended December 31, 1995 15 Consolidated Statements of Stockholders' Equity for the Three Years Ended December 31, 1995 16 Consolidated Statements of Cash Flows for the Three Years Ended December 31, 1995 17 Notes to the Consolidated Financial Statements 18-29 Peoples Bancorp Inc.: (Parent Company Only Financial Statements are included in Note 15 of the Notes to the Consolidated Financial Statements) 28-29 Quarterly financial data set forth at page 29 of the Company's 1995 Annual Report are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. - --------------------------------------------------------- No response required. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. - ------------------------------------------------------------- Directors and Executive Officers of the Company include those persons enumerated under "Election of Directors" on pages 5 and 6 of the Company's definitive Proxy Statement relating to the Company's Annual Meeting of Shareholders to be held April 9, 1996, which section is expressly incorporated by reference. Other Executive Officers are Carol A. Schneeberger (39), Vice President/Operations; Rolland B. Swart (57), Vice President/Business Development; John (Jack) W. Conlon (50), Chief Financial Officer; Jeffrey D. Welch (41), Treasurer; and RobRoy Walters (37), Controller. Ms. Schneeberger became Vice President/Operations of the Company in October, 1988. Prior thereto, she was Auditor of the Company from August, 1987 to October, 1988, and Auditor of Peoples Bank from January, 1986 to October, 1988. She was Assistant Auditor of Peoples Bank from January, 1979 to January, 1986. Mr. Swart joined the Company in October, 1990 at his current position, left this position in August, 1993, to become an executive vice president with Peoples Bank, and then rejoined the Company at his current position in September, 1994. Mr. Conlon has been Chief Financial Officer of the Company since April, 1991. He has also been Chief Financial Officer and Treasurer of Peoples Bank for more than five years. Mr. Welch has been Treasurer of the Company since 1985. Mr. Walters joined the Company in July, 1995. Mr. Walters has been Controller for Peoples Bank since January, 1993. Prior thereto, Mr. Walters was Assistant Controller from April, 1991 to December, 1992, and Accounting Manager from February, 1989 to March, 1991. No disclosure is required to be made by the Company under Item 405 of Regulation S-K. ITEM 11. EXECUTIVE COMPENSATION. - --------------------------------- See "Compensation Committee Interlocks and Insider Participation" and "Compensation of Executive Officers and Directors" on page 10, and pages 10 through 13, respectively, of the Company's definitive Proxy Statement relating to the Company's Annual Meeting of Shareholders to be held April 9, 1996, which are expressly incorporated by reference. Neither the report on executive compensation nor the performance graph included in the Company's definitive Proxy Statement relating to the Company's Annual Meeting of Shareholders to be held on April 9, 1996, shall be deemed to be incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. - ------------------------------------------------------------- See "Security Ownership of Certain Beneficial Owners and Management" on pages 2 through 4 of the Company's definitive Proxy Statement relating to the Company's Annual Meeting of Shareholders to be held April 9, 1996, which section is expressly incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. - --------------------------------------------------------- See "Transactions Involving Management" on pages 7 and 8 of the Company's definitive Proxy Statement relating to the Company's Annual Meeting of Shareholders to be held April 9, 1996, which section is expressly incorporated by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. - -------------------------------------------------------------- (a) (1) Financial Statements -------------------- For a list of all financial statements included in this Annual Report on Form 10-K, see "Index to Financial Statements" at Page 13. (a) (2) Financial Statement Schedules ----------------------------- All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. (a) (3) Exhibits -------- Exhibits filed with this Annual Report on Form 10-K are attached hereto. For a list of such exhibits, see "Exhibit Index" beginning at page 14. The following table provides certain information concerning executive compensation plans and arrangements required to be filed as exhibits to this Annual Report on Form 10-K. Executive Compensation Plans and Arrangements --------------------------------------------- Exhibit No. Description Location ----------- ---------------------------- ------------------- 10(a) Deferred Compensation Incorporated herein Agreement dated November 16, by reference to 1976 between Robert E. Evans Exhibit 6(g) to and The Peoples Banking and Registration Statement Trust Company, as amended No. 2-68524 on Form March 13, 1979. S-14 of Peoples Bancorp Inc., a Delaware corporation and the Company's predecessor ("Peoples Delaware"). 10(b) Peoples Bancorp Inc. Pages 60 through 89. Retirement Savings Plan. (Amended and Restated Effective January 1, 1996.) 10(d) Peoples Bancorp Inc. Pages 90 through 149. Retirement Plan and Trust. (Amended and Restated Effective January 1, 1989.) 10(e) Summary of the Incentive Incorporated herein Bonus Plan of Peoples by reference to Bancorp Inc. Exhibit 10(f) of Peoples Delaware's Annual Report on Form 10-K for fiscal year ended December 31, 1992 (File No. 0-16772). 10(f) Peoples Bancorp Inc. Amended Incorporated herein by and Restated 1993 Stock reference to Exhibit 4 Option Plan. of the Company's Registration Statement on Form S-8 filed August 25, 1993 (Registration Statement No. 33-67878). 10(g) Form of Stock Option Pages 150 thorugh 154. Agreement used in connection with grant of non-qualified stock options under Peoples Bancorp Inc. Amended and Restated 1993 Stock Option Plan. 10(h) Form of Stock Option Pages 155 through 159. Agreement dated May 20, 1993, used in connection with grant of incentive stock options under Peoples Bancorp Inc. Amended and Restated 1993 Stock Option Plan. 10(i) Form of Stock Option Pages 160 through 164. Agreement dated November 10, 1994, used in connection with grant of incentive stock options under Peoples Bancorp Inc. Amended and Restated 1993 Stock Option Plan. 10(j) Peoples Bancorp Inc. 1995 Incorporated herein by Stock Option Plan. reference to Exhibit 4 of the Company's Form S-8 filed May 24, 1995 (Registration Statement No. 33-59569). 10(k) Form of Stock Option Pages 165 through 169. Agreement used in connection with grant of non-qualified stock options to non-employee directors of the Company under Peoples Bancorp Inc. 1995 Stock Option Plan. 10(l) Form of Stock Option Pages 170 through 174. Agreement used in connection with grant of non-qualified stock options to non-employee directors of the Company's subsidiaries under Peoples Bancorp Inc. 1995 Stock Option Plan. (b) Reports on Form 8-K ------------------- There were no current reports on Form 8-K filed during the quarter ended December 31, 1995. (c) Exhibits -------- Exhibits filed with Annual Report on Form 10-K are attached hereto. For a list of such exhibits, see "Exhibit Index" beginning at page 14. (d) Financial Statement Schedules ----------------------------- None. SIGNATURES - ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. PEOPLES BANCORP INC. Date: March 25, 1996 By: /s/ ROBERT E. EVANS Robert E. Evans, President Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signatures Title Date - --------------------------- ------------------------- -------------- /s/ ROBERT E. EVANS President and Chief March 25, 1996 Robert E. Evans Executive Officer and Director Director March 25, 1996 Jewell Baker /s/ DENNIS D. BLAUSER Director March 25, 1996 Dennis D. Blauser /s/ GEORGE W. BROUGHTON Director March 25, 1996 George W. Broughton /s/ WILFORD D. DIMIT Director March 25, 1996 Wilford D. Dimit Director March 25, 1996 Barton S. Holl /s/ NORMAN J. MURRAY Director March 25, 1996 Norman J. Murray /s/ JAMES B. STOWE Director March 25, 1996 James B. Stowe /s/ PAUL T. THEISEN Director March 25, 1996 Paul T. Theisen /S/ THOMAS C. VADAKIN Director March 25, 1996 Thomas C. Vadakin /S/ JOSEPH H. WESEL Chairman of the Board March 25, 1996 Joseph H. Wesel and Director /s/ JEFFREY D. WELCH Treasurer (Principal March 25, 1996 Jeffrey D. Welch Accounting Officer) /s/ JOHN W. CONLON Chief Financial Officer March 25, 1996 John W. Conlon PEOPLES BANCORP INC. INDEX TO FINANCIAL STATEMENTS 1995 Annual Report Financial Statements: Pages - --------------------------------------------------------- ----------- Peoples Bancorp Inc. and Subsidiaries: Report of Independent Auditors (Ernst & Young LLP) 30 Consolidated Balance Sheets as of December 31, 1995 and 1994 14 Consolidated Statements of Income for the Three Years Ended December 31, 1995 15 Consolidated Statements of Stockholders' Equity for the Three Years Ended December 31, 1995 16 Consolidated Statements of Cash Flows for the Three Years Ended December 31, 1995 17 Notes to the Consolidated Financial Statements 18-29 Peoples Bancorp Inc.: (Parent Company Only Financial Statements are included in Note 15 of Notes to the Consolidated Financial Statements) 28-29 The report of Coopers & Lybrand L.L.P. is included at Exhibit 99 and is incorporated herein by reference. EXHIBIT INDEX PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 Exhibit Number Description Exhibit Location - ------- ----------------------------------- ----------------------------- 2 Office Purchase and Assumption Pages 17 to 59. Agreement between Peoples Bank and Bank One, Athens, N.A., dated December 14, 1995. 3 (a) Amended Articles of Incorporated herein by Incorporation of Peoples reference to Exhibit 3(a) to Bancorp Inc. the Company's Registration Statement on Form 8-B filed July 20, 1993 (File No. 0-16772). 3 (b) Regulations of Peoples Bancorp Inc. Incorporated herein by reference to Exhibit 3(b) to the Company's Registration Statement on Form 8-B filed July 20, 1993 (File No. 0-16772). 10 (a) Deferred Compensation Agreement Incorporated herein by dated November 16, 1976 between reference to Exhibit 6(g) Robert E. Evans and The Peoples to Registration Statement Banking and Trust Company, as No. 2-68524 on Form S-14 amended March 13, 1979. of Peoples Bancorp Inc., a Delaware corporation and the Company's predecessor ("Peoples Delaware"). 10 (b) Peoples Bancorp Inc. Retirement Pages 60 through 89. Savings Plan. (Amended and Restated Effective January 1, 1996.) 10 (c) Amended and Restated Loan Agreement Incorporated herein by dated June 30, 1994 between the reference to Exhibit 10(c) Company and Fifth Third Bank. of the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1994 (File No. 0-16772). 10 (d) Peoples Bancorp Inc. Retirement Pages 90 through 149. Plan and Trust. (Amended and Restated Effective January 1, 1989.) 10 (e) Summary of the Incentive Bonus Incorporated herein by Plan of Peoples Bancorp Inc. reference to Exhibit 10(f) of Peoples Delaware's Annual Report on Form 10-K for fiscal year ended December 31, 1992 (File No. 0-16772). 10 (f) Peoples Bancorp Inc. Amended Incorporated herein by and Restated 1993 Stock Option reference to Exhibit 4 of Plan. the Company's Registration Statement on Form S-8 filed August 25, 1993 (Registration Statement No. 33-67878). 10 (g) Form of Stock Option Agreement Pages 150 through 154. used in connection with grant of non-qualified stock options under Peoples Bancorp Inc. Amended and Restated 1993 Stock Option Plan. 10 (h) Form of Stock Option Agreement Pages 155 through 159. dated May 20, 1993, used in connection with grant of incentive stock options under Peoples Bancorp Inc. Amended and Restated 1993 Stock Option Plan. 10 (i) Form of Stock Option Agreement Pages 160 through 164. dated November 10, 1994, used in connection with grant of incentive stock options under Peoples Bancorp Inc. Amended and Restated 1993 Stock Option Plan. 10 (j) Peoples Bancorp Inc. 1995 Stock Incorporated herein by Option Plan. reference to Exhibit 4 of the Company's Form S-8 filed May 24, 1995 (Registration Statement No. 33-59569). 10 (k) Form of Stock Option Agreement Pages 165 through 169. used in connection with grant of non-qualified stock options to non-employee directors of the Company under Peoples Bancorp Inc. 1995 Stock Option Plan. 10 (l) Form of Stock Option Agreement Pages 170 through 174. used in connection with grant of non-qualified stock options to non-employee directors of the Company's subsidiaries under Peoples Bancorp Inc. 1995 Stock Option Plan. 11 Computation of Earnings Per Share. Page 175. 12 Statements of Computation of Page 176. Ratios. 13 Peoples Bancorp Inc. Annual Report Page 177 through 223. to Shareholders for the fiscal year ended December 31, 1995 (not deemed filed except for portions thereof which are specifically incorporated by reference into this Annual Report on Form 10-K). 21 Subsidiaries of Peoples Bancorp Page 224. Inc. 23 (a) Consent of Independent Auditors Page 225. - Ernst & Young LLP. 23 (b) Consent of Independent Accountants Page 226. - Coopers & Lybrand L.L.P. 27 Financial Data Schedule. Page 227. 99 Report of Independent Accountants Page 228. - Coopers & Lybrand L.L.P. EX-2 2 PURCHASE AGREEMENT EXHIBIT 2 PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 OFFICE PURCHASE AND ASSUMPTION AGREEMENT BETWEEN PEOPLES BANK AND BANK ONE, ATHENS, N.A. Dated December 14, 1995 OFFICE PURCHASE AND ASSUMPTION AGREEMENT - ---------------------------------------- This Office Purchase and Assumption Agreement (the "Agreement" herein), made and entered into this 14th day of December, 1995, by and between The Peoples Bank and Trust Company of Marietta, Ohio, an Ohio banking corporation with its principal office at 138 Putnam St., Marietta, Ohio 45750 (hereinafter called "Peoples") and Bank One, Athens, National Association, a national banking association with its principal office at 2 South Court Street, Athens, Ohio 45701 (hereinafter called "BANK ONE"). WHEREAS, Peoples desires to purchase and assume from BANK ONE, and BANK ONE desires to sell and assign to Peoples certain assets and liabilities associated with offices of BANK ONE in Gallipolis, Pomeroy, and Rutland, Ohio, as hereinafter described; NOW, THEREFORE, in consideration of the premises hereinafter set forth and other good and valuable consideration, the sufficiency of which is hereby acknowledged, Peoples and BANK ONE hereby agree as follows: 1. PURCHASE AND ASSUMPTION. ------------------------ 1.01 Purchase and Sale of Assets. At the Closing, as defined in Section 6.01 hereof (the "Closing"), Peoples shall purchase and acquire and BANK ONE shall sell and assign the real estate and other assets described in Section 1.02 hereof (collectively, the "Assets") all of which are used in and/or relate to business conducted by BANK ONE at its branch offices known as and located at: (a) 352 2nd Ave., Gallipolis, Ohio (the "Gallipolis Branch"); (b) Court and 2nd Street, Pomeroy, Ohio (the "Pomeroy Branch"); and (c) Salem Street, Rutland, Ohio (the "Rutland Branch") pursuant to the terms and conditions set forth herein and subject to exceptions, if any, set forth herein. The foregoing offices are hereinafter sometimes collectively referred to as the "Offices" and each, individually, sometimes as an "Office." The transactions contemplated by this Agreement and the purchase of assets and assumption of liabilities provided for herein is sometimes referred to herein as the "Acquisition." 1.02 Transfer of Assets. Subject to the terms and conditions of this Agreement, BANK ONE shall assign, transfer, convey and deliver to Peoples, on and as of the Closing on the Closing Date, as defined in Section 6.01 hereof, the Assets, which shall include the following: (a) Owned Real Estate. All of BANK ONE's right, title and interest in and to the real estate described in attached Schedule A on which an Office is situated, together with all of BANK ONE's rights in and to all improvements thereon; and all easements rights, privileges and appurtenances associated therewith (the "Owned Real Estate"); (b) Furniture and Equipment. All of BANK ONE's right, title and interest in and to the furniture, fixtures and equipment, excluding the teller calculators, CRTs, controller and printer and signs, printed supplies and documents bearing the BANK ONE name and/or logo, owned by BANK ONE and located at the Offices, but specifically including that listed on Schedule C attached hereto (the "Fixed Assets"); (c) Safe Deposit Business. All right, title and interest of BANK ONE in and to the safe deposit business (subject to the allocation of safe deposit rental payments as provided in Section 1.03(c)(ii) hereof) located at the Offices as of the close of business on the Closing Date; (d) Cash on Hand. All cash on hand at the Offices as of the close of business on the Closing Date including vault cash, petty cash, ATM cash and tellers' cash; (e) Prepaid Expenses. All prepaid expenses recorded or otherwise reflected on the books of BANK ONE as at October 31, 1995, or incurred in the ordinary course of business thereafter, as being attributable to the Offices as of the close of business on the day immediately preceding the Closing Date, but only to the extent attributable to the Assets sold, assigned or transferred to Peoples by BANK ONE pursuant to this Agreement and only to the extent arising by reason of Peoples's use or ownership of such Assets after the close of business on the Closing Date. Any and all prepaid expenses incurred by BANK ONE with respect to the Offices subsequent to October 31, 1995, shall be subject to the prior written consent of Peoples; (f) Office Loans. All right, title and interest in and to all those loans which, as of the close of business on the Closing Date, are (i) secured, in whole or in part, by Deposit Accounts (as hereinafter defined) attributable to an Office and being assumed by Peoples pursuant to this Agreement (the "Deposit Account Loans") or (ii) automatically created as the result of an overdraft of a Deposit Account pursuant to a pre-approved overdraft protection program offered by BANK ONE (the "Overdraft Loans"). The Deposit Account Loans and Overdraft Loans are hereinafter referred to collectively as the "Office Loans." BANK ONE shall not make any material change to its customary policies for making Office Loans at the Offices or extend Office Loans which are materially different than loans offered by BANK ONE's other offices in Athens, Ohio. The transfer of the Office Loans will be made without any reserve for loan losses; (g) Records of the Offices. All original records and documents related to the Assets transferred or liabilities assumed by Peoples including, but not limited to the deposit accounts; and (h) Contracts or Agreements. All of BANK ONE's right, title and interest in and to the maintenance and service agreements related to the Offices, as listed on Schedule D annexed hereto and made a part hereof (the "Assumed Contracts"), provided the same are assignable. 1.03 Acceptance and Assumption. Subject to the terms and conditions of this Agreement, on and as of the Closing on the Closing Date, Peoples shall: (a) Assets. Receive and accept all of the Assets assigned, transferred, conveyed and delivered to Peoples by BANK ONE pursuant to this Agreement, including those identified in Section 1.02 above. (b) Deposit Liabilities. Assume and thereafter discharge, pay in full and perform all of BANK ONE's obligations and duties relating to the "Deposit Liabilities" (as hereinafter defined). The term "Deposit Liabilities" is defined herein as all of BANK ONE's obligations, duties and liabilities of every type and character relating to all deposit accounts, other than (i) KEOGH accounts and (ii) deposit accounts securing any loan of BANK ONE which is not an Office Loan, for which Peoples assumes no liability, which, as reflected on the books of BANK ONE as of the close of business on the Closing Date, are attributable to the Offices. The deposit accounts referred to in the immediately preceding sentence (hereinafter the "Deposit Accounts") include, without limitation, passbook accounts, checking, Money Market and NOW accounts, Individual Retirement Accounts for which BANK ONE has not received, on or before the Closing Date, the written advice from the account holder of such account holder's objection or failure to accept Peoples as successor custodian ("IRA's") and certificates of deposit. The "obligations, duties and liabilities" referred to in the immediately preceding sentence include, without limitation, the obligation to pay and otherwise process all Deposit Accounts in accordance with applicable law and their respective contractual terms and the duty to supply all applicable reporting forms for post-closing periods including, without limitation, Form 1099's, relating to the Deposit Accounts. With regard to each IRA included within the Deposit Accounts, Peoples shall also assume the plan pertaining thereto and the trustee or custodial arrangement in connection therewith. (c) Liabilities Under Leases/Safe Deposit Business. Assume and thereafter fully and timely perform and discharge, in accordance with their respective terms, all of the liabilities and obligations of BANK ONE arising after the Closing Date with respect to: (i) all leases listed on Schedule E to this Agreement (including safe deposit leases if any) and sold, assigned or transferred to Peoples by BANK ONE pursuant to this Agreement; (ii) the safe deposit business of the Offices including, but not limited to, the maintenance of all necessary facilities for the use of safe deposit boxes by the renters thereof during the periods for which such persons have paid rent therefor in advance to BANK ONE, subject to the agreed allocation of such rents, which allocation shall be satisfied in full by BANK ONE paying to Peoples, in the manner specified in Section 6.04 hereof, the amount of rental payment received by BANK ONE for each such safe deposit box attributable to and prorated to reflect the period from and after the Closing Date, subject to the provisions of the applicable leases or other agreements relating to such boxes; and (iii) all safekeeping items and agreements listed on Schedule E to this Agreement and delivered to Peoples by BANK ONE pursuant to this Agreement, including, but not limited to, all applicable safekeeping agreements, memoranda, or receipts so delivered to Peoples by BANK ONE hereunder. (d) Other Liabilities. Fully and timely perform and discharge, as the same may be or become due the Assumed Contracts and all additional liabilities, obligations and deferred expenses of BANK ONE as of the date of this Agreement, which are (i) reflected on the books of BANK ONE as being attributable to an Office as of the close of business on the Closing Date, and (ii) disclosed, by description and an estimate of the amount, to Peoples in writing prior to the date of this Agreement), but only to the extent attributable to the Assets sold, assigned or transferred to Peoples by BANK ONE pursuant to this Agreement and only to the extent arising by reason of Peoples's use or ownership of such Assets after the close of business on the Closing Date. No additional liabilities and obligations of BANK ONE incurred subsequent to the date of this Agreement shall be assumed by Peoples unless the prior written consent of Peoples has been obtained prior to the incursion of the liability or obligation by BANK ONE. (e) Other Obligations. Fully and timely perform its obligations relative to employees of the Offices, if any, as set forth hereinafter. 1.04 Payment of Funds. Subject to the terms and conditions hereof, at the Closing: (a) Consideration. In consideration of Peoples's assumption of the Deposit Liabilities and its other agreements herein, BANK ONE shall make available and transfer to Peoples, in the manner specified in Section 6.04 hereof, funds equal to the aggregate balance of all Deposit Accounts (including interest posted or accrued to such accounts as of the close of business on the day immediately preceding the Closing Date) plus the deferred expenses identified in Section 1.03(d) hereof prorated as of the close of business on the day preceding the Closing Date less an amount equal to the sum of: (i) the amount of cash on hand at the Offices transferred to Peoples as of the close of business on the Closing Date; and (ii) 8.366% of the aggregate "Core Deposits" (as hereinafter defined) of the Offices as of the close of business on the Closing Date. The term "Core Deposits" shall mean the aggregate balance of all Deposit Liabilities of the Offices (which aggregate balance shall include interest posted to such accounts as of the close of business on the Closing Date but shall exclude interest accrued but not posted to such accounts as of such dates). In the event that the Core Deposits as of close of business on the Closing Date shall be less than $73,815,000, BANK ONE may, at its sole option, provide funds which shall constitute Core Deposits for purposes of this Agreement, so that the Core Deposits assumed by People's hereunder as of the Closing Date shall be not less than $73,815,000. The amount calculated as the product of 8.366 % times the Core Deposits of the Offices as of the close of business on the Closing Date, up to a maximum of $81,585,000 of Core Deposits, is hereinafter called the "Acquisition Consideration;" and (iii) the amount of prepaid expenses described in Section 1.02(f) of this Agreement, prorated as of the close of business on the day immediately preceding the Closing Date; and (iv) the book value of the Office Loans together with accrued and unpaid interest thereon computed as of the close of business on the Closing Date. In the event that BANK ONE provides supplemental funds as Core Deposits pursuant to subsection (ii) herein, the rate and maturity of such supplemental funds shall be equal to the average rate and maturity of the other Core Deposits assumed by Peoples hereunder. In the event that the sum of items (i) through (vi) above should be in excess of the aggregate amount to be transferred by BANK ONE pursuant to the first paragraph of this Section 1.04(a), the full amount of such excess shall constitute an amount due from Peoples to BANK ONE, and shall be paid to BANK ONE at the Closing in the manner specified in Section 6.04 hereof. The parties shall execute a Preliminary Settlement Statement at the Closing and Final Settlement post-closing, in substantially the same forms as those attached as Schedules P and Q. (b) Reimbursement and Proration of Certain Expenses. All other expenses (i) due and payable at times after the Closing Date for periods prior to the close of business on the Closing Date or (ii) paid prior to the close of business on the Closing Date for periods following the Closing Date, including the prepaid expenses described in Section 1.02(f) hereof and deferred expenses described in Section 1.03(d) hereof, including without limitation, real estate taxes and assessments which are a lien but not yet due and payable, utility payments, payments due on leases assigned, payments due on assigned service and maintenance contracts and similar expenses relating to the Offices shall be prorated between BANK ONE and Peoples as of the close of business on the day immediately preceding the Closing Date, provided, however, that all real estate taxes and assessments, and to the extent payable by Seller and/or Buyer, shall be prorated at the Closing on the basis of the most recently certified real estate taxes and assessments, and all utility payments and lease payments shall be prorated on the basis of the best information available at Closing. With respect to premiums paid to the FDIC deposit insurance for the Deposit Liabilities it shall be assumed that all the Deposit Liabilities are insured under the Bank Insurance Fund; the proration of FDIC insurance premiums will be based on the amount of the Deposit Liabilities as of the close of business on the Closing Date and the number of days during any period for which BANK ONE has prepaid premiums to the FDIC but during which Peoples has held or will hold the Deposit Liabilities. For prorations, if any, which cannot be reasonably calculated as of the Closing, a post-closing adjustment shall be made in the manner specified in Section 6.04 hereof. (c) Expenses Relating to Real Property. The transfer (or conveyance) fees relating to the Owned Real Estate and the costs, fees and expenses of all title commitments, title guaranties and title examinations relating to the procurement of the Title Commitments related to the Owned Real Estate and the referred to in Sections 2.01(c) and 5.02(g) herein, shall be allocated to, and shall be borne, solely and exclusively by BANK ONE. The costs, fees and expenses relating to the premiums and endorsements for all title insurance policies (net of the costs of all title commitments, guaranties and examinations), recording costs and other similar costs, fees and expenses, if any, relating to the sale and transfer of the Owned Real Estate or the transfer of BANK ONE's interest in the , shall be allocated to, and shall be borne, solely and exclusively, by Peoples. BANK ONE shall reimburse Peoples at the Closing for all the costs, fees and expenses allocated to BANK ONE pursuant to this Section 1.04(c) but paid by Peoples, and Peoples shall reimburse BANK ONE at the Closing for all of the costs, fees and expenses allocated to Peoples pursuant to this Section 1.04(c) but paid by BANK ONE in the manner specified in Section 6.04 herein. If this transaction does not close by virtue of a breach of this Agreement, the breaching party shall be responsible for and shall, as appropriate, reimburse the other party for its expenses as set forth herein. If this transaction does not close for any other reason, each party shall reimburse the other party upon termination of this Agreement for such party's share of expenses so that each party shall pay the same share of expenses as it would have paid at Closing. 2. CONDUCT OF THE PARTIES PRIOR TO CLOSING. ---------------------------------------- 2.01 Covenants of BANK ONE. BANK ONE hereby covenants to Peoples that, from October 31, 1995, until the Closing, it will do or cause the following to occur: (a) Operation of the Offices. BANK ONE shall continue to operate the Offices in a manner equivalent to that manner and system of operation employed immediately prior to October 31,1995; provided, however, that it is contemplated by the parties that, prior to Closing, BANK ONE will be terminating certain programs which are currently in effect which allow depositors to access Deposit Accounts through electronic means. BANK ONE will use its best efforts to ensure that no harm or damage to the reputation of the Offices or material reduction in the existing deposit liabilities of the Offices occurs. Notwithstanding the foregoing and except as may be required to obtain the required authorizations referred to in Section 2.03 of this Agreement, between the date of this Agreement and the Closing Date, and except as may be otherwise required by a regulatory authority, BANK ONE shall not, without the prior consent of Peoples, which consent shall not be unreasonably withheld: (i) cause any Office to engage or participate in any material transaction or incur or sustain any obligation which, in the aggregate, is material to its business, condition or operations except in the ordinary course of business; (ii) cause any Office to transfer to BANK ONE's other operations any material amount of Assets, except for (a) supplies, if any, which have unique function in BANK ONE's business and ordinarily would not be useful to Peoples, (b) cash and other normal intrabank transfers which may be transferred in the ordinary course of business in accordance with normal banking practices and (c) signs, or those parts thereof, bearing the BANK ONE name and/or logo; (iii) cause the Offices to transfer to BANK ONE's other operations any deposits other than deposits securing loans made by BANK ONE which are not Office Loans, except in the ordinary course of business at the unsolicited request of depositors, or cause any of BANK ONE's other operations to transfer to the Offices any deposits, except in the ordinary course of business at the unsolicited request of depositors and except as BANK ONE may provide pursuant section 1.04(a)(ii) herein, provided, however, that BANK ONE shall be permitted to make such transfers of any deposits to or from the Offices provided that neither (A) the net amount of transfers to the Offices minus the amount of transfers from the Offices nor (B) the net amount of transfers from the Offices minus transfers to the Offices exceeds $50,000; (iv) invest in any Fixed Assets on behalf of any Office, except for commitments made on or before the date of this Agreement which are disclosed to Peoples on Schedule C of this Agreement and for replacements of furniture, furnishings and equipment and normal maintenance and refurbishing purchased or made in the ordinary course of Office business; (v) enter into or amend any continuing contract (other than Deposit Liabilities and Office Loans) relating to the Offices, which cannot be terminated without cause and without payment of any amounts as a penalty, bonus, premium or other compensation for termination, or which is not made in the ordinary course of Office business; (vi) undertake any actions which are inconsistent with a program to use all reasonable efforts to maintain good relations with customers and with employees employed at the Offices, unless such actions are required or permitted by this Agreement; (vii) hire (other than to replace a departing employee and/or to bring the number of employees at the Offices to normal staffing levels), transfer, reassign or terminate any employee of the Offices, increase the compensation of any employee of the Offices, or promote any of the employees except pursuant to and consistent with customary BANK ONE procedures and policies; or (viii) make any material change to its customary policies for setting rates on deposits offered at the Offices. (b) Information Concerning the Offices. Upon reasonable notice, BANK ONE shall permit officers and authorized representatives of Peoples access to inspect the Offices during normal business hours or at such other time mutually agreed upon by both parties and permit Peoples to make or cause to be made such reasonable investigation of information and materials relating to the financial condition of the Offices, including general and subsidiary ledgers, deposit records, audit reports and any other information concerning the business, property, personnel and legal questions concerning the Offices (and related to the physical condition of the Offices), as Peoples reasonably deems necessary or advisable; provided, however, that such access and investigation shall be reasonably related to the transactions contemplated hereby and shall not interfere unnecessarily with the normal operations of the Offices or BANK ONE; and provided, further, that nothing in this Section 2.01(b) shall be deemed to require BANK ONE to breach any obligation of confidentiality or to reveal any proprietary information, trade secrets, marketing, strategic plans or information not related to the transaction contemplated by this Agreement. The information and materials related to the financial condition of the Offices which will be made available to Peoples from BANK ONE pursuant to this subsection will be accurate in all material respects and will accurately and completely reflect the Deposit Liabilities attributable to the Offices as of the date the information is provided. (c) Title Commitments for Real Estate. BANK ONE shall deliver to Peoples, at BANK ONE's expense, with respect to the Owned Real Estate no later than thirty (30) days after the date of this Agreement, a commitment or commitments (the "Title Commitments") having an effective date as near as feasible to the date of delivery of such Title Commitments from a title insurance company authorized to do business in Ohio designated by BANK ONE and reasonably satisfactory to Peoples, to issue to Peoples as soon as practicable after the Closing Date, as applicable, an American Land Title Association (ALTA) owners (1992), including "gap", contiguity, access, EPA, and Form 9 endorsements, and/or leasehold title insurance (1975 Form) policies having an effective date as of the Closing Date in an amount satisfactory to Peoples (but not in excess of the appraised value of such properties) covering the Owned Real Estate, subject to the exceptions specified in the Title Commitments. Such commitments shall show title vested in BANK ONE. If title to all or part of the Owned Real Estate or Lease Real Estate is unmarketable or is subject to any defect, lien, encumbrance, easement, condition, restriction or encroachment other than the Permitted Exceptions as defined in Section 10.08(c) herein, then Peoples shall provide written notice thereof to BANK ONE. BANK ONE shall have thirty days after written notice thereof from Peoples, to elect to remedy or remove any such defect, lien, encumbrance, easement, condition, restriction or encroachment but, if BANK ONE does not, Peoples may elect to attempt to cure or remove such defect or encumbrance or other matter, for a period of thirty days thereafter. If such defect or encumbrance or other matter is not cured, then, in addition to any other rights which Peoples may have hereunder, Peoples shall have the right (i) to declare this Agreement terminated by written notice to BANK ONE, or (ii) to waive any objection to such defect or encumbrance or other matter in which event such defect, encumbrance, or other matter shall be deemed to be a Permitted Exception. The Owned Real Estate is being sold by BANK ONE to Peoples hereunder free and clear of all liens, claims, encumbrances and rights of tenants in possession except for the Permitted Exceptions, and the conveyance by Warranty Deed to be delivered by BANK ONE pursuant hereto shall be subject only to the Permitted Exceptions. BANK ONE also shall execute and deliver to Peoples at the time of Closing such affidavits and other instruments, if any, as the title insurance issuing the Title Commitments may require to delete the standard exceptions appearing as Schedule B items in a standard ALTA owners or leasehold owners title insurance policy, other than those which may only be deleted by a survey. BANK ONE also shall execute and deliver a so-called FIRPTA affidavit at Closing. Peoples shall have the right to obtain at its sole cost and expense duly certified surveys, and BANK ONE hereby grants to Peoples and its surveyors, agents and contractors right of access to the Owned Real Estate for the purpose of performing the surveys.If such surveys are performed, the resulting legal descriptions shall be used in all deeds of conveyance or assignment, as necessary. (d) Required Authorizations. BANK ONE shall obtain and procure all necessary corporate approvals and authorizations, if any, required on its part to enable it to fully perform all obligations imposed on it hereunder which must be performed by it at or prior to the Closing. (e) Creation of Liens and Encumbrances. With respect to the Owned Real Estate, BANK ONE shall not create or allow any liens, imperfections in title, charges, easements, restrictions or encumbrances other than the Permitted Exceptions. (f) Condemnation. If prior to Closing all or any portion of the Owned Real Estate is taken or is made subject to eminent domain or other governmental acquisition proceedings, then BANK ONE shall promptly notify Peoples thereof, and Peoples may either complete the Closing and receive the proceeds paid or payable on account of such acquisition proceedings, or terminate this Agreement. If Peoples terminates this Agreement, both parties shall thereupon be relieved from all further obligations hereunder. (g) Insurance Proceeds, Casualty and Condemnation Payments. BANK ONE shall maintain adequate insurance on all the Assets consisting of Owned Real Estate and Fixed Assets. In the event of any damage, destruction or condemnation affecting such Assets between the date hereof and the time of the Closing, BANK ONE shall deliver to Peoples any insurance proceeds and other payments, to the extent of the applicable amount set forth in Section 1.04(a)(ii) or (iii) hereof with respect to Owned Real Estate and the replacement cost with respect to the Fixed Assets, as the case may be, received (or with respect to insurance proceeds, which would be received assuming BANK ONE's insurance policy had no deductible) by BANK ONE as a result thereof unless, in the case of damage or destruction, BANK ONE has repaired or replaced the damaged or destroyed property. (h) IRA Accounts. Not later than thirty days prior to the expected Closing Date, BANK ONE shall, at BANC ONE's expense, mail notice of BANK ONE's resignation as Custodian and the appointment of Peoples as the Successor Custodian, effective upon Closing, of each Individual Retirement Account maintained at the Offices. The notice shall include such other information that is mutually agreed upon by BANK ONE and Peoples. 2.02 Covenants of Peoples. Peoples hereby covenants to BANK ONE that, from the date hereof until the Closing, it will do or cause the following to occur: (a) Regulatory Applications. Peoples shall prepare and submit for filing, at no expense to BANK ONE, any and all applications, filings, and registrations with, and notifications to, all federal and state authorities required on the part of Peoples or any shareholder or affiliate of Peoples for the Acquisition to be consummated at the Closing as contemplated in Section 6.01 herein and for Peoples to operate the Offices following the Closing. Peoples shall provide BANK ONE with a draft copy of each application for BANK ONE's review and comment prior to filing, which review and comment by BANK ONE will occur not later than 10 business days following receipt thereof by BANK ONE. Such applications will be submitted to BANK ONE in draft form within thirty (30) days from the date of this Agreement and filed by Peoples without delay following BANK ONE's review and receipt of comments thereon, if any; provided, however, that in no event will such applications be filed later than sixty (60) days from the date of this Agreement. Thereafter, Peoples shall pursue all such applications, filings, registrations, and notifications diligently and in good faith, and shall file such supplements, amendments, and additional information in connection therewith as may be reasonably necessary for the Acquisition to be consummated at such Closing and for Peoples to operate the Offices following the Closing. Peoples shall deliver to BANK ONE evidence of the filing of each and all of such applications, filings, registrations and notifications (except for any confidential portions thereof), and any supplement, amendment or item of additional information in connection therewith (except for any confidential portions thereof). Peoples shall also deliver to BANK ONE a copy of each material notice, order, opinion and other item of correspondence received by Peoples from such federal and state authorities (except for any confidential portions thereof) and shall advise BANK ONE, at BANK ONE's request, of developments and progress with respect to such matters. (b) Required Authorizations. Peoples shall obtain and procure all necessary corporate approvals and authorizations, if any, required on its part to enable it to fully perform all obligations imposed on it hereunder which must be performed by it at or prior to the Closing. (c) Satisfaction of Conditions. Peoples shall not voluntarily undertake any course of action inconsistent with the satisfaction of the requirements or the conditions applicable to it, or its agreements, undertakings, obligations, or covenants set forth in this Agreement, and it shall promptly do all such reasonable acts and take all such reasonable measures as may be appropriate to enable it to perform as early as possible the agreements, undertakings, obligations, and covenants herein provided to be performed by it, and to enable the conditions precedent to BANK ONE's obligations to consummate the Closing of the Acquisition to be fully satisfied. Additionally, Peoples shall not knowingly, directly or through any existing or future subsidiary or affiliate, take any action that would be in conflict with, or result in the denial, delay, termination, or withdrawal of, any of the regulatory approvals referred to in this Agreement. 2.03 Covenants of All Parties. BANK ONE hereby covenants to Peoples, and Peoples hereby covenants to BANK ONE that, from the date hereof until the Closing, such party shall cooperate fully with the other party in attempting to obtain all consents, approvals, permits, or authorizations which are required to be obtained pursuant to any federal or state law, or any federal or state regulation thereunder, for or in connection with the transactions described and contemplated in this Agreement. 3. REPRESENTATIONS AND WARRANTIES. ------------------------------- 3.01 Representations and Warranties of BANK ONE. BANK ONE represents and warrants to Peoples as follows: (a) Good Standing and Power of BANK ONE. BANK ONE is a national banking association duly organized, validly existing, and in good standing under the laws of the United States with corporate power to own its properties and to carry on its business as presently conducted. BANK ONE is an insured bank as defined in the Federal Deposit Insurance Act and applicable regulations thereunder. (b) Authorization of Agreement. The execution and delivery of this Agreement, and the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of BANK ONE, and this Agreement is a valid and binding obligation of BANK ONE. (c) Effective Agreement. Subject to the receipt of any and all necessary regulatory approvals and required consents, the execution, delivery, and performance of this Agreement by BANK ONE and the consummation of the transactions contemplated hereby, will not conflict with, result in the breach of, constitute a violation or default, result in the acceleration of payment or other obligations, or create a lien, charge or encumbrance, under any of the provisions of Articles of Association or By-Laws of BANK ONE, under any judgment, decree or order, under any law, rule, or regulation of any government or agency thereof, or under any material contract, material agreement or material instrument to which BANK ONE is subject, where such conflict, breach, violation, default, acceleration or lien would have a material adverse effect on the Assets or BANK ONE's ability to perform its obligations hereunder. (d) Title to Real Estate And Other Assets. Except for the Owned Real Estate, BANK ONE is the sole owner of each of the Assets free and clear of any mortgage, lien, encumbrance or restrictions of any kind or nature. As to the Owned Real Estate, BANK ONE is the sole owner of a fee simple interest in, and has good and marketable title to, such Owned Real Estate, free and clear of all liens, claims, encumbrances and rights of tenants in possession except for the Permitted Exceptions and shall convey such real estate to Peoples by delivery at the Closing of a warranty deed conveying such title subject only to the Permitted Exceptions. (e) Zoning Variations. As of the date of this Agreement, BANK ONE has neither received written notice of nor has it any notice of any contemplation to provide BANK ONE with any written notice from any governmental authority of any uncorrected violations of zoning and/or building codes relating to the Owned Real Estate. The Owned Real Estate is zoned to permit Peoples to use said properties as offices of a financial institution. (f) IRA Account Documentation. The form of Individual Retirement Custodial Account Agreement for individual retirement accounts, and the related Amended and Restated Individual Retirement Account Disclosure Statement annexed hereto as Schedule F, constitute the form of the document establishing the trustee or custodial arrangement in connection with all IRAs's maintained at the Offices. (g) Condemnation Proceedings. BANK ONE has received no written notice of any pending or threatened, nor is it aware of any contemplated, condemnation proceeding affecting or relating to the Offices. (h) No Broker. No broker or finder, or other party or agent performing similar functions, has been retained by BANK ONE or is entitled to be paid based upon any agreements, arrangements, or understandings made by BANK ONE in connection with the transactions contemplated hereby, and no brokerage fee or other commission has been agreed to be paid by BANK ONE on account of the transactions contemplated hereby. (i) Taxes. All federal, state and local payroll, withholding, property, sales, use and transfer taxes, if any, which are due and payable by BANK ONE relating to the Offices prior to the date of Closing shall be paid in full as of the Closing Date or BANK ONE shall have made appropriate provision for such payment in accordance with ordinary business practices. Any claims for refunds of taxes which have been paid by BANK ONE shall remain the property of BANK ONE. (j) Operations Lawful. The conduct of banking business at the Offices is in compliance in all material respects with all federal, state, county and municipal laws, ordinances and regulations applicable to conduct of such business. (k) Third-Party Claims. There are no actions, suits or proceedings, pending or, to the best of BANK ONE's knowledge, threatened against or affecting BANK ONE which could have a material adverse effect on the aggregate value of the banking business and Assets of the Offices. (l) Insurance. BANK ONE maintains such insurance on the Offices and the Fixed Assets to be purchased by or assigned to Peoples as may be required or as is customary in the business of banking. (m) Labor Relations. No employee located at any of the Offices is represented, for purposes of collective bargaining, by a labor organization of any type. BANK ONE is unaware of any efforts during the past three years to unionize or organize any employees at any Office, and no material claim related to employees at the Offices under the Fair Labor Standards Act, National Labor Relations Act, Civil Rights of 1964, Walsh-Healy Act, Davis Bacon Act, Civil Rights of Act of 1866, Age Discrimination in Employment Act, Equal Pay Act of 1963, Executive Order No. 11246, Federal Unemployment Tax Act, Vietnam Era Veterans Readjustment Act, Occupational Safety and Health Act, Americans with Disabilities Act or any state or local employment related law, order, ordinance or regulation, no unfair labor practice, discrimination or wage-and-hour claim is pending or, to the best of BANK ONE's knowledge, threatened against or with respect to BANK ONE. (n) Governmental Notices. BANK ONE has not received notice from any federal or state governmental agency indicating that it would oppose or not grant or issue its consent or approval, if required, with respect to the transactions contemplated by this Agreement. (o) Environmental. To the actual knowledge of the executive officers of BANK ONE, there are no actions, proceedings or investigations pending before any environmental regulatory body, federal or state court with respect to or threatened against or affecting BANK ONE in respect of any Office under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), or under the any federal, state, local or municipal environmental statute, ordinance or regulation in respect thereof and in connection with any release of any toxic or "hazardous substance," pollutant or contaminant into the "environment," nor, to the best knowledge of the executive officers of BANK ONE, is there any reasonable basis for the institution of any such actions or proceedings or investigations which is probable of assertion, nor are there any such actions or proceedings or investigations in which BANK ONE is a plaintiff or complainant. To the actual knowledge of the executive officers of BANK ONE, BANK ONE is not responsible in any material respect under any applicable environmental law for any release by BANK ONE or for any release by an other "Person" at or in the vicinity of any Office of a hazardous or toxic substance, contaminant or pollutant caused by the spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of hazardous wastes or other chemical substances, pollutants or contaminants into the environment, nor is BANK ONE responsible for any material costs (as a result of the acts or omissions of BANK ONE, or, to the actual knowledge of the executive officers of BANK ONE, as a result of the acts or omissions of any other "person") of any remedial action including, without limitation, costs arising out of security fencing, alternative water supplies, temporary evacuation and housing and other emergency assistance undertaken by any environmental regulatory body having jurisdiction over BANK ONE to prevent or minimize any actual or threatened release by BANK ONE on premises any hazardous wastes or other chemical substances, pollutants and contaminants into the environment which would endanger the public health or the environment. All terms contained in quotation marks in this paragraph and the paragraph immediately following shall have the meaning ascribed to such terms as defined in all federal, state and local statutes, regulations or ordinances. Except as previously disclosed to Peoples in writing, to the actual knowledge of the executive officers of BANK ONE, each Office is, in all material respects, in compliance with all applicable Federal, state, local or municipal statutes, ordinances, laws and regulations and all orders, rulings or other decisions of any court, administrative agency or other governmental authority relating to the protection of the environment. For purposes of this section, the term "executive officer" shall refer to all executive officers of BANK ONE as defined in 12 CFR e215.2 as of the date of this Agreement. (p) Access to Real Estate. No fact or condition exists which would result in the termination or impairment of access to the Owned Real Estate from adjoining public or private streets or ways or which could result in discontinuation of necessary sewer, water, electric, gas, telephone, or other utilities or services. All sewage, sanitation, plumbing, refuse disposal, and similar facilities servicing the Owned Real Estate are in full compliance with applicable governmental regulations. (q) Mechanic's Liens. BANK ONE has paid or will pay in full all bills and invoices for labor and material of any kind arising from the ownership, operation, management, repair, maintenance, or leasing of the Owned Real Estate, and no actual or potential mechanic's lien or other claims are outstanding or available to any party in connection with the ownership, operation, management, repair, maintenance, or leasing said properties. (r) Deposit. Attached hereto as Schedules G is a true and accurate schedule of all Deposit Accounts (including individual retirement accounts) domiciled at the Offices, prepared as of October 31, 1995, listing by Office and by category the amount of all deposits and the interest rates and maturity dates associated with such deposits, and indicating the deposits that constitute Core Deposits. The maturity and mix (but not the amount) of the Deposit Accounts, by category of account, shall be substantially the same at the Closing as on October 31, 1995, subject, in all respects, to any and all variances which may occur as a result of customer actions and any and all market conditions affecting depository institutions in the markets served by the Offices (s) Office Loans. Attached hereto as Schedule H is a true and accurate schedule of all Office Loans, including accrued and unpaid interest thereon, computed as of a date within thirty (30) days prior to the date of this Agreement, excluding, however, such Office Loans which are more than 30 days past due for payment. (t) Personal Property. Schedule C is a true and accurate schedule of Fixed Assets owned by BANK ONE at any of the Offices, which Schedule specifies the original cost and net book value of each such item, as shown on the financial records of BANK ONE, computed as of the month-end immediately prior to the date of execution of this Agreement and describing any security interest therein or lien thereon. (u) Assumed Contracts. Schedule D is a true and accurate schedule of all Assumed Contracts related to the Offices. Each Assumed Contract is valid and subsisting in full force and effect. (v) FIRPTA. BANK ONE is not a "foreign person" within the meaning of the Internal Revenue Code e 1445. 3.02 Representations and Warranties of Peoples. Peoples represents and warrants to BANK ONE as follows: (a) Good Standing and Power of Peoples. Peoples is a banking corporation duly organized, validly existing, and in good standing under the laws of the State of Ohio with corporate power to own its properties and to carry on its business as presently conducted. Peoples is an insured bank, as defined in the Federal Deposit Insurance Act and applicable regulations thereunder. (b) Authorization of Agreement. The execution and delivery of this Agreement, and the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of Peoples, and this Agreement is a valid and binding obligation of Peoples. (c) Effective Agreement. Subject to the receipt of any and all necessary regulatory approvals, the execution, delivery, and performance of this Agreement by Peoples, and the consummation of the transactions contemplated hereby, will not conflict with, result in the breach of, constitute a violation or default, result in the acceleration of payment or other obligations, or create a lien, charge or encumbrance, under any of the provisions of the Articles of Incorporation or Code of Regulations of Peoples, under any judgment, decree or order, under any law, rule or regulation of any government or agency thereof, or under any material agreement, material contract or material instrument to which Peoples is subject, where such conflict, breach, violation, default, acceleration or lien would have a material adverse effect on Peoples's ability to perform its obligations hereunder. (d) No Broker. No broker or finder, or other party or agent performing similar functions, has been retained by Peoples or is entitled to be paid based upon any agreements, arrangements, or understandings made by Peoples in connection with the transactions contemplated hereby, and no brokerage fee or other commission has been agreed to be paid by Peoples on account of the transactions contemplated hereby. 4. ACTIONS RESPECTING EMPLOYEES AND PENSION AND EMPLOYEE BENEFIT PLANS. -------------------------------------------------------------------- 4.01 Employment of Employees (a) Peoples may, but shall be under no obligation to, extend offers of employment, as of the Closing Date to employees of the Offices. (b) Not later than thirty (30) days following the date of this Agreement, Peoples shall advise BANK ONE, in writing, of its election, at its sole discretion, to offer employment to, as of the Closing Date, any or all of the persons assigned to the Offices as employees of Peoples (such selected persons, who thereafter accept such offer of employment, are hereinafter referred to as "Transferred Employees"), but the language of this Agreement shall not be construed as an offer of employment to any such persons. Following the expiration of said 30 days, BANK ONE shall be permitted to offer employment to any employees of the Offices who are not Transferred Employees. (c) BANK ONE will cooperate with Peoples to the extent reasonably requested and legally permissible to provide Peoples with information about employees of the Offices including, without limitation, providing Peoples with the personnel files of those employees of the Offices who provide BANK ONE with their written consent thereto, and a means to meet with employees of the Offices for the purpose of selecting Transferred Employees. 4.02 Terms and Conditions of Employment. Except as otherwise provided explicitly in this Agreement, the terms of employment for each Transferred Employee shall be determined solely by Peoples's policies, procedures, and programs; provided, however, that for purposes of Peoples's various employee benefit plans at and following the Closing Date, (i) time of service with BANK ONE will be credited to Transferred Employees for purposes of determining and calculating their eligibility for and vesting with respect to such plans and (ii) all pre-existing conditions of Transferred Employees will be waived by Peoples with respect to all Peoples's plans. 4.03 Compliance with Law. BANK ONE agrees that it shall comply with any applicable requirements, if any, for the Worker Adjustment and Retraining Notification Act in connection with the transaction contemplated by this Agreement. 4.04 Actions to be Taken by BANK ONE. BANK ONE covenants to Peoples that it will do or cause the following to occur: (a) Solicitation of Transferred Employees. Except with the written consent of Peoples, for six months following the Closing Date, BANK ONE will not solicit Transferred Employees as prospective officers or employees of BANK ONE. (b) Employee Benefit Programs. BANK ONE's obligations to employees of the Offices, including Transferred Employees, will be as set forth in established policies of BANC ONE CORPORATION and/or BANK ONE and BANK ONE shall continue its employee benefit programs in full force and effect as benefit programs for Transferred Employees through the Closing Date. After the Closing, BANK ONE shall retain the responsibility and liability for the funding and payment of all claims incurred under such employee benefit programs through the Closing Date. Peoples shall have no obligation or liability to compensate Transferred Employees for benefits of any kind earned, accrued, promised and/or provided to Transferred Employees as employees of BANK ONE, except with respect to eligibility and vesting as set forth in Section 4.02, above. (c) Employees of the Offices. BANK ONE shall not, without Peoples's prior written consent (i) increase the aggregate full-time equivalent size of the work force at the Offices above the aggregate normal staffing levels designated by BANK ONE for the Offices at the date hereof, (ii) terminate any Transferred Employee prior to the Closing Date, unless such person is dismissed for cause and written notice of such dismissal is provided to Peoples, (iii) transfer or assign any Transferred Employee prior to the Closing Date to a position of permanent employment with BANK ONE; or (iv) increase the compensation of any Transferred Employee except pursuant to existing BANK ONE policies and procedures. The obligations of BANK ONE pursuant to this Section 4.04 shall survive the Closing. 5. CONDITIONS PRECEDENT TO CLOSING. -------------------------------- 5.01 Conditions to BANK ONE's Obligations. The obligations of BANK ONE to consummate the Acquisition are subject to the satisfaction, or the waiver in writing by BANK ONE to the extent permitted by applicable law, of the following conditions at or prior to the Closing: (a) Prior Regulatory Approval. All filings and registrations with, and notifications to, all federal and state authorities required for consummation of the Acquisition shall have been made, all approvals and authorizations of all federal and state authorities required for consummation of the Acquisition shall have been received and shall be in full force and effect, and all applicable waiting periods shall have passed. (b) Corporate Action. The Board of Directors of Peoples shall have taken all corporate action necessary by it to effectuate this Agreement and the Acquisition and Peoples shall have furnished BANK ONE with a certified copy of each such resolution adopted by the Board of Directors of Peoples evidencing the same. (c) Representations and Warranties. The representations and warranties of Peoples set forth in this Agreement shall be true and correct in all material respects on the Closing Date with the same effect as though all such representations and warranties had been made on and as of such date, and Peoples shall have delivered to BANK ONE a Certificate to that effect, dated as of the Closing Date to the effect specified in Schedule I to this Agreement. (d) Covenants. Each and all of the covenants and agreements of Peoples to be performed or complied with at or prior to Closing pursuant to this Agreement shall have been duly performed or complied with in all material respects by Peoples, or waived by BANK ONE, and Peoples shall have delivered to BANK ONE a Certificate to that effect, dated as of the Closing Date to the effect specified in Schedule I to this Agreement. (e) No Proceeding or Prohibition. At the time of the Closing, there shall not be any litigation, investigation, inquiry, or proceeding pending or threatened in or by any court or agency of any government or by any third party which in the judgment of the executive officers of BANK ONE, with the advice of counsel, presents a bona fide claim to restrain, enjoin, or prohibit consummation of the transaction contemplated by this Agreement or which might result in rescission in connection with such transactions; and BANK ONE shall have been furnished with a Certificate, substantially in the form as specified in Schedule I to this Agreement, dated as of the Closing Date and signed by the Chairman, President, or an Executive Vice President and Secretary or Assistant Secretary of Peoples, to the effect that no such litigation, investigation, inquiry, or proceeding is pending or, to the best of their knowledge, threatened. (f) Opinion of Counsel. Peoples shall have delivered to BANK ONE an opinion, dated as of the Closing Date, of legal counsel reasonably satisfactory to BANK ONE and its counsel, in form and substance reasonably satisfactory to BANK ONE and its counsel, to the effect specified in Schedule J to this Agreement. 5.02 Conditions to Peoples's Obligations. The obligations of Peoples to consummate the Acquisition are subject to the satisfaction, or the waiver in writing by Peoples to the extent permitted by applicable law, of the following conditions at or prior to the Closing: (a) Prior Regulatory Approval. All filings and registrations with, and notifications to, all federal and state authorities required for consummation of the Acquisition and operation of the Offices by Peoples shall have been made, all approvals and authorizations of all federal and state authorities required for consummation of the Acquisition and operation of the Offices by Peoples shall have been received and shall be in full force and effect, and all applicable waiting periods shall have passed. (b) Corporate Action. The Board of Directors of BANK ONE shall have taken all corporate action necessary to effectuate this Agreement and the Acquisition; and BANK ONE shall have furnished Peoples with a certified copy of each such resolution adopted by the Board of Directors of BANK ONE evidencing the same. (c) Representations and Warranties. The representations and warranties of BANK ONE set forth in this Agreement shall be true and correct in all material respects on the Closing Date with the same effect as though all such representations and warranties had been made on and as of such date (unless a different date is specifically indicated in such representations and warranties), and BANK ONE shall have delivered to Peoples a Certificate to that effect, dated as of the Closing Date to the effect specified in Schedule K to this Agreement. (d) Covenants. Each and all of the covenants and agreements of BANK ONE to be performed or complied with pursuant to this Agreement shall have been duly performed or complied with in all material respects by BANK ONE, or waived by Peoples, and BANK ONE shall have delivered to Peoples a Certificate to that effect, dated as of the Closing Date to the effect specified in Schedule K to this Agreement. (e) No Proceedings or Prohibitions. At the time of the Closing, there shall not be any litigation, investigation, inquiry, or proceeding pending or threatened in or by any court or agency of any government or by any third party which in the judgment of the executive officers of Peoples, with the advice of counsel, presents a bona fide claim to restrain, enjoin, or prohibit consummation of the transactions contemplated by this Agreement or which might result in rescission in connection with such transactions; and Peoples shall have been furnished with a Certificate, in substantially the form specified in Schedule K to this Agreement, dated as of the Closing Date and signed by the Chairman, President, or Vice President, and the Secretary or Assistant Secretary of BANK ONE, to the effect that no such litigation, investigation, inquiry, or proceeding is pending or threatened to the best of their knowledge. (f) Opinion of Counsel. BANK ONE shall have delivered to Peoples an opinion, dated as of the Closing Date, of legal counsel reasonably satisfactory to Peoples and its counsel, in form and substance reasonably satisfactory to Peoples and its counsel, to the effect specified in Schedule L to this Agreement. (g) Real Property. The Title Commitment (as defined in Section 2.01(c) herein) shall have been delivered to Peoples, and updated to or as close as practicable to (but in no event more than five (5) business days prior to) the Closing Date, in accordance with the terms of such Section, and such updated Title Commitment shall not include any special exceptions other than those set forth in the original Title Commitment and any other Permitted Exceptions. (h) Fixed Assets. There shall have been no material alteration in or adjustment to the Fixed Assets. For purposes of this subsection (h), it will not be considered to be a material alteration or adjustment to the Fixed Assets if (i) there is damage or destruction to the Fixed Assets as contemplated by Section 2.01(g) herein and BANK ONE complies with said Section 2.01(g), (ii) BANK ONE makes additions to the Fixed Assets with the prior written consent of Peoples or (iii) BANK ONE makes additions to the Fixed Assets without Peoples's consent in order to correct emergency situations which are threatening to impair BANK ONE's operations at an Office. 5.03 Non-Satisfaction of Conditions Precedent. The non-occurrence or delay of the Closing of the Acquisition by reason of the failure of timely satisfaction of all conditions precedent to the obligations of any party hereto to consummate the Acquisition shall in no way relieve such party of any liability to the other party hereto, nor be deemed a release or waiver of any claims the other party hereto may have against such party, if and to the extent the failure of timely satisfaction of such conditions precedent is attributable to the actions or inactions of such party. 5.04 Waiver of Conditions Precedent. The conditions specified in Sections 5.01 and 5.02 herein shall be deemed satisfied or, to the extent not satisfied, waived if the Closing occurs unless such failure of satisfaction is reserved in a writing executed by Peoples and BANK ONE at or prior to the Closing. 6. CLOSING. -------- 6.01 Closing and Closing Date. The Acquisition contemplated by this Agreement shall be consummated and closed (the "Closing") at such location as shall be mutually agreed upon by Peoples and BANK ONE, on a date to be mutually agreed upon by Peoples and BANK ONE which date is after all required regulatory approvals have been obtained and all applicable regulatory waiting periods associated therewith have expired. The precise date on which the Closing shall occur (the "Closing Date") shall be confirmed by the parties in writing not less than five (5) days after receiving all required regulatory approvals. 6.02 BANK ONE's Actions at Closing. At the Closing (unless another time is specifically stated in Section 6.04 hereof), BANK ONE shall, with respect to the Offices: (a) deliver to Peoples at the Offices such of the Assets purchased hereunder as shall be capable of physical delivery, including, without limitation, all assets comprising the safe deposit box business, if any, of the Offices; and (b) execute, acknowledge and deliver to Peoples all such warranty deeds (qualified, as necessary, to reflect all Permitted Exceptions), endorsements, assignments, bills of sale, and other instruments of conveyance, assignment, and transfer as shall reasonably be necessary or advisable to consummate the sale, assignment, and transfer of the Assets sold or assigned to Peoples hereunder and such other documents as the title company may reasonably require; the originals of all blueprints, construction plans, specifications and plat relating to the Owned Real Estate, which are now in BANK ONE's possession or which BANK ONE has reasonable access to; and such other documents or instruments as may be reasonably required by Peoples, required by other provisions of this Agreement, or reasonably necessary to effectuate the Closing. All of the documents and instruments to be delivered by BANK ONE hereunder shall be in form and substance reasonably satisfactory to counsel for Peoples; and (c) assign, transfer, and deliver to Peoples such of the following records (in whatever form or medium then maintained by BANK ONE) pertaining to the Deposit Liabilities and accrued interest thereon of the Offices assumed by Peoples hereunder as exist and are available: (i) signature cards, orders and contracts between BANK ONE and depositors of the Offices, and records of similar character; and (ii) canceled checks and/or negotiable orders of withdrawal representing charges to depositors; and (iii) a trial balance listing of records of account; and (iv) all other miscellaneous records, statements and other data and materials maintained by BANK ONE relative to any Deposit Liabilities being assumed by Peoples; and (d) assign, transfer, and deliver to Peoples such safe deposit and safekeeping files and records (in whatever form or medium then maintained by BANK ONE) pertaining to the safe deposit business of the Offices transferred to Peoples hereunder as exist and are available, together with the contents of the safe deposit boxes maintained at the Offices, as the same exist as of the close of business on the day immediately preceding the Closing Date (subject to the terms and conditions of the leases or other agreements relating to the same) and all securities and other records, if any, held by the Offices for their customers as of the close of business on the day immediately preceding the Closing Date (subject to the terms and conditions of the agreements or receipts relating to the same); and (e) make available and transfer to Peoples on the Closing Date and prior to the conclusion of the Closing any funds required to be paid to Peoples pursuant to the terms of this Agreement; and (f) execute, acknowledge and deliver to Peoples all Certificates and other documents required to be delivered to Peoples by BANK ONE at the Closing pursuant to the terms hereof; and (g) assign by endorsement substantially in a form as provided in Schedule N attached hereto, transfer and deliver to Peoples the contract, promissory note or other evidence of indebtedness related to the Office Loans together with the loan file and records (in whatever form or medium then maintained by BANK ONE) pertaining to such Office Loans; (h) assign to Peoples all BANK ONE's rights in and to the Assumed Contracts which are assignable and which constitute part of the Assets; and (i) execute and deliver to People's the Assignment, Transfer, and Appointment of Successor Custodian for Individual IRA's in the form set forth in Schedule M to this Agreement. 6.03 Peoples's Actions at the Closing. At the Closing (unless another time is specifically stated in Section 6.04 hereof), Peoples shall, with respect to the Offices: (a) execute, acknowledge, and deliver to BANK ONE, to evidence the assumption of the liabilities and obligations of BANK ONE by Peoples hereunder, an instrument of assumption in the form set forth in Schedule O to this Agreement, and BANK ONE shall then accept, execute, and acknowledge such instrument. Copies of such instrument may be recorded in the public records at the option of either party hereto. The execution and acknowledgment of such instrument shall not be deemed to be a waiver of any rights or obligations of any party to this Agreement; (b) receive, accept and acknowledge delivery of all Assets, and all records and documentation relating thereto, sold, assigned, transferred, conveyed or delivered to Peoples by BANK ONE hereunder; and (c) execute and deliver to BANK ONE such written receipts for the Assets, properties, records, and other materials assigned, transferred, conveyed, or delivered to Peoples hereunder as BANK ONE may reasonably have requested at or before the Closing; (d) pay to BANK ONE on the Closing Date and prior to the conclusion of the Closing any funds required to be paid to BANK ONE at the Closing pursuant to the terms of this Agreement; (e) execute, acknowledge and deliver to BANK ONE all Certificates and other documents required to be delivered to BANK ONE by Peoples at the Closing pursuant to the terms hereof; (f) execute, acknowledge and deliver to BANK ONE an agreement wherein Peoples assumes obligations with respect to the Assumed Contracts for all periods following the Closing Date with respect thereto; and (g) execute and deliver to BANK ONE the Assignment, Transfer, and Appointment of Successor Custodian for Individual IRA's in the form set forth in Schedule M to this Agreement. 6.04 Methods of Payment. Subject to the adjustment procedures set forth in this Section 6.04, the transfer of the funds, if any, due to Peoples or to BANK ONE, as the case may be, as set forth pursuant to the terms of Section 1.04(a) hereof, shall be made on the Closing Date in immediately available United States Federal Funds. At least two business days prior to the Closing, BANK ONE and Peoples shall provide written notice to one another indicating the account and bank to which such funds shall be wire transferred. In order to facilitate the Closing, the parties agree: (i) that the amount of funds transferred on the Closing Date, pursuant to Section 1.04(a) hereof, shall be computed based upon (a) the aggregate book value plus accrued interest of the Office Loans as of the close of business on the day immediately preceding the Closing Date, (b) cash on hand at the Offices as of the close of business on the day immediately preceding the Closing Date, and (c) the aggregate balance of all Deposit Accounts (including interest posted or accrued to such accounts and Individual Retirement Accounts which have become IRAs as a result of the written appointment of Peoples as the successor custodian and the failure of the account holders to object to such appointment) as of the close of business on the day immediately preceding the Closing Date; and (ii) that within ten (10) business days after the Closing, the parties shall make appropriate post-closing adjustments, consistent with the provisions of Section 1.04 hereof, based upon actual Deposit Accounts, Office Loans and cash transactions which took place on the Closing Date or which took place prior to the Closing Date but which were not reflected as of the close of business on the day immediately preceding the Closing Date and execute the Final Settlement in a form substantially to Schedule Q, attached. In addition, prorations of prepaid and deferred income and expenses that cannot be reasonably calculated at the Closing shall be settled and paid based on actual figures as soon as possible after the Closing. 6.05 Availability of Closing Documents. The documents proposed to be used and delivered at the Closing shall be made available for examination by the respective parties not later than 12:00 noon, Ohio time, on the tenth Business Day prior to the Closing Date. 6.06 Effectiveness of Closing. Upon the satisfactory completion of the Closing, which does not include and shall not require completion of the adjustment and proration arrangements set forth in Section 6.04, the Acquisition shall be deemed to be effective and the Closing shall be deemed to have occurred. 7. CERTAIN TRANSITIONAL MATTERS. ----------------------------- 7.01 Transitional Action by Peoples. After the Closing, unless another time is otherwise indicated: (a) Peoples shall: (i) pay in accordance with the law and customary banking practices and applicable Deposit Account contract terms, all properly drawn and presented checks, negotiable orders of withdrawal, drafts, debits, and withdrawal orders presented to Peoples by mail, over the counter, through electronic media, or through the check clearing system of the banking industry, by depositors of the Deposit Accounts assumed by Peoples hereunder, whether drawn on checks, negotiable orders or withdrawal, drafts, or withdrawal order forms provided by Peoples or BANK ONE; and (ii) in all other respects discharge, in the usual course of the banking business, the duties and obligations of BANK ONE with respect to the balances due and owing to the depositors whose Deposit Accounts are assumed by Peoples hereunder; provided, however, that any obligations of Peoples pursuant to this Section 7.01 to honor checks, negotiable orders of withdrawal, drafts, and withdrawal orders on forms provided by BANK ONE and carrying its imprint (including its name and transit routing number) shall not apply to any checks, draft, or withdrawal order (i) presented to Peoples more than one hundred twenty (120) days following the Closing Date, (ii) with a date more than one hundred twenty (120) days prior to (a) the Closing Date or (b) the date of Peoples's receipt thereof, or (iii) on which a stop payment has been requested by the deposit customer. The provisions of this subsection 7.01(a) shall in no way limit Peoples's duties or obligations arising under Section 1.03(b) hereof. (b) Peoples shall, not earlier than the time of procurement of all regulatory approvals required for consummation of the transaction contemplated by this Agreement nor later than ten days prior to the Closing Date, notify all depositors of the Offices by letter, acceptable to BANK ONE, produced in, if appropriate, several similar, but different forms calculated to provide necessary and specific information to the owners of particular types of accounts, of Peoples's pending assumption of the Deposit Liabilities hereunder, and, in appropriate instances, notify depositors that on and after the Closing Date certain BANK ONE deposit-related services and/or BANK ONE's debit card and automatic teller machine services, will be terminated. As an enclosure to such notices, Peoples may furnish appropriate depositors with brochures, forms and other written materials related or necessary to the assumption of the Deposit Accounts by Peoples and the conversion of said accounts to Peoples accounts, including the provision of checks to appropriate depositors using the forms of Peoples with instructions to such depositors to utilize such Peoples checks on and after the Closing Date and thereafter to destroy any unused checks on BANK ONE's forms. The expenses of the printing, processing and mailing of such letter notices and providing new Peoples checks and other forms and written materials to appropriate customers shall be borne by Peoples. Before Closing, except as provided in this paragraph, Peoples will not contact BANK ONE's customers except as may occur in connection with advertising or solicitations directed to the public generally or in the course of obtaining the requisite regulatory approvals of the transaction. (c) Peoples shall promptly pay to BANK ONE an amount equivalent to the amount of any checks, negotiable orders of withdrawal, drafts, or withdrawal orders (net of the applicable Acquisition Consideration paid by Peoples with respect to the Deposit Liabilities represented by any such instrument) credited as of the close of business on the Closing Date to a Deposit Account assumed by Peoples hereunder which are returned uncollected to BANK ONE after the Closing Date and which shall include an amount equivalent to holds placed upon such deposit account for items cashed by BANK ONE as of the close of business on the Closing Date which items are subsequently dishonored. (d) All tasks and obligations concerning the provision of data processing services to or for the Offices after the Closing, other than those specifically set forth in, and to the extent assumed by BANK ONE pursuant to, Section 7.02(b) herein, are the sole and exclusive responsibility of, and shall be performed solely and exclusively by, Peoples. (e) Peoples shall, not later than the close of business on the business day immediately following the Closing Date, supply suitable government-backed securities as security for any deposits of governmental units included among the Deposit Liabilities for which BANK ONE had provided similar security. (f) Peoples shall, as soon as practicable after the Closing Date, prepare and transmit at Peoples's expense to each of the obligors on Office Loans transferred to Peoples pursuant to this Agreement a notice to the effect that the loan has been transferred and directing that payment be made to Peoples at the address specified by Peoples, with Peoples's name as payee on any checks or other instruments used to make payments, and, with respect to such loan on which a payment notice or coupon book has been issued, to issue a new notice or coupon book reflecting the name and an address of Peoples as the person to whom and place at which payments are to be made. (g) If the balance due on any Office Loan transferred to Peoples pursuant to this Agreement has been reduced by BANK ONE as a result of a payment by check or draft received prior to the close of business on the Closing Date, which item is returned unpaid to BANK ONE after the day immediately preceding the Closing Date, the asset value represented by the loan transferred shall be correspondingly increased and an amount in cash equal to such increase shall be promptly paid by Peoples to BANK ONE. (h) Peoples shall use its best efforts to cooperate with BANK ONE in assuring an orderly transition of ownership of the Assets and responsibility for the liabilities, including the Deposit Liabilities, assumed by Peoples hereunder. 7.02 Transitional Actions by BANK ONE. After the Closing, unless another time is otherwise indicated: (a) BANK ONE shall use its best efforts to cooperate with Peoples in assuring an orderly transition of ownership of the Assets and responsibility for the liabilities, including the Deposit Liabilities, assumed by Peoples hereunder. BANK ONE is responsible for all tax and customer reporting up to the date of closing including, but not limited to, dropping off and mailing cut-off statement at the time of closing on all checking account and the payment of interest payable at the time of closing on all interest bearing checking accounts. (b) BANK ONE's sole and exclusive responsibilities concerning the provision of data processing services to or for the Deposit Accounts of the Offices after the Closing Date shall be as set forth in this Section 7.02(b). Within 10 business days following the date of this Agreement, BANK ONE shall provide Peoples with applicable product functions and specifications relating to the data processing support required for the Deposit Accounts, Office Loans, and safe deposit business (if such data processing support currently is provided with respect to such business) maintained at the Offices (such Deposit Accounts, Office Loans and safe deposit business, if applicable, hereinafter called the "Accounts"). Within 10 business days of the date of this Agreement, BANK ONE shall provide to Peoples all automated customer and account data related to the Deposit Liabilities available over the last 12 months in generic form which are machine readable on IBM (or IBM compatible) equipment or which shall be on EBCDIC format eighteen or 36 track 3480 cartridges (non-compressed data and fixed length records). A format description of all data field definitions must accompany the data. By not later than 2:00 P.M. E.S.T. immediately following the Closing Date, BANK ONE shall make available for Peoples's pick-up at Columbus, Ohio, tapes containing all pertinent data and descriptive information relating to the Accounts which is then available to BANK ONE, which tapes shall constitute BANK ONE's records maintained as of and current to the close of business on the Closing Date with respect to the Accounts. BANK ONE shall bear all costs and expenses relating to the performance of its obligations pursuant to this Section 7.02(b). (c) Prior to the Closing Date, BANK ONE shall cooperate with Peoples, at Peoples's expense and at no expense to BANK ONE, in making Transferred Employees available at reasonable times for whatever program of training Peoples deems advisable; provided, however, that Peoples shall conduct such training program in a manner that does not materially interfere with or prevent the performance of the normal duties and activities of suchTransferred Employees. Peoples shall make request of BANK ONE for training opportunities prior to the Closing Date. Such requests, which shall specify the time, duration and place of such training, must be approved by BANK ONE. Such approvals will not be unreasonably withheld by BANK ONE. (d) BANK ONE shall cooperate with and permit Peoples, at Peoples's option and expense and at no expense to BANK ONE, to make provision for the installation of teller equipment in the Offices; provided, however, that Peoples shall arrange for the installation and placement of such equipment at such times and in a manner that does not significantly interfere with the normal business activities and operation of BANK ONE or the Offices. (e) BANK ONE shall resign as custodian of each IRA account maintained at the Offices and assign the custodianship of such accounts to Peoples upon Closing. (f) Not sooner than one (1) business day prior to the Closing nor later than the close of business on the Closing Date, BANK ONE shall terminate its debit card service and convert and change over its direct deposit or payroll and retirement payments service for the Deposit Accounts from BANK ONE to Peoples. Such terminations will be preceded by the notice described in Section 7.01(b) herein. (g) As of the opening of business on the first business day after the Closing Date, BANK ONE and Peoples shall provide the Federal Reserve Bank of Cleveland with all information necessary in order to expedite the clearing and sorting of all checks, drafts, instruments and other commercial paper relative to the Deposit Liabilities and/or the Office Loans (hereinafter collectively referred to as "Paper Items"). Peoples shall bear all charges and costs imposed by the Federal Reserve in connection with the reassignment of account number ranges for sorting the Paper Items. In the event the Federal Reserve and/or any other regional or local clearinghouse for negotiable instruments fails, refuses or is unable to direct sort such Paper Items for delivery to Peoples with the result that such Paper Items are presented to BANK ONE, by not later than : .m. local time of each business day following the Closing and continuing for one hundred twenty (120) days after the Closing, BANK ONE will make available to Peoples for pick up from BANK ONE's offices or the offices of BANK ONE's agent and/or processor at Columbus, Ohio, all of the Paper Items which are received by BANK ONE from the Federal Reserve Bank of Cleveland and/or any regional or local clearinghouse during the morning of each such business day on an "as-received basis." At the same time BANK ONE shall also make available to Peoples information and records, including but not limited to systems printouts, concerning such Paper Items and concerning incoming Automated Clearing House items ("ACH items") as well as outstanding Automatic Teller Machine ("ATM") transactions. Such information and records, including but not limited to systems printouts, will utilize the most recent account number designated by BANK ONE for each of the Deposit Accounts and/or the Office Loans. Each business day BANK ONE will endeavor to see that the sum of (a) the actual Paper Items provided to Peoples plus (b) all ACH items and ATM transactions captured by BANK ONE in its information and records balance with the sum of (c) the information and records, including but not limited to systems printouts, provided by BANK ONE relative to the Paper Items plus (d) the information and records, including but not limited to systems printouts, provided relative to the ACH items and ATM transactions affecting the Deposit Accounts and/or the Office Loans. BANK ONE shall provide the foregoing at no charge to Peoples except that Peoples shall pay any charges assessed to BANK ONE by the Federal Reserve Bank of Cleveland a national or local clearinghouse and/or BANK ONE's agent and/or processor to the extent such assessments relate to the Deposit Accounts. Peoples shall be responsible for pick up of the data to be provided by BANK ONE. BANK ONE and Peoples shall arrange for appropriate daily settlement with one another in order that the transmission of all monies associated with the matters set forth in this Section 7.02(g) might be effected promptly. BANK ONE shall not be liable to Peoples for any failure to provide the data required by this Section 7.02(g) to the extent any such failure results from causes beyond BANK ONE's control including war, strike or other labor disputes, acts of God, errors or failures of the Federal Reserve Bank of Cleveland and/or a participating regional or local clearinghouse, or equipment failure or other emergency wherein BANK ONE and/or its agent processor has been unable to process inclearings from the Federal Reserve Bank of Cleveland or such clearinghouse. (h) BANK ONE shall, not earlier than the time of procurement of all regulatory approvals required for consummation of the transaction contemplated by this Agreement nor later than twenty days prior to the Closing Date, notify all depositors of the Offices and all borrowers of any Office Loan by letter acceptable to Peoples, produced in, if appropriate, several similar, but different forms calculated to provide necessary and specific information to the owners of particular types of accounts and/or loans, of Peoples's pending assumption of the Deposit Liabilities and acquisition of the Office Loans hereunder, and, in appropriate instances, notify depositors that on and after the Closing Date certain BANK ONE deposit-related services and/or BANK ONE's debit card and automatic teller machine services, will be terminated. The expenses of the printing, processing and mailing of such letter notices shall be borne by BANK ONE. (i) For a period of sixty (60) days after the Closing Date, BANK ONE will forward to Peoples, within two (2) business days of receipt, loan payments received by BANK ONE with respect to the Office Loans. Peoples will forward, within two (2) business days of receipt payments received by Peoples with respect to any loans not assigned to Peoples under this Agreement. Peoples and BANK ONE further agree to refer customers to the offices of the other when such customers present payments over the counter to the party not holding their respective loan. 7.03 Overdrafts and Transitional Action. Overdrafts paid on the Deposit Accounts with respect to ledger dates after the Closing Date will be the responsibility and risk of Peoples. Overdrafts approved with respect to ledger dates more than four (4) business days prior to the Closing Date will be the responsibility and risk of BANK ONE. Overdrafts approved with respect to ledger dates during the period beginning four (4) business days prior to the Closing Date through the Closing Date, inclusive, will initially be the responsibility and risk of Peoples (other than overdrafts of customers who are specifically identified in writing by Peoples to BANK ONE not less than four (4) business days prior to the Closing Date); provided, however, that Peoples shall have the right to retransfer any such overdrafts back to BANK ONE for BANK ONE's responsibility and at its risk within six (6) days following the Closing Date, and BANK ONE will repurchase all rights in respect of such overdrafts from Peoples for the amount of each such overdraft outstanding at the time it is retransferred back to BANK ONE less the amount of the Acquisition Consideration paid by Peoples to BANK ONE attributable to such overdrafts; provided, however, that Peoples shall have closed all accounts on which each such overdraft exists not later than the date of such retransfer. 7.04 ATMs. (a) Within ten (10) business days following the date of this Agreement, BANK ONE shall provide Peoples all automated customer and account data related to the purchased ATM accounts, including all transaction history available over the last twelve (12) months related to the accounts in generic form which are machine readable on IBM equipment or which shall be on EBCDIC format eithteen or thirty-six track 3480 cartridges (non-compressed data and fixed length records. As format description of all data fields with field definitions must accompany the data. The information on these tapes must contain, but is not limited to, customer name, address, card number, card status (open, closed or blocked), personal identification number ("PIN"), withdrawal limits, the Deposit Accounts activated by, accessible to or committed to such cards, issue dates and/or open dates, last transaction dates, expiration dates and social security numbers as to all ATM cards issued to customers of the BANK ONE Offices processor to deactivate the operation of the BANK ONE ATM Cards completely or to deactivate or disconnect the Deposit Accounts from such BANK ONE ATM Cards no later than the business day cutoff on the date prior to the Closing Date so that all activity generated by the BANK ONE ATM Cards shall have settled prior to the Closing Date. All transactions and activity related to the BANK ONE ATM Cards following the Closing Date which are received or forwarded to BANK ONE will be returned by BANK ONE to its processor for forwarding to Peoples or will be accepted and forwarded by BANK ONE to Peoples along with all corresponding funds. BANK ONE thereafter agrees to immediately notify its processor to deactivate such ATM Cards and to forward all transactions related thereto directly to Peoples. (b) BANK ONE agrees to deactivate the ATMs located at the Offices on or before the business day cutoff on the day prior to the Closing Date. Thereafter, Peoples shall reconfigure the ATMs to its standards for activation after the business day cutoff on the Closing Date. (c) Peoples and BANK ONE agree to cooperate with each other to assure that all transactions originated through the ATM or originated with the ATM Cards prior to or on the Closing Date shall be for the account of BANK ONE and all transactions originated after the Closing Date shall be for the account of Peoples. A post closing adjustment shall be made in the manner set forth in Section 6.04 hereof to reflect all such transactions which cannot be reasonably calculated as of the Closing. 7.05 Effect of Transitional Action. Except as and to the extent expressly set forth in this Article 7, nothing contained in this Article 7 shall be construed to be an abridgment or nullification of the rights, customs and established practices under applicable banking laws and regulations as they affect any of the matters addressed in this Article 7. 8. GENERAL COVENANTS AND INDEMNIFICATION. -------------------------------------- 8.01 Confidentiality Obligations of Peoples. From and after the date hereof, Peoples and its affiliates and parent company shall treat all information received from BANK ONE concerning the business, assets, operations, and financial condition of BANK ONE (including without limitation the Offices), as confidential, unless and to the extent that Peoples can demonstrate that such information was already known to Peoples and its affiliates, if any, or in the public domain or received from a third person not known by Peoples to be under any obligation to BANK ONE; and Peoples shall not use any such information (so required to be treated as confidential) for any purpose except in furtherance of the transactions contemplated hereby. Upon the termination of this Agreement, Peoples shall, and shall cause its affiliates, if any, to, promptly return all documents and workpapers containing, and all copies of, any such information (so required to be treated as confidential) received from or on behalf of BANK ONE in connection with the transactions contemplated hereby. The covenants of Peoples contained in this Section 8.01 are of the essence and shall survive any termination of this Agreement, but shall terminate at the Closing, if it occurs, with respect to any information that is limited solely to the activities and transactions of the Offices; provided, however, that neither Peoples nor any of its affiliates shall be deemed to have violated the covenants set forth in this Section 8.01 if Peoples shall in good faith disclose any of such confidential information in compliance with any legal process, order or decree issued by any court or agency of government of competent jurisdiction. It is expressly acknowledged by BANK ONE that all information provided to Peoples related to this purchase and assumption transaction may be provided to Peoples's affiliates for the purpose of consummating the transaction which is the subject of this Agreement. 8.02 Confidentiality Obligations of BANK ONE. From and after the date hereof, BANK ONE, its affiliates and its parent corporation shall treat all information received from Peoples concerning Peoples's business, assets, operations, and financial condition as confidential, unless and to the extent BANK ONE can demonstrate that such information was already known to BANK ONE or its affiliates or in the public domain, and BANK ONE shall not use any such information (so required to be treated as confidential) for any purpose except in furtherance of the transactions contemplated hereby. Upon the termination of this Agreement, BANK ONE shall promptly return all documents and workpapers containing, and all copies of, any such information (so required to be treated as confidential) received from or on behalf of Peoples in connection with the transactions contemplated hereby. The covenants of BANK ONE contained in this Section 8.02 are of the essence and shall survive any termination of this Agreement; provided, however, that BANK ONE nor any of its affiliates shall be deemed to have violated the covenants set forth in this Section 8.02 if BANK ONE shall in good faith disclose any of such confidential information in compliance with any legal process, order or decree issued by any court or agency of government of competent jurisdiction. It is expressly acknowledged by Peoples that all information provided to BANK ONE related to this purchase and assumption transaction may be provided to Banc One Corporation and BANK ONE's affiliates for the purpose of consummating the transaction which is the subject of this Agreement. 8.03 Indemnification by BANK ONE. From and after the Closing Date, BANK ONE shall indemnify, hold harmless, and defend Peoples from and against all claims, losses, liabilities, demands and obligations, including without limitation reasonable attorneys' fees and expenses, which People's may receive, suffer, or incur arising out of any actions, suits, or proceedings commenced prior to the Closing (other than proceedings to prevent or limit the consummation of the Acquisition) relating to operations at the Offices and/or the Deposit Liabilities or Office Loans of the Offices; and BANK ONE shall further indemnify, hold harmless, and defend Peoples from and against all losses and liabilities, including reasonable attorneys' fees and expenses, arising out of any actions, suits, or proceedings commenced on or after the Closing to the extent the same relate to operations at the Offices and/or the Deposit Liabilities or Office Loans prior to the Closing. The obligations of BANK ONE under this Section 8.03 shall be contingent upon Peoples giving BANK ONE written notice (i) of receipt by Peoples of any process and/or pleadings in or relating to any actions, suits, or proceedings of the kinds described in this Section 8.03, including copies thereof, and (ii) of the assertion of any claim or demand relating to the operation of the Offices and/or the Deposit Liabilities or Office Loans prior to the Closing, including, to the extent known to Peoples, the identity of the person(s) or entity(ies) asserting such claim or making such demand and the nature thereof, and including copies of any correspondence or other writings relating thereto. All notices required by the preceding sentence shall be given within fifteen days of the receipt by Peoples of any such process or pleadings or any oral or written notice of the assertion of any such claims or demands. BANK ONE shall have the right to take over Peoples's defense in any such actions, suits, or proceedings through counsel selected by BANK ONE, to compromise and/or settle the same and to prosecute any available appeals or reviews of any adverse judgment or ruling that may be entered therein. The obligations of BANK ONE pursuant to this Section 8.03 shall survive the Closing. 8.04 Indemnification by Peoples. From and after the Closing Date, Peoples shall indemnify, hold harmless and defend BANK ONE from and against all claims, losses, liabilities, demands and obligations, including without limitation reasonable attorneys' fees and operating expenses which BANK ONE may receive, suffer, or incur in connection with (i) any losses incurred by BANK ONE related to BANK ONE's compliance with instructions from Peoples made pursuant to Section 7.04 of this Agreement and not related to any negligence or malfeasance on the part of BANK ONE and (ii) operations and transactions occurring after the Closing and which involve the Assets transferred, the Deposit Liabilities or Office Loans and the other obligations and liabilities assumed pursuant to this Agreement. The obligations of Peoples under this Section 8.04 shall be contingent upon BANK ONE giving Peoples written notice (i) of the receipt by BANK ONE of any process and/or pleadings in or relating to any actions, suits or proceedings of the kinds described in this Section 8.04, including copies thereof, and (ii) of the assertion of any claim or demand relating to the Assets transferred to and/or the Deposit Liabilities or Office Loans and the other obligations and liabilities assumed by Peoples on or after the Closing, including, to the extent known to BANK ONE, the identity of the person(s) or entity(ies) asserting such claim or making such demand and the nature thereof, and including copies of any correspondence or other writings relating thereto. All notices required by the preceding sentence shall be given within fifteen (15) days of the receipt by BANK ONE of any such process or pleadings or any oral or written notice of the assertion of any such claims or demands. Peoples shall have the right to take over BANK ONE's defense in any such actions, suits, or proceedings through counsel selected by Peoples, to compromise and/or settle the same and to prosecute any available appeals or review of any adverse judgment or ruling that may be entered therein. The obligations of Peoples pursuant to this Section 8.04 shall survive the Closing. 8.05 Solicitation of Customers by Peoples Prior to Closing. At any time prior to the Closing Date, Peoples will not, and will not permit any of its affiliates, if any, to conduct any marketing, media or customer solicitation campaign which is specifically targeted to induce customers whose Deposit Account liabilities are to be assumed or Office Loans are to be acquired by Peoples pursuant to this Agreement to discontinue their account relationships with BANK ONE, except as may occur in connection with advertising or solicitations directed to the public generally. Additionally, at any time prior to the Closing, Peoples shall not offer to pay on any transaction accounts or any new or renewal savings accounts or certificates of deposits, rates of interest greater than those offered or then being paid on similar accounts for like term and amount by the main office and all Washington County, Ohio offices of Peoples. 8.06 Solicitation of Customers by BANK ONE After the Closing. From the date of this Agreement and for three (3) years following the Closing Date, BANK ONE will not, and BANK ONE will not permit any of its affiliates, including the directors, officers, employees or principal shareholders of BANK ONE, to directly compete for or solicit deposit accounts from customers whose Deposit Liabilities and/or Office Loans are assumed or acquired by Peoples pursuant to this Agreement, except as may occur in connection with (i) advertising or solicitations directed to the public generally, (ii) solicitations outside Meigs County and Gallia County, Ohio and (iii) BANK ONE customers with a banking relationship with BANK ONE at offices other than the Offices as of the Closing Date. 8.07 Further Assurances. From and after the date hereof, each party hereto agrees to execute and deliver such instruments and to take such other actions as the other party hereto may reasonably request in order to carry out and implement this Agreement. Without limiting the foregoing, BANK ONE agrees to execute and deliver such deeds, bills of sale, acknowledgments, and other instruments of conveyance and transfer as, in the reasonable judgment of Peoples, shall be necessary and appropriate to vest in Peoples the legal and equitable title to the Assets of BANK ONE being conveyed to Peoples hereunder. The covenants of each of the parties hereto pursuant to this Section 8.07 shall survive the Closing. 8.08 Operation of the Offices. Except as otherwise provided in this Agreement, neither BANK ONE, its subsidiaries, affiliates or parent corporation shall be obligated to provide for any managerial, financial, business, or other services to the Offices, including without limitation any personnel, employee benefit, data processing, accounting, risk management, or other services or assistance that may have been provided to the Offices prior to the close of business on the Closing Date, and Peoples shall take such action as may in its judgment appear to be necessary or advisable to provide for the ongoing operation and management of, and the provision of services and assistance to, the Offices after the Closing Date. As soon as possible after the Closing Date, Peoples shall change the legal name of the Offices and, except for any documents or materials in possession of the customers of the Offices (including but not limited to deposit tickets and checks), shall not use and shall cause the Offices to cease using any signs, stationery, advertising, documents, or printed or written materials that refer to the Offices by any name that includes the words "BANK ONE" or "BANC ONE." Preceding the Closing, BANK ONE shall cooperate with any reasonable requests of Peoples directed to obtaining specifications for the procurement of new signs of Peoples's choosing so that Peoples is in a position to install new signs immediately following the close of business on the Closing Date; provided, however, that Peoples's receipt of all sign specifications shall be obtained by Peoples in a manner that does not significantly interfere with the normal business activities and operations of the Offices, and further provided that the procurement of all new signs shall be at the sole and exclusive expense of Peoples. As indicated in Section 1.02(c), BANK ONE will retain its signs located at the Offices. If removed by Peoples in conjunction with its installation of new signs, Peoples shall obtain BANK ONE's approval for such removal and shall insure that said signs are removed without damaging them. It is understood by the parties hereto that, with the exception of the signs themselves, all mounting facilities for the signs shall be considered as fixtures or as part of the Fixed Assets. 8.09 Information After Closing. For a period of seven (7) years following the Closing, upon written request of BANK ONE to Peoples or Peoples to BANK ONE, as the case may be, such requested party shall provide the requesting party with reasonable access to, or copies of, information and records relating to the Offices which are then in the possession or control of the requested party reasonably necessary to permit the requesting party or any of its subsidiaries or affiliates to comply with or contest any applicable legal, tax, banking, accounting, or regulatory policies or requirements, or any legal or regulatory proceeding thereunder or requests related to customer relationships at the Offices prior to Closing. In the event of any such requests, the requesting party shall reimburse the requested party for the reasonable costs of the requested party related to such request. 8.10 Survival of Covenants. The obligations and covenants of the parties under this Section 8 shall survive the Closing. 8.11 Individual Retirement Accounts. All Individual Retirement Accounts related to the Offices that shall not have become IRAs by the close of business on the 30th day following the Closing shall not be assigned by BANK ONE to Peoples or assumed by Peoples. BANK ONE may thereafter, at its option, elect to retain such Individual Retirement Accounts, advise the account holders that it has withdrawn its resignation as custodian or transfer the amount in such Individual Retirement Accounts to the account holders. 9. TERMINATION. ------------ 9.01 Termination by Mutual Agreement. This Agreement may be terminated and the transactions contemplated hereby may be abandoned by mutual consent of the parties authorized by a vote of a majority of the Board of Directors (or by the vote of the Executive Committee of such Board, if so empowered) of each of BANK ONE and Peoples. 9.02 Termination by BANK ONE. This Agreement may be terminated and the transactions contemplated hereby abandoned by a vote of a majority of the Board of Directors (or by the vote of the Executive Committee of such Board, if so empowered) of BANK ONE: (a) in the event of a material breach by Peoples of this Agreement; or (b) in the event any of the conditions precedent specified in Section 5.01 of this Agreement has not been met as of the date required by this Agreement and, if not so met, has not been waived by BANK ONE; or (c) in the event any regulatory approval required for consummation of the Acquisition is denied by the applicable regulatory authority or in the event that at any time prior to the Closing Date it shall become reasonably certain to BANK ONE, with the advice of counsel, that a regulatory approval required for consummation of the Acquisition will not be obtained; or (d) on or after June 30, 1996 if the Closing has not then occurred. 9.03 Termination by Peoples. This Agreement may be terminated and the transactions contemplated hereby abandoned by a vote of a majority of the Board of Directors (or by the vote of the Executive Committee of such Board, if so empowered) of Peoples: (a) in the event of a material breach by BANK ONE of this Agreement; or (b) in the event any of the conditions precedent specified in Section 5.02 of this Agreement has not been met as of the date required by this Agreement and, if not so met, has not been waived by Peoples; or (c) in the event any regulatory approval required for consummation of the Acquisition is denied by the applicable regulatory authority or in the event that at any time prior to the Closing Date it shall become reasonably certain to Peoples, with the advice of counsel, that a regulatory approval required for consummation of the Acquisition will not be obtained; or (d) on or after June 30, 1996 if the Closing has not then occurred. 9.04 Effect of Termination. The termination of this Agreement pursuant to Sections 9.02 or 9.03 of this Article 9 shall not release any party hereto from any liability or obligation to the other party hereto arising from (i) a breach of any provision of this Agreement occurring prior to the termination hereof or (ii) the failure of timely satisfaction of conditions precedent to the obligations of a party to the extent that such failure of timely satisfaction is attributable to the actions or inactions of such party. 10. MISCELLANEOUS PROVISIONS. ------------------------- 10.01 Expenses. Except as and to the extent specifically allocated otherwise herein, each of the parties hereto shall bear its own expenses, whether or not the transactions contemplated hereby are consummated. 10.02 Certificates. All statements contained in any certificate ("Certificate") delivered by or on behalf of BANK ONE or Peoples pursuant to this Agreement or in connection with the transactions contemplated hereby shall be deemed to be representations and warranties of the party delivering the Certificate hereunder. Each such Certificate shall be executed on behalf of the party delivering the Certificate by duly authorized officers of such party. 10.03 Termination of Representations and Warranties. The respective representations and warranties of BANK ONE and Peoples contained or referred to in this Agreement or in any Certificate, schedule, or other instrument delivered or to be delivered pursuant to this Agreement shall terminate at the Closing, except for: (a) those representations and warranties contained in any warranty deeds delivered by BANK ONE to Peoples at the Closing; (b) those representations and warranties contained in any bill of sale relating to the Assets delivered by BANK ONE to Peoples at Closing; (c) those representations and warranties contained in any instrument of assumption or in any Certificate in the forms of Schedule I and Schedule O, respectively, attached hereto and delivered by Peoples to BANK ONE at the Closing; (d) those representations and warranties contained in any Certificate in the form of Schedule K attached hereto, delivered by BANK ONE to Peoples at the Closing; and (e) those representations and warranties of BANK ONE contained in Section 3.01(o) of this Agreement. 10.04 Waivers. Each party hereto, by written instrument signed by duly authorized officers of such party, may extend the time for the performance of any of the obligations or other acts of the other party hereto and may waive, but only as affects the party signing such instrument: (a) any inaccuracies in the representations or warranties of the other party contained or referred to in this Agreement or in any document delivered pursuant hereto; (b) compliance with any of the covenants or agreements of the other party contained in this Agreement; (c) the performance (including performance to the satisfaction of a party or its counsel) by the other party of such of its obligations set out herein; and (d) satisfaction of any condition to the obligations of the waiving party pursuant to this Agreement. 10.05 Notices. All notices and other communications hereunder may be made by mail, hand-delivery or by courier service and notice shall be deemed to have been given when received; provided, however, if notices and other communications are made by nationally recognized overnight courier service for overnight delivery, such notice shall be deemed to have been given one business day after being forwarded to such a nationally recognized overnight courier service for overnight delivery. If to BANK ONE: 1. Bank One, Athens, National Association Attention: Larry Headlee 125 Putnam Street Marietta, Ohio 45750 With a copy to: BANC ONE CORPORATION Attention: Steven A. Bennett Senior Vice President 100 East Broad Street Columbus, Ohio 43271-0158 If to Peoples: The Peoples Bank and Trust Company of Marietta, Ohio Attention: Robert E. Evans P.O. Box 738 Marietta, Ohio 45750 With a copy to: Peoples Bancorp, Inc. Attention: C. R. Hunsaker P.O. Box 738 Marietta, Ohio 45750 or such other person or address as any such party may designate by notice to the other parties, and shall be deemed to have been given as of the date received. 10.06 Parties in Interest: Assignment; Amendment. This Agreement is binding upon and is for the benefit of the parties hereto and their respective successors, legal representatives, and assigns, and no person who is not a party hereto (or a successor or assignee of such party) shall have any rights or benefits under this Agreement, either as a third party beneficiary or otherwise. This Agreement cannot be assigned, and this Agreement cannot be amended or modified, except by a written agreement executed by the parties hereto or their respective successors and assigns. 10.07 Headings. The headings, table of contents, and index to defined terms (if any) used in this Agreement are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 10.08 Terminology. The specific terms of art that are defined in various provisions of this Agreement shall apply throughout this Agreement (including without limitation each Schedule hereto), unless expressly indicated otherwise. In addition, the following terms and phrases shall have the meanings set forth for purposes of this Agreement (including such Schedule): (a) The term "business day" shall mean any day other than a Saturday, Sunday, or a day on which Peoples is closed in accordance with the laws of the State of Ohio or the United States of America. Any action, notice, or right which is to be taken or given or which is to be exercised or lapse on or by a given date which is not a business day may be taken, given, or exercised, and shall not lapse, until the next business day following. (b) The term "affiliate" shall mean, with respect to any person, any other person directly or indirectly controlling, controlled by or under common control with such person. (c) The term "Permitted Exceptions" shall mean, with respect to the Owned Real Estate, (i) those five standard exceptions appearing as Schedule B items in a standard ALTA owners or leasehold title insurance policy, and any other exceptions, restrictions, easements, rights of way, and encumbrances referenced in the Title Commitment delivered by BANK ONE to Peoples as indicated in Section 2.01(c) of this Agreement; (ii) statutory liens for current taxes or assessments not yet due, or if due not yet delinquent, or the validity of which is being contested in good faith by appropriate proceedings; (iii) such other liens, imperfections in title, charges, easements, restrictions, and encumbrances (but in all cases of Owned Real Estate excluding those which secure borrowed money) which, individually and in the aggregate, do not materially detract from the value of, or materially interfere with the present use of, any property subject thereto or affected thereby; and (iv) such other exceptions as are approved by Peoples in writing. (d) The term "person" shall mean any individual, corporation partnership, limited liability company, association, trust, or other entity, whether business, personal, or otherwise. (e) Unless expressly indicated otherwise in a particular context, the terms "herein," "hereunder," "hereto," "hereof," and similar references refer to this Agreement in its entirety and not to specific articles, sections, schedules, or subsections of this Agreement. Unless expressly indicated otherwise in a particular context, references in this Agreement to enumerated articles, sections, and subsections refer to designated portions of this Agreement (but do not refer to portions of any Schedule unless such Schedule is specifically referenced) and do not refer to any other document. (f) The term "subsidiary" shall mean a corporation, partnership, limited liability company, joint venture, or other business organization more than 50% of the voting securities or interests in which are beneficially owned or controlled by the indicated parent of such entity. 10.09 Flexible Structure. References in this Agreement to federal or state laws or regulations, jurisdictions, or chartering or regulatory authorities shall be interpreted broadly to allow maximum flexibility in consummating the transactions contemplated hereby in light of changing business, economic, and regulatory conditions. Without limiting the foregoing, in the event BANK ONE and Peoples agree in writing to alter the legal structure of the Acquisition contemplated by this Agreement references in this Agreement to such laws, regulations, jurisdictions, and authorities shall be deemed to be altered to reflect the laws, regulations, jurisdictions, and authorities that are applicable in light of such change. 10.10 Press Releases. BANK ONE and Peoples shall approve the form and substance of any press release of any matters relating to this Agreement issued by the other. 10.11 Entire Agreement. This Agreement supersedes any and all oral or written agreements and understandings heretofore made relating to the subject matter hereof and contains the entire agreement of the parties relating to the subject matter hereof. All schedules, exhibits, and appendices to this Agreement are incorporated into this Agreement by reference and made a part hereof. 10.12 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Ohio and the National Banking Laws of the United States. 10.13 Counterparts. This Agreement may be executed in several counter- parts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.14 Tax Matters. Peoples and BANK ONE agree that they will file applicable tax returns and other related schedules and documents based on the allocations in this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized, all as of the date first above written. Bank One, Athens, ATTEST: National Association /s/ EARL D. WESTBROOK By: /s/ LARRY HEADLEE Earl D. Westbrook Larry Headlee Its: Chairman and CEO ATTEST: The Peoples Bank and Trust Company of Marietta, Ohio /s/ CHARLES R. HUNSAKER By: /s/ ROBERT E. EVANS Charles R. Hunsaker Robert E. Evans Its: Chairman and CEO SUPPLEMENTAL INFORMATION TO THE "OFFICE PURCHASE AND ASSUMPTION AGREEMENT" BETWEEN PEOPLES BANK AND BANK ONE, ATHENS, N.A. - --------------------------------------------------------------- THE COMPANY WILL FURNISH SUPPLEMENTAL INFORMATION TO THE COMMISSION UPON REQUEST THE FOLLOWING OMITTED EXHIBITS AND SCHEDULES TO THE OFFICE PURCHASE AND ASSUMPTION AGREEMENT BETWEEN PEOPLES BANK AND BANK ONE, ATHENS, N.A. Schedule A: Description of Owned Real Estate. Schedule B: Description of Leased Real Estate and Third Party Lease. Schedule C: Furniture, Fixtures and Equipment. Schedule D: Assumed Contracts. Schedule E: List of Leases, Safekeeping Items and Agreements. Schedule F: Form of Individual Retirement Custodial Account Agreement and Amended and Restated Individual Retirement Account Disclosure Statement. Schedule G: Deposit Accounts. Schedule H: Office Loans. Schedule I: Certification of Peoples Bank. Schedule J: Form of Opinion of Counsel for Peoples Bank. Schedule K: Certification of Bank One, Athens, N.A. Schedule L: Form of Opinion of Counsel for Bank One, Athens, N.A. Schedule M: Assignment, Transfer and Appointment of Successor Custodian for IRAs. Schedule N: Form of Assignment of Office Loans, Notes, Agreements and Pledge. Schedule O: Form of Instrument of Assumption. Schedule P: Form of Preliminary Settlement Statement. Schedule Q: Form of Final Settlement Statement. EX-10 3 EXHIBIT 10(B)-RETIREMENT SAVINGS PLAN EXHIBIT 10(b) - ------------- PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 PEOPLES BANCORP INC. RETIREMENT SAVINGS PLAN Amended and Restated Effective January 1, 1996 PEOPLES BANCORP INC. RETIREMENT SAVINGS PLAN TABLE OF CONTENTS - ----------------- I. DEFINITIONS 4 II. PARTICIPATION 2.01 Eligibility and Election to Participate 8 2.02 Reemployment 8 2.03 Employment After Normal Retirement Age 8 2.04 Designation of Beneficiary 9 III. CONTRIBUTIONS 3.01 Contribution of Participant Deferrals 9 3.02 Participant Nondeductible Contributions 10 3.03 Rollover Contributions 10 3.04 Employer Matching Contributions 10 3.05 Limitation of Participant Deferrals 11 3.06 Maximum Participant and Matching Contributions for Highly-Compensated Employees 11 3.07 Combined Alternative Limitation on Participant Deferrals and Employer Matching Contributions 12 IV. PARTICIPANT'S ACCOUNTS; ALLOCATIONS 4.01 Participant's Accounts 12 4.02 Allocation of Employer Matching Contributions 13 4.03 Allocation of Net Gains or Losses; Crediting of Accounts 13 4.04 Limitation of Annual Additions 13 4.05 Limitation of Reversion of Contributions 15 V. INVESTMENT OF CONTRIBUTIONS AND VALUATION OF FUNDS 5.01 Investment Funds 16 5.02 Investment Fund Options 16 5.03 Qualifying Employer Securities 17 5.04 Valuation of Trust Fund 17 VI. WITHDRAWALS OF PARTICIPANT DEFERRALS WHILE EMPLOYED 6.01 Withdrawal of Employee Deferral Accounts 17 6.02 Hardship Withdrawals 17 6.03 Withdrawal of Nondeductible Contributions 18 6.04 Amount and Payment of Withdrawals 18 VII. AMOUNT AND DISTRIBUTION OF BENEFITS 7.01 Retirement Benefits 19 7.02 Death Benefits 19 7.03 Disability Benefits 19 7.04 Benefits Upon Termination of Employment 19 7.05 Distribution of Benefits 19 7.06 Timing of Distributions 20 VIII. DEFERRAL PLAN COMMITTEE 8.01 Appointment of Committee 21 8.02 Powers and Duties 21 8.03 Actions by the Committee 22 8.04 Interested Committee Members 22 8.05 Indemnification 22 8.06 Conclusiveness of Action 23 8.07 Payment of Expenses 23 8.08 Claims Procedure 23 IX. AMENDMENT TO THE PLAN 9.01 Right to Amend 24 X. TERMINATION OF THE PLAN 10.01 Right to Terminate 24 10.02 Plan Merger and Consolidation 24 10.03 Successor Employer 24 XI. TRUST AND THE TRUSTEE 11.01 Employer to Select Trustee 25 XII. TOP HEAVY PLAN PROVISIONS 12.01 Definitions 25 12.02 Top Heavy Status 26 12.03 Minimum Contributions 26 XIII. MISCELLANEOUS 13.01 Voluntary Plan 27 13.02 Designation of Dates 27 13.03 Non-alienation of Benefits 27 13.04 Participant Loans 27 13.05 Inability to Receive Benefits 29 13.06 Lost Participants 29 13.07 Limitation of Rights 29 13.08 Gender 29 13.09 Invalid Provision 29 13.10 One Plan 29 13.11 Governing Law 30 PEOPLES BANCORP INC. RETIREMENT SAVINGS PLAN Peoples Bancorp Inc. hereby adopts the following retirement savings plan pursuant to Sections 401(a) and 401(k) of the Code, effective January 1, 1996. The Plan is an amendment and restatement of the Peoples Bancorp Inc. Retirement Savings Plan, effective January 1, 1989 and effective December 31, 1985. The Plan shall be for the exclusive benefit of the Participants and, where applicable, the Beneficiaries of such Participants. It is intended that this Plan, together with the Trust Agreement, shall comply with the applicable provisions of the Internal Revenue Code of 1986, as amended, and the Employee Retirement Income Security Act of 1974, as amended. ARTICLE I DEFINITIONS - ----------- Whenever used herein, the following words and phrases shall have the meaning specified below. Additional words and phrases may be defined in the text of the Plan. "Accounts" means a Participant's Employee Deferral Account, his Voluntary Contributions Account, his Rollover Account and his Employer Matching Contributions Account. "Affiliate" means any other employer which, together with the Employer, is a member of a controlled group of corporations or of a commonly controlled trade or business [as defined in Code Sections 414(b) and (c) and as modified by Code Section 415(h)] or of an affiliated service group [as defined in Code Section 414(m)] or other organization described in Code Section 414(o). "Beneficiary" means the person, persons or entity designated by a Participant pursuant to the terms of Section 2.04 to receive the death benefit payable under the Plan. "Break in Service" means a Period of Severance of one year. "Code" means the Internal Revenue Code of 1986, as may be amended from time to time. "Committee" means the Deferral Plan Committee as described in Article VIII. "Compensation" means the total amount reflected on a Participant's Form W-2 for the Plan Year, excluding any benefits paid under this Plan, except Compensation shall include any salary deferrals made by a Participant pursuant to Section 3.01. Notwithstanding the preceding sentence, for purposes of allocating the Employer's contribution under the Plan, for the year in which a Participant begins or resumes participation in the Plan, Compensation before his participation began or resumed shall be disregarded. Effective for Plan Years beginning after December 31, 1988, Compensation paid by the Employer during any Plan Year in excess of $200,000 as adjusted under Code Section 401(a)(17) shall be excluded and effective for Plan Years beginning after December 31, 1993, Compensation paid by the Employer during any Plan Year in excess of $150,000 as adjusted under Code Section 401(a)(17) shall be excluded. In determining the Compensation of a Participant for purposes of the $200,000 or $150,000 limit, the family aggregation rules of Code Section 414(q)(6) will apply, except in applying such rules, the term "family" will include only the Spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the year. If, as a result of the application of such rules, Compensation would exceed the adjusted $200,000 or $150,000 limitation, then the limitation will be prorated among the affected persons in proportion to each such person's compensation as determined under this paragraph prior to the application of this limitation. "Effective Date" means, for this amended and restated Plan, January 1, 1996, unless some other effective date is provided for in any specific provision herein. "Employee" means any person who, on or after the Effective Date, is receiving remuneration for personal services rendered to the Employer (or who would be receiving such remuneration except for an authorized leave of absence). In addition, any Leased Employee shall be treated as an Employee of the Employer. However, contributions or benefits provided by the leasing organization for any Leased Employee which are attributable to services performed for the Employer shall be treated as provided by the Employer. The preceding sentences shall not apply to any Leased Employee of the Employer if (a) Leased Employees do not constitute more than 20% of the Employer's non-highly-compensated work force [as defined by reference to Section 414(q) of the Code]; and (b) the Leased Employee is covered by a money purchase pension plan maintained by the leasing organization which provides (i) a nonintegrated employer contribution rate for each participant of at least 10% of compensation; (ii) full and immediate vesting; and (iii) immediate participation for all employees of the leasing organization (except for those individuals whose compensation is less than $1,000 in each plan year during the four-year period ending with the plan year). "Employer" means Peoples Bancorp Inc., its Affiliates and any successor business or organization which shall assume the obligations of the Plan. "Employment Commencement Date" means the date on which the Employee first performs an Hour of Service for the Employer or an Affiliate. "Entry Date" means the first day of January, April, July and October of each Plan Year. "ERISA" means the Employee Retirement Income Security Act of 1974, as periodically amended. "Family Member" means, with respect to any individual, such individual's Spouse and lineal ascendants or descendants and the spouses of such lineal ascendants or descendants. "Highly-Compensated Employee" means a highly-compensated active employee and a highly-compensated former employee. A highly-compensated active employee includes any Employee who performs service for the Employer or an Affiliate during the determination year and who, during the look-back year (a) received compensation in excess of $75,000 (as adjusted by the Secretary of the Treasury); (b) received compensation in excess of $50,000 (as adjusted by the Secretary of the Treasury) and was a member of the top-paid group for such year; or (c) was an officer of the Employer or an Affiliate and received compensation during such year that is greater than 50% of the dollar limitation in effect under Code Section 415(b)(1)(A). The term Highly-Compensated Employee also includes (a) Employees who are both described in the preceding paragraph if the term "determination year" is substituted for the term "look-back year" and one of the 100 Employees who received the most compensation from the Employer or an Affiliate during the determination year; and (b) Employees who are 5% owners at any time during the look-back year or determination year. If no officer has satisfied the compensation requirement of (c) in the preceding paragraph during either a determination year or look-back year, the highest paid officer for such year shall be treated as a Highly-Compensated Employee. For this purpose, the determination year shall be the Plan Year. The look-back year shall be the 12-month period immediately preceding the determination year. A highly-compensated former Employee includes any Employee who separated from service (or was deemed to have separated) prior to the determination year, performs no service for the Employer or an Affiliate during the determination year and was a highly-compensated active employee for either the separation year or any determination year ending on or after the Employee's 55th birthday. A separation year is the determination year the Employee separates from service. If an Employee is, during a determination year or look-back year, a Family Member of either a 5% owner who is an active or former Employee or a Highly-Compensated Employee who is one of the 10 most highly-compensated employees ranked on the basis of compensation paid by the Employer or its Affiliates during such year, then the Family Member and the 5% owner or top-10 highly-compensated employee shall be aggregated. In such case, the Family Member and 5% owner or top-10 highly-compensated employee shall be treated as a single Employee receiving compensation and Plan contributions or benefits equal to the sum of such compensation and contributions or benefits of the Family Member and 5% owner or top-10 highly-compensated employee. The determination of who is a Highly-Compensated Employee, including the determinations of the number and identity of Employees in the top-paid group, the top 100 Employees, the number of Employees treated as officers and the compensation that is considered will be made in accordance with Code Section 414(q) and the regulations thereunder. "Hour of Service" means: (a) each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer or an Affiliate. These hours shall be credited to the Employee for the computation period or periods in which the duties are performed; (b) each hour for which an Employee is paid, or entitled to payment, by the Employer or an Affiliate on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence; and (c) each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer or an Affiliate. An Hour of Service credited under paragraph (a) or (b) above will not be credited under this paragraph (c). These hours shall be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made. "Inactive Participant" means a Participant whose employment with the Employer or an Affiliate has continued but (a) whose participation has been suspended as a result of making a withdrawal pursuant to Section 6.02 hereof; or (b) who has suspended his deferrals pursuant to Section 3.01(c) hereof. "Investment Funds" means the investment funds as determined by the Committee and described in Section 5.02 for the investment of Participant Accounts pursuant to Participant directions. "Leased Employee" means any person (other than an employee of the recipient) who, pursuant to an agreement between the recipient and any other person (leasing organization), has performed services for the recipient [or for the recipient and related persons determined in accordance with Code Sections 414(n) and 414(o)] on a substantially full-time basis for a period of at least one year, and such services are of a type historically performed by employees in the business field of the recipient employer. "Lower-Compensated Employee" means any Employee who is not a Highly-Compensated Employee. "Normal Retirement Age" means the Participant's 65th birthday; provided, however, that this Plan shall not be interpreted to require that a Participant retire prior to attaining any specific age. "Participant" means either (a) an Employee who is participating in the Plan in accordance with Article II and for whom Accounts are being maintained; or (b) a former Employee of the Employer or an Affiliate for whom Accounts are being maintained. "Period of Severance" means the time period between an Employee's Severance from Service and the date on which he is next credited with an Hour of Service. "Plan" means the plan designated as the Peoples Bancorp Inc. Retirement Savings Plan, as described in this document and as it may be periodically amended. "Plan Year" means the 12 months beginning on each January 1 and ending each December 31. The Plan Year shall be the "Limitation Year" for purposes of Code Section 415 and Section 4.04 of the Plan. "Projected Annual Benefit" means the annual benefit to which a Participant would be entitled under all Employer sponsored defined benefit plans, assuming that the Participant continues employment until his normal retirement date, that the Participant's Compensation continues until his normal retirement date at the rate in effect during the current calendar year and that all other factors relevant for determining benefits under the Plan remain constant at the level in effect during the current calendar year. "Severance from Service" means the earliest of the date on which an Employee either (a) quits; (b) retires; (c) is discharged; (d) dies; or (e) is continuously absent (with or without pay) beyond (i) the first anniversary of the first day of his approved absence; or (ii) the expiration of his approved absence, whichever is longer. An Employee will not be deemed to have incurred a Severance from Service while in active service with the United States armed forces and while his reemployment rights are protected by law. If a Participant retires because of disability and recovers before his normal retirement date but is not rehired by the Employer or an Affiliate, he will be treated as having quit (rather than retired) on the date his disability began. "Spouse" or "Surviving Spouse" means an individual who is legally married to the Participant, provided that an individual who was formerly married to the Participant will be treated as the Spouse or Surviving Spouse to the extent provided under a qualified domestic relations order, as described in Code Section 414(p). "Trust Agreement" means the agreement, and any amendments made thereto, by and between the Employer and the Trustee for the management, investment and disbursement of funds held in the Trust Fund. "Trust Fund" means the Employer's portion of the fund established pursuant to the terms of the Trust Agreement, which fund may be comprised of one or more Investment Funds. "Trustee" means the bank, trust company and/or individual designated by the Employer to hold and invest the Trust Fund and to pay benefits and expenses as authorized by the Committee in accordance with the terms and provisions of the agreement by and between the Employer and such bank, trust company and/or individual. "Valuation Date" means each March 31, June 30, September 30 and December 31, or more frequently if determined to be necessary by the Committee. "Year of Service" means each 12-month period between an Employee's Employment Commencement Date and his Severance from Service. (a) Years of Service include an Employee's Period of Severance if he is reemployed by the Employer or an Affiliate before a Break in Service; (b) except for determining eligibility to participate, periods of service less than a full year will be aggregated; and (c) any portion of a Year of Service which is less than a full year will be stated as a fractional year with each full or partial month equal to 1/12th of a year. If a Participant is absent for maternity/paternity purposes and that absence begins during Plan Years beginning after December 31, 1984, the 12-consecutive-month period beginning on the first anniversary of the date the absence began will not be counted as a Break in Service. For purposes of this section, an absence from work for maternity/paternity purposes means an absence due to (a) the pregnancy of the Employee; (b) the birth of a child of the Employee; (c) the placement of a child with the Employee in connection with the adoption of such child by the Employee; or (d) the caring for a child for a period beginning immediately after birth or placement. ARTICLE II PARTICIPATION - ------------- 2.01. Eligibility and Election to Participate --------------------------------------- Each individual who was a Participant in the Plan on the day before the Effective Date shall remain a Participant in this Plan on the Effective Date. Each Employee who is classified by the Employer as a full-time employee who is not a Participant on the Effective Date shall become a Participant in the Plan on the Entry Date coincident with or next following his Employment Commencement Date. Each Employee who is classified by the Employer as a part-time employee who is not a Participant on the Effective Date shall become a Participant in the Plan on the Entry Date coincident with or next following the date as of which he has been credited with 1,000 Hours of Service. To be eligible to make Participant deferrals, a Participant must complete an enrollment form and agree to make contributions to the Plan, authorize the Employer to withhold such contributions from his Compensation and pay the same to the Trustee and designate a Beneficiary. An Employee who declines to make Participant deferrals at the time when he is initially eligible shall be a Participant for all other purposes of the Plan and may elect to make Participant deferrals on the next Entry Date thereafter, provided the Employee completes the required form at least five days prior to such date. 2.02. Reemployment ------------ If a Participant whose employment has terminated is subsequently reemployed, he shall be eligible to participate in the Plan on the Entry Date following his reemployment. 2.03. Employment After Normal Retirement Age -------------------------------------- A Participant who continues in the employ of the Employer after his Normal Retirement Age shall continue to be a Participant for all purposes of the Plan. 2.04. Designation of Beneficiary -------------------------- (a) Each Participant shall designate a Beneficiary to receive any death benefit payable under the Plan. In the event the Participant dies before a distribution has occurred pursuant to Section 7.01, 7.03 or 7.04, such distribution shall be paid to the Participant's Surviving Spouse. If there is no Surviving Spouse, or if the Surviving Spouse consents to forego receipt of the distribution in accordance with paragraph (b) below, distribution shall be made to any person, persons or entity designated by the Participant as a Beneficiary hereunder. If more than one Beneficiary is named, the Participant may specify the sequence and/or proportion in which payments must be made to each Beneficiary. In the absence of such specification, payments shall be made in equal shares to all named Beneficiaries. To the extent otherwise consistent with this Plan, a Participant may change his Beneficiary from time to time by written notice delivered to the Committee in the manner prescribed by the Committee. If no Beneficiary has been designated or if no designated Beneficiary is living at the time of the Participant's death, payment of such death benefit, if any, to the extent permitted by law, shall be made to the surviving person or persons in the first of the following classes of successive preference of Beneficiaries: (i) Surviving Spouse; (ii) issue, then living, per stirpes; (iii) executors or administrators. Any minor's share shall be paid to such adult or adults as have been appointed legal guardian and have assumed custody and support of such minor. Proof of death satisfactory to the Committee must be furnished prior to the payment of any death benefit under the Plan. (b) If the Participant's Beneficiary under the Plan is someone other than the Participant's Spouse, then such designation is subject to the Spouse's consent. Spousal consent shall be valid only if (i) it is made in writing on a form prescribed by the Committee; (ii) the Spouse acknowledges the effect of the consent; and (iii) the consent and acknowledgment are witnessed by a Plan representative or a notary public. If the Participant establishes to the satisfaction of the Committee that such written consent may not be obtained because his Spouse cannot be located, a designation of a Beneficiary other than his Spouse will be deemed to have been made with spousal consent. ARTICLE III CONTRIBUTIONS - ------------- 3.01. Contribution of Participant Deferrals ------------------------------------- (a) Effective January 1, 1987, each Participant may elect, by entering into a salary reduction agreement with the Employer, for each Plan Year to defer a portion of his Compensation, not to exceed the lesser of (i) 15% of his Compensation; or (ii) the maximum amount permitted under Section 402(g) of the Code, taking into account elective deferrals made under other qualified cash or deferred arrangements in which the Participant participates. Such deferred amounts shall be contributed by the Employer to the Participant's Employee Deferral Account. (b) A Participant's election to make Participant deferrals shall be effective for each payroll period during which an effective salary reduction agreement is on file with the Employer. (c) A Participant's deferral percentage will remain in effect, notwithstanding any change in his Compensation, until he elects to change such percentage. A Participant may elect to increase, decrease or cease his deferral percentage, as of the first payroll period starting on or after the first day of a quarter of the Plan Year, by submitting a salary reduction agreement at least 15 days in advance of the first day of the quarter (or such greater of lesser period as the Committee may establish for purposes of administrative convenience). A Participant who has elected a deferral percentage for a prior portion of a Plan Year who fails to change such percentage on an allowable date for a subsequent portion of a Plan Year shall be deemed to have kept his prior deferral percentage in effect for such subsequent portion of the Plan Year. (d) Participant deferrals under this section shall be made by payroll deductions authorized by the Participant and shall be contributed to the Plan by the Employer. Participant deferrals constitute Employer contributions under the Plan and are intended to qualify as elective contributions under Code Section 401(k). Amounts allocated to a Participant's Employee Deferral Account shall be fully vested in such Participant and nonforfeitable at all times. The salary-deferral arrangement of this Plan and any other plans of the Employer [which include a cash or deferred arrangement under Section 401(k) of the Code and which are considered one plan for purposes of Section 401(a)(4) or Section 401(b) of the Code] shall be treated as one salary-deferral arrangement for purposes of applying the provisions of this Article III. (e) Effective January 1, 1987, in the event a Participant notifies the Committee in writing by any March 1 that, with respect to the previous calendar year, such Participant has made elective Participant deferrals in excess of the maximum amount permitted under Section 402(g)(5) of the Code for such calendar year (taking into account for this purpose the aggregate salary deferrals made by the Participant to all qualified cash or deferred arrangements in which he participates), then the Committee shall return to such Participant by the next following April 15 the amount specified in such written notification of his Participant deferral contributions to the Plan during the previous calendar year, together with allocable earnings thereon. To the extent that a Participant has made elective Participant deferrals in excess of the maximum amount permitted under Code Section 402(g)(5) to this Plan or any other plan maintained by the Employer or an Affiliate, such Participant shall be deemed to have notified the Committee of such excess deferrals. 3.02. Participant Nondeductible Contributions --------------------------------------- Each Participant may, if he so elects, contribute to the Trustee of this Plan in any Plan Year amounts not in excess of 10% of the Compensation paid or accrued to the Participant by the Employer during such Plan Year. All amounts contributed by a Participant under this section shall be credited to his Voluntary Contributions Account and shall be fully vested in the Participant and nonforfeitable at all times. Contributions may be in cash, by means of salary reductions or otherwise, in accordance with such rules as the Committee may determine. 3.03. Rollover Contributions ---------------------- Subject to such restrictions as the Committee may apply or affirmative refusal by the Committee to accept such rollovers, an Employee may roll over a distribution from another qualified pension or profit sharing plan; provided, however, that notwithstanding any provision contained herein, no Employee shall roll over more than a maximum amount of $500,000 in any one particular Plan Year into any Investment Fund or Funds in which investments are made in equity securities of the Employer. Amounts so rolled over shall be credited to the Employee's Rollover Account and shall be fully vested in such Employee and nonforfeitable at all times. Amounts transferred directly from another qualified pension or profit sharing plan shall be treated hereunder as a rollover. 3.04. Employer Matching Contributions ------------------------------- For each Plan Year, the Employer shall contribute an amount equal to a percentage of the total amount of contributions agreed to be made by it pursuant to salary reduction agreements under Section 3.01 entered into between the Employer and Participants for such Plan Year. The amount of this matching contribution, if any, shall be determined in the discretion of the Board of Directors. Contributions made pursuant to this Section 3.04 shall be allocated to the Employer Matching Contributions Account of Participants who both (a) made Participant deferrals during the Plan Year for which such matching contribution is made by the Employer; and (b) are employed by the Employer or an Affiliate on the last day of such Plan Year. Matching contributions shall be allocated to each eligible Participant in the proportion which the total Participant deferral contributions of such Participant for the Plan Year bears to the total Participant deferral contributions of all Participants who are eligible for matching contributions for the Plan Year. Any amounts contributed by the Employer pursuant to this paragraph shall be paid on an annual basis to the Trustee. 3.05. Limitation of Participant Deferrals ----------------------------------- (a) Notwithstanding Section 3.01, effective January 1, 1987, the deferral percentages under Section 3.01 shall be modified as provided in paragraph (c) if the requirements of paragraph (b) are not satisfied. (b) An actual deferral percentage shall be determined for each Employee who is eligible to become a Participant. Such percentage shall be his total Participant deferrals, divided by his Compensation during the portion of the Plan Year during which he was eligible to participate in the Plan. With respect to Employees who are eligible to but make no deferrals under this Plan for the year, such actual deferral percentage shall be zero. The average of the actual deferral percentages for all eligible Employees who are Highly-Compensated Employees (High Average), when compared to the average of the actual deferral percentages for all eligible Employees who are Lower-Compensated Employees (Low Average), must meet one of the following requirements: (i) the High Average is no greater than the Low Average times 1.25; or (ii) the excess of the High Average over the Low Average is not greater than 2% and the High Average is no greater than the Low Average times 2.0. (c) The Committee shall make a determination as of the last day of the Plan Year regarding the maximum Participant deferral contribution which each Participant who is a Highly-Compensated Employee may elect to defer, and any Participant who elected to defer more than his maximum permissible Participant deferral contribution shall be deemed to have elected to defer the maximum permissible Participant deferral contribution as determined by the Committee. For this purpose, all cash or deferred arrangements under which a Highly-Compensated Employee is eligible to participate shall be treated as a single arrangement. If it is determined as of the end of the Plan Year that any amounts withheld by the Employer for such Participant exceed the amounts determined permissible by the Committee or, if the amount of the Participant's Participant deferral contribution would limit the contribution the Employer has determined to make for its corresponding fiscal year, then the excess amount or the portion of the Participant's Participant deferral contribution which would so limit the Employer's contribution, together with interest thereon (if any) for the Plan Year, shall be returned by the Employer or the Trustee to the Participant within 2 1/2 months after the end of the Plan Year, but in no event later than the last day of the following Plan Year. For purposes of this paragraph (c), the amount of excess contributions for a Highly-Compensated Employee will be determined in the following manner. First, the actual deferral ratio (ADR) of the Highly-Compensated Employee with the highest ADR is reduced to the extent necessary to satisfy the actual deferral percentage (ADP) test or cause such ratio to equal the ADR of the Highly-Compensated Employee with the next highest ratio. Second, this process is repeated until the ADP test is satisfied. The amount of excess contributions for a Highly-Compensated Employee is then equal to the total of elective and other contributions taken into account for the ADP test minus the product of the Employee's contribution ratio as determined above and the Employee's Compensation. The Committee shall have the right to limit or reduce the Participant deferral contributions of Participants, as it determines necessary and in any manner it determines, to ensure that the aggregate allocation to the Employee Deferral Accounts of all Participants will not exceed the amount permitted as a deduction by the Employer pursuant to the Code and to ensure that, with respect to any particular Participant, the amount credited to such Participant's Employee Deferral Account for the Plan Year does not exceed the amount permissible under Section 415 of the Code. 3.06. Maximum Participant and Matching Contributions for Highly-Compensated Employees -------------------------------------------------- (a) Effective January 1, 1987, the contribution percentage for eligible Highly-Compensated Employees under this Plan shall not exceed the greater of (i) 125% of such percentage for all other eligible Employees; or (ii) the lesser of 200% of such percentage for all other eligible Employees or the percentage for all other eligible Employees plus two percentage points. (b) For purposes of this section, the contribution percentage for a specified group of Employees for a Plan Year shall be the average of the ratios (calculated separately for each Employee in such group) of (i) the sum of the Participant's nondeductible contributions and the Employer matching contributions made under the Plan on behalf of each such Employee for such Plan Year to (ii) the Employee's compensation [within the meaning of Section 414(s) of the Code] for the portion of such Plan Year during which he was eligible to participate in the Plan. (c) Any Employee who is eligible to make a Participant deferral contribution under the Plan shall be considered an "eligible employee" for purposes of this section. (d) The Plan shall not be treated as failing to meet the requirements of this section for any Plan Year if, before the close of the following Plan Year, the amount of the excess aggregate contributions for such Plan Year and any income allocable to such contributions is distributed. For this purpose, income allocable to excess contributions shall include only income for the Plan Year for which the excess aggregate contributions were made. Any distribution of the excess aggregate contributions for any Plan Year shall be made to Highly-Compensated Employees on the basis of the respective portions of such amounts attributable to each of such Employees. For purposes of this section, the term "excess aggregate contributions" shall mean, with respect to any Plan Year, the excess of (i) the amount of the Participant nondeductible contributions and Employer matching contributions actually made by or on behalf of Highly-Compensated Employees for such Plan Year over (ii) the maximum amount of such contributions permitted under the contribution percentage requirement described above (determined by reducing contributions made on behalf of Highly-Compensated Employees in order of their contribution percentages beginning with the highest of such percentages). 3.07. Combined Alternative Limitation on Participant Deferrals and Employer Matching Contributions -------------------------------------------------------- Notwithstanding any provision of this Article III, effective January 1, 1987, if, as of any Plan Year, both the High Average specified in Section 3.05 (relating to actual deferral percentages) and the contribution percentage for Highly-Compensated Employees specified in Section 3.06 (relating to actual contribution percentages) exceed the Low Average specified in Section 3.05 and the contribution percentage for Lower-Compensated Employees specified in Section 3.06 by more than 25%, the Committee shall apply the aggregate alternative limitation in accordance with Section 1.401(m)-2 of the Income Tax Regulations. In the event the combined alternative limitation is not satisfied for any given Plan Year, the Employer shall direct the Committee to reduce the High Average of Section 3.05 and/or the contribution percentage for Highly-Compensated Employees of Section 3.06 as permitted by Sections 3.05 and 3.06 hereof to the extent necessary to satisfy the combined alternative limitation. ARTICLE IV PARTICIPANT'S ACCOUNTS; ALLOCATIONS - ----------------------------------- 4.01. Participant's Accounts ---------------------- The Committee shall maintain Accounts as follows for each Participant in the Plan: (a) an Employer Matching Contributions Account to record (i) his share of the Employer matching contributions, allocated under Section 3.03; and (ii) his share of the net income, or net losses, resulting from the investment thereof. (b) an Employee Deferral Account to record (i) the Participant's Participant deferrals made pursuant to Section 3.01, minus any withdrawals; and (ii) his share of the net income, or net losses, resulting from the investment thereof. (c) a Voluntary Contributions Account to record: (i) his nondeductible contributions, minus any withdrawals; and (ii) his share of the net income, or net losses, resulting from the investment thereof. (d) a Rollover Account to record (i) the Participant's rollovers made pursuant to Section 3.03; and (ii) his share of the net income, or net losses, resulting from the investment thereof. 4.02. Allocation of Employer Matching Contributions --------------------------------------------- Employer matching contributions made under Section 3.04 shall be allocated to each Participant in accordance with the provisions of Section 3.04. 4.03. Allocation of Net Gains or Losses; Crediting of Accounts -------------------------------------------------------- As of each Valuation Date, the fair market value of the Trust Fund shall be determined in accordance with Section 5.04. The net increase or decrease in such values resulting from the investment of the assets therein and from administrative expenses charged to the Trust Fund, if any, pursuant to Section 8.07 shall be apportioned to each Participant's Employer Matching Contributions Account and Rollover Account in proportion to the value thereof as of the last preceding Valuation Date. The net increase or decrease in the value of the Trust Fund resulting from investment of the assets therein and from administrative expenses charged to the Trust Fund, if any, pursuant to Section 8.07 shall be apportioned to each Participant's Employee Deferral Account in the ratio that the sum of the value of such Participant's Employee Deferral Account as of the preceding Valuation Date plus a weighted average of any Participant deferrals made to such Employee Deferral Account since the preceding Valuation Date less any withdrawals made from such Employee Deferral Account since the preceding Valuation Date bears to the total value of all Participants' Employee Deferral Accounts as of the preceding Valuation Date plus a weighted average of all Participant deferrals made to the Plan since the preceding Valuation Date less any withdrawals made from all Employee Deferral Accounts since the preceding Valuation Date. The net increase or decrease in the value of the Trust Fund resulting from investment of the assets therein and from administrative expenses charged to the Trust Fund, if any, pursuant to Section 8.07 shall be apportioned to each Participant's Voluntary Contributions Account in the ratio that the sum of the value of such Participant's Voluntary Contributions Account as of the preceding Valuation Date plus a weighted average of any Participant nondeductible contributions made to such Voluntary Contributions Account since the preceding Valuation Date less any withdrawals made from such Voluntary Contributions Account since the preceding Valuation Date bears to the total value of all Participants' Voluntary Contributions Accounts as of the preceding Valuation Date plus a weighted average of all Participant nondeductible contributions made to the Plan since the preceding Valuation Date less any withdrawals made from all Voluntary Contributions Accounts since the preceding Valuation Date. 4.04. Limitation of Annual Additions ------------------------------ (a) Basic Limitation. Notwithstanding Sections 3.01 and 3.05 and subject to the provisions of paragraphs (b) and (c) below, Annual Additions to each Participant's Account shall not exceed the lesser of (i) $30,000 or such larger amount as may be determined by the Secretary of the Treasury for Limitation Years ending on or after January 1, 1988; or (ii) 25% of the Participant's compensation for the Limitation Year. For purposes of this Section 4.04, "compensation" shall mean compensation as defined in Treasury Regulation Section 1.415-2(d) and shall include wages, salaries, fees for professional services, percentage of profits, earned income in the case of a self-employed Participant, disability payments, paid or reimbursed moving expenses to the extent not deductible by the Participant, medical reimbursement items and the value of a non-qualified stock option to the extent includable in an Employee's gross income upon making the election under Code Section 83(b). Specifically excluded are salary deferral contributions, contributions to the distributions from most deferred compensation plans, amounts realized from the sale of a non-qualified stock option or from the sale, exchange or other disposition of stock acquired under a qualified stock option plan and most amounts which receive special tax benefits. Also for purposes of this section, "Annual Additions" means the sum of the following amounts credited to a Participant's Account for the Limitation Year under all defined contribution plans maintained by the Employer: (i) Employer contributions; (ii) Forfeitures; (iii) Employee contributions; (iv) amounts allocated after March 31, 1984 to an individual medical account, as defined in Code Section 415(l)(2), which is part of a defined benefit plan maintained by the Employer; and (v) amounts derived from contributions paid or accrued after December 31, 1985 in taxable years ending after such date which are attributable to postretirement medical benefits allocated to the separate account of a Key Employee [as defined in Code Section 416(i)] under a welfare benefit fund [as defined in Code Section 419(e)] maintained by the Employer. The amounts described under this subparagraph (v) shall not be subject to the 25% of compensation limit provided in Section 4.04(a). (b) Participation in Other Defined Contribution Plan. The limitation of this Section 4.04 with respect to any Participant who at any time has participated in any other qualified defined contribution plan [as defined in Section 3(34) of ERISA and Code Section 414(i)] maintained by the Employer will apply as if the total contributions allocated under all such defined contribution plans in which the Participant has participated were allocated under one plan. (c) Participation in this Plan and Defined Benefit Plan. If a Participant has been a Participant in a qualified defined benefit plan [as defined in Section 3(35) of ERISA and Code Section 414(j)] maintained by the Employer, the sum of the Participant's defined benefit plan fraction and defined contribution plan fraction for any year shall not exceed one. The defined benefit plan fraction is a fraction, the numerator of which is the sum of the Participant's Projected Annual Benefit under all defined benefit plans (whether or not terminated) maintained by the Employer, and the denominator of which is the lesser of (i) 1.25 times the dollar limitation of Code Section 415(b)(1)(A) in effect for the limitation year; or (ii) 1.4 times the Participant's average annual earnings for the three consecutive years that produce the highest average. The defined contribution plan fraction is a fraction, the numerator of which is the sum of the Annual Additions to the Participant's Accounts under all defined contribution plans maintained by the Employer (whether or not terminated) for the current and all prior years, and the denominator of which is the sum of the lesser of the following amounts determined for such years and for each prior Year of Service with the Employer: (i) 1.25 times the dollar limitation in effect under Code Section 415(c)(1)(A) for such year; or (ii) 1.4 times the amount which may be taken into account under Code Section 415(c)(1)(B). For any years in which the Plan is "top heavy" as defined in Section 12.02, "1.0" shall be substituted for "1.25" in the preceding two paragraphs. As to each Participant, if, in any Limitation Year, the sum of the defined benefit plan fraction and the defined contribution plan fraction exceeds 1.0, the rate of benefit accruals under this Plan will be reduced so that the sum of the fractions equals 1.0. (d) Adjustments. If the limitation described in this Section 4.04 is effective in limiting the amount to be allocated to the Accounts of a Participant for a Plan Year, the annual contributions hereunder will be reduced as necessary to bring them within the limitation, as follows: (i) first, amounts attributable to Participant nondeductible contributions will be reduced. Such amounts will be returned to the Participant; (ii) second, amounts attributable to the Participant's deferrals will be reduced. Such amounts will be returned to the Participant as cash Compensation and will be subject to all federal, state, municipal and/or county taxes and other deductions which would apply to cash Compensation; and (iii) third, the Employer matching contribution allocated to the Participant's Employer Matching Contributions Account will be reduced. The amount of the reduction will be credited to an unallocated Employer Matching Contributions Account and will reduce current or future Employer matching contributions. (e) Members of Controlled Group. The determination of the limitation on Annual Additions described in this Section 4.04 will be made considering the Employees of all members of a controlled group of corporations or commonly controlled trades or businesses [as defined in Code Sections 414(b) and (c) as modified by Code Section 415(h)] or affiliated service groups [as defined in Code Section 414(m)] of which the Employer is a part as employed by a single employer. Such determination will be made assuming the phrase "more than 50%" is substituted for the phrase "at least 80%" each place it appears in Code Section 1563(a)(1). 4.05. Limitation of Reversion of Contributions ---------------------------------------- Except as provided in paragraphs (a) through (c) below, contributions made under the Plan shall be held for the exclusive benefit of Participants and their Beneficiaries and may not revert to the Employer. (a) In the case of a contribution which is made by the Employer by a mistake of fact, such contribution shall be returned to the Employer within one year after it is contributed to the Plan. (b) In the case of a contribution conditioned on the Plan's qualification under Code Section 401(a), if the Plan fails to qualify initially, such contribution shall be returned to the Employer within one year after the date that the Plan's qualification is denied. (c) In the case of a contribution conditioned upon its deductibility under Code Section 404, to the extent the deduction is disallowed, the amount disallowed shall be returned to the Employer within one year after the disallowance. ARTICLE V INVESTMENT OF CONTRIBUTIONS AND VALUATION OF FUNDS - -------------------------------------------------- 5.01. Investment Funds ---------------- Each Participant will have his Employer Matching Contributions Account, his Employee Deferral Account, his Voluntary Contributions Account and his Rollover Account invested in the Trust Fund. 5.02. Investment Fund Options ----------------------- The Committee shall establish and maintain one or more Investment Funds for the investment of Participant Accounts under the Plan. Each sum credited to a Participant's Accounts shall be invested in such Investment Funds by the Trustee pursuant to directions received from the Participant. There shall be six such Investment Funds, as hereinafter indicated: (a) The Peoples Stock Fund shall be a common stock fund of the Trustee which consists of a diversified portfolio of high-quality common stocks. While awaiting investment in common stocks, any cash held by the Trustee may be invested in common or collective short-term investment funds of the Trustee. (b) The Certificate of Deposit Fund shall be a fixed income fund of the Plan which consists of investments in various deposit instruments of The Peoples Banking and Trust Company or The First National Bank of Southeastern Ohio, which bear a reasonable interest rate. While awaiting investment into the fixed income fund, any cash held by the Trustee may be invested in common or collective short-term investment funds of the Trustee. (c) The Peoples Bancorp Stock Fund shall consist of common shares of Peoples Bancorp Inc. While awaiting investment into Peoples Bancorp Inc. common shares, any cash held by the Trustee may be invested in common or collective short-term investment funds of the Trustee. (d) The Peoples Special Stock Fund shall be a common stock fund which consists of a diversified portfolio of small company common stocks and common stock mutual funds. While awaiting investment in common stocks and/or common stock mutual funds, any cash held by the Trustee may be invested in common or collective short-term investment funds of the Trustee. (e) The Acorn Fund shall be a common stock fund, managed by Wanger Asset Management, L.P., which consists of a diversified portfolio of common stocks of small and medium sized companies in the United States and overseas. While awaiting investment in Acorn Fund, any cash held by the Trustee may be invested in common or collective short-term investment funds of the Trustee. (f) The Vanguard S&P 500 Index Fund shall be a common stock fund, managed by the Vanguard Group of Investment Companies, which consists of a diversified portfolio of common stocks of large companies in the United States. While awaiting investment in the Vanguard S&P Index Fund, any cash held by the Trustee may be invested in common or collective short-term investment funds of the Trustee. Each Participant will direct, at the time he elects to make Participant deferrals, voluntary contributions and/or rollover contributions, that contributions be invested in one or more of the Investment Funds. If the Participant elects to have his contributions invested in more than one such Investment Fund, he shall designate the portion of contributions that will be invested in each Investment Fund. Any investment election given by a Participant for investment of contributions will continue in effect until changed by the Participant. A Participant may make or change an investment election as of the first day of a quarter of the Plan Year by submitting an instruction in a way prescribed by the Committee, at least 15 days in advance (or such greater of lesser period as the Committee may establish for purposes of administrative convenience). 5.03. Qualifying Employer Securities ------------------------------ Notwithstanding any other provision of this Plan, the Plan is authorized to invest and hold up to 100% of the Trust assets in "qualifying employer securities" [as that term is defined in Section 407(d)(5) of ERISA] and "bank deposits" [as that term is defined in Section 4975(d)(4) of the Code]. The Plan may purchase such common shares or other securities of the Employer from the Employer or from any other source, and such common shares or securities may be outstanding, newly issued or treasury securities. All such purchases shall be made at fair market values. If no common shares or other securities of the Employer are available for purchase, the Plan may retain cash uninvested or may invest all or any part thereof in any other investment if such retention is prudent under all the facts and circumstances then prevailing. Each Participant may vote Employer securities, which are entitled to vote and are allocated to the Accounts of such Participant. The Trustee shall provide to each Participant materials pertaining to the exercise of such rights containing all of the information distributed to other shareholders of the Employer. A Participant shall have the opportunity to exercise any such rights within the same time period as other shareholders of the Employer. In the exercise of voting rights, votes representing fractional common shares and common shares held in unallocated inventory shall be voted in the same ratio for the election of Directors and for and against each issue as the applicable vote directed by Participants with respect to whole common shares . Notwithstanding any other provision of this Plan, a Participant who is entitled to a distribution from the Plan (other than a hardship withdrawal or a withdrawal of his nondeductible contributions) has a right to demand that his benefits be distributed in the form of Employer securities to the extent his Accounts reflect ownership of whole common shares or consist of Employer securities. 5.04. Valuation of Trust Fund ----------------------- As of each Valuation Date, the Trustee shall determine the current market value of the net assets of the Trust Fund, including the current market value of each Investment Fund established by the Committee pursuant to Section 5.02. ARTICLE VI WITHDRAWALS OF PARTICIPANT DEFERRALS WHILE EMPLOYED - --------------------------------------------------- 6.01. Withdrawal of Employee Deferral Accounts ---------------------------------------- Except as provided in Section 3.01(e) and Section 3.05, the balance to the credit of a Participant in his Employee Deferral Account shall not be distributable until the Participant's retirement, death, disability, separation from service with the Employer, termination of the Plan (provided a total distribution is made and the Employer does not establish a successor plan), the date of the sale by the Employer of all of its assets (provided the affected Participant continues in the employ of the corporation acquiring such assets) or the date of the sale by the Employer of its interest in a subsidiary (provided the affected Participant continues in the employ of the subsidiary), except for any withdrawal distributions for hardship, if permitted under Section 6.02 of the Plan. No portion of a Participant's Employee Deferral Account shall be distributable merely by reason of the completion of a stated period of participation or the lapse of a fixed number of years. 6.02. Hardship Withdrawals -------------------- Upon 15 days' written notice to the Committee and subject to Committee approval, a Participant may withdraw all or a portion of his Employee Deferral Account (excluding any earnings credited thereto) as of the Valuation Date immediately preceding his withdrawal request to the extent necessary to meet a financial hardship. Requests for withdrawal pursuant to this Section 6.02 may only be made once in a 12-month period. The amount of any withdrawal under this section due to financial hardship shall not be less than $500 nor in excess of the amount necessary to meet such financial hardship plus any amounts necessary to pay any federal, state or local income taxes reasonably anticipated to result from the withdrawal. For purposes of the Plan, a financial hardship shall include any of the following events: (a) expenses for medical care described in Code Section 213(d) previously incurred by the Participant or his Spouse or dependents (as defined in Code Section 152) or necessary for these persons to obtain medical care described in Code Section 213(d); (b) costs directly related to the purchase of a principal residence for the Participant (excluding mortgage payments); (c) the payment of tuition and related educational fees for the next 12 months of post-secondary education for the Participant, his Spouse, children or dependents; or (d) payments necessary to prevent the eviction of the Participant from the Participant's principal residence or foreclosure on the mortgage on that residence. An application for withdrawal pursuant to this section may only be approved by the Committee if a Participant either (a) certifies that his financial need cannot be met by insurance, reasonable liquidation of assets (not itself creating a hardship), cessation of Participant deferrals, by other distributions or nontaxable loans from plans maintained by the Employer or by borrowing from commercial sources on reasonable commercial terms; or (b) elects to (i) first obtain all other distributions and all other nontaxable loans currently available under the Plan and any other Plans maintained by the Employer; (ii) suspend his Participant deferrals and contributions to this Plan and all other plans maintained by the Employer for a period of 12 months following his receipt of a hardship distribution pursuant to this section; and (iii) have his Participant deferrals to this Plan for his taxable year immediately following the taxable year of the hardship distribution limited to the applicable limit on Participant deferrals under Section 402(g) of the Code minus his Participant deferrals for the taxable year of the hardship distribution. 6.03. Withdrawal of Nondeductible Contributions ----------------------------------------- A Participant shall, upon 30 days' prior written notice to the Committee, be entitled to withdraw at any time his entire Voluntary Contributions Account, or any portion of such Voluntary Contributions Account. Requests for withdrawal pursuant to this Section 6.03 may only be made once in a 12-month period. 6.04. Amount and Payment of Withdrawals --------------------------------- All withdrawals under Article VI shall be effective as of the Valuation Date immediately preceding the date the Committee receives a timely withdrawal request from the Participant. The amount of such withdrawal shall be taken from the Participant's Account as of such Valuation Date and paid to the Participant in a single lump sum as soon as administratively possible. ARTICLE VII AMOUNT AND DISTRIBUTION OF BENEFITS - ----------------------------------- 7.01. Retirement Benefits ------------------- The retirement benefit payable under the Plan in the case of a Participant whose employment with the Employer is terminated on or after his Normal Retirement Age shall be 100% of his Accounts on the Valuation Date immediately following his termination of employment if the termination of employment occurs after the mid-point of any calendar quarter. If the Participant's termination of employment occurs on or before the mid-point of a calendar quarter, the benefit payable shall be 100% of the Participant's Accounts on the Valuation Date immediately preceding his termination of employment, plus any contributions and earnings subsequently allocated to such Accounts and less any subsequent distributions from and losses subsequently allocated to such Accounts. 7.02. Death Benefits -------------- The death benefit payable to a Beneficiary under the Plan in the case of a Participant whose employment with the Employer is terminated due to his death shall be 100% of his Accounts on the Valuation Date immediately following the Participant's death if the death occurs after the mid-point of any calendar quarter. If the Participant's death occurs on or before the mid-point of a calendar quarter, the benefit payable shall be 100% of the Participant's Accounts on the Valuation Date immediately preceding his death, plus any contributions and earnings subsequently allocated to such Accounts and less any subsequent distributions from and losses subsequently allocated to such Accounts. 7.03. Disability Benefits ------------------- The disability benefit payable under the Plan in the case of a Participant who becomes totally and permanently disabled shall be 100% of his Accounts on the Valuation Date immediately following the date of his total and permanent disability if the termination of employment occurs after the mid-point of any calendar quarter. If the Participant's termination of employment occurs on or before the mid-point of a calendar quarter, the benefit payable shall be 100% of the Participant's Accounts on the Valuation Date immediately preceding his termination of employment, plus any contributions and earnings subsequently allocated to such Accounts and less any subsequent distributions from and losses subsequently allocated to such Accounts. A Participant shall be deemed totally and permanently disabled if the Participant qualifies for Social Security disability benefits. 7.04. Benefits Upon Termination of Employment --------------------------------------- The benefit payable under the Plan in the case of a Participant whose employment with the Employer is terminated for any reason other than retirement, death or disability shall be 100% of his Accounts, as of the Valuation Date immediately following his termination of employment if the termination of employment occurs after the mid-point of any calendar quarter. If the Participant's termination of employment occurs on or before the mid-point of a calendar quarter, the benefit payable shall be 100% of the Participant's Accounts on the Valuation Date immediately preceding his termination of employment, plus any contributions and earnings subsequently allocated to such Accounts and less any subsequent distributions from and losses subsequently allocated to such Accounts. 7.05. Distribution of Benefits ------------------------ (a) At the time a Participant becomes entitled to receive any amount because of his retirement, death, disability or termination of employment, the Trustee, acting in accordance with the written instructions of the Committee, shall either make payment from the Trust Fund to such Participant or his Beneficiary (i) in a lump sum; or (ii) in such periodic installments as may be elected by the Participant or Beneficiary over a time period not to exceed 10 years. Effective January 1, 1993, if a Participant is entitled to a distribution under this Section 7.05 which qualifies as an Eligible Rollover Distribution and he (a) elects to have such distribution paid directly to an Eligible Retirement Plan; and (b) specifies the Eligible Retirement Plan to which such distribution is to be paid (in a manner required by the Plan Administrator), such distribution shall be made from the Plan in the form of a direct trustee-to-trustee transfer to the Eligible Retirement Plan so specified. The preceding sentence shall only be applicable to the extent that a Participant's Eligible Rollover Distribution would be includible in the Participant's gross income if it were not transferred to an Eligible Retirement Plan. For purposes of this paragraph, the term "Eligible Rollover Distribution" shall have the meaning given to such term under Section 401(a)(31)(C) of the Code and the term "Eligible Retirement Plan" shall have the meaning given to such term under Section 401(a)(31)(D) of the Code. If a Participant's Accounts are to be distributed in other than an immediate lump sum, minimum annual payments under the Plan must be paid over one of the following periods (or a combination thereof): (i) a period certain not extending beyond the life expectancy of the Participant; or (ii) a period certain not extending beyond the joint and last survivor expectancy of the Participant and a designated Beneficiary. (b) If the Participant's Accounts are to be distributed in other than a lump sum, then the amount to be distributed each year must be at least an amount equal to the quotient obtained by dividing the total amount of the Participant's Accounts by the life expectancy of the Participant or joint and last survivor expectancy of the Participant and designated Beneficiary. If the Participant's Spouse is not the designated Beneficiary, the method of distribution selected must assure that at least 50% of the present value of the amount available for distribution is paid within the life expectancy of the Participant. If the distribution of the Participant's Accounts has begun and he dies before such Accounts have been distributed to him, the remaining portion of such Accounts will be distributed at least as rapidly as under the method of distribution being used prior to the Participant's death. Subject to the succeeding paragraph, if the Participant dies before his distribution has begun, his Accounts shall be distributed within five years of his death unless (i) a portion of such Accounts is payable to or on behalf of a designated Beneficiary; (ii) such portion will be distributed over the life of such designated Beneficiary; and (iii) such distribution begins not later than one year after the date of the Participant's death (or such date as prescribed by the Secretary of Treasury). Notwithstanding the preceding paragraph, if the designated Beneficiary is the Participant's Surviving Spouse, the date by which the distribution must commence under (iii) in the preceding paragraph shall be the date the Participant would have attained age 70 1/2. If the Surviving Spouse dies before distribution to said Spouse begins, this section shall apply as if the Surviving Spouse were the Participant. Life expectancy of a Surviving Spouse may be recalculated annually; however, in the case of any other designated Beneficiary, such life expectancy will be calculated at the time that payment first commences without further calculations. In addition, any amount paid to a child of the Participant will be treated as if it had been paid to the Surviving Spouse if the amount becomes payable to the Surviving Spouse when the child reaches the age of majority. 7.06. Timing of Distributions ----------------------- (a) Distributions under the Plan pursuant to this Article VII will begin as soon as practicable, but, unless otherwise elected by the Participant, not later than 60 days following the end of the Plan Year in which the Participant attains age 65, celebrates his tenth anniversary of participation in the Plan or terminates employment, whichever is latest. In no event will the entire interest of a Participant be distributed, or commence to be distributed, later than April 1 following the year in which the Participant attains age 70 1/2. (b) Notwithstanding the previous paragraph, if a Participant terminates service and the value of his Accounts does not exceed $3,500 (and did not exceed $3,500 at the time of any prior distribution), the Participant shall receive a distribution of the value of his Accounts as soon as administratively feasible following his termination of service. If a Participant terminates service and the value of his Accounts exceeds $3,500 (or exceeded $3,500 at the time of any prior distribution), the Participant may elect to receive a distribution of the value of his Accounts as soon as administratively feasible following his termination of service. For purposes of this paragraph, if the value of a Participant's Accounts is zero, the Participant shall be deemed to have received a distribution of such Accounts. ARTICLE VIII DEFERRAL PLAN COMMITTEE - ----------------------- 8.01. Appointment of Committee ------------------------ A Deferral Plan Committee consisting of not less than three members nor more than five members shall be appointed by the Board of Directors of the Employer to administer the Plan. Vacancies in the Committee, which result from death, resignation or otherwise, shall be filled from time to time by appointment of a new Committee member by the Employer; and any member of the Committee may be removed at any time at the discretion of the Employer. 8.02. Powers and Duties ----------------- (a) The Committee shall, in its discretion, have full power to administer the Plan and to construe and apply all of its provisions on behalf of the Employer. The Employer shall be the Named Fiduciary within the meaning of Section 402(a) of ERISA for purposes of Plan administration. The Committee may delegate to any other person or organization any of its powers and duties with respect to the operation of this Plan. The Committee's powers and duties, unless properly delegated, shall include, but shall not be limited to (i) deciding questions relating to eligibility, continuity of service and amount of benefits; (ii) deciding disputes which may arise with regard to the rights of Employees, Participants and their legal representatives or Beneficiaries under the terms of the Plan. Such decisions by the Committee shall be deemed final in each case; (iii) obtaining such information from the Employer with respect to its Employees as shall be necessary to determine the rights and benefits of such Employees under the Plan. The Committee may rely conclusively upon such information furnished by the Employer; (iv) compiling and maintaining all records necessary for the Plan; (v) furnishing the Employer, upon request, such reports with respect to the administration of the Plan as are reasonable and appropriate; (vi) authorizing the Trustee to make payment of all benefits as they become payable under the Plan; (vii) engaging such legal, administrative, actuarial, investment, accounting, consulting and other professional services as the Committee deems proper; (viii) adopting rules and regulations for the administration of the Plan not inconsistent with the Plan; (ix) doing and performing such other actions as may be provided for in other parts of this Plan. (b) The Committee shall determine whether domestic relations orders represent "qualified domestic relations orders" as that term is defined in Code Section 414(p) or a successor provision. If the Committee determines the order is a qualified domestic relations order, it shall direct the manner and time of distribution pursuant to the order. Prior to such determination, the Committee shall promptly notify the Participant affected with respect to the order and any payee under the order of the receipt of the order. The Committee shall send such notices to the address set forth in the order, or if the address is not set forth therein, to the last known address. Such notice shall state that the Committee is in the process of determining whether the order is a qualified domestic relations order and such notice shall also permit a reasonable period under the circumstances for comment with respect to such determination. During such period, the Committee shall cause the amounts otherwise payable under the order to be segregated in a separate account. After the determination is made, the Committee shall notify the Participant and any payee under the order of such determination. Any payee may designate a representative for receipt of copies of notices sent to the payee with respect to the order. 8.03. Actions by the Committee ------------------------ The Committee may act at a meeting, or in writing without a meeting, by the vote or assent of a majority of its members. The Committee shall appoint one of its members to act as a secretary to record all action taken by it. The Committee shall have authority to designate in writing one or more of its members as the person(s) authorized to execute papers and perform other ministerial duties on behalf of the Committee. 8.04. Interested Committee Members ---------------------------- No member of the Committee shall participate in any action of the Committee on a matter in which such member has a specialized individual interest as a Participant in the Plan. Such matters shall be determined by a majority of the remainder of the Committee. 8.05. Indemnification --------------- The Employer shall indemnify and hold harmless any person who is or was a member of the Committee or any person who is or was an employee who performs or performed services with respect to the Plan against all liabilities and all reasonable expenses (including, without limitation, counsel fees and amounts paid in settlement other than to the Employer) incurred or paid in connection with any threatened or pending action, suit or proceeding to which such person (or his executor, administrator or other legal representative) may be made a party or in which such person may otherwise be involved by reason of the fact that he serves or has served as a member of the Committee or otherwise performs or has performed services with respect to the Plan; provided that (a) if such action, suit or proceeding shall be prosecuted against such person (or his executor, administrator or other legal representative) to final determination on the merits or otherwise, it shall not be finally adjudged in such action, suit or proceeding that such person is liable for gross negligence or willful misconduct in the performance of his duty to the Employer or the Plan in relation to the matter or matters in respect of which indemnification is claimed; or (b) if such action, suit or proceeding shall be settled or otherwise terminated as against such person (or his executor, administrator or other legal representative) without a final determination, it shall be determined that such person was not guilty of gross negligence or willful misconduct in the performance of his duty to the Employer or the Plan in relation to the matter or matters in respect of which indemnification is claimed, such determination to be made by a majority of the members of the Board of Directors of the Employer or by independent counsel to whom the question may be referred by the Board of Directors. The Employer's obligations under this section may be satisfied through the purchase of a policy or policies of insurance providing equivalent protection. 8.06. Conclusiveness of Action ------------------------ Any action on matters within the discretion of the Committee shall be conclusive, final and binding upon all Participants of the Plan and upon all persons claiming any rights hereunder including Beneficiaries. 8.07. Payment of Expenses ------------------- The members of the Committee shall serve without compensation for services as such. Notwithstanding the preceding sentence, the Trust Fund shall reimburse the Committee and its members for all necessary and proper expenses incurred in carrying out their duties under the Plan. The compensation or fees of accountants, counsel and other specialists may be paid directly by the Employer or by the Trust Fund; and any other costs of administering the Plan or Trust may be charged to the Trust; and, at the discretion of the Employer, such costs may be reimbursed by the Employer. 8.08. Claims Procedure ---------------- (a) A Participant or Beneficiary or the Employer acting on behalf of such Participant or Beneficiary shall notify the Committee of a claim for benefits under the Plan. Such request shall be in writing to the Committee and shall set forth the basis of such claim and shall authorize the Committee to conduct such examinations as may be necessary for the Committee to determine, in its discretion, the validity of the claim and to take such steps as may be necessary to facilitate the payment of benefits to which the Participant or Beneficiary may be entitled under the terms of the Plan. A decision by the Committee shall be made promptly and not later than 90 days after the Committee's receipt of the claim of benefits under the Plan, unless special circumstances require an extension of the time for processing; in which case, a decision shall be rendered as soon as possible, but not later than 180 days after the initial receipt of the claim for benefits. (b) Whenever a claim for benefits by any Participant or Beneficiary has been denied by the Committee, a written notice prepared in a manner calculated to be understood by the Participant or Beneficiary must be provided setting forth (i) the specific reasons for the denial; (ii) the specific reference to the pertinent Plan provisions on which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the Plan's claim review procedure. (c) Upon denial of his claim by the Committee, a Participant or Beneficiary (i) may request a review by a named fiduciary, other than the Committee, upon written application to the Employer; (ii) may review pertinent Plan documents; and (iii) may submit issues and comments in writing to a named fiduciary. A Participant or Beneficiary shall have 60 days after receipt by the claimant of written notification of a denial of a claim to request a review of a denied claim. A decision by a named fiduciary shall be made promptly and not later than 60 days after the named fiduciary's receipt of a request for review, unless special circumstances require an extension of the time for processing; in which case, a decision shall be rendered as soon as possible, but not later than 120 days after receipt of a request for review. The decision on review by a named fiduciary shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. ARTICLE IX AMENDMENT TO THE PLAN - --------------------- 9.01. Right to Amend -------------- The Employer shall have the right at any time, by an instrument in writing, to modify, alter or amend this Plan in whole or in part; provided, however, that no such amendment shall in any way affect the vested rights of the Participants under this Plan. The Board of Directors of the Employer, an executive committee of the Board of Directors, or other committee of the Board of Directors or any executive officer to which or whom the Board of Directors delegates discretionary authority with respect to the Plan, may exercise the Employer's right to amend the Plan. If an amendment changes the vested rights provided in this Plan, each Participant having not less than three Years of Service may elect, during the period beginning when the amendment is adopted and ending no earlier than the latest of (a) 60 days after the amendment's adoption; (b) 60 days after the amendment's effective date; or (c) 60 days after the Participant is issued a written notice of the amendment, to have his vested rights computed without regard to such amendment. No amendment shall be made to this Plan which shall attempt to transfer any part of the corpus or income of the Trust to purposes other than the exclusive benefit of Participants and their Beneficiaries. No amendment to the Plan shall eliminate or reduce an early retirement benefit or eliminate an optional form of distribution. ARTICLE X TERMINATION OF THE PLAN - ----------------------- 10.01. Right to Terminate ------------------ The Employer shall have the right to terminate the Plan in whole or in part at any time. The Board of Directors of the Employer, an executive committee of the Board of Directors, or other committee of the Board of Directors or any executive officer to which or whom the Board of Directors delegates discretionary authority with respect to the Plan, may exercise the Employer's right to terminate the Plan. In the event of a termination, partial termination or complete discontinuation of contributions, each affected Participant shall be 100% vested in the value of all his Accounts. 10.02. Plan Merger and Consolidation ----------------------------- If the Plan is merged or consolidated with any other plan, or if the assets or liabilities of the Plan are transferred to any other plan, each Participant shall be entitled to a distribution immediately after such merger, consolidation or transfer (determined as if such plan then terminated) at least equal to the distribution to which he would have been entitled had the Plan terminated immediately prior to such merger, consolidation or transfer. 10.03. Successor Employer ------------------ In the event of the dissolution, merger, consolidation or reorganization of the Employer, provision may be made by which the Plan and Trust will be continued by the successor; and, in that event, such successor shall be substituted for the Employer under the terms and provisions of this Trust Agreement upon the filing in writing of its election to do so with the Trustee and acceptance by the Trustee, and providing such successor meets the requirements of the Code. The substitution of the successor shall constitute an assumption of Plan liabilities by the successor; and the successor shall have all of the powers, duties and responsibilities of the Employer under the Plan. ARTICLE XI TRUST AND THE TRUSTEE - --------------------- 11.01. Employer to Select Trustee -------------------------- The Employer shall select a Trustee to hold and invest the Trust Fund in accordance with the terms of a Trust Agreement. The Trustee shall be a bank or trust company incorporated under the laws of the United States or of any state and qualified to operate as a trustee or a combination of such entities or an individual. The Employer may, from time to time, change the Trustee then serving under the Trust Agreement to another Trustee or elect to terminate the Trust and hold the Plan assets in any other method acceptable under ERISA. The Trustee shall invest, manage, acquire and dispose of the Plan's assets. However, the Employer may, in its sole discretion, retain an investment manager [as defined in Section 3(38) of ERISA] to direct the manner in which some or all of the Plan's assets are invested, managed, acquired or disposed of by the Trustee. The Trustee shall be the Named Fiduciary within the meaning of ERISA with respect to the investment, management and control of the Trust Fund, unless such duties are delegated to an investment manager or otherwise delegated under the terms of the Trust Agreement. The Trust Agreement may include provision for participation in a joint or associated Trust Fund or pooled separate account for the purpose of pooling investment experience. ARTICLE XII TOP HEAVY PLAN PROVISIONS - ------------------------- 12.01. Definitions ----------- If the Plan is or becomes top heavy in any Plan Year, the provisions of this Article XII will supersede any conflicting provisions in the Plan. The following definitions and rules are necessary to comply with related federal tax requirements: (a) Key Employee: Any Employee or former Employee (and the Beneficiaries of such Employee) who at any time during the determination period was (i) an officer of the Employer if such individual's annual compensation exceeds 50% of the dollar limitation under Code Section 415(b)(1)(A); (ii) an owner (or an individual who is considered an owner under Code Section 318) of one of the ten largest interests in the Employer if such individual's annual compensation exceeds the dollar limitation under Code Section 415(c)(1)(A); (iii) a 5% owner of the Employer; or (iv) a 1% owner of the Employer who has annual compensation of more than $150,000. For purposes of this section, annual compensation means compensation as defined in Code Section 415(c)(3), but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the Employee's gross income under Code Section 125, 402(a)(8), 402(h) or 403(b). The determination period is the Plan Year containing the Determination Date and the four preceding Plan Years. The determination of who is a Key Employee will be made in accordance with Code Section 416(i)(1) and the regulations thereunder. (b) Non-Key Employee: Any Employee or former Employee of the Employer who is not a Key Employee. The Beneficiary of a Non-Key Employee will be treated as a Non-Key Employee, and the Beneficiary of a former Non-Key Employee will be treated as a former Non-Key Employee. (c) Determination Date: For any Plan Year subsequent to the first Plan Year, the last day of the preceding Plan Year. For the first Plan Year, the last day of such Plan Year. (d) Permissive Aggregation Group: The Required Aggregation Group of plans plus any other plan or plans of the Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Code Sections 401(a)(4) and 410. (e) Required Aggregation Group: (i) Each qualified plan of the Employer in which at least one Key Employee participates or participated at any time during the determination period (regardless of whether the Plan has terminated); and (ii) any other qualified plan of the Employer which enables a plan described in (i) to meet the requirements of Code Section 401(a)(4) or 410. (f) Top Heavy Plan: The Plan, if it meets the requirements of Section 12.02. 12.02. Top Heavy Status ---------------- This Plan, and any other plans aggregated with it, will become top heavy pursuant to this Section 12.02, as of the Determination Date, if the present value of accrued benefits for Key Employees is more than 60% (90% in the case of "super top heavy") of the sum of the present value of accrued benefits of all Employees, excluding former Key Employees. In the case of more than one plan which is to be aggregated, the present value of the accrued benefits (including distributions for Key Employees and all Employees) is first determined separately for each plan as of each plan's determination date. The plans then will be aggregated by adding the results of each plan as of the determination dates for such plans that fall within the same calendar year. The combined results will indicate whether the plans are top heavy. For purposes of any plan that is aggregated with this Plan, such computations shall be made, for such plan, by using the interest rate and mortality assumptions contained in such plan. The Account balances and accrued benefits of a Participant who has not performed services for the Employer maintaining the Plan during the five-year period ending on the Determination Date will be disregarded. The present value of accrued benefits as of the Determination Date for any individual is the sum of (a) the Account balance as of the most recent Valuation Date occurring within a 12-month period ending on the Determination Date; (b) an adjustment for contributions due as of the Determination Date; and (c) the aggregate distributions made with respect to such individual under the Plan during the five-year period ending on the Determination Date. For a profit sharing plan, the adjustment in (b) is generally the amount of contributions actually made after the Valuation Date but on or before the Determination Date. In determining whether the Plan is top heavy, it must be aggregated with each plan included in the Required Aggregation Group. In addition, the Employer may aggregate plans included in the Permissive Aggregation Group. 12.03. Minimum Contributions --------------------- For each Plan Year in which the Plan is top heavy, each Participant who is a Non-Key Employee (including those Participants who did not complete 1,000 Hours of Service in the Plan Year) must receive an annual allocation of contributions (disregarding Social Security benefits) equal to at least 3% of his Compensation; provided that, if the largest percentage of Compensation allocated to a Key Employee for a Plan Year is less than 3%, that largest percentage will be substituted for 3%. For any year in which the Employer maintains a defined benefit plan in addition to this Plan, the requirements of this paragraph will be satisfied by providing each Non-Key Employee with the 2% minimum annual benefit provided under the top heavy provisions of the defined benefit plan. For any year in which the Employer maintains another defined contribution plan in addition to this Plan, the minimum benefit described in this paragraph shall be provided by such other defined contribution plan. ARTICLE XIII MISCELLANEOUS - ------------- 13.01. Voluntary Plan -------------- The Plan is purely voluntary on the part of the Employer; and neither the establishment of the Plan nor any amendment thereof nor the creation of any fund or account nor the payment of any benefits shall be construed as giving any person a legal or equitable right against the Employer, the Trustee or the Committee unless the same shall be specifically provided for in this Plan or conferred by affirmative action of the Committee or the Employer in accordance with the terms and provisions of this Plan. Nor shall such actions be construed as giving any Employee or Participant the right to be retained in the service of the Employer. All Employees and/or Participants shall remain subject to discharge to the same extent as though this Plan had not been established. 13.02. Designation of Dates -------------------- Whenever any date designated herein shall fall on a Saturday, Sunday or holiday, the next succeeding day which is not a Saturday, Sunday or holiday will be substituted therefor, except that where a date is designated as the last day of a period and such date falls on a Saturday, Sunday or holiday, the next preceding day which is not a Saturday, Sunday or holiday shall be substituted therefor. 13.03. Non-alienation of Benefits -------------------------- Participants and their Beneficiaries shall be entitled to all the benefits specifically set out under the terms of the Plan, but said benefits or any of the property rights therein shall not be assignable or distributable to any creditor or other claimant of such Participant. A Participant shall not have the right to anticipate, assign, pledge, accelerate or in any way dispose of or encumber any of the monies or benefits or other property which may be payable or become payable to such Participant or his Beneficiary. The preceding sentence shall also apply to the creation, assignment or recognition of a right to any benefit payable with respect to a Participant pursuant to a domestic relations order, unless such order is determined to be a qualified domestic relations order, as defined in Code Section 414(p) and determined pursuant to Section 8.02(b) of the Plan. 13.04. Participant Loans ----------------- The Committee shall direct the Trustee to loan a Participant or Beneficiary an amount from his Accounts, on a reasonably equivalent basis and in accordance with the following rules: A Participant's loan, when added to the balance of any other outstanding loans the Participant may have under this Plan or any other qualified retirement plan maintained by the Employer or an Affiliate, shall not exceed the lesser of (a) $50,000 reduced to the extent of (i) the highest outstanding loan balance of the Participant's loans outstanding during the immediately prior 12-month period (ending the day before the new loan is granted) over (ii) the total of all outstanding loans the day the new loan is granted; or (b) 50% of the Participant's Total Vested Account Balance. For purposes of this section, "Total Vested Account Balance" means the total dollar value as of the Valuation Date coinciding with or immediately preceding the date of the loan, of the vested portion of the Participant's Employer Matching Contributions Account, Voluntary Contributions Account and Employee Deferral Account. In addition to such rules and regulations as the Committee may adopt, all loans shall comply with the following terms and conditions: (a) all loans shall be subject to the approval of the Committee or its agent; (b) an application for a loan by a Participant shall be made in writing to the Committee or its agent, whose action thereon shall be final; (c) in reviewing applications for loans, the Committee shall apply nondiscriminatory criteria to determine whether to approve or deny an applicant's request; (d) the period of repayment for any loan shall be arrived at by mutual agreement between the Committee or its agent and the borrower, but all loans shall become due and payable upon termination of employment and the period in no event shall exceed five years, except that a ten-year repayment rule shall apply to any loan used for the purpose of establishing or preserving a home which is the Participant's principal residence; (e) each loan shall be made at a reasonable rate of interest, based upon prevailing interest rates for similar loans in the surrounding business community in which the Plan is administered; (f) each loan shall be treated as a separate investment of the funds credited to such Participant's Accounts and the Committee shall reduce such Participant's Accounts in any Investment Funds as the Participant has so directed; (g) payments by a Participant on any such loan shall be credited to such Participant's Accounts in the various Investment Funds in the same proportions as the Participant's deferral contributions are made to such Investment Funds at the time such loan payments are made; (h) an amount equal to all unpaid loans to such Participant, including accrued interest thereon, shall be deducted from the amount otherwise distributable to any Participant or to a Beneficiary of any such Participant pursuant to Article VII for purposes of repayment of such loans; (i) repayment of loans shall be by payroll deduction or other approved method on a level amortization basis except that a Participant may prepay the outstanding principal balance of his loan at any time; (j) the Committee will also notify the Participant that, to the extent his loan is secured by the balance in his Employee Deferral Account, no interest deduction is allowable; (k) loans shall be made available to all Participants and Beneficiaries on a reasonably equivalent basis; (l) loans shall not be made available to Highly-Compensated Employees in an amount greater than the amount made available to other Employees; (m) each loan shall be secured by the balance remaining in the Participant's Accounts and/or by such other security usually and customarily utilized in the banking industry as the Committee may deem adequate; (n) the Committee shall approve and deny loans on a nondiscriminatory basis using criteria customary and usual in the banking industry; (o) no participant loan shall exceed the present value of the Participant's Accounts; (p) a Participant must obtain the consent of his or her Spouse, if any, to use of his Accounts as security for the loan. Spousal consent shall be obtained no earlier than the beginning of the 90-day period that ends on the date on which the loan is to be secured. The consent must be in writing, must acknowledge the effect of the loan and must be witnessed by a Plan representative or notary public. Such consent shall thereafter be binding with respect to that loan. A new consent shall be required if the Accounts are used for renegotiation, extension, renewal or other revisions of the loan; and (q) in the event of default, foreclosure on the note and attachment of security will not occur until a distributable event occurs in the Plan. If a valid spousal consent has been obtained in accordance with (q), then, notwithstanding any other provision of this Plan, the portion of the Participant's Accounts used as a security interest held by the Plan by reason of a loan outstanding to the Participant shall be taken into account for purposes of determining the amount of the Accounts payable at the time of death or distribution, but only if the reduction is used as repayment of the loan. If less than 100% of the Participant's Accounts (determined without regard to the preceding sentence) are payable to the Surviving Spouse, then the Accounts shall be adjusted by first reducing the Accounts by the amount of the security used as repayment of the loan and then determining the benefit payable to the Surviving Spouse. 13.05. Inability to Receive Benefits ----------------------------- If the Committee receives evidence that (a) a person entitled to receive any payment under the Plan is physically or mentally incompetent to receive payment and to give a valid release therefor; and (b) another person or an institution is then maintaining or has custody of such person and no guardian, committee or other representative of the estate of such person has been duly appointed by a court of competent jurisdiction, such payment may be made to such other person or institution referred to in (b) above. The release to such other person or institution shall be a valid and complete discharge for the payment. 13.06. Lost Participants ----------------- If the Committee is unable, after reasonable and diligent effort, to locate a Participant or Beneficiary who is entitled to payment under the Plan, the payment due such person shall become a forfeiture (and applied to reduce Employer contributions); provided, however, that if the Participant or Beneficiary later files a claim for his benefit, it shall be reinstated. Notification by certified or registered mail to the last known address of the Participant or Beneficiary shall be deemed a reasonable and diligent effort to locate such person. 13.07. Limitation of Rights -------------------- Nothing in the Plan, expressed or implied, is intended or shall be construed to confer upon or give to any person, firm or association other than the Employer, the Participants and their successors in interest any right, remedy or claim under or by reason of this Plan. 13.08. Gender ------ Whenever used in this Plan, the masculine pronoun refers to both men and women. 13.09. Invalid Provision ----------------- In case any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts of this Plan; but this Plan shall be construed and enforced as if said illegal and invalid provision(s) had never been inserted herein. 13.10. One Plan -------- This Plan may be executed in any number of counterparts, each of which shall be deemed an original; and said counterparts shall constitute but one and the same instrument and may be sufficiently evidenced by any one counterpart. 13.11. Governing Law ------------- The Plan shall be governed by and construed in accordance with the federal laws governing employee benefit plans qualified under the Code and in accordance with the local laws of the State of Ohio where such laws are not in conflict with the aforementioned federal laws. IN WITNESS WHEREOF, the undersigned has caused this Plan to be executed by a duly authorized individual effective as of the date first above written. PEOPLES BANCORP INC. By: /s/ LARRY HOLDREN Larry Holden, Executive Vice President - Personnel Date: December 28, 1995 EX-10 4 EXHIBIT 10(D)-RETIREMENT PLAN AND TRUST EXHIBIT 10(d) - ------------- PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 PEOPLES BANCORP INC. RETIREMENT PLAN As Amended and Restated Effective January 1, 1989 PEOPLES BANCORP INC. RETIREMENT PLAN Peoples Bancorp, Inc., a corporation organized under the laws of the State of Ohio, herein referred to as Employer, does hereby amend and restate and, as amended and restated, continue a Pension Plan for the benefit of its Eligible Employees on the terms and conditions described hereinafter. ARTICLE 1 PREFACE - ------- Section 1.1. Effective Date. Except as otherwise provided herein, the effective date of the Plan as amended and restated herein is January 1, 1989. Section 1.2. Purpose of the Plan. The purpose of the Plan is to provide a systematic program for the retirement of the Eligible Employees of the Employer by continuing the program under which the Employer makes regular contributions to a Trust Fund, which contributions are accepted, invested and disbursed by a Trustee or Trustees to provide definitely determinable benefits for such Employees or their Beneficiaries. Section 1.3. Legal Effect. The terms and conditions of the Plan as restated herein shall amend and supersede prospectively and in their entirety the terms and conditions of the Prior Plan originally effective January 1, 1982, and as amended and restated effective January 1, 1984, and all subsequent amendments thereto except as otherwise expressly stated herein; notwithstanding, however, the provisions of such Prior Plan shall continue to govern the rights of all Employees who retired or otherwise ceased to work for the Employer prior to the date of execution hereof, except as is otherwise expressly stated herein. Section 1.4. Form of Plan. The Plan shall be a single plan of a controlled group, as defined in Code Sections 414(b), 414(c) and 414(m). Only service and Compensation with the Employer by an Eligible Employee shall be used to determine the amount of any benefit under the Plan. Section 1.5. Governing Law. This Plan shall be regulated, construed and administered under the laws of the State of Ohio, except when preempted by federal law. Section 1.6. Headings. The headings and subheadings in this Plan have been inserted for convenience and reference only and are to be ignored in any construction of the provisions hereof. Section 1.7. Gender and Number. The masculine gender shall be deemed to include the feminine, the feminine gender shall be deemed to include the masculine, and the singular shall include the plural unless otherwise clearly required by the context. ARTICLE 2 DEFINITIONS - ----------- The words and phrases defined and used hereinafter shall have the following meaning, unless a different meaning is clearly required by the context of the Plan. Section 2.1. Accrual Date shall mean the first day of the month coincident with or next following the date a Participant is no longer employed by the Employer. Section 2.2. Accrued Benefit of a Participant as of the Accrual Date, before his Normal Retirement Age shall equal the product of (a) and (b) where: (a) is a fraction, not exceeding 1, the numerator of which is the total number of his Years of Service as of such Accrual Date and the denominator of which is the total number of Years of Service he would have if he separated from service at his Normal Retirement Age; and (b) is the projected annual normal retirement benefit, defined in Section 5.1, calculated to reflect the number of Years of Service he would have if he separated from service at his Normal Retirement Age and his Average Compensation as if he had attained his Normal Retirement Age on the Accrual Date. The minimum Accrued Benefit shall not be less than the Accrued Benefit as of the date this Plan is executed under the provisions of the Peoples Bancorp Inc. Retirement Plan and Trust or the Peoples Banking and Trust Company Employees' Pension Plan, as appropriate, except as otherwise provided by actions taken in accordance with Internal Revenue Service Notice 88-131, Notice 89-92, IRS Revenue Procedure 89-65, IRS Notice 91-38, IRS Announcement 92-29, IRS Notice 92-36, or any other such IRS guidance regarding the timing of the implementation of changes made by the Tax Reform Act of 1986 affecting the Plan. The Accrued Benefit of a Participant who has attained his Normal Retirement Age shall be based on the benefits provided under Section 5.4. Section 2.3. Act shall mean the Employee Retirement Income Security Act of 1974 as amended or as it may be amended from time to time. Section 2.4. Actuarial Equivalent shall mean equality in value of the aggregate amounts expected to be received under different forms of payment. Such equality in value shall be based on assumptions as to the occurrence of future events. The future events to be taken into account are mortality for Participants, mortality for Beneficiaries, and an interest discount for the time value of money. For this Plan, the actuarial assumptions are as follows: (a) Mortality assumption for payments to Participants: UP Mortality Table projected to 1984, adjusted for twenty percent (20%) female content. (b) Mortality assumption for payments to Beneficiaries and survivors: UP Mortality Table projected to 1984, adjusted for eighty percent (80%) female content. (c) Interest assumption: Interest rate used as of the first day of the current Plan Year by the Pension Benefit Guaranty Corporation for purposes of valuing immediate or deferred (as appropriate) annuities for terminating plans under Act Section 4062. The interest rate in effect during the Plan Year in which benefits are to commence shall be applied exclusively in all determinations of actuarial equivalence. The Actuarial Equivalent of the Accrued Benefit as of the date this amendment and restatement is executed shall be the greater of: (a) the Actuarial Equivalent of the Accrued Benefit as of such date under the terms of the Plan as in effect on the day preceding the date this amendment and restatement is executed, or (b) the Actuarial Equivalent as determined under the definition of Actuarial Equivalent as amended herein. Section 2.5. Actuary shall mean an enrolled actuary or firm of actuaries which has on its staff an enrolled actuary selected by the Committee to provide actuarial services for the Plan. Section 2.6. Age shall mean attained age at latest anniversary of birth. Section 2.7. Annuity Starting Date shall mean: (a) the first day of the first period for which an amount is payable as an annuity, or (b) in the case of a benefit not payable in the form of an annuity, the first day on which all events have occurred which entitle the Participant to such benefit. Section 2.8. Average Compensation shall mean the average of the Participant's annual Compensation paid during five consecutive Years of Service out of the last ten Years of Service preceding the Plan Year which contains the Participant's accrual date, such five consecutive years chosen so as to produce the highest average. If a Participant has less than five consecutive years of actual Compensation, the average will be taken over his total Years of Service during such period. Section 2.9. Beneficiary shall mean the person or persons or legal entity designated as such by a Participant or Inactive Participant to receive the benefits, if any, payable in the event of the Participant's or Inactive Participant's death. A Beneficiary may only be designated as appropriate, pursuant to Article 5 or Article 7. When Article 5 or Article 7 allows the designation of a Beneficiary, each Participant or Inactive Participant may name a Beneficiary on a form provided by the Plan Administrator and delivered to the Plan Administrator. Such designation may include more than one person with one or more secondary or contingent Beneficiaries and shall be subject to change upon written request of such Participant or Inactive Participant in the same manner as the original designation. Section 2.10. Board shall mean the Board of Directors of the Employer. Section 2.11. Break in Service shall mean the failure of an Employee to complete more than 500 Hours of Service during a Plan Year. Such Break in Service shall be effective as of the first day of the Plan Year in which such event occurs. A Break in Service shall not result solely from Disability or illness, an authorized leave of absence, or military service. Section 2.12. Code shall mean the Internal Revenue Code of 1986, as amended or as it may be amended from time to time. Section 2.13. Committee shall mean the Committee, as described in Article 9 hereof. Section 2.14. Compensation, except for purposes of Articles 8 and 14 herein, shall mean remuneration paid by the Employer to an Employee for services rendered as reported or reportable on Form W-2 for federal income tax withholding purposes (or similar form required for such purposes) including incentive pay, overtime and bonuses, but excluding directors fees. Compensation shall also include any employee deferrals under a Code Section 401(k) plan maintained by the Employer and salary reduced under a Code Section 125 arrangement maintained by the Employer. Compensation in excess of $200,000 shall not be considered for any Plan Year. The $200,000 limitation shall be adjusted for cost-of-living increases as allowed by the Secretary of the Treasury pursuant to Code Section 401(a)(17). In determining the Compensation of a Participant for purposes of this limitation, the family aggregation rules of Code Section 414(q)(6) shall apply, except that in applying such rules, the term "family" shall include only the Spouse of the Participant and any descendants of the Participant who have not attained Age 19 before the close of the Plan Year. The $200,000 limitation shall be applied to a family aggregation unit on a pro rata basis according to each such Participant's Compensation without regard to such limitation. Section 2.15. Covered Compensation shall mean, with respect to a Participant, the average of the taxable wage bases (rounded to the nearest multiple of $600) in effect under Section 230 of the Social Security Act for each year during the 35 year period ending with the year in which the Participant attains his Social Security Retirement Age. In determining a Participant's Covered Compensation for a Plan Year, the taxable wage base for the current Plan Year and any subsequent Plan Year shall be assumed to be the same as the taxable wage base in effect as of the first day of the Plan Year for which the determination is being made. Section 2.16. Date of Employment shall mean the first date on which an Employee completes an Hour of Service. Section 2.17. Date of Reemployment shall mean the first date on which an Employee completes an Hour of Service following a Break in Service. If an Employee incurs a Break in Service without terminating employment, such date will be deemed to occur on the first day of the first Plan Year following the year in which such Break in Service occurs. Section 2.18. Disability shall mean the permanent and total inability of a Participant, by reason of physical or mental infirmity or both, to perform the work customarily assigned to him by the Employer. The determination of the existence or nonexistence of Disability shall be made by the Committee pursuant to a medical examination by a medical doctor selected or approved by the Committee. Section 2.19. Early Retirement Age shall mean the first day of the month coincident with or next following Age 50 and the completion of 10 Years of Service. Section 2.20. Early Retirement Date shall mean the date on or after his Early Retirement Age on which the Participant elects, pursuant to Section 5.2, to retire from employment and begin receipt of early retirement benefits. Section 2.21. Eligible Employee shall mean any Employee who is not included in a unit of Employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between Employee representatives and the Employer. In no event shall a "leased employee," as defined in Code Section 414(n)(2), be an Eligible Employee. Section 2.22. Employee shall mean any person who is employed by the Employer. Section 2.23. Employer shall mean Peoples Bancorp, Inc. or any Related Employer who, with the written consent of the Board of Directors of Peoples Bancorp, Inc., agrees in writing to be a party hereto. Section 2.24. Entry Date shall mean the first day of each Plan Year. Section 2.25. Fund, Trust or Trust Fund shall mean the sum of the contributions made by the Employer and held by the Trustee in a trust created herein, increased by the profits and income thereto and decreased by any losses and reasonable expenses incurred in the administration of the trust and any payments made therefrom under the Plan. Section 2.26. Hour of Service shall mean: (a) Each hour for which an Employee is paid or entitled to payment for the performance of duties for the Employer. These hours shall be credited to the Employee for the computation period in which the duties are performed, and (b) Each hour for which an Employee is paid, or entitled to payment, by the Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. Notwithstanding the preceding sentence: (1) No more than 501 hours will be credited under this paragraph to an Employee on account of any single continuous period during which the Employee performs no duties (whether or not such period occurs in a single computation period); (2) An hour for which an Employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed will not be credited to the Employee if such payment is made or due under a plan maintained solely for the purpose of complying with applicable workmen's compensation, or unemployment compensation or disability insurance laws; and (3) Hours will not be credited for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee. (c) Each hour for which back pay, irrespective of mitigation or damages, is either awarded or agreed to by the Employer. The same hours shall not be credited both under paragraph (a) or paragraph (b), as the case may be, and under this paragraph (c). These hours shall be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made. (d) Each hour for which an Employee is required to be credited for military service under applicable law and regulations and which is not otherwise credited under this Section. (e) Hours under this Section shall be calculated and credited pursuant to Section 2530.200b-2 of the Department of Labor Regulations which is incorporated herein by reference. (f) Solely for purposes of determining whether a Break in Service for vesting and participation has occurred, an Employee or former Employee who is absent from work for maternity or paternity leave shall receive credit either for the Hours of Service, as described in subsections (a) - (e) above, which would otherwise have been credited to such Employee or former Employee but for such absence, or in any case in which such Hours of Service cannot be determined, eight Hours of Service per day of absence. The total number of Hours of Service credited under this subsection (f) shall not exceed 501. Hours of Service pursuant to this paragraph shall be credited in the computation period during which the absence begins if doing so would prevent a Participant from incurring a one-year Break in Service in that computation period. In any other case, these hours shall be credited in the following computation period. For purposes of this paragraph, an absence from work for maternity or paternity leave means an absence (1) by reason of pregnancy of the Employee or former Employee, (2) by reason of the birth of a child of the Employee or former Employee, (3) by reason of placement of a child with the Employee or former Employee in connection with the adoption of such child by such Employee or former Employee, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. Notwithstanding the above, no credit shall be given for Hours of Service pursuant to this subsection (f) unless the Employee or former Employee furnishes sufficient information to the Plan Administrator or the Committee to establish that the absence is due to maternity or paternity leave and the number of days of such absence. Section 2.27. Inactive Participant shall mean a person who terminates employment or otherwise ceases to be a Participant but who is entitled to receive an immediate or a deferred vested benefit from the Plan. Section 2.28. Limitation Year shall mean the calendar year. Section 2.29. Normal Form of Benefit shall mean an annuity paid in equal monthly installments on the first day of each calendar month in which the Participant shall have lived the entire preceding calendar month. Section 2.30. Normal Retirement Age shall mean for Participants who entered the Plan before the first day of the first Plan Year beginning after December 31, 1987, the sixty-fifth birthday of the Participant. For Participants who entered the Plan on or after the first day of the first Plan Year beginning after December 31, 1987, it shall mean the later of the sixty-fifth birthday of the Participant or the first day of the Plan Year which includes the fifth anniversary of the date the Participant commences participation in the Plan. Section 2.31. Normal Retirement Date shall mean the first day of the month coincident with or next following the Normal Retirement Age. Section 2.32. Participant shall mean every Eligible Employee who has met the requirements of Article 3 and who is not an Inactive Participant. Section 2.33. Plan shall mean the Peoples Bancorp Inc. Retirement Plan, as amended and restated herein and as it may be subsequently amended. Section 2.34. Plan Administrator shall mean the Chairman of the Committee. Section 2.35. Plan Year shall mean the 12-month period ending on December 31. Section 2.36. Prior Plan shall mean the Peoples Bancorp Inc. Retirement Plan and Trust and the Peoples Banking and Trust Company Employees' Pension Plan. Section 2.37. Related Employer shall mean a corporation which is a member of a controlled group of corporations, within the meaning of Sections 1563(a)(1), (a)(2) and (a)(3) of the Code, of which the Employer is also a member. Related Employer shall also mean any other trade or business, whether or not incorporated, which is under common control with the Employer, within the meaning of Section 414(c) of the Code, and/or all members of an affiliated service group within the meaning of Section 414(m) of the Code. For purposes of Article 14, however, the phrase "more than 50 percent" shall be substituted for the phrase "at least 80 percent" each place it appears in Section 1563(a)(1) of the Code. Section 2.38. Social Security Retirement Age shall mean generally the Age at which unreduced old-age insurance benefits will commence under the Social Security Act as shown below. Date of Birth Social Security Retirement Age Before January 1, 1938 65 After December 31, 1937 but Before January 1, 1955 66 After December 31, 1954 67 Section 2.39. Spouse shall mean the Participant's or Inactive Participant's spouse as determined under the laws of the state or commonwealth in which the Participant or Inactive Participant resides. Section 2.40. Trustee shall mean the bank, trust company, other financial institution or individual or individuals holding and managing the Fund according to the terms of Peoples Bancorp Inc. Retirement Plan Trust Agreement. Section 2.41. Year of Service shall mean a Plan Year during which an Employee has completed at least 1,000 Hours of Service, subject to the following qualifications and exceptions: (a) Service performed prior to a Break in Service shall be disregarded if such Break in Service commenced prior to July 1, 1976. (b) In the case of a nonvested Participant, Years of Service before any period of consecutive one-year Breaks in Service shall be disregarded if the number of consecutive one-year Breaks in Service equals or exceeds the greater of five or the aggregate number of Years of Service before such period. Any Years of Service disregarded pursuant to the previous sentence shall also be disregarded when applying the provisions of that sentence to a subsequent period of Breaks in Service. If an individual would have lost credit for Years of Service under the rule of parity as stated in the Prior Plan as of the end of the Plan Year beginning in 1984, the rules of this paragraph shall not apply to that individual with respect to Years of Service before the Plan Year beginning in 1985. Credit for those prior years in such a case is forever lost. If an individual would not have lost credit for Years of Service under the rule of parity as stated in the Prior Plan as of the end of the Plan Year beginning in 1984, the rules of this paragraph shall apply to that individual with respect to all Years of Service. (c) Service after Normal Retirement Date shall be credited, including such service before January 1, 1988, for any Employee who has at least one Hour of Service in any Plan Year beginning after December 31, 1987, subject to the other provisions of this Section. (d) For purposes of vesting, Years of Service, as determined above, with a Related Employer for the period of time during which employers are related shall be counted as service with the Employer. (e) Where the Employer maintains the plan of a predecessor employer, as defined in Section 1.411(a)-5(b) of the Income Tax Regulations, Years of Service, as determined above, with such predecessor employer shall be treated as Years of Service with the Employer for purposes of vesting. (f) For purposes of vesting, an Employee who was covered by the Peoples Banking & Trust Company Employees' Pension Plan as of January 1, 1989 and who is credited with at least 1,000 Hours of Service in both the period beginning January 1, 1989 and ending on December 31, 1989, and the period beginning on July 1, 1988 and ending on June 30, 1989 shall be credited with two Years of Service. (g) For purposes of determining a Participant's Accrued Benefit, with respect to those Participants covered by the Peoples Banking & Trust Company Employees' Pension Plan as of January 1, 1989, the accrual computation period beginning July 1 shall be changed to the 12-consecutive-month period beginning on January 1. The period from July 1, 1988 to January 1, 1989, shall be treated as a partial accrual computation period. In order to receive pro rata credit for purposes of benefit accrual for service in the partial accrual computation period, such a Participant must be credited with 1,000 Hours of Service. (h) Any Employee who has at least one Hour of Service in any Plan Year beginning after December 31, 1987 and who was previously excluded from participation because he was hired after Age 60 shall receive retroactive service from their Date of Employment, subject to the other provisions of this Section. ARTICLE 3 ELIGIBILITY AND PARTICIPATION - ----------------------------- Section 3.1. Eligibility. An Eligible Employee who has attained Age 20 1/2 and who has been an Employee for six months shall become a Participant at the time specified in Section 3.2. The Age 60 exclusion contained in the Prior Plan is eliminated effective January 1, 1988. Section 3.2. Participation. Any Eligible Employee who has satisfied the requirements of Section 3.1 shall become a Participant on the first Entry Date coincident with or next following the date on which such requirements are met unless such Employee separated from service and did not return to employment before his Entry Date. Once an Eligible Employee becomes a Participant he shall remain a Participant until he terminates employment with an Employer regardless of the number of Hours of Service he completes in a Plan Year. An Eligible Employee who terminates employment before his Entry Date, after meeting the requirements of Section 3.1, and is rehired before his Entry Date shall become a Participant on his Entry Date. An Eligible Employee who terminates employment or who incurs a Break in Service without terminating employment, after meeting the requirements of Section 3.1, and is rehired or avoids a Break in Service in a Plan Year shall become a Participant on his Date of Reemployment. Section 3.3. Transfer to or from Eligible Class of Employees. In the event a Participant is no longer an Eligible Employee and becomes ineligible to participate but has not terminated employment or incurred a Break in Service, such Employee will participate immediately upon again becoming an Eligible Employee. If such a Participant terminates employment or incurs a Break in Service, eligibility to participate will be determined under the Break in Service rules of Section 3.2 above. In the event an Employee who is not an Eligible Employee becomes an Eligible Employee, such Eligible Employee will participate immediately if such Eligible Employee has satisfied the minimum age and service requirements and would otherwise have previously become a Participant. Notwithstanding, such Eligible Employee shall be subject to the Break in Service rules of Section 3.2 above. Section 3.4. Service with a Related Employer. Service with a Related Employer not adopting this Plan shall be considered service with the Employer when determining if an Employee has completed the service requirement for eligibility. A Participant who transfers employment to a company which is a Related Employer not adopting this Plan shall remain covered by the Plan, but such Inactive Participant shall receive credit, for purposes of determining his Accrued Benefit, for service only to the extent of his service while an Eligible Employee of the Employer. For vesting purposes, such Inactive Participant shall continue to accrue Years of Service hereunder. If such Inactive Participant is transferred again to the Employer as an Eligible Employee, he shall participate in the Plan on his date of transfer. If such individual remains in the employ of a Related Employer not adopting this Plan until his termination of employment, his benefits shall be calculated based on the provisions of Articles 5, 6 and 7. Section 3.5. Service as a Leased Employee. Each "leased employee" who performs services for the Employer or Related Employer on a substantially full-time basis for a period of at least one year shall be considered an Employee or an employee of a Related Employer as appropriate for purposes of determining if this Plan satisfies the minimum coverage requirements of Code Section 410(b). An individual will be considered to have performed services on a substantially full-time basis if that individual is credited with the lesser of 1,500 Hours of Service or 75% of the Hours of Service that are customarily performed in the particular position by an Employee or an employee of a Related Employer. If a "leased employee" becomes an Eligible Employee by being hired in a capacity other than as a "leased employee," service in any Plan Year beginning in or after 1984, while a "leased employee" shall be considered when determining such Employee's Years of Service for vesting purposes. ARTICLE 4 CONTRIBUTIONS - ------------- Section 4.1. Contributions by the Employer. The Employer contemplates that the contributions to the Trust under this Plan shall be made by the Employer, based upon the recommendation of the Actuary, as recommended by the Committee. All Employer contributions under this Plan are expressly conditioned on their current deductibility under the Code. Section 4.2. Gains from Terminations. Any gains arising from the death of Participants or from forfeitures shall not be utilized to increase the benefits to the remaining Participants. Section 4.3. Funding Requirements. The Employer shall fund the Plan in a manner consistent with the provisions of the Code, the Act, and such other laws and regulations as shall be applicable, to the end that the Plan shall be funded on a lawful and sound actuarial basis; but to the extent permitted by governing law, the Employer shall be free to determine the manner and means of making provision for funding the Plan. Section 4.4. Contributions by Participants. Contributions by Participants are neither required nor permitted. ARTICLE 5 RETIREMENT - ---------- Section 5.1. Normal Retirement. As of his Normal Retirement Date, a Participant shall be eligible to retire and to receive his normal retirement benefit. The annual normal retirement benefit, subject to the provisions of Articles 8 and 14, shall be calculated as the Normal Form of Benefit as follows: (a) Forty percent (40%) of the Participant's Average Compensation, plus (b) Seventeen percent (17%) of the excess of the Participant's Average Compensation over his Covered Compensation; (c) Such sum multiplied by the ratio of his total Years of Service to 30, such ratio not to exceed 1. In no event shall the normal retirement benefit for any Participant other than a highly compensated Employee (as defined in Code Section 414(q)) be less than his minimum projected benefit under the Prior Plan at Age 65 using his Compensation as of January 1, 1993. In no event shall the normal retirement benefit be less than the highest early retirement benefit that would have been payable to the Participant as of the beginning of any Plan Year. In no event shall the normal retirement benefit under this Plan be less than the Accrued Benefit to the credit of the Participant as of the date before this amendment and restatement is executed. Section 5.2. Early Retirement. A Participant who has not attained his Normal Retirement Age, but has attained his Early Retirement Age, may elect to retire as of the first day of any calendar month following written notice to the Employer and to the Committee. At the option of the Participant, subject to Section 5.10, benefits may begin as of any calendar month following his early retirement and preceding the date which would have been his Normal Retirement Date had he remained an Employee. Such early retirement benefit of a Participant shall be calculated as the Normal Form of Benefit payable pursuant to Section 5.1 hereof and shall equal his Accrued Benefit as of his Early Retirement Date, reduced by one-fifteenth for each of the first five years and one-thirtieth for each of the next ten years by which his Early Retirement Date precedes his Normal Retirement Date. Section 5.3. Disability Retirement. A Participant who has not attained his Normal Retirement Age, and suffers Disability may retire as of the first day of any calendar month next following the date the Committee determines that he is disabled. Payment of his Disability benefit may begin on the first day of any calendar month prior to his Normal Retirement Age at the request of the disabled Participant, subject to Section 5.8. If the Participant is covered under a long-term disability insurance plan maintained by the Employer and receives disability payments thereunder, his benefits shall begin on the first day of the month chosen by the Participant, but in no event before the termination of the long-term disability plan payments, subject to the provisions of Section 15.8. The Disability retirement benefit shall equal his Accrued Benefit as of the first day of the month following last receipt of Compensation from the Employer reduced for each year by which the starting date of the Disability retirement benefit precedes his Normal Retirement Date in the same manner as described in Section 5.2 and actuarially reduced for each additional year before Age 50. The Disability retirement benefit shall be payable under one of the methods of payment specified in Section 5.6, subject to Section 5.7. Section 5.4. Delayed Retirement. If a Participant is in service following his Normal Retirement Date, payment of his normal retirement benefit shall be deferred until the first day of the calendar month coincident with or next following his actual retirement, hereinafter called his Delayed Retirement Date. In no event shall benefit payments be delayed beyond the date specified in Article 15. Notwithstanding the above, a Participant may elect to begin receiving payment on the first day of any month following his Normal Retirement Date. If a Participant is in service following his Normal Retirement Date, his benefit shall continue to accrue until his actual retirement date. In no event, however, shall a Participant's benefit at actual retirement be less than the Accrued Benefit at the Normal Retirement Date increased actuarially to his actual date of retirement. For purposes of this adjustment the assumptions shall be those specified in the definition of Actuarial Equivalent except that when determining the increase in value for the period between Normal Retirement Date and Delayed Retirement Date, only the interest assumption shall be used. Section 5.5. Reemployment Following Retirement. If a Participant begins to receive a periodic benefit following early retirement and is subsequently reemployed prior to attaining Normal Retirement Age, benefit payments shall cease during the period of reemployment. If a Participant begins to receive a benefit following Disability retirement, recovers and resumes employment prior to attaining his Normal Retirement Age, benefit payments shall cease. Upon his subsequent retirement, his benefit accrued to that date shall be based on the total of both periods of Years of Service and shall reflect Compensation as if the period of employment were contiguous to the prior period of employment. However, the benefit paid to such Participant shall be adjusted by the Actuarial Equivalent of any benefits previously paid. If a Participant begins to receive a benefit following Normal Retirement Age, early retirement or Disability and is subsequently reemployed after attaining Normal Retirement Age he shall be treated as a Participant eligible for delayed retirement. The continuation or cessation of benefit payments as well as the continuation of benefit accrual shall be consistent with the provisions of Section 5.4. If an individual receives a distribution from the Plan which then represents the Actuarial Equivalent of the present value of his full Accrued Benefit and is subsequently reemployed or otherwise earns additional service under the Plan, his Years of Service for purposes of determining his Accrued Benefit shall include service prior to his termination on which the earlier distribution was based. However, the benefit subsequently paid to such Participant shall be adjusted by the Actuarial Equivalent of the benefit previously paid. Section 5.6. Methods of Payment. Each retiring Participant shall be offered the optional methods of payment listed below. Any benefits payable under such optional methods of payment shall be the Actuarial Equivalent of the Normal Form of Benefit and shall be subject to the distribution restrictions of Article 15. (a) Life Annuity: An annuity payable in equal monthly installments during the Participant's lifetime only, on the first day of each calendar month in which the Participant has lived the entire preceding month. (b) Five Years Certain and Life Annuity: An annuity payable in monthly installments on the first day of each calendar month for 60 months certain and thereafter on the first day of each calendar month in which the Participant has lived the entire preceding month. (c) Ten Years Certain and Life Annuity: An annuity payable in monthly installments on the first day of each calendar month for 120 months certain and thereafter on the first day of each calendar month in which the Participant has lived the entire preceding month. (d) Joint and Full Survivor Annuity: An annuity whereby a monthly installment shall be paid to the Participant during his lifetime and thereafter in the same monthly amount to the Beneficiary during the Beneficiary's lifetime, on the first day of each calendar month in which the Participant or his Beneficiary has lived the entire preceding month. (e) Joint and One-Half Survivor Annuity: An annuity, whereby a monthly installment shall be paid to the Participant during his lifetime and thereafter in one-half of such monthly amount to the Beneficiary during the Beneficiary's lifetime, on the first day of each calendar month in which the Participant or his Beneficiary has lived the entire preceding month. (f) Joint and Three-Fourths Survivor Annuity: An annuity, whereby a monthly installment shall be paid to the Participant during his lifetime and thereafter in three-fourths of such monthly amount to the Beneficiary during the Beneficiary's lifetime, on the first day of each calendar month in which the Participant or his Beneficiary has lived the entire preceding month. (g) Lump Sum: A single lump sum payment shall be distributed. Such lump sum payment shall be the Actuarial Equivalent of the vested Accrued Benefit payable at the time of distribution as the Normal Form of Benefit. The commencement of a lump sum benefit shall be effective as of the later of the effective date of the Participant's retirement unless the Participant or Inactive Participant specifically elects to waive the 30 day advance notice requirement. Such waiver shall only be applicable to a distribution for which Code Sections 401(a)(11) and 417 are not applicable, and for which the plan administrator has informed the participant of the right to a period of at least 30 days after receipt of the notice to consider the decision to elect a distribution. Any such lump sum which is $200 or more shall include the right of the Participant to make a direct rollover under Code Section 401(a)(31), as provided in Article 16. Section 5.7. Election of Option. The provisions of Sections 5.7, 5.8 and 5.9 shall apply to any Participant or Inactive Participant who is credited with at least one Hour of Service on or after August 23, 1984. A payment option as set forth in Section 5.6 shall be elected, changed or revoked by the Participant, his guardian, or attorney-in-fact, by written notice filed with the Committee during the election period specified below; provided, however: (a) A married Participant shall be deemed to have elected a joint and one-half survivor annuity with his Spouse as his Beneficiary unless he makes an affirmative election not to take such an annuity. (b) If the Beneficiary under a joint and survivor option dies before the commencement of payments, the election shall be inoperative. (c) If a timely election shall not have been made, payment shall be made under the Normal Form of Benefit to an unmarried Participant, unless otherwise provided herein. Notwithstanding the above, any election by a Participant not to provide a joint and one-half (or greater) survivor annuity with his Spouse as the named Beneficiary shall not take effect unless the Participant's Spouse consents in writing to such election and the consent acknowledges the effect of such election. The Spouse's consent must be witnessed by a Plan representative or a notary public or it must be established to the satisfaction of a Plan representative that the consent cannot be obtained because there is no Spouse, because the Spouse cannot be located or because of such other circumstances as the Secretary of the Treasury may prescribe by regulations. A Spouses's consent under this Section must generally recognize the specific non-spouse Beneficiary, if applicable, and the specific method of payment. A Spouse may elect to irrevocably release all rights to a qualified joint and survivor annuity and may expressly permit that subsequent elections within the election period be made by the Participant without any requirement of further consent by the Spouse. A Spouse has the right to restrict consent to a specific Beneficiary and/or method of payment. For purposes of this Section a former Spouse will be treated as the Spouse to the extent provided under a qualified domestic relations order as described in Code Section 414(p). Section 5.8. Election Period. A Participant may elect the method of benefit payment during the 90-day period ending on his Annuity Starting Date. Any election made during the election period shall be revocable, and another such election may be made at any time prior to the close of the election period, at which time the last such election which shall have been made shall be irrevocable. Any such election, and any revocation thereof, shall be made by notice in writing to the Committee in a form which is satisfactory to the Committee. In the case of a Participant who elects to begin receiving retirement benefit payments on a date such that there is not sufficient time to provide notice under this Section at least 30 days before his Annuity Starting Date, interim payments under the method of payment elected shall be made unless a lump sum payment is elected, but the initial election shall be revocable by the Participant or his Spouse within 30 days of the date the notice is given. Section 5.9. Information to be Given Participants. Consistent with regulations prescribed by the Secretary of the Treasury and no less than 30 days and no more than 90 days before his Annuity Starting Date, a written statement shall be mailed or personally delivered to him setting forth a general description of the joint and one-half survivor annuity, as well as the circumstances under which it shall be provided unless the Participant shall elect another form of payment, the availability of such election, and a general explanation of the financial effect of such election. Such written statement shall also include a statement of the rights of the Participant's Spouse as provided in Section 5.7. It shall further notify the Participant that he may make a written request at any time during the election period specified above, for an additional written statement of the terms and conditions of the joint and one-half survivor annuity and the financial effect of payment in some method other than the joint and one-half survivor annuity. Section 5.10. Consent Requirement. Notwithstanding anything in this Plan to the contrary, no distribution shall commence to a Participant before his Normal Retirement Age without the written consent of the Participant or Inactive Participant and his Spouse, if any (except in the case of a qualified joint and survivor annuity), unless the Actuarial Equivalent present value of the Participant's vested Accrued Benefit does not exceed $3,500. Notwithstanding the above, no such distribution shall be made if, at any previous time, the Actuarial Equivalent of the benefit exceeded $3,500 and the Participant was eligible to begin receipt of immediate monthly payments. Section 5.11. Payment of Small Benefits. If the Actuarial Equivalent present value of the Participant's vested Accrued Benefit does not exceed $3,500, such amount shall be distributed to the Participant at the time at which such retirement benefits are to commence, as a lump sum without his consent, provided such distribution represents the Participant's entire vested interest in the Plan. Such distribution shall be made within the time period specified in Article 15. Any such lump sum which is $200 or more shall include the right of the Participant to make a direct rollover under Code Section 401(a)(31), as provided in Article 16. Section 5.12. Transition Rule. (a) Any living Participant not receiving benefits on August 23, 1984, who was credited with at least one Hour of Service under this Plan or a predecessor plan on or after September 2, 1974, and who is not otherwise credited with any service in a Plan Year beginning on or after January 1, 1976, must be given the opportunity to have his or her benefits paid in accordance with subsection (c) of this Section 5.12. (b) The opportunity to elect (as described in subsection (a) above) must be afforded to the appropriate Participants during the period commencing on August 23, 1984, and ending on the date benefits would otherwise commence to said Participants. (c) Any Participant who has elected, pursuant to subsection (a) of this Section, shall have his or her benefits distributed in accordance with all of the following requirements if benefits would have been payable in the form of a life annuity: (1) Automatic joint and survivor annuity. If benefits in the form of a life annuity become payable to a married Inactive Participant who: (A) begins to receive payments under the Plan on or after Normal Retirement Age; or (B) begins to receive payments on or after the Qualified Early Retirement Age; or (C) separates from service on or after attaining Normal Retirement Age (or the Qualified Early Retirement Age) and after satisfying the eligibility requirements for the payment of benefits under the plan and thereafter dies before beginning to receive such benefits; then such benefits will be received under this Plan in the form of a qualified joint and survivor annuity, unless the Participant has elected otherwise during the election period. The election period must be at least a 90-day period and must not end more than 90 days before the commencement of benefits. Any election hereunder will be in writing and may be changed by the Participant at any time. (2) For purposes of this Section 5.12 only. (A) Qualified Early Retirement Age is the latest of: 1) the earliest date, under the Plan, on which the Participant may elect to receive retirement benefits, 2) the first day of the 120th month beginning before the Participant reaches Normal Retirement Age, or 3) the date the Participant begins participation. (B) Qualified joint and survivor annuity is an annuity for the life of the Participant with a one-half (or greater, if applicable) survivor annuity for the life of his Spouse as described in Section 5.6. ARTICLE 6 VESTING - ------- Section 6.1. General. The Accrued Benefit of each Participant, subject to the provisions of Article 8, shall be fully vested in him (that is, not subject to forfeiture) upon the first to occur of the following dates: (a) Attainment of his Normal Retirement Age (whether or not the Participant actually retires), (b) Date on which he first becomes eligible to elect early retirement (whether or not he actually elects such early retirement), (c) Date on which he first qualifies for Disability retirement, or (d) Date of completion of five or more Years of Service. Section 6.2. Payments Following Termination of Service. (a) If a Participant shall terminate employment for any reason other than normal retirement, Disability retirement, early retirement or death and is not later reemployed, payment of his vested Accrued Benefit, as determined pursuant to this Article, shall be deferred until he is eligible for and elects to receive an early retirement benefit under the Plan or his Normal Retirement Date, whichever is earlier. On that date, if he is then living, he shall receive his vested Accrued Benefit payable to or with respect to him in the same manner as if he were then a Participant entitled to an early or Normal Retirement Benefit under the Plan. (b) If the Actuarial Equivalent present value of the Participant's vested Accrued Benefit does not exceed $3,500, such amount shall be distributed as a lump sum without the Participant's consent, provided such distribution represents the Participant's entire vested interest in the Plan. Notwithstanding the above, no such distribution shall be made if, at any previous time, the Actuarial Equivalent of the benefit exceeded $3,500 and the Participant was eligible to begin receipt of immediate monthly payments. If the Actuarial Equivalent present value of the Participant's vested Accrued Benefit is greater than $3,500, distribution of such benefit will be in accordance with the provisions of Section 5.7. An unmarried Participant shall have the right to elect an immediate life annuity, in lieu of such lump sum. Such benefit shall be reduced in the same manner as early retirement benefits in Section 5.2 and actuarially reduced for each additional year before he would have attained his Early Retirement Age. Any lump sum distribution under this subsection (b) shall be made as soon as administratively feasible following the Plan Year in which such termination occurs. Any such lump sum which is $200 or more shall include the right of the Participant to make a direct rollover under Code Section 401(a)(31), as provided in Article 16. (c) If an individual receives a distribution from the Plan which then represents the Actuarial Equivalent of the present value of his full Accrued Benefit and is subsequently reemployed or otherwise earns additional service under the Plan, his Years of Service for purposes of determining his Accrued Benefit shall include service prior to his termination on which the earlier distribution was based. However, the benefit subsequently paid to such Participant shall be adjusted by the Actuarial Equivalent of the benefit previously paid. Section 6.3. Rights of Employees. The adoption of the Plan shall not be construed as conferring any legal or other rights upon any Employee or any persons for continuation of employment, nor shall it interfere with the right of the Employer to discharge any Employee or to deal with him without regard to the effect thereof under the Plan. Section 6.4. Deemed Distribution. Any individual whose employment with the Employer, or a Related Employer, has terminated prior to that individual obtaining any nonforfeitable Accrued Benefit under the Plan shall be treated as having been cashed-out of the Plan on his termination date, and his status as a Participant in the Plan shall cease as of that date, subject to his right to again commence participation, as otherwise provided by the Plan. ARTICLE 7 DEATH - ----- Section 7.1. General. Except as otherwise provided in Article 5 and in this Article 7, no death benefit shall be payable under the Plan. Section 7.2. Death Prior to the Annuity Starting Date. If a vested married Participant or vested married Inactive Participant dies prior to his Annuity Starting Date, his surviving Spouse, if any, shall be entitled to an annuity equal to the following amount. In the case of a married Participant who dies on or before his earliest retirement date, the survivor annuity shall be computed as if the Participant had separated from service on the date of his death, survived to the earliest retirement date under the Plan, had commenced receiving payment of a joint and one-half survivor annuity as provided in Section 5.6, then died on the day after his earliest retirement date. In the case of a married Inactive Participant who dies on or before his earliest retirement date, the survivor annuity shall be computed in the same manner as for an active Participant, except that the date he separated from service instead of the date of his death shall be used. In the case of a married Participant or a married Inactive Participant who dies after his earliest retirement date, such survivor annuity shall be computed as if such Participant had begun receiving a joint and one-half survivor annuity on the day before his death. Section 7.3. Payment of Small Benefits. Notwithstanding the above, if the lump sum Actuarial Equivalent of the benefit described in Section 7.2 is $3,500 or less, then payment shall be made to the Spouse in a lump sum. Notwithstanding the above, no such distribution shall be made if, at any previous time, the Actuarial Equivalent of the benefit exceeded $3,500 and the Participant was eligible to begin receipt of immediate monthly payments. Section 7.4. Commencement of and Period for Payment of Death Benefits. The Spouse shall elect a benefit commencement date which falls within the period beginning on the date the Participant or Inactive Participant would have attained his earliest retirement date and ending on the date on which the deceased Participant or Inactive Participant would have attained Age 70 1/2. If the Participant's or Inactive Participant's Spouse, if any, does not survive, no death benefit will be paid. Section 7.5. Death Following the Annuity Starting Date. If a Participant or Inactive Participant dies after the Annuity Starting date, payments (if any are appropriate) shall be made in accordance with the method of payment elected by the Participant or Inactive Participant pursuant to Article 5, and shall in all events be payable at least as rapidly as under the method of payment in effect prior to the Participant's or Inactive Participant's death. Section 7.6. Qualified Domestic Relations Order. For purposes of this Article 7, a former Spouse shall be treated as the Spouse to the extent provided under a qualified domestic relations order as described in Code Section 414(p). Section 7.7. Transition Rule. Any living married Inactive Participant not receiving benefits on August 23, 1984, who would otherwise not receive the benefits prescribed by Section 7.2 shall have Section 7.2 apply to him if he is credited with at least one Hour of Service under this Plan or a predecessor plan in any Plan Year beginning on or after January 1, 1976, and if he had at least ten Years of Service for vesting and had at least a partially vested interest in the Plan at the time he separated from service. Section 7.8. Death After Election of Joint and Survivor Annuity. If a Participant or Inactive Participant who had made a valid election under Section 5.7 of a qualified joint and survivor annuity with a survivorship portion payable to his Spouse greater than 50% dies before his Annuity Starting Date, the survivor annuity otherwise payable under this Article shall not be less than the monthly amount the Spouse would have received under the method of payment elected had the Participant or Inactive Participant died on the day after his Annuity Starting Date. ARTICLE 8 TOP-HEAVY PLAN PROVISIONS - ------------------------- Section 8.1. Determination Date. If, as of the Determination Date, the Plan is a Top-Heavy Plan, as defined in Section 8.3, the provisions of this Article 8 shall apply. The Determination Date with respect to any Plan Year shall be the last day of the preceding Plan Year. Section 8.2. Valuation Date. The Valuation Date is the date on which a Participant's Accrued Benefit is determined for purposes of determining if this Plan is a Top-Heavy Plan. Except as provided below, the Valuation Date shall be the most recent date falling within the 12-month period ending on the Determination Date, on which a computation was made for purposes of computing plan costs for minimum funding purposes. In the first Plan Year the Accrued Benefit for a Participant shall be determined either (a) as if that Participant terminated service as of the Determination Date or (b) as if that Participant terminated service as of the Valuation Date, taking into account the estimated Accrued Benefit as of the Determination Date. For the second Plan Year, the Accrued Benefit for a Participant must not be less than his Accrued Benefit taken into account for the first Plan Year unless the difference is attributable to using an estimate of the Accrued Benefit as of the Determination Date for the first Plan Year and using the actual Accrued Benefit as of the Determination Date for the second Plan Year. For any Plan Year after the second Plan Year the Accrued Benefit for a Participant must be determined as if the Employee terminated service as of the Valuation Date. The Accrued Benefit of a Participant other than a Key Employee shall be determined under (a) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (b) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Section 411(b)(1)(C) of the Internal Revenue Code. Section 8.3. Top-Heavy Plan. (a) The Plan shall be considered a Top-Heavy Plan, if, as of the Determination Date, either: (1) the aggregate of the present value of the Accrued Benefits for Key Employees under the Plan exceeds 60% of the sum of the present value of the Accrued Benefits of all Employees under the Plan, or (2) the Plan is part of a Top-Heavy Group, as defined in Section 8.5. Notwithstanding anything in this subsection (a), if this Plan is part of an aggregation group, as defined in Section 8.5, that is found not to be Top-Heavy, then this Plan shall not be a Top-Heavy Plan. (b) The present value of Accrued Benefits for purposes of this Section shall be determined according to the following actuarial assumptions: Annual effective interest rate of 5% Mortality: PBGC I for males PBGC II for females For purposes of this Section the actuarial assumptions used for all plans within the Top-Heavy Group must be the same. (c) For purposes of determining whether the Top-Heavy rules apply for any Plan Year: (1) Rollover contributions initiated by an Employee and accepted by this Plan after December 31, 1983, shall not be recognized with respect to this Plan if the rollover contribution came from a plan not maintained by the Employer or Related Employer. (2) Any Accrued Benefit for an Employee who is not currently a Key Employee, but at one time was a Key Employee, shall not be recognized for the Plan Year ending on the Determination Date. (3) Except as provided in (4) below, the Accrued Benefit for an Employee shall include aggregate distributions made with respect to such Employee under the Plan during the five-year period ending on the Determination Date, except for the distributions made to former Key Employees excluded above, and distributions rolled over to a plan maintained by the Employer or Related Employer. (4) Effective for Plan Years beginning after December 31, 1984, if an individual has not performed any service for the Employer at any time during the five-year period ending on the Determination Date, any Accrued Benefit for such individual shall not be taken into account. (5) The Accrued Benefit shall include any non-proportional subsidies but shall exclude proportional subsidies. (d) Notwithstanding, when two or more plans constitute an aggregation group, the present value of the accrued benefits shall be determined separately for each plan as of each plan's Determination Date and then aggregated for each plan as of the Determination Date for such plans that fall within the same calendar year. Section 8.4. Key Employee shall mean any Employee or former Employee who, at any time during the Plan Year or any of the four preceding Plan Years, is: (a) an officer of the Employer having an annual Compensation greater than 50% of the defined benefit dollar limitation under Section 415(b)(1)(A) of the Code (as it may be increased by the Secretary of the Treasury for any applicable cost of living increases); however, the maximum number of officers considered Key Employees may not exceed (i) three if there are less than 30 Employees, (ii) ten percent of all Employees if there are between 30 and 500 Employees, or (iii) 50 if there are more than 500 Employees. Officers shall include only those administrative executives who regularly and continuously serve as such. Title alone shall not be determinative of officer status; (b) one of the ten Employees earning an annual Compensation which exceeds the maximum defined contribution annual additions dollar limit under Code Section 415 and owning (or considered as owning within the meaning of Code Section 318) more than both 1/2 percent interest and the largest interests in the Employer; (c) a five-percent owner of the Employer, meaning if the employer is a Corporation, any person who owns (or is considered as owning within the meaning of Section 318) more than five percent of the outstanding stock of the Employer or stock possessing more than five percent of the total combined voting power of all stock of the corporation, or if the employer is not a corporation, any person who owns more than five percent of the capital or profits interest in the Employer; or (d) a one-percent owner of the Employer having an annual Compensation from the Employer of more than $150,000, meaning if the employer is a corporation, any person who owns (or is considered as owning within the meaning of Section 318) more than one percent of the outstanding stock of the Employer or stock possessing more than one percent of the total combined voting power of all stock of the corporation, or if the Employer is not a corporation, any person who owns more than one percent of the capital or profits interest in the Employer. For purposes of this Section 8.4, Employee shall mean any Employee, as defined in Article 2, of the Employer, or any employee of a Related Employer if the Plan is part of a Top-Heavy Group with the plan of a Related Employer. Employee and Key Employee shall include any beneficiary of an Employee or a Key Employee, and former Key Employee shall include any beneficiary of a former Key Employee. For purposes of subsections (b), (c), and (d) above, constructive ownership rules of Code Section 318 shall be applied by substituting "5 percent" for "50 percent" in Code Section 318(a)(2). For purposes of determining ownership under subsections (b), (c) and (d) above, the aggregation rules of Code Section 414(b), (c) and (m) shall not apply. Notwithstanding anything above, the criteria used in the determination of Key Employees shall be consistent with Code Section 416, which is incorporated herein by reference. Non-Key Employee shall mean any Employee who is neither a Key Employee nor a former Key Employee. Section 8.5. Top-Heavy Group. (a) Top-Heavy Group shall mean an aggregation group where the sum, as of the Determination Date, of (1) and (2) exceeds 60% of the same amount determined for all Employees, under all plans included in the group, and (1) is the present value of the cumulative accrued benefits for Key Employees under any defined benefit plan included in the group, and (2) is the sum of the account balances of Key Employees under any defined contribution plan included in the group. (b) The aggregation group must include: (1) any plan of the Employer or Related Employer in which a Key Employee is a participant, and (2) any plan on which a plan covering a Key Employee depends for qualification under the requirements of Code Section 401(a)(4) or 410. (c) The aggregation group may also include, at the election of the Employer, any plan not required to be included in an aggregation group if such group would continue to meet the qualification requirements of Code Sections 401(a)(4) and 410. If such an aggregation group is found not to be Top-Heavy, then no plan shall be considered Top-Heavy. If the aggregation group is found to be Top-Heavy, then all plans in the group, except the plan which was not required to be included, would be considered Top-Heavy Plans. (d) All plans maintained by the Employer (including plans that have terminated) during the 5-year period ending on a Determination Date must be considered in determining the Top-Heavy Group as of that Determination Date. Section 8.6. Minimum Benefits for Top-Heavy Plans. If the Plan is or becomes a Top-Heavy Plan, then, notwithstanding the provisions of Section 2.2, the minimum accrued benefit expressed as a single life annuity beginning at Normal Retirement Age for each Non-Key Employee who is a Participant shall be the lesser of: (a) two percent of his Top-Heavy Average Compensation times Top-Heavy Years of Service, or (b) 20% of his Top-Heavy Average Compensation. If the form of benefit is other than a single life annuity, the minimum benefit must be an amount that is the Actuarial Equivalent of the above minimum benefit. If the benefit commences at a date other than at Normal Retirement Age, the Participant will receive an amount that is at least the Actuarial Equivalent of the single life annuity benefit commencing at Normal Retirement Age. Each Non-Key Employee who is a Participant shall receive this minimum benefit regardless of the Non-Key Employee's level of Compensation and regardless of whether the Non-Key Employee is employed on a specified date. Section 8.7. Top-Heavy Group Minimum Benefits. In the case of a Top-Heavy Group consisting of both defined benefit and defined contribution plans, the required minimum accrued benefit or Employer contribution for each Top-Heavy Year of Service for Employees participating in each type of Plan shall be satisfied by the minimum accrued benefit under this Plan. The required minimum accrued benefit or Employer contribution for each Top-Heavy Year of Service for Employees who do not participate in this Plan but who do participate in another plan of the Top-Heavy Group shall be satisfied by providing the minimum accrued benefit or contribution under that plan. Section 8.8. Compensation and Top-Heavy Average Compensation. For purposes of determining the minimum benefit of Section 8.6, Compensation shall mean compensation as defined in Section 14.1(c) of the Plan. Top-Heavy Average Compensation shall mean the average Compensation paid during the consecutive Top-Heavy Years of Service, not to exceed five years, which produces the highest average Compensation. In determining the Top-Heavy Average Compensation, years during which the Employee did not earn a Year of Service shall be disregarded. Section 8.9. Years of Service. Top-Heavy Years of Service shall mean all Years of Service, excluding any Year of Service after which the Plan was not a Top-Heavy Plan for the Plan Year ending during such Year of Service and further excluding any Year of Service completed in a Plan Year beginning before January 1, 1984. Section 8.10. No Duplication of Minimum Benefit. If the Employer maintains another qualified plan which provides a minimum benefit or contribution, then the minimum benefit or contribution provided under this Plan shall not, when combined with the benefit or contribution provided by the other plan, exceed the amount required by Section 416(c) of the Code. Section 8.11. Minimum Vesting Requirements. If the Plan is or becomes a Top-Heavy Plan, as defined in Section 8.3, then, notwithstanding the provisions of Section 6.1, a Participant shall be 100% vested in his Accrued Benefit after three Years of Service. Years of Service for the purposes of vesting in a Top-Heavy Plan shall include all Years of Service, including years prior to January 1, 1984, and years during which the Plan is not considered to be a Top-Heavy Plan. Vesting pursuant to this Section 8.11 shall apply to each Participant's entire Accrued Benefit. However, when the Plan becomes a Top-Heavy Plan, the Accrued Benefit of any Employee who does not complete at least one Hour of Service after the Plan becomes Top-Heavy is not required to be subject to the minimum vesting schedule for Top-Heavy Plans. When the Plan ceases to be a Top-Heavy Plan, the vesting schedule shall not revert to the schedule defined in Section 6.1. Section 8.12. Adjustments in Section 415 Limits for Top-Heavy Plans. If this Plan is a Top-Heavy Plan or if the Plan and one or more other plans maintained by the Employer or Related Employer in the aggregate are or become a Top-Heavy Group, then the defined benefit plan fraction, as defined in Section 14.8, shall be applied by substituting 1.0 for 1.25, and the defined contribution plan fraction as defined in Section 14.8 shall be applied by substituting 1.0 for 1.25. The above paragraph shall not apply if (a) and (b) below are satisfied: (a) In the case of a Top-Heavy Group consisting of both defined contribution and defined benefit plans, a minimum benefit shall be provided for each Non-Key Employee who participates in defined benefit plans equal to the lesser of three percent (3%) of Top-Heavy Average Compensation as defined in Section 8.8, per Top-Heavy Year of Service after January 1, 1984, or thirty percent (30%) of Top-Heavy Average Compensation, as defined in Section 8.8. Notwithstanding, a minimum contribution of four percent (4%) of Top-Heavy Average Compensation shall be provided for each Non-Key Employee covered only by a defined contribution plan in the Top-Heavy Group. (b) The present value of the cumulative accrued benefits of all Key Employees does not exceed ninety percent (90%) of the present value of the cumulative accrued benefits of all Employees participating in this Plan or participating in this Plan and any other plans included in the Top-Heavy Group, excluding former Key Employees. Section 8.13. Transition Fraction. If this Plan is a Top-Heavy Plan to which the above Section 8.12 applies, then $41,500 shall be substituted for $51,875 in the Transition Fraction defined in Article 14. ARTICLE 9 ADMINISTRATION BY COMMITTEE - --------------------------- Section 9.1. The Committee shall consist of not less than three nor more than five individuals who shall be appointed by the Board to serve at the pleasure of the Board. Any member of the Committee may resign, and his successor, if any, shall be appointed by the Board. The Committee shall be responsible for the general administration and interpretation of the Plan and for carrying out its provisions, except to the extent all or any of such obligations are specifically imposed on the Trustee or the Board. The Committee shall constitute a named fiduciary under the Plan. Section 9.2. The members of the Committee shall elect a Chairman and may elect an acting Chairman. They shall also elect a Secretary and may elect an acting Secretary, either one of whom may be, but need not be, members of the Committee. The Committee may appoint from its membership such subcommittees with such powers as the Committee shall determine and may authorize one or more of its members, or any agent, to execute or deliver any instruments or to make any payment on behalf of the Committee. Section 9.3. The Committee shall hold such meetings upon such notice at such places and at such intervals as it may from time to time determine. Notice of meetings shall not be required if notice is waived in writing by all of the members of the Committee or if all such members are present at the meeting. Section 9.4. A majority of the members of the Committee shall constitute a quorum for the transaction of business. All resolutions or other actions taken by the Committee at any meeting shall be by vote of a majority of those present and entitled to vote at any such meeting. Resolutions may be adopted or other action taken without a meeting only upon written consent thereto signed by all of the members of the Committee. Section 9.5. The Committee shall maintain full and complete records of its deliberations and decisions. Its records shall contain all relevant data pertaining to individual Participants and their rights under the Plan and in the Fund. Section 9.6. Subject to the limitations of the Plan and of the Act, the Committee may from time to time establish rules or by-laws for the administration of the Plan and the transaction of its business. Section 9.7. No individual member of the Committee shall have any right to vote or decide upon any matter relating solely to himself or to any of his rights or benefits under the Plan. Such member, however, may sign any unanimous written consent to resolutions adopted or other action taken without a meeting. Section 9.8. The Committee may correct errors and, insofar as practicable, may adjust any benefit or credit or payment accordingly. Section 9.9. Subject to the claims procedure set forth in Article 11, the Committee shall have the duty and authority to interpret and construe the provisions of the Plan and to decide any dispute which may arise regarding the rights of Participants thereunder. Such determinations shall apply uniformly to all persons similarly situated and shall be binding and conclusive upon all interested persons. Section 9.10. The Committee may, at its option, instruct the Trustee to purchase annuity contracts from a legal reserve life insurance company to provide any benefits due from the Plan. Any such annuity contracts shall be nontransferable and nonforfeitable. Section 9.11. The Committee may engage an actuary, attorney, accountant or any other technical advisor to perform such other duties as shall be required regarding the operation of the Plan and may employ such clerical and related personnel as the Committee shall deem necessary or desirable in carrying out the provisions of the Plan. Subject to the provisions of the Act, the Committee may determine and recommend annually to the Board the amount of contribution to be made to the Fund for the year. Section 9.12. No fee or compensation shall be paid to any member of the Committee for his services as such. Section 9.13. The Committee shall be entitled to reimbursement out of the Trust Fund for reasonable expenses properly and actually incurred in the performance of its duties in the administration of the Plan. ARTICLE 10 ALLOCATION OF RESPONSIBILITIES AMONG NAMED FIDUCIARIES, MANAGEMENT OF FUNDS AND AMENDMENT OR TERMINATION OF PLAN - -------------------------------------------------------- Section 10.1. The responsibilities allocated to the named fiduciaries are as follows: (a) Board: (1) to amend the Plan, (2) to appoint and remove members of the Committee, (3) to appoint and remove Trustees under the Plan, (4) to determine the amount to be contributed to the Plan each year by the Employer, and (5) to terminate the Plan. (b) Committee: (1) to interpret the provisions of the Plan and to determine the rights of the Participants under the Plan including eligibility for participation or benefits, except to the extent otherwise provided in Article 11 relating to the claims procedure, (2) to administer the Plan in accordance with its terms, except to the extent powers to administer the Plan are specifically delegated to another named fiduciary or other person or persons as provided in the Plan, (3) to calculate the service and to account for the Accrued Benefits of Participants and to maintain service and employment records, and (4) to direct the Trustees in the distribution of Trust assets and benefit payments. (c) Plan Administrator: (1) to file such reports as may be required to the United States Department of Labor, the Internal Revenue Service, the Pension Benefit Guaranty Corporation and any other government agencies for which reports may be required to be submitted from time to time, (2) to comply with requirements of law for disclosure of Plan provisions and other information relating to the Plan, to Participants and other interested parties, (3) to administer the claims procedure, as provided in Article 11, (4) to direct the Trustee to withhold from distributions made pursuant to this Plan those amounts required by law and further to direct the Trustee to make any reports to Participants and to any others as may be required by the Internal Revenue Code or other controlling law, rules or regulations, and (5) to establish and execute the funding policy of the Plan. (d) Trustees: (1) to invest and reinvest Trust assets, (2) to make benefit payments to Plan Participants as directed by the Committee, (3) to render annual or other periodic or terminal accountings to the Employer as provided in the Trust Agreement, and (4) otherwise to hold, administer and control the assets of the Trust as provided in the Plan and Trust Agreement. (e) Investment Manager: If appointed in accordance with the terms of the Trust Agreement, the Investment Manager shall have the power to manage, acquire and dispose of any assets under the Plan, or to direct the Trustee in the management, acquisition or disposition of any such assets. Section 10.2. Except as otherwise provided in the Act, a named fiduciary shall not be responsible or liable for acts or omissions of another named fiduciary with respect to its fiduciary responsibilities. A named fiduciary of the Plan shall be responsible and liable only for its own acts or omissions with respect to fiduciary duties specifically allocated to it and designated as its responsibility. Section 10.3. All assets of the Plan shall be held in a Trust forming part of the Plan. The Trust shall be administered as a Fund to provide for the payment of benefits out of the income and principal of the Trust to the Participants or their successors in interest as provided in the Plan. All fiduciaries (as defined in the Act) with respect to the Plan shall discharge their duties as such solely in the interest of the Participants and their successors in interest (a) for the exclusive purposes of providing benefits to Participants and their successors in interest and of defraying reasonable expenses of administering the Plan and Trust, (b) with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims, and (c) in accordance with the Plan and Trust Agreement, except to the extent such documents may be inconsistent with the Act. Except when specifically provided in this Plan or in the Trust, the assets of the Plan shall never inure to the benefit of the Employer. At no time shall it be possible for the Plan assets to be used for, or diverted to, any purpose other than for the exclusive benefit of the Participants and their Beneficiaries. Notwithstanding the foregoing, contributions made by the Employer may be returned to the Employer if: (a) the contributions were conditioned on the initial qualification of the Plan under the Code, the Commissioner of Internal Revenue determines the Plan is not initially qualified under the Internal Revenue Code and all assets attributable to such employer contributions are returned within one year after the plan is found to not so qualify; or (b) the contribution was made due to a mistake of fact; the contribution is returned within one year of the mistaken payment of the contribution and the return satisfies the requirements of paragraph (d) below; or (c) the contribution was conditioned on its current deductibility, under Code Section 404, the deduction is disallowed, the contribution is returned within one year of the disallowance of the deduction, the return satisfies the requirements of paragraph (d) below. (d) The return of a Plan contribution to the Employer satisfies the requirements of this paragraph if the amount so returned does not exceed the amount contributed over (1) the amount that would have been contributed had there been no mistake of fact or (2) the amount that would have been contributed had the contribution been limited to the amount that is deductible after any disallowance by the Internal Revenue Service. Earnings aribution. Section 10.4. The Employer and the Trustee shall enter into an appropriate Trust Agreement, which shall be a part of the Plan, for the administration of the Trust under the Plan. Such Trust Agreement shall contain such powers and reservations as to investment, reinvestment, control and disbursement of the funds of the Trust and such other provisions as shall be agreed upon and set forth therein which are not inconsistent with the provisions of this Plan, its nature and purposes, and the Act. Said Trust Agreement shall provide that the Board may remove the Trustee at any time upon reasonable notice, that the Trustee may resign at any time upon reasonable notice, and that upon such removal or resignation of any Trustee, the Board shall designate a successor Trustee. Section 10.5. All requests, directions, requisitions and instructions of the Committee to the Trustee shall be in writing and signed by the Secretary of the Committee or by any one member of the Committee authorized by the majority to sign. Section 10.6. The Employer hereby reserves the right, by action of the Board, to amend or terminate the Plan and Trust or Trust Agreement at any time. Except, however, as provided in Sections 10.3 and 12.3, no such amendment or termination shall have the effect of diverting the Trust Funds to purposes other than for the exclusive benefit of the Participants. ARTICLE 11 CLAIMS PROCEDURE - ---------------- Section 11.1. Filing of a Claim for Benefits. If either a Participant or a Beneficiary believes he is entitled to a benefit from the Plan which he is not receiving, he (the "claimant") shall file a written claim with the Plan Administrator or any member of the Committee upon a form approved by the Committee. In the event the Plan Administrator is the claimant, all actions which are required to be taken by the Plan Administrator pursuant to this Article shall be taken instead by a member of the Committee as designated by the Employer. Section 11.2. Notification to Claimant of Decision. Notice of a decision with respect to a claim shall be furnished to the claimant within 90 days following the receipt of the claim by the Plan Administrator or any member of the Committee unless special circumstances require an extension of time for processing the claim. If there is a need for such an extension, written notice of the extension shall be furnished by the Committee to the claimant prior to the expiration of the initial 90 day period. In no event shall such extension exceed a period of 90 days from the end of the initial 90 day period. The notice of extension shall indicate the special circumstances requiring the extension and the date by which the notice of decision with respect to the claim shall be furnished. Commencement of benefit payments shall constitute notice of approval of a claim to the extent of the amount of the approved benefit. If such claim shall be wholly or partially denied, such notice shall be in writing and worded in a manner calculated to be understood by the claimant and shall set forth: (a) the specific reason or reasons for the denial, (b) specific reference to pertinent provisions of the Plan on which the denial is based, (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary and (d) an explanation of the Plan's claims review procedure. If the claimant is not notified of the decision regarding his claim in accordance with this Article, the claim shall be deemed denied and the claimant shall then be permitted to proceed with the claims review procedure provided in Section 11.3. Section 11.3. Claims Review Procedure. Within 60 days following receipt by the claimant of notice of the claim denial or within 60 days following the close of the 90 day period referred to in Section 11.2, if the claimant is not notified of the decision within such 90 day period, the claimant may appeal denial of the claim. The claimant shall be given an opportunity to review pertinent documents and to submit issues and comments in writing. A request for review by the Committee shall be in writing and shall contain all additional information which the claimant wishes considered. Following such request for review, the Committee shall fully and fairly review the decision denying the claim. Section 11.4. Decision on Review. The decision on review of a denied claim shall be made in the following manner. (a) The Committee shall make its decision regarding the merits of the denied claim within 60 days following receipt by the Committee of the request for review (or within 120 days after such receipt in a case where there are special circumstances requiring extension of time for reviewing the appealed claim). It shall deliver the decision to the claimant in writing. If an extension of time for reviewing the appealed claim is required because of special circumstances, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. If the decision on review is not furnished within the prescribed time, the claim shall be deemed denied on review. (b) The decision on review shall set forth specific reasons for the decision, shall be written in a manner calculated to be understood by the claimant and shall cite specific references to the pertinent Plan provisions on which the decision is based. Section 11.5. Action by Authorized Representative of Claimant. All actions set forth in this Article to be taken by the claimant may likewise be taken by a representative of the claimant duly authorized by him to act in his behalf on such matters. The Plan Administrator or the Committee may require such evidence of the authority to act of any such representative as either may deem reasonably necessary or advisable. ARTICLE 12 TERMINATION OF PLAN AND TRUST - ----------------------------- Section 12.1. In the event of termination of the Plan, all Employer contributions shall cease, and no additional Participants shall enter the Plan. The net assets of the Trust, after reduction for expenses of administration and liquidation, shall be allocated to the Participants in the following order: (a) First, to the benefits attributable to voluntary Employee contributions, if any, which is the portion of an Accrued Benefit of a Participant, Spouse or other Beneficiary due to voluntary contributions, if any, rather than contributions, if any, required for participation in the Plan or in any merged plan. (b) Second, to the benefits attributable to mandatory Employee contributions, if any, which is the portion of an Accrued Benefit, other than those specified in subsection (a) of a Participant, Spouse, or other Beneficiary due to the Participant's contributions, if any, which were required for participation in the Plan or in any merged plan. (c) Third, to the Actuarial Equivalent of the Accrued Benefit, other than those specified in subsections (a) and (b), of each Participant with respect to whom payments under the Plan commenced at least three years preceding the date of termination or with respect to whom payments under the Plan would have commenced at least three years preceding the date of termination if such Participant had retired as of the beginning of such three year period, provided that there shall be excluded from this subsection (c) any increase in benefits resulting from amendments to the Plan at any time during the five years preceding the date of termination. (d) Fourth, the Actuarial Equivalent of all Accrued Benefits, other than those specified in subsections (a) through (c), payment of which are guaranteed by the Pension Benefit Guaranty Corporation referred to in the Act, determined irrespective of the limitation to a single $750 monthly benefit (as may be further adjusted for cost of living expenses) where an Employee is a Participant in more than one Plan of the Employer. (e) Fifth, the Actuarial Equivalent of all Accrued Benefits, other than those specified in subsections (a) through (d), which are vested under the Plan. (Vested interests shall be determined without taking the termination of the Plan into account.) If, however, the assets under the Plan are not sufficient to pay the Actuarial Equivalent of such vested Accrued Benefits in full, first priority shall be given to such benefits which would have been vested under the Plan as in effect at the beginning of the five year period ending on the date of Plan termination. (Any assets of the Plan in excess of such amount shall be used to satisfy increases in benefits due to any Plan amendments within the five year period). Second priority shall be given to such amendment providing for the smallest increase in benefits and third priority to such amendment providing for the second smallest increase in benefits and continuing until the first to occur of exhaustion of Plan assets or payment of the Actuarial Equivalent of all increases in Accrued Benefits due to amendments during such five year period. (f) Sixth, the Actuarial Equivalent of Accrued Benefits under the Plan in addition to the Accrued Benefits described in subsections (a) through (e). If the net assets of the Trust available for allocation as provided in the foregoing subsections (a) through (f) are insufficient to satisfy in full all Accrued Benefits designated in such subsections, such net assets shall be applied to satisfaction in full of the Accrued Benefits designated in each such subsection in the order set forth, and no part of such assets shall be applied to satisfy Accrued Benefits designated in any such subsection until all Accrued Benefits designated in all preceding subsections have been satisfied in full. If such net assets applied to satisfy the Accrued Benefits under one subsection are insufficient to fully satisfy the Accrued Benefits designated in that subsection, such net assets so allocated pursuant to such subsection shall be apportioned in satisfaction of such benefits on the basis of the present value, as of the Plan termination date, of such Accrued Benefits. Section 12.2. The amount allocated pursuant to Section 12.1 hereof shall be payable to such Employees, in the form of an annuity or any other optional methods of payment under Section 5.6. Such distributions will insure that the provisions of Sections 5.6 and 5.7 shall be complied with. If the value of a married or single Participant's or Inactive Participant's benefit is $3,500 or less, then the Committee shall distribute the benefit in a single lump sum in any event. Any such lump sum which is $200 or more shall include the right of the Participant or Inactive Participant to make a direct rollover under Code Section 401(a)(31), as provided in Article 16. Each Participant eligible for retirement will be given at least a reasonable period during which he can elect or revoke his form of benefit payment. Section 12.3. Upon complete termination of the Plan, each Participant shall have a fully vested and nonforfeitable interest in his Accrued Benefit to the extent funded. In determining the funded Accrued Benefit of each such Participant, the provisions of Sections 12.1 and 12.4 shall apply. If, following a complete termination of the Plan, there are assets in the Trust Fund resulting from variations in actual experience and expected actuarial experience after all liabilities of the Plan to the Participants have been satisfied, such remaining assets shall be distributed to the Employer. Section 12.4. For purposes of complying with the requirements of Section 1.401-4(c) of the regulations of the United States Treasury Department, the following provisions are hereby incorporated in and made a part of this Plan. (a) The following terms are defined for the purposes of this Section 12.4: (1) The term "Benefits" includes any periodic income, any withdrawal values payable to a living Participant and the cost of any death benefits which may be payable after retirement on behalf of a Participant, but does not include the cost of any death benefits with respect to a Participant before retirement nor the amount of any death benefits actually payable after the death of a Participant whether such death occurs before or after retirement. (2) The term "Full Current Costs" means the normal cost of the Plan for all years since the effective date of the Plan, plus interest on any unfunded liability during such period. (3) The term "Annual Compensation" of a Participant means either such Participant's average regular annual Compensation, or such average Compensation for the last five years, or such Participant's last annual Compensation if such Compensation is reasonably similar to his average regular annual Compensation for the preceding five years. (4) The term "Substantial Owner" means an Employee or former Employee who is presently or who at any time during the last 60 months was: (A) in the case of a sole proprietorship, the sole owner of an unincorporated trade or business, (B) in the case of a partnership, a partner who directly or indirectly owns more than ten percent of either the capital interest or the profits interest in such partnership, or (C) in the case of a corporation, a person who directly or indirectly owns more than ten percent in value of the voting stock of that corporation. For purposes of this subsection (a)(4), the constructive ownership rules of Section 1563(e) of the Code (without regard to Section 1563(e)(3)(C)) shall apply. (b) Upon the occurrence of any event described in subsection (c) of this Section, the Employer contribution applied for the benefit of a Participant who is among the twenty-five highest paid Employees of the Employer at the effective date of the Plan and whose anticipated annual normal retirement benefit under the Plan exceeds $1,500 shall be restricted in accordance with subsection (d) of this Section. (c) The restrictions described in subsection (d) of this Section shall become applicable if: (1) the Plan is terminated within ten years after the original effective date of the Plan; (2) the Benefits of a Participant described in subsection (b) above become payable within ten years after the effective date of the Plan; or (3) the Plan is not subject to the minimum funding requirements of Code Section 412 and the Benefits of a Participant described in (b) above become payable after the Plan has been in effect for ten years and the Full Current Costs of the Plan for the first ten years have not been funded. (d) The restrictions required under subsection (b) of this Section are that the Employer contributions which may be used for the benefit of a Participant described in such subsection (b) shall not exceed the greater of (1) or (2) where: (1) is the greater of $20,000, or 20 percent of the first $50,000 of the Annual Compensation of such Participant multiplied by the number of years between the effective date of the Plan and (A) the date of termination of the Plan; (B) in the case of a Participant described in subsection (c)(2) of this Section, the date the Benefit of the Participant becomes payable, if this date is before the termination date of the Plan; or (C) in the case of a Participant described in subsection (c)(3) of this Section, the date of the failure to meet the Full Current Costs of the Plan. However, if the Full Current Costs of the Plan have not been met on the date described in (A) or (B) of this subsection, whichever is applicable, then the date of the failure to meet such Full Current Costs shall be substituted for the date referred to in (A) or (B) of this subsection. For purposes of determining the contributions which may be used for the Benefits of a Participant when (B) of this subsection applies, the number of years taken into account may be recomputed for each year if the Full Current Costs of the Plan are met for such year. (2) is a dollar amount equal to: (A) in the case of a Participant described in (b) above who is also a Substantial Owner, the present value of the benefit guaranteed for such Participant under Section 4022 of the Act if the Plan was terminated or the present value of the benefit that would be guaranteed under Section 4022 of the Act and applicable regulations thereunder had the Plan terminated on the date Benefits commence; or (B) in the case of a Participant described in (b) above who is not a Substantial Owner, the present value of the maximum benefit described in Section 4022(b)(3)(B) of the Act, determined on the earlier of the date the Plan terminates or the date Benefits commence, without regard to any other limitations of Section 4022 of the Act. (e) For the purposes of this Section, the Employer contributions which, at a given time, may be used for the Benefits of a Participant include any unallocated funds which would be used for his Benefits if the Plan were then terminated or the Participant were then to withdraw from the Plan, as well as all contributions allocated up to that time exclusively for his Benefits. (f) The provisions of this Section apply to a former or retired Participant of the Employer, as well as to a Participant still in the service of the Employer. (g) Notwithstanding the foregoing provisions of this Section, if Benefits under the Plan (or the predecessor or any prior Plan) shall be materially increased, the foregoing restrictions of this Section shall apply with respect to such increase as of the effective date thereof. The effective date of such increase for the purpose of applying such restrictions will be treated as if it were the effective date of the predecessor or prior Plan. However, with respect to any Participant who is among the twenty-five highest paid Employees of the Employer on such effective date, there shall be substituted for the limit upon the Benefit set forth in subdivision (d)(1) above a limit which does not exceed the greatest of the following three amounts: (1) The Employer contributions (or funds attributable thereto) which would have been applied to provide the Benefits for the Participant if the Plan (or the predecessor or prior plan, if applicable) had been continued without change; (2) The sum of $20,000; or (3) The sum of (A) and (B) where (A) is the Employer contributions (or funds attributable thereto) which would have been applied to provide Benefits for the Participant under the Plan (or the predecessor or prior Plan, if applicable) if it had been terminated the day before the effective date of such increase in Benefits, and (B) is an amount computed by multiplying the number of years for which the current costs of the Plan after that date are met by (i) 20% of his Annual Compensation or (ii) $10,000, whichever is smaller. (h) Notwithstanding anything above to the contrary, this Section shall be applied in accordance with the rules of Section 1.401-4(c) of the regulations of the United States Treasury Department which is incorporated herein by reference. (i) In the event of Plan termination, the benefit of any highly compensated active or former Employee is limited to a benefit that is nondiscriminatory under Code Section 401(a)(4). For Plan Years beginning on or after January 1, 1991, benefits distributed to any of the 25 most highly compensated active and former highly compensated Employees are restricted such that the annual payments are no greater than an amount equal to the payment that would be made on behalf of the Employee under a single life annuity that is the Actuarial Equivalent of the sum of the Employee's Accrued Benefit and the Employee's other benefits under the Plan. The preceding paragraph shall not apply if: (a) after payment of the benefit to an Employee described in the preceding paragraph, the value of Plan assets equals or exceeds 110% of the value of current liabilities, as defined in Code Section 412(l)(7), or (b) the value of the benefits for an Employee described above is less than 1% of the value of current liabilities. For purposes of this Section, benefit includes loans in excess of the amount set forth in Code Section 72(p)(2)(A), any periodic income, any withdrawal values payable to a living Employee, and any death benefits not provided for by insurance on the Employee's life. Section 12.5. The conditions of the preceding Section 12.4 shall not restrict the payment in one lump sum of the entire amount to which a Participant may be entitled under the lump sum option set forth in the Article 5 of this Plan while this Plan is in full effect and its full current cost has been paid provided the following conditions are met: (a) The Participant must enter into a written agreement with the Trustee, binding upon his estate, in which the Participant agrees to repay to the Trustee a sum equal to the actuarially equivalent value of the amount by which the Participant's monthly retirement benefit would have been decreased during the Participant's then remaining lifetime pursuant to the provisions set forth in the preceding Section 12.4 of this Article 12 in the event the Plan is terminated or the full current cost is not met during the period specified in Section 12.4. (b) The Participant must also guarantee payment of any amount required by the agreement by depositing with the Trustee, or with a depository acceptable to the Trustee, simultaneously with the aforesaid lump sum payment, property having a fair market value equal to one hundred twenty-five percent (125%) of the amount repayable if the plan had been terminated on the date the lump sum payment was made to the Participant. The property is to be held by the depository until the receipt of a certification by the Trustee that the Participant (or his estate) is no longer obligated to repay any amount under the agreement. (c) The Participant must further agree that if the market value of the property held by the depository falls below one hundred twenty-five percent (125%) of the amount which would then be repayable if the Plan were terminated, he will deposit additional property in the amount necessary to bring the total value of the property held by the depository up to the one hundred twenty-five percent (125%) level. Section 12.6. In the event of a partial termination of the Plan, each affected Participant shall have a fully vested and nonforfeitable interest in his Accrued Benefit to the extent funded as of the date of partial termination after reduction for expenses of administration and liquidation of the terminated portion of the Trust. In determining the funded Accrued Benefit of each such Participant and the method of distribution thereof, the provisions in Sections 12.1 and 12.4 shall apply. For this purpose the portion of the Trust constituting the funded Accrued Benefits of such Participants will be treated as if it were the entire Trust and the affected Participants will be treated as if they were all of the Participants in the Plan. ARTICLE 13 MISCELLANEOUS - ------------- Section 13.1. Merger or Consolidation of Plan. In the event of any merger or consolidation of the Plan with any other plan or a transfer of assets or liabilities of the Plan to any other plan (which merged, consolidated or transferee plan shall be referred to in this Section as the "successor plan"), the benefit which each Participant would receive if the successor plan (and the instant Plan, if this Plan continues in existence and he has any interest remaining therein) were terminated immediately after the merger, consolidation or transfer, shall be equal to or greater than the benefit he would have received if the instant Plan (and the successor plan, if the successor plan existed immediately prior to the merger, consolidation or transfer and he had any interest therein) had been terminated immediately preceding the merger, consolidation or transfer. Section 13.2. Communication to Employees. In accordance with the requirements of the Act, the Employer shall communicate to the Participants the principal terms of the Plan and the benefits available thereunder. Section 13.3. Non-Assignability of Benefits. No portion of the Accrued Benefit with respect to any Participant shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge except in the case of a qualified domestic relations order as described in Code Section 414(p). Any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void except in the case of a qualified domestic relations order as described in Code Section 414(p). No portion of such Accrued Benefit shall in any manner be payable to any assignee, receiver or Trustee, or be liable for the Participant's debts, contracts, liabilities, engagements or torts, or be subject to any legal process of attachment except in the case of a qualified domestic relations order as described in Code Section 414(p). Section 13.4. Facility of Payments. If a Participant shall be physically, mentally or legally incapable of receiving or acknowledging receipt of any payment under the Plan to which he is entitled, the Committee, upon the receipt of satisfactory evidence of his incapacity and satisfactory evidence that another person or institution is maintaining him and that no guardian or committee has been appointed for him, may cause any payment otherwise payable to him to be made to such person or institution so maintaining him. Section 13.5. Amendment. No amendment to the Plan (including a change in the actuarial basis for determining optional or early retirement benefits) shall be effective to the extent that it has the effect of decreasing a Participant's Accrued Benefit. Notwithstanding the preceding sentence, a Participant's Accrued Benefit may be reduced to the extent permitted under Section 412(c)(8) of the Code. For purposes of this paragraph, a plan amendment which has the effect of (1) eliminating or reducing an early retirement benefit or a retirement type subsidy, or (2) eliminating an optional form of benefit, with respect to benefits attributable to service before the amendment shall be treated as reducing Accrued Benefits. In the case of a retirement-type subsidy, the preceding sentence shall apply only with respect to a Participant who satisfies (either before or after the amendment) the preamendment conditions for the subsidy. In general, a retirement-type subsidy is a subsidy that continues after retirement, but does not include a qualified disability benefit, a medical benefit, a social security supplement, a death benefit (including life insurance), or a plant shutdown benefit (that does not continue after retirement age). Furthermore, if the vesting schedule of the Plan is amended, in the case of an Employee who is a Participant as of the later of the date such amendment is adopted or the date it becomes effective, the nonforfeitable percentage (determined as of such date) of such Employee's Employer-derived Accrued Benefit will not be less than the percentage computed under the Plan without regard to such amendment. If the vesting schedule under the Plan is amended and the vesting under the new schedule is at any point not as rapid as under the prior schedule, each Participant with at least three Years of Service may elect to have his nonforfeitable percentage computed under the Plan according to the prior schedule. For purposes of the above paragraph, a Participant shall be considered to have completed three Years of Service if he has completed 1,000 Hours of Service in each of three Plan Years, whether or not consecutive, ending with or prior to the last day of the election period described below. The election period shall begin no later than the date the amendment is adopted and shall end no earlier than the later of the following dates: (a) the date which is 60 days after the date the amendment is adopted; (b) the date which is 60 days after the amendment becomes effective; or (c) the date which is 60 days after the day the Participant is issued written notice of the change by the Employer or the Plan Administrator. If the vesting schedule of this Plan is changed, the nonforfeitable percentage of any Participant's Accrued Benefit derived from Employer contributions determined as of the later of the date the change is effective or the date the change is adopted shall not be less than the nonforfeitable percentage computed under the Plan without regard to such change. Section 13.6. Designation of Beneficiary. In any event where a Participant or Inactive Participant may name a Beneficiary to receive any death benefits provided, pursuant to Article 5 or, pursuant to Article 7, such Beneficiary shall be named on a form provided by the Plan Administrator and delivered to the Plan Administrator. Such designation may include more than one person with one or more secondary or contingent Beneficiaries and shall be subject to change upon written request of such Participant or Inactive Participant in the same manner as the original designation. If a Beneficiary is receiving or is entitled to receive payments from the Plan and dies before receiving all of the payments due him, any remaining payments shall be made to the contingent Beneficiary, if any. The provisions of this Section are subject to the spousal consent provisions of Article 5 and, if applicable, Article 7. In no event shall language in this Section be construed to allow a Participant or Inactive Participant to name a Beneficiary other than his Spouse when Article 7 only provides for payment to the Spouse upon the death of a married Participant or married Inactive Participant. Section 13.7. Fiduciary Discretion. In discharging the duties assigned to it under the Plan, the Trustee, Plan Administrator, the Committee, and any other fiduciary shall have the discretion to interpret the Plan; to adopt, amend, and rescind rules and regulations pertaining to their duties under the Plan; and to make all other determinations necessary or advisable for the discharge of their duties under the Plan. Such discretionary authority shall be absolute and exclusive if exercised in a uniform and nondiscriminatory manner with respect to all similarly situated individuals. The express grant in the Plan of any specific power to a fiduciary with respect to any duty assigned to it under the Plan shall not be construed as limiting any power or authority of the fiduciary to discharge its duties. ARTICLE 14 LIMITATIONS ON BENEFITS AND CONTRIBUTIONS UNDER THE PLAN - -------------------------------------------------------- Section 14.1. Definitions and Rules Applicable to this Article. (a) "Annual Benefit" shall mean the total benefit payable from this Plan calculated as a straight life annuity. Except as provided below, an Annual Benefit payable in a form other than a straight life annuity must be adjusted to an actuarially equivalent straight life annuity before applying the limitations of this Article. The interest rate assumption used to determine actuarial equivalence will be the greater of the interest rate specified in the definition of Actuarial Equivalent in Article 2 of this Plan or five percent. The Annual Benefit does not include any benefits attributable to Employee contributions or rollover contributions, or the assets transferred from a qualified plan that was not maintained by the Employer. No actuarial adjustment to the benefit is required for (a) the value of a qualified joint and survivor annuity, (b) the value of benefits that are not directly related to retirement benefits (such as the qualified disability benefit, pre-retirement death benefits, and post-retirement medical benefits), and (c) the value of post-retirement cost-of-living increases made in accordance with the Federal Income Tax Regulations. (b) "Average Compensation" shall mean a Participant's highest average Compensation from the Employer over a period of three consecutive calendar years. If a Participant is employed for less than three calendar years, his Average Compensation shall be his average earnings over his calendar years of employment. Average Compensation shall include bonus payments and other taxable remuneration. (c) "Compensation." A Participant's earned income, wages, salaries, and fees for professional services, and other amounts received for personal services actually rendered in the course of employment with the Employer (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses), and excluding the following: (1) Employer contributions to a plan of deferred compensation which are not included in the Employee's gross income for the taxable year in which contributed or Employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation; (2) Amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (3) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (4) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Section 403(b) of the Code (whether or not the amounts are actually excludable from the gross income of the Employee). Compensation for any Limitation Year is the compensation actually paid or includable in gross income during such year. (d) "Current Accrued Benefit" shall mean a Participant's accrued benefit under the Plan, determined as if the Participant had separated from service as of the close of the last Limitation Year beginning before January 1, 1987, when expressed as an Annual Benefit. In determining the amount of a Participant's Current Accrued Benefit, the following shall be disregarded: (1) any change in the terms and conditions of the Plan after May 5, 1986; and (2) any cost of living adjustment occurring after May 5, 1986. (e) This Article 14 shall be effective on the first day of the Limitation Year beginning after December 31, 1986. Section 14.2. Limitation on Annual Benefits. Subject to the provisions of Section 14.4 below, this Plan when aggregated with the benefits from any other defined benefit plan (whether or not terminated) ever maintained by the Employer or Related Employer shall not provide Annual Benefits which exceed the lesser of $90,000 or 100% of a Participant's Average Compensation. This limitation shall be hereinafter referred to as the "Maximum Annual Benefit." The Maximum Annual Benefit shall be increased by cost of living increases published in regulations by the Secretary of the Treasury. Any adjustments made as a result of this Section 14.2 shall not be effective prior to the first day of the Limitation Year for which the increase is effective as prescribed by the regulations. Such adjustments shall also be made to the Annual Benefits of any Inactive Participant provided that no adjustments shall be made following the Annuity Starting Date of any Participant or Inactive Participant. Section 14.3. No Adjustments to Annual Benefit of Less than $10,000. Subject to the provisions of Section 14.4 below, if the Annual Benefit payable from this Plan or from this Plan and any other defined benefit plan maintained by the Employer to a Participant does not exceed $10,000, the adjustment to the Annual Benefit in Section 14.2 above shall not be required, provided that the Participant has never been covered by a defined contribution plan maintained by the Employer. Section 14.4. Adjustment of Limitation for Years of Service or Participation. (a) Defined Benefit Dollar Limitation. If a Participant has completed less than ten years of participation, the Participant's Accrued Benefit shall not exceed the defined benefit dollar limitation under Section 14.2 above as adjusted by multiplying such amount by a fraction, the numerator of which is the Participant's number of years (or part thereof) of participation in the Plan, and the denominator of which is ten. (b) Other Defined Benefit Limitations. If a Participant has completed less than ten years of service with the Employer or Related Employers, the percentage of Compensation limitation described in Section 14.2 and the limitations described in Section 14.3 shall be adjusted by multiplying such amounts by a fraction, the numerator of which is the Participant's number of years of service (or part thereof), and the denominator of which is ten. (c) Limitations on Reductions. In no event shall Sections 14.4(a) or 14.4(b) reduce the limitations provided under Sections 415(b)(1) and (4) of the Code to an amount less than one-tenth of the applicable limitation (as determined without regard to this Section 14.4). (d) Application to Changes in Benefit Structure. To the extent provided by the Secretary of the Treasury, this Section 14.4 shall be applied separately with respect to each change in the benefit structure of the Plan. Section 14.5. Benefit Payable Prior to Social Security Retirement Age. If the $90,000 Maximum Annual Benefit is payable to a Participant prior to his attaining his Social Security Retirement Age, such Annual Benefit shall be adjusted on an actuarial basis as if such Annual Benefit is payable beginning at his Social Security Retirement Age. The above adjustment shall be made in such manner as the Secretary of the Treasury may prescribe which is consistent with the reduction for old-age insurance benefits commencing before the Social Security Retirement Age under the Social Security Act. For the purpose of adjusting the maximum for the commencement of benefits prior to Age 62, the interest rate assumption shall not be less than the greater of five percent (5%) or the rate specified in the Plan for determining actuarial equivalence for early retirement. Section 14.6. Benefit Payable After Social Security Retirement Age. If retirement benefits begin after a Participant reaches his Social Security Retirement Age, the $90,000 Maximum Annual Benefit shall be adjusted in accordance with regulations prescribed by the Secretary so that the Maximum Annual Benefit shall be equivalent to the benefit which would be payable at his Social Security Retirement Age. For the purpose of adjusting any such maximum, the interest rate assumption shall not be greater than the lesser of five percent (5%) or the rate specified in the Plan for determining actuarial equivalence for delayed retirement. Section 14.7. Application of Maximum Limitation to Separate Plans. If the Employer maintains one or more defined benefit plans in addition to this Plan, the Maximum Annual Benefit shall be applied in the aggregate to this Plan and to all such other defined benefit plans. Section 14.8. Limitation for Participants in Defined Benefit Plan and Defined Contribution Plan. (a) If an Employee is or was a Participant in one or more defined benefit plans and one or more defined contribution plans ever maintained by the Employer or Related Employer (whether or not terminated), the sum of the defined benefit plan fraction and the defined contribution plan fraction for that Participant shall not exceed 1.0 for any Limitation Year. If the sum of the defined benefit plan fraction and the defined contribution plan fraction shall exceed 1.0 in any year for any Participant in this Plan, the Employer shall adjust the numerator of the defined benefit plan fraction so that the sum of the defined benefit plan fraction and the defined contribution plan fraction shall not be in excess of 1.0 in any Limitation Year for such Participant. (b) For the purpose of this Article, the term defined benefit plan fraction for any Limitation Year shall mean a fraction the numerator of which is the projected Annual Benefit payable to a Participant as of the close of the then current Limitation Year under all defined benefit plans maintained by the Employer or Related Employer and the denominator of which is the lesser of: (1) the product of 1.25 multiplied by the maximum dollar limitation for the Limitation Year concerned as provided under Code Section 415, or (2) the product of 1.4 multiplied by the applicable amount to be taken into account according to the percentage of compensation limit as defined for this purpose under Code Section 415. (c) The term defined contribution plan fraction for any Limitation Year shall mean a fraction the numerator of which is the aggregate amount of annual additions made to a Participant's accounts under all defined contribution plans, whether or not terminated, maintained by this Employer or Related Employer (including the annual additions attributable to the Participant's nondeductible contributions to this and all other defined benefit plans maintained by this Employer or Related Employer) as of the close of the then current Limitation Year and the denominator of which as of the end of any Limitation Year, is the sum of the defined contribution denominator increments for that Limitation Year and all prior Limitation Years of the Participant's service with the Employer or Related Employer (regardless of whether the Plan was in existence during those years.) For each Limitation Year, the defined contribution denominator increment is the lesser of the following amounts: (1) the product of 1.25 multiplied by the maximum dollar limitation for the Limitation Year concerned, as provided under Code Section 415, or (2) the product of 1.4 multiplied by the applicable amount to be taken into account according to the percentage of compensation limit as defined for this purpose under Code Section 415. For purposes of this Section 14.8(c), amounts allocated, after March 31, 1984, to an individual medical account, as defined in Code Section 415(l), which is part of a pension or annuity plan maintained by the Employer are treated as annual additions to a defined contribution plan. Also, amounts derived from contributions paid or accrued after December 31, 1985, which are attributable to post-retirement medical benefits allocated to the separate account of a Key Employee, as defined in Section 8.4, under a welfare benefit fund, as defined in Code Section 419(e), maintained by the Employer, are treated as annual additions to a defined contribution plan. In no event shall this be construed as applying the limitations of Code Section 415(c)(1)(B) to individual medical accounts or post-retirement medical benefits. (d) With respect to any year ending after December 31, 1982, and at the election of the Plan Administrator, the amount taken into account in determining the denominator of the defined contribution plan fraction with respect to each Participant for all years ending before January 1, 1983, shall be an amount equal to the product of (1) and (2), where (1) is the denominator of the defined contribution plan fraction as calculated for the Limitation Year ending in 1982, and (2) is the Transition Fraction. Transition Fraction means a fraction the numerator of which is the lesser of $51,875 or 1.4 multiplied by 25% of the Compensation of the Participant for the Limitation Year ending in 1981 and the denominator of which is the lesser of $41,500 or 25% of the Participant's Compensation for the Limitation Year ending in 1981. (e) For purposes of computing the defined contribution plan fraction, "Annual Addition" shall mean the amount allocated to a Participant's account during the Limitation Year as a result of: (1) Employer contributions, (2) Employee contributions, (3) Forfeitures, and (4) Amounts described in Code Sections 415(l)(2) and 419A(d)(2). The Annual Addition for any Limitation Year beginning before January 1, 1987, shall not be recomputed to treat all employee contributions as an Annual Addition. If the Plan satisfied the applicable requirements of Section 415 of the Code as in effect for all Limitation Years beginning before January 1, 1987, an amount shall be subtracted from the numerator of the defined contribution plan fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the defined benefit plan fraction and defined contribution plan fraction computed under Section 415(e)(1) of the Code does not exceed 1.0 for such Limitation Year. Section 14.9. Preservation of Accrued Benefit Under the Tax Equity and Fiscal Responsibility Act of 1982. Notwithstanding the above provisions of this Article 14, if a Participant was a Participant in this Plan before January 1, 1983, the Maximum Annual Benefit shall not be less than the Participant's Accrued Benefit at the close of the 1982 Limitation Year. Section 14.10. Preservation of Accrued Benefit Under the Tax Reform Act of 1986. (a) This Section 14.10 shall apply to defined benefit plans that were in existence on May 6, 1986, and that met the applicable requirements of Section 415 of the Code as in effect for all Limitation Years. (b) If the Current Accrued Benefit of an individual who is a Participant as of the first day of the Limitation Year beginning on or after January 1, 1987, exceeds the benefit limitations under Section 415(b) of the Code (as modified by changes made by the Tax Reform Act of 1986) referred to above in Sections 14.4, 14.5 and 14.6, then, for purposes of Code Sections 415(b) and (e), the defined benefit dollar limitation with respect to such individual shall be equal to such Current Accrued Benefit. ARTICLE 15 DISTRIBUTION REQUIREMENTS - ------------------------- Section 15.1. General Rules. (a) Except as otherwise provided in Article 5, regarding the joint and survivor annuity requirements, the requirements of this Article shall apply to any distribution of a Participant's interest and will take precedence over any inconsistent provisions of this Plan. Unless otherwise specified, the provisions of this Article apply to calendar years beginning after December 31, 1984. (b) All distributions required under this Article shall be determined and made in accordance with the Income Tax Regulations under Section 401(a)(9) of the Code, including the minimum distribution incidental benefit requirement of Section 1.401(a)(9)-2 of the Income Tax Regulations. Section 15.2. Required Beginning Date. The entire interest of a Participant must be distributed or begin to be distributed no later than the Participant's required beginning date. Section 15.3. Limits on Distribution Periods. As of the first distribution calendar year, distributions, if not made in a single-sum, may only be made over one of the following periods (or a combination thereof): (a) the life of the Participant, (b) the life of the Participant and a designated Beneficiary, (c) a period certain not extending beyond the life expectancy of the Participant, or (d) a period certain not extending beyond the joint and last survivor expectancy of the Participant and a designated Beneficiary. Section 15.4. Determination of Amount to be Distributed Each Year. (a) If the Participant's interest is to be paid in the form of annuity distributions under the Plan, payments under the annuity shall satisfy the following requirements: (1) the annuity distributions must be paid in periodic payments made at intervals not longer than one year; (2) the distribution period must be over a life (or lives) or over a period certain not longer than a life expectancy (or joint life and last survivor expectancy) described in Section 401(a)(9)(A)(ii) or Section 401(a)(9)(B)(iii) of the Code, whichever is applicable; (3) the life expectancy (or joint life and last survivor expectancy) for purposes of determining the period certain shall be determined without recalculation of life expectancy; (4) once payments have begun over a period certain, the period certain may not be lengthened even if the period certain is shorter than the maximum permitted; (5) payments must either be nonincreasing or increase only as follows: (i) with any percentage increase in a specified and generally recognized cost-of-living index; (ii) to the extent of the reduction to the amount of the Participant's payments to provide for a survivor benefit upon death, but only if the Beneficiary whose life was being used to determine the distribution period described in Section 15.3 above dies and the payments continue otherwise in accordance with that Section over the life of the Participant; (iii) to provide cash refunds of Employee contributions upon the Participant's death; or (iv) because of an increase in benefits under the Plan. (6) If the annuity is a life annuity (or a life annuity with a period certain not exceeding 20 years), the amount which must be distributed on or before the Participant's required beginning date (or, in the case of distributions after the death of the Participant, the date distributions are required to begin pursuant to Section 15.5 below) shall be the payment which is required for one payment interval. The second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year. Payment intervals are the periods for which payments are received, e.g., bimonthly, monthly, semi-annually, or annually. If the annuity is a period certain annuity without a life contingency (or is a life annuity with a period certain exceeding 20 years) periodic payments for each distribution calendar year shall be combined and treated as an annual amount. The amount which must be distributed by the Participant's required beginning date (or, in the case of distributions after the death of the Participant, the date distributions are required to begin pursuant to Section 15.4(a)(5) above) is the annual amount for the first distribution calendar year. The annual amount for other distribution calendar years, including the annual amount for the calendar year in which the Participant's required beginning date (or the date distributions are required to begin pursuant to Section 15.5 below) occurs, must be distributed on or before December 31 of the calendar year for which the distribution is required. (b) Annuities purchased after December 31, 1988, are subject to the following additional conditions: (1) Unless the Participant's Spouse is the designated Beneficiary, if the Participant's interest is being distributed in the form of a period certain annuity without a life contingency, the period certain as of the beginning of the first distribution calendar year may not exceed the applicable period determined using the table set forth in Q and A A-5 of Section 1.401(a)(9)-2 of the Income Tax Regulations. (2) If the Participant's interest is being distributed in the form of a joint and survivor annuity for the joint lives of the Participant and a nonspouse Beneficiary, annuity payments to be made on or after the Participant's required beginning date to the designated Beneficiary after the Participant's death must not at any time exceed the applicable percentage of the annuity payment for such period that would have been payable to the Participant using the table set forth in Q and A A-6 of Section 1.401(a)(9)-2 of the Income Tax Regulations. (c) Transitional rule. If payments under an annuity which complies with Section (a) above begin prior to January 1, 1989, the minimum distribution requirements in effect as of July 27, 1987, shall apply to distributions from this plan, regardless of whether the annuity form of payment is irrevocable. This transitional rule also applies to deferred annuity contracts distributed to or owned by the Employee prior to January 1, 1989, unless additional contributions are made under the Plan by the Employer with respect to such contract. (d) If the form of distribution is an annuity made in accordance with this Section 15.4, any additional benefits accruing to the Participant after his or her required beginning date shall be distributed as a separate and identifiable component of the annuity beginning with the first payment interval ending in the calendar year immediately following the calendar year in which such amount accrues. (e) Any part of the Participant's interest which is in the form of an individual account shall be distributed in a manner satisfying the requirements of Section 401(a)(9) of the Code and the regulations thereunder. Section 15.5. Death Distribution Provisions. (a) Distribution beginning before death. If the Participant dies after distribution of his or her interest has begun, the remaining portion of such interest will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Participant's death. (b) Distribution beginning after death. If the Participant dies before distribution of his or her interest begins, distribution of the Participant's entire interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death except to the extent that an election is made to receive distributions in accordance with (1) or (2) below: (1) if any portion of the Participant's interest is payable to a designated Beneficiary, distributions may be made over the life or over a period certain not greater than the life expectancy of the designated Beneficiary commencing on or before December 31 of the calendar year immediately following the calendar year in which the Participant died; (2) if the designated Beneficiary is the Participant's surviving Spouse, the date distributions are required to begin in accordance with (1) above shall not be earlier than the later of (1) December 31 of the calendar year immediately following the calendar year in which the Participant died and (2) December 31 of the calendar year in which the Participant would have attained Age 70 1/2. The Participant's designated Beneficiary must elect the method of distribution no later than the earlier of (1) December 31 of the calendar year in which distributions would be required to begin under this Section, or (2) December 31 of the calendar year which contains the fifth anniversary of the date of death of the Participant. If the Participant has no designated Beneficiary, or if the designated Beneficiary does not elect a method of distribution, distribution of the Participant's entire interest must be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death. (c) For purposes of Section 15.5(b) above, if the surviving Spouse dies after the Participant, but before payments to such Spouse begin, the provisions of Section 15.5(b), with the exception of paragraph (2) therein, shall be applied as if the surviving Spouse were the Participant. (d) For purposes of this Section 15.5, any amount paid to a child of the Participant will be treated as if it had been paid to the surviving Spouse if the amount becomes payable to the surviving Spouse when the child reaches the age of majority. (e) For the purpose of this Section 15.5, distribution of a Participant's interest is considered to begin on the Participant's required beginning date (or, if Section 15.5(c) above is applicable, the date distribution is required to begin to the surviving Spouse pursuant to Section 15.5(b) above). If distribution in the form of an annuity described in Section 15.4 above irrevocably commences to the Participant before the required beginning date, the date distribution is considered to begin is the date distribution actually commences. Section 15.6. Definitions (a) Applicable life expectancy. The life expectancy (or joint and last survivor expectancy) calculated using the attained Age of the Participant (or designated Beneficiary) as of the Participant's (or designated Beneficiary's) birthday in the applicable calendar year reduced by one for each calendar year which has elapsed since the date life expectancy was first calculated. If life expectancy is being recalculated, the applicable life expectancy shall be the life expectancy as so recalculated. The applicable calendar year shall be the first distribution calendar year, and if life expectancy is being recalculated such succeeding calendar year. If annuity payments commence before the required beginning date, the applicable calendar year is the year such payments commence. If distribution is in the form of an immediate annuity purchased after the Participant's death with the Participant's remaining interest, the applicable calendar year is the year of purchase. (b) Designated Beneficiary. The individual who is designated as the Beneficiary under the plan in accordance with Section 401(a)(9) of the Code and the regulations thereunder. (c) Distribution calendar year. A calendar year for which a minimum distribution is required. For distributions beginning before the Participant's death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant's required beginning date. For distributions beginning after the Participant's death, the first distribution calendar year is the calendar year in which distributions are required to begin pursuant to Section 15.5 above. (d) Life expectancy. Life expectancy and joint and last survivor expectancy are computed by use of the expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax Regulations. Unless otherwise elected by the Participant (or Spouse in the case of distributions described in Section 15.5(b)(2) above) by the time distributions are required to begin, life expectancies shall be recalculated annually. Such election shall be irrevocable as to the Participant (or Spouse) and shall apply to all subsequent years. The life expectancy of a nonspouse Beneficiary may not be recalculated. (e) Required beginning date. (1) General rule. The required beginning date of a Participant is the first day of April of the calendar year following the calendar year in which the Participant attains Age 70 1/2. (2) Transitional rule. The required beginning date of a Participant who attains Age 70 1/2 before January 1, 1988, shall be determined in accordance with (A) or (B) below: (A) Non-5-percent owners. The required beginning date of a Participant who is not a "5-percent owner" (as defined in (3) below) is the first day of April of the calendar year following the calendar year in which the later of retirement or attainment of Age 70 1/2 occurs. (B) 5-percent owners. The required beginning date of a Participant who is a 5-percent owner during any year beginning after December 31, 1979, is the first day of April following the later of: (i) the calendar year in which the Participant attains Age 70 1/2, or (ii) the earlier of the calendar year with or within which ends the Plan Year in which the Participant becomes a 5-percent owner, or the calendar year in which the Participant retires. The required beginning date of a Participant who is not a 5-percent owner who attains Age 70 1/2 during 1988 and who has not retired as of January 1, 1989, is April 1, 1990. (3) 5-percent owner. A Participant is treated as a 5-percent owner for purposes of this Section if such Participant is a 5-percent owner as defined in Section 416(i) of the Code (determined in accordance with Section 416 but without regard to whether the plan is top-heavy) at any time during the plan year ending with or within the calendar year in which such owner attains Age 66 1/2 or any subsequent Plan Year. (4) Once distributions have begun to a 5-percent owner under this Section, they must continue to be distributed, even if the Participant ceases to be a 5-percent owner in a subsequent year. (5) Plans maintained by governments and churches. In the case of a governmental plan (as defined in Section 414(d) of the Code) or plans maintained by a church (as defined in Sections 3121(w)(3)(A) or 3121(w)(3)(B) of the Code), the required beginning date shall be the later of the date determined under the preceding provisions of Section 15.6(e) or April 1 of the calendar year following the calendar year in which the Employee retires. (f) Participant. Participant shall be as defined in Article 2 and shall for the purposes of this Article 15 also include the term Inactive Participant, where appropriate. Section 15.7. Transitional Rule. (a) Notwithstanding the other requirements of this Article and subject to the requirements of Article 5 regarding joint and survivor annuity requirements, distribution on behalf of any Employee, including a 5-percent owner, may be made in accordance with all of the following requirements (regardless of when such distribution commences): (1) The distribution by the Trust is one which would not have disqualified such Trust under Section 401(a)(9) of the Internal Revenue Code as in effect prior to amendment by the Deficit Reduction Act of 1984. (2) The distribution is in accordance with a method of distribution designated by the Employee whose interest in the Trust is being distributed or, if the Employee is deceased, by a Beneficiary of such Employee. (3) Such designation was in writing, was signed by the Employee or the Beneficiary, and was made before January 1, 1984. (4) The Employee had accrued a benefit under the Plan as of December 31, 1983. (5) The method of distribution designated by the Employee or the Beneficiary specifies the time at which distribution will commence, the period over which distributions will be made, and in the case of any distribution upon the Employee's death, the Beneficiaries of the Employee listed in order of priority. (b) A distribution upon death will not be covered by this transitional rule unless the information in the designation contains the required information described above with respect to the distributions to be made upon the death of the Employee. (c) For any distribution which commences before January 1, 1984, but continues after December 31, 1983, the Employee, or the Beneficiary, to whom such distribution is being made, will be presumed to have designated the method of distribution under which the distribution is being made if the method of distribution was specified in writing and the distribution satisfies the requirements in subsections 15.7(a)(1) and (5). (d) If a designation is revoked any subsequent distribution must satisfy the requirements of Section 401(a)(9) of the Code and the regulations thereunder. If a designation is revoked subsequent to the date distributions are required to begin, the Trust must distribute by the end of the calendar year following the calendar year in which the revocation occurs the total amount not yet distributed which would have been required to have been distributed to satisfy Section 401(a)(9) of the Code and the regulations thereunder, but for the Section 242(b)(2) election. For calendar years beginning after December 31, 1988, such distributions must meet the minimum distribution incidental benefit requirements in Section 1.401(a)(9)-2 of the Income Tax Regulations. Any changes in the designation will be considered to be a revocation of the designation. However, the mere substitution or addition of another Beneficiary (one not named in the designation) under the designation will not be considered to be a revocation of the designation, so long as such substitution or addition does not alter the period over which distributions are to be made under the designation, directly or indirectly (for example, by altering the relevant measuring life). In the case in which an amount is transferred or rolled over from one plan to another plan, the rules in Q and A J-2 and Q and A J-3 of Section 1.401(a)(9)-1 of the Income Tax Regulations shall apply. Section 15.8. Compliance with Section 401(a)(14) of the Code. Benefits under this Plan must begin, unless the Participant elects otherwise, no later than the 60th day after the close of the Plan Year in which the latest of the following events occurs: (1) the Participant attains Normal Retirement Age, (2) the Participant terminates his Service with the Employer, or (3) the tenth anniversary of the year in which the Participant commences participation in the Plan. ARTICLE 16 DIRECT ROLLOVER ELECTIONS - ------------------------- Section 16.1. This Article applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. Section 16.2. Definitions. (a) Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancy) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (b) Eligible retirement plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (c) Distributee: A distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code; are distributees with regard to the interest of the spouse or former spouse. (d) Direct rollover: A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. Section 16.3. Additional Direct Rollover Rules. The following additional rules apply to the Plan in addition to the model language provided above. (a) A distributee may elect a complete direct rollover with respect to all of the distribution or a partial direct rollover with respect to a portion of the distribution and the remainder will be paid directly to the distributee. The amount of a partial direct rollover must be at least $500. (b) A distributee who is entitled to elect a direct rollover with respect to any or any portion of a distribution but who does not make any election shall be deemed to have rejected the direct rollover option. (c) A distribution of less than $200 that would otherwise be an eligible rollover distribution shall not be an eligible rollover distribution if it is reasonable to expect that all such distributions to the distributee from the Plan during the same calendar year will total $200 or less. (d) This rules of this Article shall be administered in compliance with regulations issued by the Internal Revenue Service under Sections 401(a)(31), 402(c)402(f) and 3405(c) of the Code, and such regulations are hereby specifically incorporated by reference. IN WITNESS WHEREOF, the Peoples Bancorp Inc. Retirement Plan is, by the authority of the Board of Directors of the Employer, executed on behalf of the Employer, the 26th day of December, 1995. PEOPLES BANCORP, INC. /s/ ROBERT E. EVANS Robert E. Evans Authorized Officer ATTEST: /s/ CHARLES R. HUNSAKER Charles R. Hunsaker General Counsel EX-10 5 EXHIBIT 10(G)-STOCK OPTION AGREEMENT 4/6/93 EXHIBIT 10(g) - ------------- PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 STOCK OPTION AGREEMENT 1993 Peoples Bancorp Inc. Stock Option Plan (Non-qualified Stock Options) THIS AGREEMENT is made to be effective as of April 6, 1993, by and between Peoples Bancorp Inc., a Delaware corporation (the "COMPANY"), and __________________________ ("OPTIONEE"). WITNESSETH: - ----------- WHEREAS, the Board of Directors of the COMPANY adopted the Peoples Bancorp Inc. 1993 Stock Option Plan (the "PLAN") on January 21, 1993; and WHEREAS, the stockholders of the COMPANY, upon the recommendation of the COMPANY's Board of Directors, approved the PLAN at the Annual Meeting of Stockholders held on April 6, 1993; and WHEREAS, pursuant to the provisions of the PLAN, directors of the COMPANY who are not also employees of the COMPANY (the "NON-EMPLOYEE DIRECTORS") are to be granted options to acquire common shares (the "COMMON SHARES") of the COMPANY in accordance with the provisions of the PLAN; and WHEREAS, pursuant to the provisions of the PLAN, the OPTIONEE, who is a NON-EMPLOYEE DIRECTOR is to be granted an option to acquire ________________ COMMON SHARES of the COMPANY effective on April 6, 1993, upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the premises, the parties hereto make the following agreements, intending to be legally bound thereby: 1) Grant of Option. The COMPANY hereby grants to the OPTIONEE an option (the "OPTION") to purchase __________________________ COMMON SHARES of the COMPANY. The OPTION is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "CODE"). 2) Terms and Conditions of the OPTION. (A) OPTION Price. The purchase price (the "OPTION PRICE") to be paid by the OPTIONEE to the COMPANY upon the exercise of the OPTION shall be $41.00 per share, subject to adjustment as provided herein. (B) Exercise of the OPTION. The OPTION may be exercised as follows: (i) At any time on or after that date which is six months after the date of this Agreement as to twenty percent (20%) of the COMMON SHARES subject to the OPTION. (ii) At any time on or after the first anniversary of the date of this Agreement as to an additional twenty percent (20%) of the COMMON SHARES subject to the OPTION; (iii) At any time on or after the second anniversary of the date of this Agreement as to an additional twenty percent (20%) of the COMMON SHARES subject to the OPTION; (iv) At any time on or after the third anniversary of the date of this Agreement as to an additional twenty percent (20%) of the COMMON SHARES subject to the OPTION; and (v) At any time on or after the fourth anniversary of the date of this Agreement as to the remaining twenty percent (20%) of the COMMON SHARES subject to the OPTION. Subject to the other provisions of this Agreement, if the OPTION becomes exercisable as to certain COMMON SHARES, it shall remain exercisable as to those COMMON SHARES until the date of expiration of the OPTION term. The grant of this OPTION shall not confer upon the OPTIONEE any right to continue as a director of the COMPANY nor limit in any way the right of the COMPANY or the stockholders of the COMPANY to terminate his status as a director in accordance with law or the COMPANY'S governing corporate documents. (C) OPTION Term. The OPTION shall in no event be exercisable after the expiration of ten (10) years from the date of this Agreement. (D) Method of Exercise. To the extent that it is exercisable, the OPTION may be exercised by mailing or delivering to the Stock Option Committee of the Board of Directors of the COMPANY (the "COMMITTEE") a written notice of exercise, signed by the OPTIONEE, or in the event of the death of the OPTIONEE, by such other person as is entitled to exercise the OPTION. The notice of exercise shall state the number of COMMON SHARES in respect of which the OPTION is being exercised, and shall either be accompanied by the payment of the full OPTION PRICE of such COMMON SHARES, or shall fix a date (not more than 10 business days from the date of the notice) for the payment of the full OPTION PRICE of the COMMON SHARES being purchased. The OPTION PRICE may be paid in cash, or by the transfer by the OPTIONEE to the COMPANY of free and clear COMMON SHARES already owned by the OPTIONEE having a Fair Market Value (as that term is defined in the PLAN) on the exercise date equal to the OPTION PRICE, or by a combination of cash and COMMON SHARES already owned by the OPTIONEE equal in the aggregate to the OPTION PRICE for the COMMON SHARES being purchased. 3) Adjustments and Changes in the COMMON SHARES subject to the OPTION. In the event there is any change in the COMMON SHARES resulting from stock splits, stock dividends, combinations or exchanges of shares, or other similar capital adjustments, the number of COMMON SHARES subject to the OPTION and the OPTION PRICE of the optioned COMMON SHARES shall be appropriately adjusted to reflect such change. 4) Non-Assignability of the OPTION. The OPTION shall not be assignable or transferable except, in the event of the death of the OPTIONEE, by the will of the OPTIONEE, or by the laws of descent and distribution. The OPTION shall be exercisable, during the OPTIONEE'S lifetime, only by the OPTIONEE. 5) Exercise After OPTIONEE Ceases to be a Director. (A) Except as otherwise provided in this Section 5, the OPTION (i) is exercisable only by the OPTIONEE, (ii) is exercisable only while the OPTIONEE is a director of the COMPANY and then only to the extent the OPTION has become exercisable by its terms, and (iii) if not exercisable by its terms at the time the OPTIONEE ceases to be a director of the COMPANY, shall immediately expire on the date the OPTIONEE ceases to be a director of the COMPANY. (B) If any portion of the OPTION is exercisable by its terms at the time the OPTIONEE ceases to be a director of the COMPANY other than by reason of the death of the OPTIONEE, the portion of the OPTION which is exercisable at the time the OPTIONEE ceases to be a director must be exercised on or before the earlier of the expiration of the OPTION term or three (3) months following the date the OPTIONEE ceases to be a director. (C) If the OPTIONEE ceases to be a director of the COMPANY by reason of the death of the OPTIONEE, the portion of the OPTION which is exercisable at the time of the OPTIONEE'S death must be exercised by the representative or representatives of the OPTIONEE'S estate, or the person or persons who acquired (by bequest or inheritance) the rights to exercise the OPTION, on or before the earlier of the expiration of the OPTION term or one year following the date of death. 6) Restrictions on Exercise. Anything contained in this Agreement or elsewhere to the contrary notwithstanding: (A) The OPTION shall not be exercisable for the purchase of any COMMON SHARES subject thereto except for: (i) COMMON SHARES subject thereto which at the time of such exercise and purchase are registered under the Securities Act of 1933, as amended (the "ACT"); and (ii) COMMON SHARES subject thereto which at the time of such exercise and purchase are exempt or are the subject matter of an exempt transaction or are registered by description, by coordination or by qualification, or at such time are the subject matter of a transaction which has been registered by description, all in accordance with Chapter 1707 of the Ohio Revised Code, as amended; and (iii) COMMON SHARES subject thereto in respect of which the laws of any state applicable to such exercise and purchase have been satisfied. (B) If any COMMON SHARES subject to the OPTION are sold or issued upon the exercise thereof to a person who (at the time of such exercise or thereafter) is an affiliate of the COMPANY for purposes of Rule 144 promulgated under the ACT, or are sold and issued in reliance upon exemptions under the securities laws of any state, then upon such sale and issuance: (i) Such COMMON SHARES shall not be transferable by the holder thereof, and neither the COMPANY nor its transfer agent or registrar, if any, shall be required to register or otherwise to give effect to any transfer thereof and may prevent any such transfer, unless the COMPANY shall have received an opinion from its counsel to the effect that any such transfer would not violate the ACT or the applicable laws of any state; and (ii) The COMPANY may cause each share certificate evidencing such COMMON SHARES to bear a legend reflecting the applicable restrictions on the transfer thereof. (C) Any share certificate issued to evidence COMMON SHARES as to which the OPTION has been exercised may bear such legends and statements as the COMPANY shall deem advisable to insure compliance with applicable federal and state laws and regulations. (D) Nothing contained in this Agreement or elsewhere shall be construed to require the COMPANY to take any action whatsoever to make the OPTION exercisable or to make transferable any COMMON SHARES purchased and issued upon the exercise of the OPTION. 7) Rights of the OPTIONEE as a Shareholder. The OPTIONEE shall have no rights or privileges as a shareholder of the COMPANY with respect to any COMMON SHARES of the COMPANY covered by the OPTION until the date of issuance and delivery of a certificate to the OPTIONEE evidencing such COMMON SHARES. 8) PLAN as Controlling. All terms and conditions of the PLAN applicable to the OPTION which are not set forth in this Agreement shall be deemed incorporated herein by reference. In the event that any term or condition of this Agreement is inconsistent with the terms and conditions of the PLAN, the PLAN shall be deemed controlling. 9) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Ohio. 10) Rights and Remedies Cumulative. All rights and remedies of the COMPANY and of the OPTIONEE enumerated in this Agreement shall be cumulative and, except as expressly provided otherwise in this Agreement, none shall exclude any other rights or remedies allowed by law or in equity, and each of said rights or remedies may be exercised and enforced concurrently. 11) Captions. The captions contained in this Agreement are included only for convenience of reference and do not define, limit, explain or modify this Agreement or its interpretation, construction or meaning and are no way to be construed as a part of this Agreement. 12) Notices and Payments. All payments required or permitted to be made under the provisions of this Agreement, and all notices and communications required or permitted to be given or delivered under this Agreement to the COMPANY or to the OPTIONEE, which notices or communications must be in writing, shall be deemed to have been given if delivered by hand, or mailed by first-class mail (postage prepaid), addressed as follows: (A) If to the COMPANY, to: Peoples Bancorp Inc. Attn: Stock Option Committee 138 Putnam Street P. O. Box 738 Marietta, Ohio 45750 (B) If to the OPTIONEE, to the address of the OPTIONEE set forth at the conclusion of this Agreement. The COMPANY or the OPTIONEE may, by notice given to the other in accordance with this Agreement, designate a different address for making payments required or permitted to be made, and for the giving of notices or other communications, to the party designating such new address. Any payment, notice or other communication required or permitted to be given in accordance with this Agreement shall be deemed to have been given on the date of the postmark stamped on the envelope by the U.S. Postal Service, metered dates not being acceptable, when placed in the U.S. Mail, addressed and mailed as provided in this Agreement. 13) Severability. If any provision of this Agreement, or the application of any provision hereof to any person or any circumstance shall be determined to be invalid or unenforceable, then such determination shall not affect any other provision of this Agreement or the application of said provision to any other person or circumstance, all of which other provisions shall remain in full force and effect, and it is the intention of each party to this Agreement that if any provision of this Agreement is susceptible of two or more constructions, one of which would render the provision enforceable and the other or others of which would render the provision unenforceable, then the provision shall have the meaning which renders it enforceable. 14) Number and Gender. When used in this Agreement, the number and gender of each pronoun shall be construed to be such number and gender as the context, circumstances or its antecedent may require. 15) Entire Agreement. This Agreement constitutes the entire agreement between the COMPANY and the OPTIONEE in respect of the subject matter of this Agreement, and this Agreement supersedes all prior and contemporaneous agreements between the parties hereto in connection with the subject matter of this Agreement. No change, termination or attempted waiver of any of the provisions of this Agreement shall be binding upon any party hereto unless contained in a writing signed by the party to be charged. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed to be effective as of the date first written above. COMPANY: PEOPLES BANCORP INC. a Delaware corporation By: __________________________________ Its:___________________________________ OPTIONEE: ______________________________________ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Pursuant to Section 2.04(a) of the Agreement of Merger, dated as of March 4, 1993, between Peoples Bancorp Inc., a Delaware corporation ("Peoples Delaware"), and Peoples Bancorp Inc., an Ohio corporation ("Peoples Ohio"), Peoples Ohio hereby assumes all of the obligations of Peoples Delaware under the foregoing Stock Option Agreement effective as of May 3, 1993, the effective date of the merger of Peoples Delaware with and into Peoples Ohio. PEOPLES BANCORP INC. an Ohio corporation By: ________________________________________ Its:_________________________________________ EX-10 6 EXHIBIT 10(H)-STOCK OPTION AGREEMENT 5/20/93 EXHIBIT 10(h) - ------------- PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 STOCK OPTION AGREEMENT 1993 Peoples Bancorp Inc. Stock Option Plan (Incentive Stock Options) THIS AGREEMENT is made to be effective as of May 20, 1993, by and between Peoples Bancorp Inc., an Ohio corporation (the "COMPANY"), and _____________________ (the "OPTIONEE"). WITNESSETH: - ----------- WHEREAS, the Board of Directors of Peoples Bancorp Inc., a Delaware corporation ("PEOPLES DELAWARE"), adopted the Peoples Bancorp Inc. 1993 Stock Option Plan (the "PLAN") on January 21, 1993; and WHEREAS, the stockholders of PEOPLES DELAWARE, upon the recommendation of the Board of Directors of PEOPLES DELAWARE, approved the PLAN at the Annual Meeting of Stockholders of PEOPLES DELAWARE held on April 6, 1993; and WHEREAS, pursuant to Section 2.04(a) of the Agreement of Merger, dated as of March 4, 1993, between PEOPLES DELAWARE and the COMPANY, the COMPANY assumed the PLAN and all of the obligations of PEOPLES DELAWARE thereunder effective as of May 3, 1993, the effective date of the merger of PEOPLES DELAWARE with and into the COMPANY; and WHEREAS, pursuant to the provisions of the PLAN, the Board of Directors of the COMPANY has appointed a Stock Option Committee (the "COMMITTEE") to administer the PLAN and the COMMITTEE has determined that an option to acquire common shares, without par value (the "COMMON SHARES"), of the COMPANY should be granted to the OPTIONEE under the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the premises, the parties hereto make the following agreements, intending to be legally bound thereby: 1) Grant of Option. The COMPANY hereby grants to the OPTIONEE an option (the "OPTION") to purchase ____________ (___) COMMON SHARES of the COMPANY. The OPTION is intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "CODE"). 2) Terms and Conditions of the OPTION. (A) OPTION Price. The purchase price (the "OPTION PRICE") to be paid by the OPTIONEE to the COMPANY upon the exercise of the OPTION shall be $35.00 per share (being 100% of the Fair Market Value (as that term is defined in the PLAN) for the COMMON SHARES of the COMPANY on the date of this Agreement), subject to adjustment as provided herein. (B) Exercise of the OPTION. The OPTION may be exercised at any time on or after that date which is six months after the date of this Agreement as to all (100%) of the COMMON SHARES subject to the OPTION. Subject to the other provisions of this Agreement, if the OPTION becomes exercisable as to certain COMMON SHARES, it shall remain exercisable as to those COMMON SHARES until the date of expiration of the OPTION term. The grant of this OPTION shall not confer upon the OPTIONEE any right to continue as an employee of the COMPANY or of any subsidiary of the COMPANY nor limit in any way the right of the COMPANY or of any such subsidiary to terminate the status of the OPTIONEE as an employee in accordance with law or the COMPANY'S or the subsidiary's, as appropriate, governing corporate documents. (C) OPTION Term. The OPTION shall in no event be exercisable after the expiration of ten (10) years from the date of this Agreement. (D) Method of Exercise. To the extent that it is exercisable, the OPTION may be exercised by mailing or delivering to the COMMITTEE a written notice of exercise, signed by the OPTIONEE, or in the event of the death of the OPTIONEE, by such other person as is entitled to exercise the OPTION. The notice of exercise shall state the number of COMMON SHARES in respect of which the OPTION is being exercised, and shall either be accompanied by the payment of the full OPTION PRICE of such COMMON SHARES, or shall fix a date (not more than 10 business days from the date of the notice) for the payment of the full OPTION PRICE of the COMMON SHARES being purchased. The OPTION PRICE may be paid in cash, or by the transfer by the OPTIONEE to the COMPANY of free and clear COMMON SHARES already owned by the OPTIONEE having a Fair Market Value (as that term is defined in the PLAN) on the exercise date equal to the OPTION PRICE, or by a combination of cash and COMMON SHARES already owned by the OPTIONEE equal in the aggregate to the OPTION PRICE for the COMMON SHARES being purchased. 3) Adjustments and Changes in the COMMON SHARES subject to the OPTION. In the event there is any change in the COMMON SHARES resulting from stock splits, stock dividends, combinations or exchanges of shares, or other similar capital adjustments, the number of COMMON SHARES subject to the OPTION and the OPTION PRICE of the optioned COMMON SHARES shall be appropriately adjusted to reflect such change. 4) Non-Assignability of the OPTION. The OPTION shall not be assignable or transferable except, in the event of the death of the OPTIONEE, by the will of the OPTIONEE, or by the laws of descent and distribution. The OPTION shall be exercisable, during the OPTIONEE'S lifetime, only by the OPTIONEE. 5) Exercise After OPTIONEE Ceases to be an Employee. If the OPTIONEE'S employment with the COMPANY and its subsidiaries terminates, the unexercisable portion of the OPTION shall immediately terminate. The exercisable portion of the OPTION shall also terminate effective immediately upon termination of employment except in the following circumstances: (A) If the termination was due to retirement under the provisions of any retirement plan of the COMPANY or any subsidiary of the COMPANY or was because of permanent disability, the OPTION may be exercised on or before the earlier of the expiration of the OPTION or three months following such termination. (B) If the termination was due to the death of the OPTIONEE and the OPTIONEE was an employee of the COMPANY and/or any subsidiary of the COMPANY at the time of the OPTIONEE'S death, the OPTION may be exercised on or before the earlier of the expiration of the OPTION or one year following the date of death. 6) Restrictions on Exercise. Anything contained in this Agreement or elsewhere to the contrary notwithstanding: (A) The OPTION shall not be exercisable for the purchase of any COMMON SHARES subject thereto except for: (i) COMMON SHARES subject thereto which at the time of such exercise and purchase are registered under the Securities Act of 1933, as amended (the "ACT"); and (ii) COMMON SHARES subject thereto which at the time of such exercise and purchase are exempt or are the subject matter of an exempt transaction or are registered by description, by coordination or by qualification, or at such time are the subject matter of a transaction which has been registered by description, all in accordance with Chapter 1707 of the Ohio Revised Code, as amended; and (iii) COMMON SHARES subject thereto in respect of which the laws of any state applicable to such exercise and purchase have been satisfied. (B) If any COMMON SHARES subject to the OPTION are sold or issued upon the exercise thereof to a person who (at the time of such exercise or thereafter) is an affiliate of the COMPANY for purposes of Rule 144 promulgated under the ACT, or are sold and issued in reliance upon exemptions under the securities laws of any state, then upon such sale and issuance: (i) Such COMMON SHARES shall not be transferable by the holder thereof, and neither the COMPANY nor its transfer agent or registrar, if any, shall be required to register or otherwise to give effect to any transfer thereof and may prevent any such transfer, unless the COMPANY shall have received an opinion from its counsel to the effect that any such transfer would not violate the ACT or the applicable laws of any state; and (ii) The COMPANY may cause each share certificate evidencing such COMMON SHARES to bear a legend reflecting the applicable restrictions on the transfer thereof. (C) Any share certificate issued to evidence COMMON SHARES as to which the OPTION has been exercised may bear such legends and statements as the COMPANY shall deem advisable to insure compliance with applicable federal and state laws and regulations. (D) Nothing contained in this Agreement or elsewhere shall be construed to require the COMPANY to take any action whatsoever to make the OPTION exercisable or to make transferable any COMMON SHARES purchased and issued upon the exercise of the OPTION. 7) Rights of the OPTIONEE as a Shareholder. The OPTIONEE shall have no rights or privileges as a shareholder of the COMPANY with respect to any COMMON SHARES of the COMPANY covered by the OPTION until the date of issuance and delivery of a certificate to the OPTIONEE evidencing such COMMON SHARES. 8) PLAN as Controlling. All terms and conditions of the PLAN applicable to the OPTION which are not set forth in this Agreement shall be deemed incorporated herein by reference. In the event that any term or condition of this Agreement is inconsistent with the terms and conditions of the PLAN, the PLAN shall be deemed controlling. 9) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Ohio. 10) Rights and Remedies Cumulative. All rights and remedies of the COMPANY and of the OPTIONEE enumerated in this Agreement shall be cumulative and, except as expressly provided otherwise in this Agreement, none shall exclude any other rights or remedies allowed by law or in equity, and each of said rights or remedies may be exercised and enforced concurrently. 11) Captions. The captions contained in this Agreement are included only for convenience of reference and do not define, limit, explain or modify this Agreement or its interpretation, construction or meaning and are no way to be construed as a part of this Agreement. 12) Notices and Payments. All payments required or permitted to be made under the provisions of this Agreement, and all notices and communications required or permitted to be given or delivered under this Agreement to the COMPANY or to the OPTIONEE, which notices or communications must be in writing, shall be deemed to have been given if delivered by hand, or mailed by first-class mail (postage prepaid), addressed as follows: (A) If to the COMPANY, to: Peoples Bancorp Inc. Attn: Stock Option Committee 138 Putnam Street P. O. Box 738 Marietta, Ohio 45750-0738 (B) If to the OPTIONEE, to the address of the OPTIONEE set forth at the conclusion of this Agreement. The COMPANY or the OPTIONEE may, by notice given to the other in accordance with this Agreement, designate a different address for making payments required or permitted to be made, and for the giving of notices or other communications, to the party designating such new address. Any payment, notice or other communication required or permitted to be given in accordance with this Agreement shall be deemed to have been given on the date of the postmark stamped on the envelope by the U.S. Postal Service, metered dates not being acceptable, when placed in the U.S. Mail, addressed and mailed as provided in this Agreement. 13) Severability. If any provision of this Agreement, or the application of any provision hereof to any person or any circumstance shall be determined to be invalid or unenforceable, then such determination shall not affect any other provision of this Agreement or the application of said provision to any other person or circumstance, all of which other provisions shall remain in full force and effect, and it is the intention of each party to this Agreement that if any provision of this Agreement is susceptible of two or more constructions, one of which would render the provision enforceable and the other or others of which would render the provision unenforceable, then the provision shall have the meaning which renders it enforceable. 14) Number and Gender. When used in this Agreement, the number and gender of each pronoun shall be construed to be such number and gender as the context, circumstances or its antecedent may require. 15) Entire Agreement. This Agreement constitutes the entire agreement between the COMPANY and the OPTIONEE in respect of the subject matter of this Agreement, and this Agreement supersedes all prior and contemporaneous agreements between the parties hereto in connection with the subject matter of this Agreement. No change, termination or attempted waiver of any of the provisions of this Agreement shall be binding upon any party hereto unless contained in a writing signed by the party to be charged. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed to be effective as of the date first written above. COMPANY PEOPLES BANCORP INC., an Ohio corporation By:________________________________ Its:_________________________________ OPTIONEE ___________________________________ ___________________________________ Street Address ___________________________________ City, State and Zip Code ___________________________________ Social Security Number EX-10 7 EXHIBIT 10(I)-STOCK OPTION AGREEMENT 11/10/94 EXHIBIT 10(j) - ------------- PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 STOCK OPTION AGREEMENT 1993 Peoples Bancorp Inc. Stock Option Plan (Incentive Stock Options) THIS AGREEMENT is made to be effective as of November 10, 1994, by and between Peoples Bancorp Inc., an Ohio corporation (the "COMPANY"), and _______________ (the "OPTIONEE"). WITNESSETH: - ----------- WHEREAS, the Board of Directors of Peoples Bancorp Inc., a Delaware corporation ("PEOPLES DELAWARE"), adopted the Peoples Bancorp Inc. 1993 Stock Option Plan (the "PLAN") on January 21, 1993; and WHEREAS, the stockholders of PEOPLES DELAWARE, upon the recommendation of the Board of Directors of PEOPLES DELAWARE, approved the PLAN at the Annual Meeting of Stockholders of PEOPLES DELAWARE held on April 6, 1993; and WHEREAS, pursuant to Section 2.04(a) of the Agreement of Merger, dated as of March 4, 1993, between PEOPLES DELAWARE and the COMPANY, the COMPANY assumed the PLAN and all of the obligations of PEOPLES DELAWARE thereunder effective as of May 3, 1993, the effective date of the merger of PEOPLES DELAWARE with and into the COMPANY; and WHEREAS, pursuant to the provisions of the PLAN, the Board of Directors of the COMPANY has appointed a Stock Option Committee (the "COMMITTEE") to administer the PLAN and the COMMITTEE has determined that an option to acquire common shares, without par value (the "COMMON SHARES"), of the COMPANY should be granted to the OPTIONEE under the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the premises, the parties hereto make the following agreements, intending to be legally bound thereby: 1. Grant of OPTION. The COMPANY hereby grants to the OPTIONEE an option (the "OPTION") to purchase ____________ (___) COMMON SHARES of the COMPANY. The OPTION is intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "CODE"). 2. Terms and Conditions of the OPTION. (A) OPTION PRICE. The purchase price (the "OPTION PRICE") to be paid by the OPTIONEE to the COMPANY upon the exercise of the OPTION shall be $23.375 per share (being 100% of the Fair Market Value (as that term is defined in the PLAN) for the COMMON SHARES of the COMPANY on the date of this Agreement), subject to adjustment as provided herein. (B) Exercise of the OPTION. The OPTION may not be exercised until the OPTIONEE shall have completed twenty-four months of continuous employment with the COMPANY and/or its subsidiaries immediately following the date hereof. Thereafter, the OPTION may be exercised as follows: i) at any time after such twenty-four-month period, as to twenty-five percent (25%) of the COMMON SHARES subject to the OPTION; ii) at any time after thirty-six months from the date of this Agreement, as to an additional twenty-five percent (25%) of the COMMON SHARES subject to the OPTION; iii) at any time after forty-eight months from the date of this Agreement, as to an additional twenty-five percent (25%) of the COMMON SHARES subject to the OPTION; and iv) at any time after sixty months from the date of this Agreement, as to an additional twenty-five percent (25%) of the COMMON SHARES subject to the OPTION. Subject to the other provisions of this Agreement, if the OPTION becomes exercisable as to certain COMMON SHARES, it shall remain exercisable as to those COMMON SHARES until the date of expiration of the OPTION term. The COMMITTEE may, but shall not be required to (unless otherwise provided in this Agreement), accelerate the schedule of the time or times when the OPTION may be exercised. The grant of this OPTION shall not confer upon the OPTIONEE any right to continue as an employee of the COMPANY or of any subsidiary of the COMPANY nor limit in any way the right of the COMPANY or of any such subsidiary to terminate the status of the OPTIONEE as an employee in accordance with law or the COMPANY's or the subsidiary's, as appropriate, governing corporate documents. (C) OPTION Term. The OPTION shall in no event be exercisable after the expiration of ten (10) years from the date of this Agreement. (D) Method of Exercise. To the extent that it is exercisable, the OPTION may be exercised by mailing or delivering to the COMMITTEE a written notice of exercise, signed by the OPTIONEE, or in the event of the death of the OPTIONEE, by such other person as is entitled to exercise the OPTION. The notice of exercise shall state the number of COMMON SHARES in respect of which the OPTION is being exercised, and shall either be accompanied by the payment of the full OPTION PRICE of such COMMON SHARES, or shall fix a date (not more than ten business days from the date of the notice) for the payment of the full OPTION PRICE of the COMMON SHARES being purchased. The OPTION PRICE may be paid in cash, or by the transfer by the OPTIONEE to the COMPANY of free and clear COMMON SHARES already owned by the OPTIONEE having a Fair Market Value (as that term is defined in the PLAN) on the exercise date equal to the OPTION PRICE, or by a combination of cash and COMMON SHARES already owned by the OPTIONEE equal in the aggregate to the OPTION PRICE for the COMMON SHARES being purchased. 3. Adjustments and Changes in the COMMON SHARES subject to the OPTION. In the event there is any change in the COMMON SHARES resulting from stock splits, stock dividends, combinations or exchanges of shares, or other similar capital adjustments, the number of COMMON SHARES subject to the OPTION and the OPTION PRICE of the optioned COMMON SHARES shall be appropriately adjusted to reflect such change. 4. Acceleration of OPTIONS. (A) In the event that the COMPANY shall enter into an agreement to consolidate with, merge into, or transfer all or substantially all of the COMPANY's assets to, another corporation or corporations (each, an "ACCELERATION EVENT"), then the OPTION shall become exercisable during the twenty (20) days immediately prior to the scheduled consummation of the ACCELERATION EVENT with respect to the full number of the COMMON SHARES subject to the OPTION. Upon consummation of the ACCELERATION EVENT, the OPTION, whether or not then fully exercised, shall terminate and cease to be exercisable, unless assumed by the successor corporation. (B) The grant of the OPTION shall not affect in any way the right of the COMPANY to consolidate with, merge into, or transfer all or substantially all of its assets to, another corporation or corporations. 5. Non-Assignability of the OPTION. The OPTION shall not be assignable or transferable except, in the event of the death of the OPTIONEE, by the will of the OPTIONEE, or by the laws of descent and distribution. The OPTION shall be exercisable, during the OPTIONEE's lifetime, only by the OPTIONEE. 6. Exercise After OPTIONEE Ceases to be an Employee. (A) If the OPTIONEE's employment with the COMPANY and its subsidiaries terminates for any reason other than the death, retirement (as defined under the provisions of any retirement plan of the COMPANY or any subsidiary of the COMPANY) or permanent disability of the OPTIONEE, the portion of the OPTION which has not yet become exercisable in accordance with Section 2(B), shall immediately terminate. If the OPTIONEE's employment with the COMPANY and its subsidiaries terminates by reason of the death, retirement or permanent disability of the OPTIONEE, the OPTION shall become exercisable with respect to the full number of COMMON SHARES subject to the OPTION. (B) The exercisable portion of the OPTION shall also terminate effective immediately upon termination of employment except in the following circumstances: i) If the termination was due to retirement under the provisions of any retirement plan of the COMPANY or any subsidiary of the COMPANY or was because of permanent disability, the OPTION may be exercised on or before the earlier of the expiration of the OPTION or three months following such termination. ii) If the termination was due to the death of the OPTIONEE and the OPTIONEE was an employee of the COMPANY and/or any subsidiary of the COMPANY at the time of the OPTIONEE's death, the OPTION may be exercised on or before the earlier of the expiration of the OPTION or one year following the date of death. 7. Restrictions on Exercise. Anything contained in this Agreement or elsewhere to the contrary notwithstanding: (A) The OPTION shall not be exercisable for the purchase of any COMMON SHARES subject thereto except for: i) COMMON SHARES subject thereto which at the time of such exercise and purchase are registered under the Securities Act of 1933, as amended (the "ACT"); and ii) COMMON SHARES subject thereto which at the time of such exercise and purchase are exempt or are the subject matter of an exempt transaction or are registered by description, by coordination or by qualification, or at such time are the subject matter of a transaction which has been registered by description, all in accordance with Chapter 1707 of the Ohio Revised Code, as amended; and iii) COMMON SHARES subject thereto in respect of which the laws of any state applicable to such exercise and purchase have been satisfied. (B) If any COMMON SHARES subject to the OPTION are sold or issued upon the exercise thereof to a person who (at the time of such exercise or thereafter) is an affiliate of the COMPANY for purposes of Rule 144 promulgated under the ACT, or are sold and issued in reliance upon exemptions under the securities laws of any state, then upon such sale and issuance: i) Such COMMON SHARES shall not be transferable by the holder thereof, and neither the COMPANY nor its transfer agent or registrar, if any, shall be required to register or otherwise to give effect to any transfer thereof and may prevent any such transfer, unless the COMPANY shall have received an opinion from its counsel to the effect that any such transfer would not violate the ACT or the applicable laws of any state; and ii) The COMPANY may cause each share certificate evidencing such COMMON SHARES to bear a legend reflecting the applicable restrictions on the transfer thereof. (C) Any share certificate issued to evidence COMMON SHARES as to which the OPTION has been exercised may bear such legends and statements as the COMPANY shall deem advisable to insure compliance with applicable federal and state laws and regulations. (D) Nothing contained in this Agreement or elsewhere shall be construed to require the COMPANY to take any action whatsoever to make the OPTION exercisable or to make transferable any COMMON SHARES purchased and issued upon the exercise of the OPTION. 8. Rights of the OPTIONEE as a Shareholder. The OPTIONEE shall have no rights or privileges as a shareholder of the COMPANY with respect to any COMMON SHARES of the COMPANY covered by the OPTION until the date of issuance and delivery of a certificate to the OPTIONEE evidencing such COMMON SHARES. 9. PLAN as Controlling. All terms and conditions of the PLAN applicable to the OPTION which are not set forth in this Agreement shall be deemed incorporated herein by reference. In the event that any term or condition of this Agreement is inconsistent with the terms and conditions of the PLAN, the PLAN shall be deemed controlling. 10. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Ohio. 11. Rights and Remedies Cumulative. All rights and remedies of the COMPANY and of the OPTIONEE enumerated in this Agreement shall be cumulative and, except as expressly provided otherwise in this Agreement, none shall exclude any other rights or remedies allowed by law or in equity, and each of said rights or remedies may be exercised and enforced concurrently. 12. Captions. The captions contained in this Agreement are included only for convenience of reference and do not define, limit, explain or modify this Agreement or its interpretation, construction or meaning and are no way to be construed as a part of this Agreement. 13. Notices and Payments. All payments required or permitted to be made under the provisions of this Agreement, and all notices and communications required or permitted to be given or delivered under this Agreement to the COMPANY or to the OPTIONEE, which notices or communications must be in writing, shall be deemed to have been given if delivered by hand, or mailed by first-class mail (postage prepaid), addressed as follows: (A) If to the COMPANY, to: Peoples Bancorp Inc. Attn: Stock Option Committee 138 Putnam Street P. O. Box 738 Marietta, Ohio 45750-0738 (B) If to the OPTIONEE, to the address of the OPTIONEE set forth at the conclusion of this Agreement. The COMPANY or the OPTIONEE may, by notice given to the other in accordance with this Agreement, designate a different address for making payments required or permitted to be made, and for the giving of notices or other communications, to the party designating such new address. Any payment, notice or other communication required or permitted to be given in accordance with this Agreement shall be deemed to have been given on the date of the postmark stamped on the envelope by the U.S. Postal Service, metered dates not being acceptable, when placed in the U.S. Mail, addressed and mailed as provided in this Agreement. 14. Severability. If any provision of this Agreement, or the application of any provision hereof to any person or any circumstance shall be determined to be invalid or unenforceable, then such determination shall not affect any other provision of this Agreement or the application of said provision to any other person or circumstance, all of which other provisions shall remain in full force and effect, and it is the intention of each party to this Agreement that if any provision of this Agreement is susceptible of two or more constructions, one of which would render the provision enforceable and the other or others of which would render the provision unenforceable, then the provision shall have the meaning which renders it enforceable. 15. Number and Gender. When used in this Agreement, the number and gender of each pronoun shall be construed to be such number and gender as the context, circumstances or its antecedent may require. 16. Entire Agreement. This Agreement constitutes the entire agreement between the COMPANY and the OPTIONEE in respect of the subject matter of this Agreement, and this Agreement supersedes all prior and contemporaneous agreements between the parties hereto in connection with the subject matter of this Agreement. No change, termination or attempted waiver of any of the provisions of this Agreement shall be binding upon any party hereto unless contained in a writing signed by the party to be charged. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed to be effective as of the date first written above. COMPANY: Peoples Bancorp Inc., an Ohio corporation By: ___________________________________ Its: ___________________________________ OPTIONEE: _______________________________________ Name _______________________________________ Street Address _______________________________________ City, State and Zip Code _______________________________________ Social Security Number EX-10 8 EXHIBIT 10(K)-STOCK OPTION AGREEMENT 4/4/95 EXHIBIT 10(k) - ------------- PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 STOCK OPTION AGREEMENT PEOPLES BANCORP INC. NON-EMPLOYEE DIRECTOR 1995 Peoples Bancorp Inc. Stock Option Plan (Non-Qualified Stock Options) THIS AGREEMENT is made to be effective as of April 4, 1995, by and between Peoples Bancorp Inc., an Ohio corporation (the "COMPANY"), and ___________________________ (the "OPTIONEE"). WITNESSETH: - ----------- WHEREAS, the Board of Directors of the COMPANY adopted the Peoples Bancorp Inc. 1995 Stock Option Plan (the "PLAN") on January 19, 1995; and WHEREAS, the shareholders of the COMPANY, upon the recommendation of the COMPANY's Board of Directors, approved the PLAN at the Annual Meeting of Shareholders held on April 4, 1995; and WHEREAS, pursuant to the provisions of the PLAN, directors of the COMPANY who are not also employees of the COMPANY (the "NON-EMPLOYEE DIRECTORS") are to be granted options to acquire common shares (the "COMMON SHARES") of the COMPANY in accordance with the provisions of the PLAN; and WHEREAS, pursuant to the provisions of the PLAN, the OPTIONEE, who is a NON-EMPLOYEE DIRECTOR, is to be granted an option to acquire _______________ COMMON SHARES of the COMPANY, effective on April 4, 1995, upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the premises, the parties hereto make the following agreements, intending to be legally bound thereby: SECTION 1 Grant of Option. The COMPANY hereby grants to the OPTIONEE an option (the "OPTION") to purchase ____________________ COMMON SHARES of the COMPANY. The OPTION is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "CODE"). SECTION 2 Terms and Conditions of the OPTION. (A) OPTION Price. The purchase price (the "OPTION PRICE") to be paid by the OPTIONEE to the COMPANY upon the exercise of the OPTION shall be $22.50 per share subject to further adjustment as provided herein. (B) Exercise of the OPTION. The OPTION may be exercised no earlier than six months from the date of this Agreement. In the event the COMPANY shall consolidate with, merge into, or transfer all or substantially all of its assets (an "ACQUISITION TRANSACTION") to another corporation or corporations, then the OPTION shall become exercisable in full, whether or not then exercisable by its terms, immediately upon consummation of the ACQUISITION TRANSACTION. Subject to the other provisions of this Agreement, if the OPTION becomes exercisable as to certain COMMON SHARES, it shall remain exercisable as to those COMMON SHARES until the date of expiration of the OPTION term. The grant of this OPTION shall not confer upon the OPTIONEE any right to continue as a director of any subsidiary of the COMPANY nor limit in any way the right of the COMPANY or the shareholders of the COMPANY to terminate his status as a director in accordance with law or the COMPANY's governing corporate documents. (C) OPTION Term. The OPTION shall in no event be exercisable after the expiration of ten (10) years from the date of this Agreement. (D) Method of Exercise. To the extent that it is exercisable, the OPTION may be exercised by mailing or delivering to the Stock Option Committee of the Board of Directors of the COMPANY (the "COMMITTEE") a written notice of exercise, signed by the OPTIONEE, or in the event of the death of the OPTIONEE, by such other person as is entitled to exercise the OPTION. The notice of exercise shall state the number of COMMON SHARES in respect of which the OPTION is being exercised, and shall either be accompanied by the payment of the full OPTION PRICE of such COMMON SHARES, or shall fix a date (not more than 10 business days from the date of the notice) for the payment of the full OPTION PRICE of the COMMON SHARES being purchased. The OPTION PRICE may be paid in cash, or by the transfer by the OPTIONEE to the COMPANY of free and clear COMMON SHARES already owned by the OPTIONEE having a Fair Market Value (as that term is defined in the PLAN) on the exercise date equal to the OPTION PRICE, or by a combination of cash and COMMON SHARES already owned by the OPTIONEE equal in the aggregate to the OPTION PRICE for the COMMON SHARES being purchased. SECTION 3 Adjustments and Changes in the COMMON SHARES subject to the OPTION. In the event there is any change in the COMMON SHARES resulting from stock splits, stock dividends, combinations or exchanges of shares, or other similar capital adjustments, the number of COMMON SHARES subject to the OPTION and the OPTION PRICE of the optioned COMMON SHARES shall be appropriately adjusted to reflect such change. SECTION 4 Non-Assignability of the OPTION. The OPTION shall not be assignable or transferable except, in the event of the death of the OPTIONEE, by the will of the OPTIONEE, or by the laws of descent and distribution. The OPTION shall be exercisable, during the OPTIONEE's lifetime, only by the OPTIONEE. SECTION 5 Exercise After OPTIONEE Ceases to be a Director. Except as otherwise provided in this Section 5, if the OPTIONEE ceases to be a director of the COMPANY for any reason other than the OPTIONEE's death or due to an act of (i) fraud or intentional misrepresentation, or (ii) embezzlement, misappropriation or conversion of assets or opportunities of the COMPANY or any subsidiary ("Cause"), the OPTION granted to the OPTIONEE under this Agreement may be exercised in full, whether or not then exercisable by its terms, on or before the expiration of the term of the OPTION; provided, however, that if the OPTIONEE shall die prior to the expiration of the term of the OPTION, the OPTION may only be exercised on or before the earlier of the expiration of the OPTION term or two years following the date of death. If the OPTIONEE ceases to be a director of the COMPANY because of death, the OPTION may be exercised in full, whether or not then exercisable by its terms, by the representative or representatives of the OPTIONEE's estate, or the person or persons who acquired (by bequest or inheritance) the rights to exercise the OPTION, only on or before the earlier of the expiration of the term of the OPTION or two years following the date of death. If the OPTIONEE ceases to be a director of the COMPANY and/or any subsidiary of the COMPANY due to Cause, all of then unexercised OPTIONS shall immediately terminate. SECTION 6 Restrictions on Exercise. Anything contained in this Agreement or elsewhere to the contrary notwithstanding: (A) The OPTION shall not be exercisable for the purchase of any COMMON SHARES subject thereto except for: (i) COMMON SHARES subject thereto which at the time of such exercise and purchase are registered under the Securities Act of 1933, as amended (the "ACT"); and (ii) COMMON SHARES subject thereto which at the time of such exercise and purchase are exempt or are the subject matter of an exempt transaction or are registered by description, by coordination or by qualification, or at such time are the subject matter of a transaction which has been registered by description, all in accordance with Chapter 1707 of the Ohio Revised Code, as amended; and (iii) COMMON SHARES subject thereto in respect of which the laws of any state applicable to such exercise and purchase have been satisfied. (B) If any COMMON SHARES subject to the OPTION are sold or issued upon the exercise thereof to a person who (at the time of such exercise or thereafter) is an affiliate of the COMPANY for purposes of Rule 144 promulgated under the ACT, or are sold and issued in reliance upon exemptions under the securities laws of any state, then upon such sale and issuance: (i) Such COMMON SHARES shall not be transferable by the holder thereof, and neither the COMPANY nor its transfer agent or registrar, if any, shall be required to register or otherwise to give effect to any transfer thereof and may prevent any such transfer, unless the COMPANY shall have received an opinion from its counsel to the effect that any such transfer would not violate the ACT or the applicable laws of any state; and (ii) The COMPANY may cause each share certificate evidencing such COMMON SHARES to bear a legend reflecting the applicable restrictions on the transfer thereof. (C) Any share certificate issued to evidence COMMON SHARES as to which the OPTION has been exercised may bear such legends and statements as the COMPANY shall deem advisable to insure compliance with applicable federal and state laws and regulations. (D) Nothing contained in this Agreement or elsewhere shall be construed to require the COMPANY to take any action whatsoever to make the OPTION exercisable or to make transferable any COMMON SHARES purchased and issued upon the exercise of the OPTION. SECTION 7 Rights of the OPTIONEE as a Shareholder. The OPTIONEE shall have no rights or privileges as a shareholder of the COMPANY with respect to any COMMON SHARES of the COMPANY covered by the OPTION until the date of issuance and delivery of a certificate to the OPTIONEE evidencing such COMMON SHARES. SECTION 8 PLAN as Controlling. All terms and conditions of the PLAN applicable to the OPTION which are not set forth in this Agreement shall be deemed incorporated herein by reference. In the event that any term or condition of this Agreement is inconsistent with the terms and conditions of the PLAN, the PLAN shall be deemed controlling. SECTION 9 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Ohio. SECTION 10 Rights and Remedies Cumulative. All rights and remedies of the COMPANY and of the OPTIONEE enumerated in this Agreement shall be cumulative and, except as expressly provided otherwise in this Agreement, none shall exclude any other rights or remedies allowed by law or in equity, and each of said rights or remedies may be exercised and enforced concurrently. SECTION 11 Captions. The captions contained in this Agreement are included only for convenience of reference and do not define, limit, explain or modify this Agreement or its interpretation, construction or meaning and are no way to be construed as a part of this Agreement. SECTION 12 Notices and Payments. All payments required or permitted to be made under the provisions of this Agreement, and all notices and communications required or permitted to be given or delivered under this Agreement to the COMPANY or to the OPTIONEE, which notices or communications must be in writing, shall be deemed to have been given if delivered by hand, or mailed by first-class mail (postage prepaid), addressed as follows: (A) If to the COMPANY, to: Peoples Bancorp Inc. Attn.: Stock Option Committee 138 Putnam Street P. O. Box 738 Marietta, Ohio 45750-0738 (B) If to the OPTIONEE, to the address of the OPTIONEE set forth at the conclusion of this Agreement. The COMPANY or the OPTIONEE may, by notice given to the other in accordance with this Agreement, designate a different address for making payments required or permitted to be made, and for the giving of notices or other communications, to the party designating such new address. Any payment, notice or other communication required or permitted to be given in accordance with this Agreement shall be deemed to have been given on the date of the postmark stamped on the envelope by the U.S. Postal Service, metered dates not being acceptable, when placed in the U.S. Mail, addressed and mailed as provided in this Agreement. SECTION 13 Severability. If any provision of this Agreement, or the application of any provision hereof to any person or any circumstance shall be determined to be invalid or unenforceable, then such determination shall not affect any other provision of this Agreement or the application of said provision to any other person or circumstance, all of which other provisions shall remain in full force and effect, and it is the intention of each party to this Agreement that if any provision of this Agreement is susceptible of two or more constructions, one of which would render the provision enforceable and the other or others of which would render the provision unenforceable, then the provision shall have the meaning which renders it enforceable. SECTION 14 Number and Gender. When used in this Agreement, the number and gender of each pronoun shall be construed to be such number and gender as the context, circumstances or its antecedent may require. SECTION 15 Entire Agreement. This Agreement constitutes the entire agreement between the COMPANY and the OPTIONEE in respect of the subject matter of this Agreement, and this Agreement supersedes all prior and contemporaneous agreements between the parties hereto in connection with the subject matter of this Agreement. No change, termination or attempted waiver of any of the provisions of this Agreement shall be binding upon any party hereto unless contained in a writing signed by the party to be charged. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed to be effective as of the date first written above. COMPANY: PEOPLES BANCORP INC., an Ohio corporation By:__________________________________ Its:__________________________________ OPTIONEE: _____________________________________ Mr. PBI Director Address City, State Zip Code SSN: XXX-XX-XXXX EX-10 9 EXHIBIT 10(L)-STOCK OPTION AGREEMENT 4/4/95 EXHIBIT 10(l) - ------------- PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 STOCK OPTION AGREEMENT SUBSIDIARY DIRECTOR 1995 Peoples Bancorp Inc. Stock Option Plan (Non-Qualified Stock Options) THIS AGREEMENT is made to be effective as of April 4, 1995, by and between Peoples Bancorp Inc., an Ohio corporation (the "COMPANY"), and ___________________________ (the "OPTIONEE"). WITNESSETH: - ----------- WHEREAS, the Board of Directors of the COMPANY adopted the Peoples Bancorp Inc. 1995 Stock Option Plan (the "PLAN") on January 19, 1995; and WHEREAS, the shareholders of the COMPANY, upon the recommendation of the COMPANY's Board of Directors, approved the PLAN at the Annual Meeting of Shareholders held on April 4, 1995; and WHEREAS, pursuant to the provisions of the PLAN, directors of subsidiaries of the COMPANY nor employees of the COMPANY or any of its subsidiaries ("SUBSIDIARY DIRECTORS") are to be granted options to acquire common shares (the "COMMON SHARES") of the COMPANY in accordance with the provision of the PLAN; and WHEREAS, pursuant to the provisions of the PLAN, the OPTIONEE, who is a SUBSIDIARY DIRECTOR, is to be granted an option to acquire _______________________ COMMON SHARES of the COMPANY, effective on April 4, 1995, upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the premises, the parties hereto make the following agreements, intending to be legally bound thereby: SECTION 1 Grant of Option. The COMPANY hereby grants to the OPTIONEE an option (the "OPTION") to purchase __________________ COMMON SHARES of the COMPANY. The OPTION is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "CODE"). SECTION 2 Terms and Conditions of the OPTION. (A) OPTION Price. The purchase price (the "OPTION PRICE") to be paid by the OPTIONEE to the COMPANY upon the exercise of the OPTION shall be $22.50 per share subject to further adjustment as provided herein. (B) Exercise of the OPTION. The OPTION may be exercised no earlier than six months from the date of this Agreement. In the event the COMPANY shall consolidate with, merge into, or transfer all or substantially all of its assets (an "ACQUISITION TRANSACTION") to another corporation or corporations, then the OPTION shall become exercisable in full, whether or not then exercisable by its terms, immediately upon consummation of the ACQUISITION TRANSACTION. Subject to the other provisions of this Agreement, if the OPTION becomes exercisable as to certain COMMON SHARES, it shall remain exercisable as to those COMMON SHARES until the date of expiration of the OPTION term. The grant of this OPTION shall not confer upon the OPTIONEE any right to continue as a director of any subsidiary of the COMPANY nor limit in any way the right of any subsidiary of the COMPANY or the COMPANY to terminate his status as a director of such subsidiary in accordance with law or the subsidiary's governing corporate documents. (C) OPTION Term. The OPTION shall in no event be exercisable after the expiration of ten (10) years from the date of this Agreement. (D) Method of Exercise. To the extent that it is exercisable, the OPTION may be exercised by mailing or delivering to the Stock Option Committee of the Board of Directors of the COMPANY (the "COMMITTEE") a written notice of exercise, signed by the OPTIONEE, or in the event of the death of the OPTIONEE, by such other person as is entitled to exercise the OPTION. The notice of exercise shall state the number of COMMON SHARES in respect of which the OPTION is being exercised, and shall either be accompanied by the payment of the full OPTION PRICE of such COMMON SHARES, or shall fix a date (not more than 10 business days from the date of the notice) for the payment of the full OPTION PRICE of the COMMON SHARES being purchased. The OPTION PRICE may be paid in cash, or by the transfer by the OPTIONEE to the COMPANY of free and clear COMMON SHARES already owned by the OPTIONEE having a Fair Market Value (as that term is defined in the PLAN) on the exercise date equal to the OPTION PRICE, or by a combination of cash and COMMON SHARES already owned by the OPTIONEE equal in the aggregate to the OPTION PRICE for the COMMON SHARES being purchased. SECTION 3 Adjustments and Changes in the COMMON SHARES subject to the OPTION. In the event there is any change in the COMMON SHARES resulting from stock splits, stock dividends, combinations or exchanges of shares, or other similar capital adjustments, the number of COMMON SHARES subject to the OPTION and the OPTION PRICE of the optioned COMMON SHARES shall be appropriately adjusted to reflect such change. SECTION 4 Non-Assignability of the OPTION. The OPTION shall not be assignable or transferable except, in the event of the death of the OPTIONEE, by the will of the OPTIONEE, or by the laws of descent and distribution. The OPTION shall be exercisable, during the OPTIONEE's lifetime, only by the OPTIONEE. SECTION 5 Exercise After OPTIONEE Ceases to be a Director. Except as otherwise provided in this Section 5, if the OPTIONEE ceases to be a director of a subsidiary of the COMPANY and/or the COMPANY for any reason other than the OPTIONEE's death or due to an act of (i) fraud or intentional misrepresentation, or (ii) embezzlement, misappropriation or conversion of assets or opportunities of the COMPANY or any subsidiary ("Cause"), the OPTION granted to the OPTIONEE under this Agreement may be exercised in full, whether or not then exercisable by its terms, on or before the expiration of the term of the OPTION; provided, however, that if the OPTIONEE shall die prior to the expiration of the term of the OPTION, the OPTION may only be exercised on or before the earlier of the expiration of the OPTION term or two years following the date of death. If the OPTIONEE ceases to be a director of a subsidiary because of death, the OPTION may be exercised in full, whether or not then exercisable by its terms, by the representative or representatives of the OPTIONEE's estate, or the person or persons who acquired (by bequest or inheritance) the rights to exercise the OPTION, only on or before the earlier of the expiration of the term of the OPTION or two years following the date of death. If the OPTIONEE ceases to be a director of a subsidiary of the COMPANY and/or the COMPANY due to Cause, all of his then unexercised OPTIONS shall immediately terminate. SECTION 6 Restrictions on Exercise. Anything contained in this Agreement or elsewhere to the contrary notwithstanding: (A) The OPTION shall not be exercisable for the purchase of any COMMON SHARES subject thereto except for: (i) COMMON SHARES subject thereto which at the time of such exercise and purchase are registered under the Securities Act of 1933, as amended (the "ACT"); and (ii) COMMON SHARES subject thereto which at the time of such exercise and purchase are exempt or are the subject matter of an exempt transaction or are registered by description, by coordination or by qualification, or at such time are the subject matter of a transaction which has been registered by description, all in accordance with Chapter 1707 of the Ohio Revised Code, as amended; and (iii) COMMON SHARES subject thereto in respect of which the laws of any state applicable to such exercise and purchase have been satisfied. (B) If any COMMON SHARES subject to the OPTION are sold or issued upon the exercise thereof to a person who (at the time of such exercise or thereafter) is an affiliate of the COMPANY for purposes of Rule 144 promulgated under the ACT, or are sold and issued in reliance upon exemptions under the securities laws of any state, then upon such sale and issuance: (i) Such COMMON SHARES shall not be transferable by the holder thereof, and neither the COMPANY nor its transfer agent or registrar, if any, shall be required to register or otherwise to give effect to any transfer thereof and may prevent any such transfer, unless the COMPANY shall have received an opinion from its counsel to the effect that any such transfer would not violate the ACT or the applicable laws of any state; and (ii) The COMPANY may cause each share certificate evidencing such COMMON SHARES to bear a legend reflecting the applicable restrictions on the transfer thereof. (C) Any share certificate issued to evidence COMMON SHARES as to which the OPTION has been exercised may bear such legends and statements as the COMPANY shall deem advisable to insure compliance with applicable federal and state laws and regulations. (D) Nothing contained in this Agreement or elsewhere shall be construed to require the COMPANY to take any action whatsoever to make the OPTION exercisable or to make transferable any COMMON SHARES purchased and issued upon the exercise of the OPTION. SECTION 7 Rights of the OPTIONEE as a Shareholder. The OPTIONEE shall have no rights or privileges as a shareholder of the COMPANY with respect to any COMMON SHARES of the COMPANY covered by the OPTION until the date of issuance and delivery of a certificate to the OPTIONEE evidencing such COMMON SHARES. SECTION 8 PLAN as Controlling. All terms and conditions of the PLAN applicable to the OPTION which are not set forth in this Agreement shall be deemed incorporated herein by reference. In the event that any term or condition of this Agreement is inconsistent with the terms and conditions of the PLAN, the PLAN shall be deemed controlling. SECTION 9 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Ohio. SECTION 10 Rights and Remedies Cumulative. All rights and remedies of the COMPANY and of the OPTIONEE enumerated in this Agreement shall be cumulative and, except as expressly provided otherwise in this Agreement, none shall exclude any other rights or remedies allowed by law or in equity, and each of said rights or remedies may be exercised and enforced concurrently. SECTION 11 Captions. The captions contained in this Agreement are included only for convenience of reference and do not define, limit, explain or modify this Agreement or its interpretation, construction or meaning and are no way to be construed as a part of this Agreement. SECTION 12 Notices and Payments. All payments required or permitted to be made under the provisions of this Agreement, and all notices and communications required or permitted to be given or delivered under this Agreement to the COMPANY or to the OPTIONEE, which notices or communications must be in writing, shall be deemed to have been given if delivered by hand, or mailed by first-class mail (postage prepaid), addressed as follows: (A) If to the COMPANY, to: Peoples Bancorp Inc. Attn.: Stock Option Committee 138 Putnam Street P. O. Box 738 Marietta, Ohio 45750-0738 (B) If to the OPTIONEE, to the address of the OPTIONEE set forth at the conclusion of this Agreement. The COMPANY or the OPTIONEE may, by notice given to the other in accordance with this Agreement, designate a different address for making payments required or permitted to be made, and for the giving of notices or other communications, to the party designating such new address. Any payment, notice or other communication required or permitted to be given in accordance with this Agreement shall be deemed to have been given on the date of the postmark stamped on the envelope by the U.S. Postal Service, metered dates not being acceptable, when placed in the U.S. Mail, addressed and mailed as provided in this Agreement. SECTION 13 Severability. If any provision of this Agreement, or the application of any provision hereof to any person or any circumstance shall be determined to be invalid or unenforceable, then such determination shall not affect any other provision of this Agreement or the application of said provision to any other person or circumstance, all of which other provisions shall remain in full force and effect, and it is the intention of each party to this Agreement that if any provision of this Agreement is susceptible of two or more constructions, one of which would render the provision enforceable and the other or others of which would render the provision unenforceable, then the provision shall have the meaning which renders it enforceable. SECTION 14 Number and Gender. When used in this Agreement, the number and gender of each pronoun shall be construed to be such number and gender as the context, circumstances or its antecedent may require. SECTION 15 Entire Agreement. This Agreement constitutes the entire agreement between the COMPANY and the OPTIONEE in respect of the subject matter of this Agreement, and this Agreement supersedes all prior and contemporaneous agreements between the parties hereto in connection with the subject matter of this Agreement. No change, termination or attempted waiver of any of the provisions of this Agreement shall be binding upon any party hereto unless contained in a writing signed by the party to be charged. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed to be effective as of the date first written above. COMPANY: PEOPLES BANCORP INC., an Ohio corporation By:__________________________________ Its:__________________________________ OPTIONEE: _____________________________________ Mr. PBT Director Address City, State Zip Code SSN: XXX-XX-XXXX EX-11 10 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 - ---------- PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 COMPUTATION OF EARNINGS PER SHARE - --------------------------------- Year Ended December 31, ----------------------------------------------- Before After Cumulative Cumulative Effect of Effect of Accounting Accounting Changes Changes 1995 1994 1993* 1993* ----------- ----------- ----------- ----------- PRIMARY EARNINGS PER SHARE - -------------------------- EARNINGS: Net income $6,050,000 $5,748,000 $5,385,000 $5,071,000 COMMON SHARES OUTSTANDING: Weighted average Common Shares outstanding 3,164,705 3,189,946 3,073,358 3,073,358 Net effect of the assumed exercise of stock options based on the treasury stock method 16,163 10,360 3,729 3,729 Total weighted average Common Shares outstanding 3,180,868 3,200,306 3,077,087 3,077,087 ---------- --------- --------- --------- PRIMARY EARNINGS PER SHARE $1.90 $1.80 $1.75 $1.65 ========== ========= ========= ========= FULLY DILUTED EARNINGS PER SHARE - -------------------------------- EARNINGS: Net income $6,050,000 $5,748,000 $5,385,000 $5,071,000 Add: Effect of not having Convertible Subordinated Debenture outstanding net of tax effect 21,000 21,000 ---------- ---------- ---------- ---------- $6,050,000 $5,748,000 $5,406,000 $5,092,000 COMMON SHARES OUTSTANDING: Weighted average Common Shares outstanding 3,164,705 3,189,946 3,073,358 3,073,358 Add: Shares issued assuming conversion of Convertible Debentures at beginning of period 49,102 49,102 Net effect of the assumed exercise of stock options based on the treasury stock method 34,498 13,519 3,729 3,729 ---------- ---------- ---------- ---------- Total weighted average Common Shares outstanding 3,199,203 3,203,465 3,126,189 3,126,189 ---------- ---------- ---------- ---------- FULLY DILUTED EARNINGS PER SHARE $1.89 $1.79 $1.73 $1.63 ========== ========== ========== ========== * Prior years weighted average shares outstanding adjusted for 10% stock dividend issued October 25, 1995, a two-for-one stock split issued April 29, 1994, and a 10% stock dividend issued April 15, 1993. EX-12 11 STATEMENTS OF COMPUTATION OF RATIOS EXHIBIT 12 - ---------- PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 COMPUTATION OF RATIOS - --------------------- NET INCOME PER SHARE Net income/Weighted average common shares outstanding CASH DIVIDENDS PER SHARE Dividends paid/Weighted average common shares outstanding BOOK VALUE PER SHARE Total shareholders' equity/Weighted average common shares outstanding RETURN ON AVERAGE ASSETS Net income/Average assets RETURN ON AVERAGE SHAREHOLDERS' EQUITY Net income/Average shareholders' equity NET INTEREST MARGIN Fully-tax equivalent net interest income/Average earning assets NON-INTEREST EXPENSE TO AVERAGE ASSETS Non-interest expense/Average assets EFFICIENCY RATIO Total expenses/(Net interest income plus non-interest income) AVERAGE LOANS TO AVERAGE DEPOSITS Average gross loans/Average deposits outstanding DIVIDEND PAYOUT RATIO Dividends declared/Net income AVERAGE STOCKHOLDERS' EQUITY TO AVERAGE ASSETS Average stockholders' equity/ Average assets PRIMARY CAPITAL TO PERIOD END TOTAL ASSETS (Stockholders' equity plus allowance for loan losses less intangible assets)/(Period end total assets plus allowance for loan losses less intangible assets) TIER 1 CAPITAL RATIO Shareholders' equity less intangible assets less securities mark-to-market capital reserve ("Tier 1 Capital")/ Risk adjusted assets TOTAL CAPITAL RATIO Tier 1 Capital plus allowance for loan blosses/Risk adjusted assets TIER 1 LEVERAGE RATIO Tier 1 Capital/Total assets NET CHARGE-OFFS TO AVERAGE LOANS (Gross chargeoffs less recoveries)/ Average net loans NONPERFORMING LOANS AS A PERCENTAGE OF PERIOD END LOANS (Nonaccrual loans plus loans past due 90 days or greater plus other real estate owned)/(Gross loans net of unearned interest) ALLOWANCE FOR LOAN LOSSES TO PERIOD END TOTAL LOANS Loan loss reserve/(Gross loans net of unearned interest) EX-13 12 ANNUAL REPORT TO SHAREHOLDERS 12/31/95 SELECTED FINANCIAL DATA The information below under the captions "Operating Data", "Balance Sheet Data" and "Per Share Data" for each of the five years in the period ended December 31, 1995 has been derived from the Consolidated Financial Statements of the Company. (Dollars in thousands, except ratios and per share data) 1995 1994 1993 1992 1991 OPERATING DATA <1> FOR THE YEAR ENDED: Total interest income $ 43,392 $ 36,104 $ 35,311 $ 37,707 $ 39,151 Total interest expense 20,777 15,424 15,263 17,887 22,172 Net interest income 22,615 20,680 20,048 19,820 16,979 Provision for loan losses 1,315 765 1,592 2,387 1,748 Other income 4,157 3,838 3,952 3,514 2,924 Other expenses 16,818 15,672 15,124 14,945 13,547 Net income 6,050 5,748 5,071 4,550 3,615 - -------------------------------------------------------------------------- BALANCE SHEET DATA AT YEAR END: Total assets $543,430 $498,006 $465,373 $468,562 $424,449 Investment securities 131,762 99,419 103,349 112,556 99,963 Net loans 372,800 354,570 315,305 285,448 273,980 Total deposits 429,077 403,819 385,639 401,623 375,027 Long-term borrowings 23,142 23,787 20,331 15,506 6,836 Stockholders' equity 51,474 45,635 42,778 38,497 32,414 - -------------------------------------------------------------------------- SIGNIFICANT RATIOS <1>,<2> Net income to: Average total assets 1.15% 1.20% 1.09% 1.01% 0.85% Average stockholders' equity 12.3 12.9 11.9 11.8 11.7 Average stockholders' equity to average total assets 9.3 9.3 8.8 7.5 7.3 Average loans to average deposits 85.2 85.5 78.4 70.2 71.4 Primary capital to period end total assets 10.4 10.1 10.1 8.9 8.6 Dividend payout ratio 32.2 29.3 29.8 28.0 29.2 - ------------------------------------------------------------------------- PER SHARE DATA <1>,<2>,<3> Net income: Primary $ 1.90 $ 1.80 $ 1.65 $ 1.55 $ 1.36 Fully diluted 4 1.89 1.79 1.63 1.45 1.18 Cash dividends paid 0.62 0.53 0.47 0.44 0.40 Book value at end of period 16.54 14.31 13.37 12.56 12.08 - ------------------------------------------------------------------------- Notes: - ------ <1> 1993 net income and per share information based upon net income after adjustment for cumulative effect of accounting changes of $314,000 or $0.10 per share. <2> Adjusted to reflect a 10% stock dividend issued October 25, 1995, a two-for-one stock split issued April 29, 1994, and a 10% stock dividend issued April 15, 1993. 1995 1994 1993 1992 1991 <3> Primary shares outstanding 3,180,868 3,200,306 3,077,087 2,930,072 2,659,041 Fully diluted shares outstanding 3,199,203 3,203,465 3,126,189 3,233,804 3,250,674 <4> Fully diluted net income per share for 1993, 1992 and 1991 is calculated as if the Subordinated Convertible Debenture were converted as of the issue date, with a corresponding increase from the after-tax reduction in interest expense. COMMON STOCK Return to Investors - ------------------- Management has a vision for Peoples Bancorp. Our goal is to become the financial services leader in all the communities we serve. Achieving this objective will lead to increases in shareholder value. Shareholder return continues to be the most important measure of our financial success. Peoples Bancorp's strong capital base ensures the Company's safety and allows opportunity for growth and expansion. Shareholder return on this investment continues to be a top priority, through both dividends and growth in the market value of the Company's stock. As a result, the Company continues to focus attention on enhancement of net income and earnings per share. Under normal circumstances, as earnings per share increase, the dividends paid per share should follow with a similar increase and have a positive effect on the market value of the Company's common stock. The following graph presents the last six year's annual performance for both earnings per share and dividends per share (data has been restated for stock splits and stock dividends): Dividends per share Earnings per share 1990 $0.37 $1.12 1991 0.40 1.18 1992 0.44 1.45 1993 0.47 1.63 1994 0.53 1.79 1995 0.62 1.89 The Company and its predecessor have paid cash dividends on their Common Stock for over 39 consecutive years and have increased the annual dividend in each of the last 30 years. The Company plans to continue to pay quarterly cash dividends, subject to certain restrictions as described in Note 10 to the audited financial statements. Prior to 1993, the Company's Common Stock was traded on a limited basis in the over-the-counter market. On February 9, 1993, the Company began trading on the Nasdaq National Stock Market (National Association of Securities Dealers Automated Quotation). Nasdaq provides brokers and others with immediate access to the best stock price for the Company and thousands of other companies across the world. The Company can be found under the symbol PEBO. In 1995, there were 567,128 shares traded through the Nasdaq system, an average daily volume of 2,251 shares. The table below sets forth the high and low bid quotations for the indicated periods, and the cash dividends declared, with respect to the Company's Common Stock. Currently eight companies serve as market makers on the Nasdaq National Stock Market on behalf of the Company. Market prices since February 9, 1993, have been obtained directly from the Nasdaq quotation system. The bid quotations and per share dividends have been retroactively adjusted for a 10% stock dividend issued on October 25, 1995, a two-for-one stock split issued on April 29, 1994, and a 10% stock dividend issued April 15, 1993. Peoples Bancorp had 1,024 stockholders of record on December 31, 1995. COMMON STOCK Quarterly Market and Dividend Information - ----------------------------------------- PER SHARE High Bid Low Bid Dividend 1995 Fourth Quarter $ 23.63 $ 22.25 $ 0.17 Third Quarter 22.73 20.00 0.15 Second Quarter 22.05 20.00 0.15 First Quarter 22.73 20.45 0.15 - ----------------------------------------------------------- 1994 Fourth Quarter $ 23.18 $ 21.14 $ 0.14 Third Quarter 22.27 20.00 0.14 Second Quarter 21.82 18.18 0.13 First Quarter 20.45 17.27 0.13 - ----------------------------------------------------------- 1993 Fourth Quarter $ 20.00 $ 17.73 $ 0.13 Third Quarter 21.14 17.27 0.12 Second Quarter 21.36 15.91 0.12 First Quarter 22.32 15.71 0.11 - ----------------------------------------------------------- The following graph represents the closing stock price of the Company's common stock for each of the last six years (adjusted for stock splits and stock dividends): Closing Stock Price ------------------------------ 1990 $ 9.61 1991 11.16 1992 16.12 1993 18.98 1994 21.82 1995 23.625 Stockholders are cordially invited to attend the Annual Meeting of Stockholders of Peoples Bancorp Inc. to be held Tuesday, April 9, 1996 at 10:00 A.M. in the Peoples Bank Conference Room, 138 Putnam Street, Marietta, Ohio. On written request, a copy of our Annual Report to the Securities and Exchange Commission on Form 10-K is available to interested Stockholders. Requests should be addressed to Ruth Otto, Corporate Secretary, Peoples Bancorp Inc., P.O. Box 738, Marietta, Ohio 45750. CONSOLIDATED BALANCE SHEETS December 31, December 31, 1995 1994 ASSETS - ------ Cash and cash equivalents: Cash and due from banks $ 17,251,000 $ 19,551,000 Interest-bearing deposits in other banks 243,000 650,000 Federal funds sold 3,500,000 4,500,000 ------------ ------------ Total cash and cash equivalents 20,994,000 24,701,000 ------------ ------------ Investment securities: Available-for-sale, at estimated fair value (amortized cost of $128,021,000 in 1995 and $91,783,000 in 1994) 131,762,000 90,172,000 Held-to-maturity, at amortized cost (fair value of $9,089,000 in 1994) 9,247,000 ------------ ------------ Total securities 131,762,000 99,419,000 ------------ ------------ Loans, net of unearned interest 379,526,000 361,353,000 Allowance for loan losses (6,726,000) (6,783,000) ------------ ------------ Net loans 372,800,000 354,570,000 ------------ ------------ Bank premises and equipment, net 10,575,000 10,807,000 Other assets 7,299,000 8,509,000 ------------ ------------ Total assets $543,430,000 $498,006,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Deposits: Non-interest bearing $ 50,067,000 $ 48,121,000 Interest bearing 379,010,000 355,698,000 ------------ ------------ Total deposits 429,077,000 403,819,000 ------------ ------------ Short-term borrowings: Federal funds purchased and securities sold under repurchase agreements 12,060,000 9,267,000 Federal Home Loan Bank advances 21,216,000 10,500,000 ------------ ------------ Total short-term borrowings 33,276,000 19,767,000 ------------ ------------ Long-term borrowings 23,142,000 23,787,000 Accrued expenses and other liabilities 6,461,000 4,998,000 ------------ ------------ Total liabilities 491,956,000 452,371,000 ------------ ------------ STOCKHOLDERS' EQUITY - -------------------- Common stock, no par value, 6,000,000 shares authorized - 3,332,598 shares issued in 1995 and 3,020,908 issued in 1994, including shares in treasury 30,898,000 24,326,000 Net unrealized holding gain (loss) on available-for-sale securities, net of deferred taxes 2,469,000 (1,030,000) Retained earnings 21,786,000 24,078,000 ------------ ------------ 55,153,000 47,374,000 Treasury stock, at cost, 220,406 shares in 1995 and 120,970 shares in 1994 (3,679,000) (1,739,000) ------------ ------------ Total stockholders' equity 51,474,000 45,635,000 ------------ ------------ Total liabilities and stockholders' equity $543,430,000 $498,006,000 ============ ============ See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF INCOME Year ended December 31, 1995 1994 1993 INTEREST INCOME: - ---------------- Interest and fees on loans $34,501,000 $28,848,000 $26,645,000 Interest and dividends on: Obligations of U.S. Government and its agencies 5,338,000 4,266,000 5,050,000 Obligations of states and political subdivisions 1,543,000 1,613,000 2,022,000 Other interest income 2,010,000 1,377,000 1,594,000 ----------- ----------- ----------- Total interest income 43,392,000 36,104,000 35,311,000 ----------- ----------- ----------- INTEREST EXPENSE: - ----------------- Interest on deposits 18,384,000 13,616,000 13,855,000 Interest on short-term borrowings 1,010,000 337,000 203,000 Interest on long-term borrowings 1,383,000 1,471,000 1,205,000 ----------- ----------- ----------- Total interest expense 20,777,000 15,424,000 15,263,000 ----------- ----------- ----------- Net interest income 22,615,000 20,680,000 20,048,000 Provision for loan losses 1,315,000 765,000 1,592,000 ----------- ----------- ----------- Net interest income after provision for loan losses 21,300,000 19,915,000 18,456,000 ----------- ----------- ----------- OTHER INCOME: - ------------- Income from fiduciary activities 1,751,000 1,607,000 1,475,000 Service charges on deposit accounts 1,565,000 1,456,000 1,295,000 Gain (loss) on sales of securities 24,000 (237,000) 45,000 Other 817,000 1,012,000 1,137,000 ----------- ----------- ----------- Total other income 4,157,000 3,838,000 3,952,000 ----------- ----------- ----------- OTHER EXPENSES: - --------------- Salaries and employee benefits 7,836,000 6,779,000 6,840,000 Net occupancy 1,126,000 1,040,000 924,000 Equipment 1,241,000 1,205,000 1,091,000 Insurance 656,000 1,038,000 1,057,000 Stationery and other supplies 572,000 619,000 543,000 Taxes other than income taxes 588,000 575,000 565,000 Amortization of excess cost over net assets acquired 159,000 159,000 159,000 Other 4,640,000 4,257,000 3,945,000 ----------- ----------- ----------- Total other expenses 16,818,000 15,672,000 15,124,000 ----------- ----------- ----------- Income before federal income taxes and cumulative effect of accounting changes 8,639,000 8,081,000 7,284,000 ----------- ----------- ----------- FEDERAL INCOME TAXES: - --------------------- Current 2,792,000 2,330,000 2,168,000 Deferred (203,000) 3,000 (269,000) ----------- ----------- ----------- Total federal income taxes 2,589,000 2,333,000 1,899,000 ----------- ----------- ----------- Income before cumulative effect of accounting changes 6,050,000 5,748,000 5,385,000 Cumulative effect of accounting changes, net of applicable taxes (314,000) ----------- ----------- ----------- NET INCOME $ 6,050,000 $ 5,748,000 $ 5,071,000 =========== =========== =========== EARNINGS PER SHARE: - ------------------- Income before cumulative effect of accounting changes: Primary $1.90 $1.80 $1.75 Assuming full dilution $1.89 $1.79 $1.73 Cumulative effect of accounting changes: Primary $0.10 Assuming full dilution $0.10 Net income per share: Primary $1.90 $1.80 $1.65 Assuming full dilution $1.89 $1.79 $1.63 Weighted average number of shares outstanding: Primary 3,180,868 3,200,306 3,077,087 Assuming full dilution 3,199,203 3,203,465 3,126,189 See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Net Unrealized Holding Gain (Loss) on Capital Available- Common Stock in Excess Retained for-Sale Treasury Shares Amount of Par Earnings Securities Stock Total - ----------------------------------------------------------------------------------------------------------------------------- Balance, January 1, 1993 1,309,491 $ 1,309,000 $16,575,000 $21,639,000 $(1,026,000) $38,497,000 - ----------------------------------------------------------------------------------------------------------------------------- Net income 5,071,000 5,071,000 Purchase of treasury stock, 12,316 shares (498,000) (498,000) Conversion of subordinated debentures to common stock 73,532 74,000 1,144,000 1,218,000 10% stock dividend 126,517 126,000 5,062,000 (5,188,000) Conversion from $1.00 par value to no par value 22,781,000 (22,781,000) Cash dividends declared of $0.47 per share (1,510,000) (1,510,000) - ----------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1993 1,509,540 24,290,000 0 20,012,000 (1,524,000) 42,778,000 - ----------------------------------------------------------------------------------------------------------------------------- Adjustment for change in method of accounting, net of taxes $ 3,048,000 3,048,000 Net income 5,748,000 5,748,000 Purchase of treasury stock, 10,488 shares (215,000) (215,000) Two-for-one stock split 1,509,540 Exercise of common stock options 520 5,000 5,000 Issuance of common stock under dividend reinvestment plan 1,308 31,000 31,000 Net change in unrealized gain (loss) on available-for-sale securities (4,078,000) (4,078,000) Cash dividends declared of $0.53 per share (1,682,000) (1,682,000) - ----------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1994 3,020,908 24,326,000 0 24,078,000 (1,030,000) (1,739,000) 45,635,000 - ----------------------------------------------------------------------------------------------------------------------------- Net income 6,050,000 6,050,000 Purchase of treasury stock, 87,340 shares (1,940,000) (1,940,000) 10% stock dividend 302,470 6,394,000 (6,394,000) Exercise of common stock options 2,722 26,000 26,000 Issuance of common stock under dividend reinvestment plan 6,498 152,000 152,000 Net change in unrealized gain (loss) on available-for-sale securities 3,499,000 3,499,000 Cash dividends declared of $0.62 per share (1,948,000) (1,948,000) - ----------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1995 3,332,598 $30,898,000 $ 0 $21,786,000 $ 2,469,000 $(3,679,000) $51,474,000 - -----------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended December 31, 1995 1994 1993 Cash flows from operating activities: - ------------------------------------- Net income $ 6,050,000 $ 5,748,000 $ 5,071,000 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 1,315,000 765,000 1,592,000 (Gain) loss on sale of investment securities (24,000) 237,000 (45,000) Depreciation, amortization, and accretion 1,564,000 1,884,000 1,584,000 (Increase) decrease in interest receivable (480,000) 466,000 Increase (decrease) in interest payable 238,000 185,000 (275,000) Deferred income tax (benefit) expense (203,000) 3,000 (565,000) Deferral of loan origination fees and costs 17,000 410,000 (221,000) Accrual for postretirement benefits 867,000 Other, net 896,000 (91,000) (698,000) - -------------------------------------------------------------------------- Net cash provided by operating activities 9,373,000 9,141,000 7,776,000 - -------------------------------------------------------------------------- Cash flows from investing activities: - ------------------------------------- Net decrease in term interest bearing deposits with banks and federal funds sold 7,468,000 Purchases of available-for-sale securities (52,955,000) (35,659,000) Purchases of held-to-maturity securities (1,230,000) (4,409,000) (29,260,000) Proceeds from sales of available-for-sale securities 1,066,000 23,072,000 Proceeds from maturities of available-for-sale securities 25,337,000 16,479,000 Proceeds from maturities of held-to-maturity securities 803,000 2,025,000 Proceeds from sales of securities held for investment 4,558,000 Proceeds from maturities of securities held for investment 33,402,000 Net increase in loans (19,562,000) (40,576,000) (31,166,000) Expenditures for premises and equipment (1,122,000) (1,142,000) (3,566,000) Proceeds from sales of other real estate owned 77,000 137,000 56,000 - -------------------------------------------------------------------------- Net cash used in investing activities (47,586,000) (40,073,000) (18,508,000) - -------------------------------------------------------------------------- Cash flows from financing activities: - ------------------------------------- Net increase (decrease) in non-interest bearing deposits 1,946,000 3,016,000 (608,000) Net increase (decrease) in interest bearing deposits 23,312,000 15,164,000 (15,376,000) Net increase in short-term borrowings 13,509,000 7,507,000 2,559,000 Proceeds from long-term borrowings 2,500,000 7,700,000 8,000,000 Payments on long-term borrowings (3,145,000) (4,244,000) (1,956,000) Cash dividends paid (1,702,000) (1,623,000) (1,510,000) Purchase of treasury stock (1,940,000) (215,000) (498,000) Proceeds from issuance of common stock 26,000 5,000 - -------------------------------------------------------------------------- Net cash provided by (used in) financing activities 34,506,000 27,310,000 (9,389,000) - -------------------------------------------------------------------------- Net decrease in cash and cash equivalents (3,707,000) (3,622,000) (20,121,000) Cash and cash equivalents at beginning of year 24,701,000 28,323,000 48,444,000 - -------------------------------------------------------------------------- Cash and cash equivalents at end of year $20,994,000 $24,701,000 $28,323,000 - -------------------------------------------------------------------------- Supplemental cash flow information: Interest paid $20,540,000 $15,239,000 $15,538,000 Income taxes paid $ 2,364,000 $ 2,383,000 $ 2,754,000 See notes to consolidated financial statements. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - ---------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The accounting and reporting policies of Peoples Bancorp Inc. and Subsidiaries (the "Company") conform to generally accepted accounting principles and to general practices within the banking industry. The Company considers all of its principal activities to be banking related. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed in the preparation of the financial statements. Certain amounts in the 1994 and 1993 financial statements have been reclassified to conform to the 1995 presentation. Principles of Consolidation: - ---------------------------- The consolidated financial statements include the accounts of Peoples Bancorp Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Cash and Cash Equivalents: - -------------------------- Cash and cash equivalents include cash and due from banks, interest bearing deposits with banks, and federal funds sold, all with original maturities of ninety days or less. Income Recognition: - ------------------- Interest income is recognized by methods which result in level rates of return on principal amounts outstanding. Amortization of premiums has been deducted from and accretion of discounts has been added to the related interest income. Nonrefundable loan fees are deferred and recognized as income over the life of the loan as an adjustment of the yield. Subsidiary banks discontinue the accrual of interest when, in management's opinion, collection of all or a portion of contractual interest has become doubtful, which generally occurs when a loan is 90 days past due. When deemed uncollectible, previously accrued interest recognized in income in the current year is reversed and interest accrued in prior years is charged against the allowance for loan losses. Interest received on non-accrual loans is included in income only if principal recovery is reasonably assured. A non-accrual loan is restored to accrual status when it is brought current, has performed in accordance with contractual terms for a reasonable period of time, and the collectibility of the total contractual principal and interest is no longer in doubt. Investment Securities: - ---------------------- Management determines the appropriate classification of investment securities at the time of purchase. Held-to-maturity securities are those securities that the Company has the positive intent and ability to hold to maturity and are recorded at amortized cost. Available-for-sale securities are those securities that would be available to be sold in the future in response to the Company's liquidity needs, changes in market interest rates, and asset-liability management strategies, among others. Available-for-sale securities are reported at fair value, with unrealized holding gains and losses reported in a separate component of stockholders' equity, net of applicable deferred income taxes. The cost of securities sold is based on the specific identification method. In late 1995, the Financial Accounting Standards Board ("FASB") issued a Special Report, "A Guide to Implementation of Statement of Financial Accounting Standards ("SFAS") No. 115 on Accounting for Certain Investments in Debt and Equity Securities". In accordance with provisions in that Special Report, the Company chose to reclassify all held-to-maturity securities to available-for-sale. At the date of transfer the amortized cost of those securities was $9,644,000 and the unrealized holding gain, net of deferred income taxes, on those securities was $271,000, which is included in stockholders' equity. Allowance for Loan Losses: - -------------------------- The allowance for loan losses is maintained at a level believed adequate by management to absorb potential losses in the loan portfolio. Management's determination of the adequacy of the allowance for loan losses is based on a quarterly evaluation of the portfolio, historical loan loss experience, current national and local economic conditions, volume, growth and composition of the portfolio, and other relevant factors. On January 1, 1995, the Company adopted SFAS No. 114 "Accounting by Creditors for Impairment of a Loan", as amended by SFAS No. 118. The allowance for loan losses related to loans that are identified for evaluation in accordance with SFAS No. 114 is based on discounted cash flows using the loan's initial effective interest rate or the fair value of the collateral for certain collateral dependent loans. Prior to the adoption of SFAS No. 114, the allowance for loan losses related to these loans was based on undiscounted cash flows or the fair value of the collateral on collateral dependent loans. The adoption of this standard did not have a material effect on the Company's financial position, results of operations, accounting policies, or the determination of the adequacy of the allowance for loan losses. Impaired loans at December 31, 1995 and the average investment in impaired loans for the year then ended were immaterial to the financial statements. Bank Premises and Equipment: - ---------------------------- Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets. Other Real Estate: - ------------------ Other real estate owned, included in other assets on the consolidated balance sheet, represents properties acquired by the Company's subsidiary banks in satisfaction of a loan. Real estate is recorded at the lower of cost or fair value based on appraised value at the date actually or constructively received, less estimated costs to sell the property. Excess of Cost Over Net Assets Acquired: - ---------------------------------------- The excess of cost over the fair value of net assets of subsidiary banks acquired is being amortized on a straight-line basis over a ten-year period. Income Taxes: - ------------- Deferred income taxes (included in other assets) are provided for temporary differences between the tax basis of an asset or liability and its reported amount in the financial statements at the statutory tax rate. The Company and its banking subsidiaries file a consolidated federal income tax return and income tax expense is allocated among all companies on a separate return basis. Earnings Per Share: - ------------------- Primary and fully diluted earnings per share are computed by dividing net income by average common shares outstanding during the year plus the dilutive effect of common stock equivalents. Options granted under the Company's stock option plans are considered common stock equivalents for the purpose of computing earnings per share. Fully diluted earnings per share is computed for 1993 and prior years assuming the Subordinated Debentures were converted as of the issue date with a corresponding increase in net income from the after-tax reduction in interest expense. 2. FAIR VALUES OF FINANCIAL INSTRUMENTS: The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments in accordance with SFAS No. 107: Cash and due from banks, interest bearing deposits with banks, and federal funds sold: - -------------------------------------------------------------- The carrying amounts reported in the balance sheet for these captions approximate their fair values. Investment securities: - ---------------------- Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are estimated using quoted market prices of comparable securities. Loans: - ------ For performing variable rate loans that reprice frequently and performing demand loans, with no significant change in credit risk, fair values are based on carrying values. The fair values for certain mortgage loans are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. The fair value of other performing loans (e.g., commercial real estate, commercial and consumer loans) are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair value for significant nonperforming loans is based on either the estimated fair value of underlying collateral or estimated cash flows discounted at a rate commensurate with the risk. Assumptions regarding credit risk, cash flows, and discount rates are determined using available market information and specific borrower information. Deposits: - --------- The carrying amounts of demand deposits, savings accounts and certain money market deposits approximate their fair values. The fair value of fixed maturity certificates of deposit is estimated using a discounted cash flow calculation that applies current rates offered for deposits of similar remaining maturities. Short-term borrowings: - ---------------------- The carrying amounts of federal funds purchased, Federal Home Loan Bank advances, and securities sold under repurchase agreements approximate their fair values. Long-term borrowings: - --------------------- The fair value of long-term borrowings is estimated using discounted cash flow analysis based on rates currently available to the Company for borrowings with similar terms. Financial instruments: - ---------------------- The fair value of loan commitments and standby letters of credit is estimated using the fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the counterparties' credit standing. The estimated fair value of these commitments approximates their carrying value. The fair value of the interest rate floor is based on quotes from other financial institutions. The estimated fair values of the Company's financial instruments are as follows: 1995 1994 Carrying Fair Carrying Fair Amount Value Amount Value FINANCIAL ASSETS: Cash and due from banks, interest bearing deposits with other banks, and federal funds sold $20,994,000 $20,994,000 $24,701,000 $24,701,000 Investment securities 131,762,000 131,762,000 99,419,000 99,261,000 Loans, net 372,800,000 378,612,000 354,570,000 350,817,000 FINANCIAL LIABILITIES: Deposits 429,077,000 430,184,000 403,819,000 402,949,000 Short-term borrowings 33,276,000 33,276,000 19,767,000 19,767,000 Long-term borrowings 23,142,000 23,255,000 23,787,000 22,098,000 OFF-BALANCE SHEET INSTRUMENTS: Interest rate floors $116,000 $751,000 3. INVESTMENT SECURITIES: Effective January 1, 1994, the Company adopted the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities". The effect of this change in accounting principle resulted in an unrealized holding gain of $3,048,000 (net of $1,570,000 in deferred income taxes), for securities classified as available-for-sale effective January 1, 1994, and has been reflected in a separate component of stockholders'equity. The expected maturities presented in the tables below may differ from the contractual maturities because borrowers may have the right to call or prepay obligations without call or prepayment penalties. Rates are calculated on a taxable equivalent basis using a 34% federal income tax rate. The portfolio contains no single issue (excluding U.S. Government and U.S. Agency securities) which exceeds 10% of stockholders' equity. Securities classified as available-for-sale At December 31, 1995: - ------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value U.S. Treasury securities $ 32,295,000 $1,057,000 $ (28,000) $ 33,324,000 U.S. Agency mortgage- backed securities 33,195,000 531,000 (15,000) 33,711,000 Other U.S. Agency securities 6,947,000 262,000 0 7,209,000 ------------ ---------- --------- ------------ Total U.S. Treasury and Agency securities 72,437,000 1,850,000 (43,000) 74,244,000 ------------ ---------- --------- ------------ Obligations of states and political subdivisions 24,879,000 997,000 (16,000) 25,860,000 Other mortgage-backed securities 12,270,000 88,000 (53,000) 12,305,000 Other securities 18,435,000 920,000 (2,000) 19,353,000 ------------ ---------- --------- ------------ Total securities available-for-sale $128,021,000 $3,855,000 $(114,000) $131,762,000 ============ ========== ========== ============ MATURITY DISTRIBUTION OF SECURITIES AVAILABLE-FOR-SALE Contractual maturities at December 31, 1995
Obliga- U.S. tions of Agency Total U.S. states and Other Total mortgage- Other Treasury political mortgage- securities U.S. backed U.S. and sub- backed Other available- Treasury securities Agency Agency divisions securities securities for-sale Within one year - --------------- Amortized cost $ 7,144,000 $ 7,144,000 $ 2,191,000 $ 500,000 $ 9,835,000 Fair Value $ 7,238,000 $ 7,238,000 $ 2,218,000 $ 512,000 $ 9,968,000 Yield 7.47% 7.47% 9.76% 8.45% 8.03% 1 to 5 years - ------------ Amortized cost 23,941,000 $ 600,000 $ 3,703,000 28,244,000 8,989,000 $ 1,018,000 9,783,000 48,034,000 Fair value 24,643,000 $ 610,000 $ 3,809,000 29,062,000 9,406,000 $ 1,015,000 10,072,000 49,555,000 Yield 6.56% 6.74% 7.83% 6.79% 8.95% 5.82% 6.95% 7.17% 5 to 10 years - ------------- Amortized cost 1,210,000 368,000 3,244,000 4,822,000 3,035,000 3,007,000 2,009,000 12,873,000 Fair value 1,443,000 370,000 3,400,000 5,213,000 3,164,000 3,025,000 2,088,000 13,490,000 Yield 7.88% 7.91% 8.02% 7.98% 8.45% 6.26% 6.87% 7.55% Over 10 years - ------------- Amortized cost 32,227,000 32,227,000 10,664,000 8,245,000 6,143,000 57,279,000 Fair value 32,731,000 32,731,000 11,072,000 8,265,000 6,681,000 58,749,000 Yield 7.36% 7.36% 8.11% 6.35% 6.07% 7.22% Total amortized cost $32,295,000 $33,195,000 $ 6,947,000 $72,437,000 $24,879,000 $12,270,000 $18,435,000 $128,021,000 Total fair value $33,324,000 $33,711,000 $ 7,209,000 $74,244,000 $25,860,000 $12,305,000 $19,353,000 $131,762,000 Total yield 6.81% 7.36% 7.92% 7.11% 8.61% 6.32% 6.69% 7.30%
Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value At December 31, 1994: SECURITIES CLASSIFIED AS AVAILABLE-FOR-SALE: - -------------------------------------------- U.S. Treasury securities $ 30,138,000 $ 157,000 $ (577,000) $ 29,718,000 U.S. Agency mortgage- backed securities 10,873,000 16,000 (391,000) 10,498,000 Other U.S. Agency securities 2,223,000 24,000 (8,000) 2,239,000 Obligations of states and political subdivisions 21,624,000 312,000 (233,000) 21,703,000 Other mortgage-backed securities 12,557,000 0 (1,144,000) 11,413,000 Other securities 14,368,000 554,000 (321,000) 14,601,000 ------------ ---------- ----------- ------------ Total securities available-for-sale $ 91,783,000 $1,063,000 $(2,674,000) $ 90,172,000 ------------ ---------- ----------- ------------ SECURITIES CLASSIFIED AS HELD-TO MATURITY: - ------------------------------------------ U.S. Agency mortgage- backed securities $ 992,000 $ 0 $ (38,000) $ 954,000 Other U.S. Agency securities 4,683,000 5,000 (35,000) 4,653,000 Obligations of states and political subdivisions 3,414,000 40,000 (123,000) 3,331,000 Other securities 158,000 0 (7,000) 151,000 ------------ ---------- ----------- ------------ Total securities held-to-maturity $ 9,247,000 $ 45,000 $ (203,000) $ 9,089,000 ============ ========== =========== ============ At December 31, 1993: SECURITIES CLASSIFIED AS HELD FOR INVESTMENT: - --------------------------------------------- Obligations of U.S. Government $ 48,790,000 $2,244,000 $ (12,000) $ 51,022,000 Obligations of U.S. Government agencies 4,809,000 56,000 (3,000) 4,862,000 Government mortgage- backed securities 13,589,000 149,000 (17,000) 13,721,000 Obligations of states and political subdivisions 26,183,000 1,648,000 27,831,000 Other bonds and securities 9,978,000 701,000 (10,000) 10,669,000 ------------ ---------- ----------- ------------ Total securities held for investment $103,349,000 $4,798,000 $ (42,000) $108,105,000 ============ ========== =========== ============ Gross realized gains were $24,000 in 1995. Gross realized gains and realized losses were $126,000 and $363,000, respectively, in 1994. Gross gains on sales of investments of $45,000 were realized in 1993. At December 31, 1995 and 1994, investment securities having a par value of $68,501,000 and $55,570,000, respectively, were pledged to collateralize government and trust department deposits in accordance with federal and state requirements. 4. LOANS: Loans are comprised of the following at December 31: 1995 1994 Commercial, financial, and agricultural $ 117,306,000 $ 117,015,000 Real estate, construction 5,919,000 2,528,000 Real estate, mortgage 154,469,000 150,289,000 Consumer 101,832,000 91,521,000 ------------- ------------- Total loans $ 379,526,000 $ 361,353,000 ============= ============= Changes in the allowance for loan losses for each of the three years in the period ended December 31, 1995, were as follows: 1995 1994 1993 Balance, beginning of year $6,783,000 $6,370,000 $5,687,000 Charge-offs (1,803,000) (1,124,000) (1,203,000) Recoveries 431,000 772,000 294,000 ---------- ---------- ---------- Net charge-offs (1,372,000) (352,000) (909,000) Provision for loan losses 1,315,000 765,000 1,592,000 ---------- ---------- ---------- Balance, end of year $6,726,000 $6,783,000 $6,370,000 ========== ========== ========== The Company's lending is primarily focused in the local southeastern Ohio market and consists principally of retail lending, which includes single-family residential mortgages and other consumer lending. The Company's largest group of business loans consists of automobile dealer floor plans, which totaled $16,455,000 and $19,238,000 at December 31, 1995 and 1994, respectively. It is the Company's policy to obtain the underlying inventory as collateral on these loans. The Company does not extend credit to any single borrower or group of related borrowers in excess of the combined legal lending limits of its subsidiary banks. In the normal course of its business, the subsidiary banks have granted loans to executive officers and directors of the Company and to their associates. Related party loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with unrelated persons and did not involve more than normal risk of collectibility. The following is an analysis of activity of related party loans for the year ended December 31, 1995: Balance, January 1, 1995 $11,374,000 New loans 3,747,000 Repayments 2,866,000 ----------- Balance, December 31, 1995 $12,255,000 =========== The balance at December 31, 1995, includes $2,041,000 of loans to one of the Company's directors which are considered by management to be potential problem loans. The credit risk associated with these loans has been considered by management in the Company's determination of the overall adequacy of the allowance for loan losses. 5. BANK PREMISES AND EQUIPMENT: The major categories of bank premises and equipment and accumulated depreciation are summarized as follows at December 31: 1995 1994 Land $ 1,607,000 $ 1,592,000 Building and premises 10,341,000 10,078,000 Furniture, fixtures and equipment 7,274,000 6,856,000 ------------ ------------ 19,222,000 18,526,000 Accumulated depreciation 8,647,000 7,719,000 ------------ ------------ Net book value $ 10,575,000 $ 10,807,000 ============ ============ Depreciation expense was $1,230,000, $1,110,000 and $906,000 for the years ended December 31, 1995, 1994 and 1993, respectively. The Company leases a banking facility and equipment under various agreements with original terms providing for fixed monthly payments over periods ranging from two to ten years. The future minimum payments, by year and in the aggregate, under noncancelable operating leases with initial or remaining terms of one year or more consisted of the following at December 31, 1995: Year Ending December 31, Operating Leases 1996 $ 120,000 1997 120,000 1998 113,000 1999 64,000 2000 6,000 Thereafter 3,000 --------- Total minimum lease payments $ 426,000 ========= Rent expense was $170,000, $181,000 and $149,000 in 1995, 1994 and 1993, respectively. 6. LONG-TERM BORROWINGS: Long-term borrowings consisted of the following at December 31: 1995 1994 Term note payable, at prime (8.5% at December 31, 1995) $ 1,560,000 $ 1,820,000 Federal Home Loan Bank advances, bearing interest at rates ranging from 4.15% to 7.00% 21,582,000 21,967,000 ------------ ------------ Total long-term borrowings $ 23,142,000 $ 23,787,000 ============ ============ The term note payable is due on December 31, 1996, with interest payable quarterly. The Note Agreement is collateralized by all of the common stock of a wholly-owned subsidiary and places certain restrictive covenants on the Company, including the maintenance of tangible net worth and the incurrence of additional indebtedness. The Federal Home Loan Bank ("FHLB") advances consist of various borrowings with maturities ranging from 10 to 15 years. The advances are collateralized by the Company's real estate mortgage portfolio and all of the FHLB common stock owned by the banking subsidiaries. The most restrictive requirement of the debt agreement requires the Company to provide real estate mortgage loans as collateral in an amount not less than 150% of advances outstanding. The aggregate minimum annual retirements of long-term borrowings in the next five years and thereafter are as follows: 1996 $ 4,611,000 1997 2,372,000 1998 4,521,000 1999 2,145,000 2000 2,276,000 Thereafter 7,217,000 ------------ Total long-term borrowings $ 23,142,000 ============ 7. EMPLOYEE BENEFIT PLANS: The Company has a noncontributory defined benefit pension plan which covers substantially all employees. The plan provides benefits based on an employee's years of service and compensation. The Company's funding policy is to contribute annually an amount that can be deducted for federal income tax purposes. Net pension cost included the following components: 1995 1994 1993 Service cost-benefits earned during the year $ 254,000 $ 260,000 $ 243,000 Interest cost on projected benefit obligations 444,000 401,000 388,000 Actual return on plan assets (831,000) (414,000) (411,000) Early retirement benefits 777,000 Net amortization and deferral 381,000 (13,000) (11,000) ---------- --------- --------- Net pension cost $1,025,000 $ 234,000 $ 209,000 ========== ========= ========= The following table sets forth the funded status and amounts recognized for the defined benefit pension plan in the consolidated balance sheets at December 31: 1995 1994 Actuarial present value of accumulated benefit obligations: Vested benefits $ 5,555,000 $ 3,958,000 Nonvested benefits 186,000 142,000 ----------- ----------- Accumulated benefit obligation 5,741,000 4,100,000 Impact of future salary increases 1,164,000 1,105,000 ----------- ----------- Actuarial present value of projected benefit obligation for service rendered to date 6,905,000 5,205,000 Plan assets at fair value, primarily U.S. Government obligations and collective investment stock and bond funds 5,460,000 4,693,000 ----------- ----------- Projected benefit obligations in excess of plan assets (1,445,000) (512,000) Unrecognized prior service cost (82,000) (92,000) Unrecognized net gain from past experience different from that assumed and effects of changes in assumptions (171,000) (404,000) Unrecognized net transition asset (59,000) (62,000) ----------- ----------- Accrued pension cost included in other liabilities $(1,757,000) $(1,070,000) =========== =========== The rates used in determining the actuarial present value of the projected benefit obligation were as follows: 1995 1994 1993 Discount rate 7.50% 8.50% 7.25% Rate of increase in compensations levels 4.00% 5.00% 4.50% Long-term rate of return on assets 9.00% 8.50% 8.50% The unrecognized net gain decreased in 1995 due to the change in the discount rate. In late 1995, the Company offered a voluntary early retirement program to a select group of employees who met certain qualifications. All employees eligible for the early retirement program accepted the offer and the Company incurred $777,000 in additional expense. The Company has a contributory defined benefit postretirement plan for former employees who were retired as of December 31, 1992. The plan provides for health and life insurance benefits. The Company's policy is to fund the cost of the benefits as they are incurred. On January 1, 1993, the Company adopted SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" which requires the accrual of the expected costs of providing postretirement benefits during the period of employee service. The Company recognized the cumulative effect of its transition obligation of $583,000, net of taxes, as a decrease in income in 1993. The net periodic postretirement benefit cost, which relates primarily to interest cost, was $65,000, $68,000, and $74,000 for 1995, 1994, and 1993, respectively. The following table sets forth the funded status and amounts recognized in the consolidated balance sheets at December 31: 1995 1994 Accumulated postretirement benefit obligation $ (857,000) $ (875,000) Unrecognized net gain 1,000 9,000 Accrued postretirement benefit cost included in other liabilities $ (856,000) $ (866,000) The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.50% at December 31, 1995 and 8.50% at December 31, 1994. The weighted average annual assumed rate of increase in the per capita cost of covered benefits (i.e. health care cost trend rate) is 9% for 1996, grading down 1% per year to an ultimate rate of 5%. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rates by one percentage point each year would increase the accumulated benefit obligation for the plan at December 31, 1995, by $103,000 and the net periodic postretirement benefit cost in 1995 by $8,000. 8. FEDERAL INCOME TAXES: The effective federal income tax rate in the consolidated statement of income is less than the statutory corporate tax rate due to the following: Year ended December 31 1995 1994 1993 Statutory corporate tax rate 34.0% 34.0% 34.0% Differences in rate resulting from: Interest on obligations of state and political subdivisions (5.0) (5.8) (7.9) Other, net 1.0 0.7 ------ ------ ------ 30.0% 28.9% 26.1% ====== ====== ====== The significant components of the Company's deferred tax assets and liabilities consisted of the following at December 31: 1995 1994 Deferred tax assets: - -------------------- Allowance for loan losses $ 1,709,000 $ 1,784,000 Accrued employee benefits 991,000 659,000 Available-for-sale securities 531,000 Deferred loan fees and costs 333,000 328,000 Other 211,000 257,000 ----------- ----------- Total deferred tax assets 3,244,000 3,559,000 Deferred tax liabilities: - ------------------------- Available-for-sale securities 1,272,000 Bank premises and equipment 546,000 468,000 Other 446,000 511,000 ----------- ----------- Total deferred tax liabilities 2,264,000 979,000 ----------- ----------- Net deferred tax assets $ 980,000 $ 2,580,000 =========== =========== The related federal income tax expense (benefit) on securities transactions approximated $8,000 in 1995, $(81,000) in 1994, and $15,000 in 1993. On January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes", which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company recognized the cumulative effect of this change in accounting of $269,000 as an increase in income in 1993. 9. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK: In the normal course of business, the Company is party to financial instruments with off-balance sheet risk necessary to meet the financing needs of customers and to manage its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, standby letters of credit, and interest rate floors. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. The contract or notional amounts of these instruments express the extent of involvement the Company has in these financial instruments. Loan Commitments and Standby Letters of Credit: - ----------------------------------------------- Loan commitments are made to accommodate the financial needs of the Company's customers. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. Historically, most loan commitments and standby letters of credit expire unused. The Company's exposure to credit loss in the event of nonperformance by the counter-party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The amount of collateral obtained is based on management's credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties. The total amounts of loan commitments and standby letters of credit are summarized as follows at December 31: Contract Amount 1995 1994 Loan commitments $36,106,000 $ 30,966,000 Standby letters of credit 2,116,000 2,083,000 Unused credit card limits 14,582,000 13,408,000 Interest Rate Floors: - --------------------- In February, 1995, the Company entered into several interest rate floor contracts with two unaffiliated financial institutions as a means of managing the risks of changing interest rates. Interest rate floors are agreements to receive payments for interest rate differentials between an index rate and a specified floor rate, computed on notional amounts. The Company is subject to the risk that the effect of changes in interest rates will cause the Company to earn less than the then current market rates on its assets. These interest rate floors subject the Company to the risk that the counter-parties may fail to perform. In order to minimize such risk, the Company deals only with high-quality, financially secure financial institutions. The exposure to credit risk is significantly less than the notional amounts of $20,000,000 since the Company will only receive the interest rate differential. These interest rate contracts expire in February, 1998. 10. REGULATORY MATTERS: The primary source of funds for the dividends paid by the Company is dividends received from its banking subsidiaries. The payment of dividends by banking subsidiaries is subject to various banking regulations. The most restrictive provision requires regulatory approval if dividends declared in any calendar year exceed the total net profits of that year plus the retained net profits of the preceding two years. At December 31, 1995, approximately $6,780,000 of retained net profits of the banking subsidiaries were available for the payment of dividends to Peoples Bancorp Inc. without regulatory approval. The Company's banking subsidiaries are required to maintain minimum amounts of capital to total "risk weighted" assets, as defined by the banking regulations. At December 31, 1995 the banking subsidiaries are required to have minimum Tier 1 and total capital ratios of 4% and 8%, respectively. The banking subsidiaries' actual ratios at that date were in excess of these stated minimums. 11. FEDERAL RESERVE REQUIREMENTS: The subsidiary banks are required to maintain average reserve balances with the Federal Reserve Bank. The Reserve requirement is calculated on a percentage of total deposit liabilities and averaged $6,371,000 for the year ended December 31, 1995. 12. BRANCH ACQUISITIONS: In December 1995, the Company entered into a definitive agreement to assume approximately $75 million in deposit liabilities from an unaffiliated institution. In the agreement, the Company will also acquire three full-service banking offices in the cities of Pomeroy, Gallipolis, and Rutland, Ohio. Pending regulatory approval, the acquisition is expected to close during the first half of 1996 and is expected to be accounted for under the purchase method. 13. CHANGES IN CAPITAL STRUCTURE: On August 22, 1995, the Company declared a 10% stock dividend issued on October 25, 1995 to shareholders of record as of October 10, 1995. On March 24, 1994, the Company declared a two-for-one stock split issued on April 29, 1994 to shareholders of record as of April 15, 1994. On January 25, 1993, the Company declared a ten percent stock dividend issued on April 15, 1993 to shareholders of record as of April 1, 1993. All per share information in the accompanying consolidated financial statements has been adjusted to give retroactive effect to these stock transactions. 14. STOCK OPTIONS: The Company's stock option plans provide for the granting of both incentive stock options and non-qualified stock options of up to 352,000 shares of common stock. Under the provisions of the plans, the option price per share shall not be less than the fair market value of the common stock on the date of grant of such option. All granted options vest in periods ranging from six months to six years and expire 10 years from the date of grant. Activity in the plans is summarized as follows: 1995 1994 Number Option Number Option of shares price of shares price Non-qualified stock options - --------------------------- Outstanding at beginning of year 18,150 $17.73-20.00 17,710 $ 18.64 Granted 27,402 20.45-21.36 2,860 17.73-20.00 Exercised 242 18.64 Canceled 2,178 18.64 ------- ------------ ------- ------------ Outstanding at end of year 45,552 17.73-21.36 18,150 17.73-20.00 ======= ============ ======= ============ Exercisable at end of year 24,798 $17.73-21.36 6,908 $17.73-20.00 ======= ============ ======= ============ Incentive stock options - ----------------------- Outstanding at beginning of year 188,650 $15.91-21.25 41,800 $ 15.91 Granted 150,150 21.25 Exercised 4,956 15.91 1,100 15.91 Canceled 2,200 15.91 ------- ------------ ------- ------------ Outstanding at end of year 183,694 15.91-21.25 188,650 15.91-21.25 ======= ============ ======= ============ Exercisable at end of year 45,094 $15.91-21.25 38,500 $ 15.91 ======= ============ ======= ============ In November, 1995, the FASB issued SFAS No. 123, "Accounting for Stock Based Compensation", which is effective for fiscal years beginning after December 15, 1995. SFAS No. 123 requires companies to estimate a fair value for stock options at the date of grant and recognize the related expense over the applicable service period. SFAS No. 123 provides companies with the option of continuing to account for stock based compensation under APB Opinion No. 25, "Accounting for Stock Issued to Employees", or applying the provisions of SFAS No. 123. The Company has decided to continue to apply the provisions of APB No. 25 to account for stock based compensation. 15. PARENT COMPANY ONLY FINANCIAL INFORMATION: December 31, 1995 1994 CONDENSED BALANCE SHEETS Assets: - ------- Cash $ 20,000 $ 20,000 Interest bearing deposits in subsidiary bank 533,000 636,000 Receivable from subsidiary bank 969,000 2,012,000 Investment securities: Available-for-sale (amortized cost of $1,098,000 and $757,000 at December 31, 1995 and 1994, respectively) 1,636,000 1,261,000 Capital note receivable from subsidiary bank 3,000,000 3,000,000 Investments in subsidiaries: Banks 46,299,000 39,651,000 Non-banks 1,065,000 976,000 Excess cost over net assets acquired 967,000 1,104,000 Other 906,000 709,000 ----------- ----------- Total assets $55,395,000 $49,369,000 =========== =========== Liabilities: - ------------ Accrued pension $ 1,757,000 $ 1,070,000 Accrued interest payable and other accrued expenses 75,000 409,000 Dividends payable 529,000 435,000 Long-term borrowings 1,560,000 1,820,000 ----------- ----------- Total liabilities 3,921,000 3,734,000 ----------- ----------- Stockholders' equity 51,474,000 45,635,000 ----------- ----------- Total liabilities and stockholders' equity $55,395,000 $49,369,000 =========== =========== Year ended December 31, 1995 1994 1993 CONSOLIDATED STATEMENTS OF INCOME Income: - ------- Dividends from subsidiary banks $3,415,000 $2,280,000 $5,080,000 Dividends from other subsidiaries 50,000 40,000 50,000 Interest 393,000 301,000 58,000 Management fees from subsidiaries 907,000 818,000 770,000 Other 69,000 123,000 110,000 ---------- ---------- ---------- Total income 4,834,000 3,562,000 6,068,000 Expenses: - --------- Salaries and benefits 1,183,000 948,000 848,000 Interest 148,000 141,000 169,000 Other 764,000 549,000 709,000 ---------- ---------- ---------- Total expenses 2,095,000 1,638,000 1,726,000 Income before federal income taxes and equity in undistributed earnings of subsidiaries 2,739,000 1,924,000 4,342,000 Applicable income tax benefit (200,000) (100,000) (231,000) Equity in undistributed earnings of subsidiaries 3,111,000 3,724,000 498,000 ---------- ---------- ---------- Net income $6,050,000 $5,748,000 $5,071,000 ========== ========== ========== Year ended December 31, 1995 1994 1993 STATEMENTS OF CASH FLOWS Cash flows from operating activities: - ------------------------------------- Net income $6,050,000 $5,748,000 $5,071,000 Adjustment to reconcile net income to cash provided by operations: Amortization and depreciation 179,000 134,000 265,000 Equity in undistributed earnings of subsidiaries (3,111,000) (3,724,000) (498,000) Other, net. 189,000 1,103,000 115,000 - -------------------------------------------------------------------------- Net cash provided by operating activities 3,307,000 3,261,000 4,953,000 - -------------------------------------------------------------------------- Cash flows from investing activities: - ------------------------------------- Purchase of investment securities (340,000) (188,000) Expenditures for premises and equipment (87,000) (46,000) (20,000) Investment in subsidiaries (150,000) Capital note receivable from subsidiary bank (3,000,000) - -------------------------------------------------------------------------- Net cash used in investing activities (577,000) (234,000) (3,020,000) - -------------------------------------------------------------------------- Cash flows from financing activities: - ------------------------------------- Payments on long-term borrowings (260,000) (260,000) (276,000) Purchase of treasury stock (1,940,000) (215,000) (498,000) Change in receivable from subsidiary 1,043,000 (406,000) 159,000 Proceeds from issuance of common stock 26,000 5,000 Cash dividends paid (1,702,000) (1,623,000) (1,510,000) - -------------------------------------------------------------------------- Net cash used in financing activities (2,833,000) (2,499,000) (2,125,000) - -------------------------------------------------------------------------- Net (decrease) increase in cash (103,000) 528,000 (192,000) Cash and cash equivalents at the beginning of the year 656,000 128,000 320,000 - -------------------------------------------------------------------------- Cash and cash equivalents at the end of the year $ 553,000 $ 656,000 $ 128,000 ========================================================================== The parent company paid interest totaling $148,000, $141,000 and $185,000 during the years ended December 31, 1995, 1994 and 1993, respectively. 16. SUMMARIZED QUARTERLY INFORMATION (UNAUDITED): A summary of selected quarterly financial information for 1995 and 1994 follows: 1995 ---------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter Interest income $10,099,000 $10,780,000 $11,086,000 $11,427,000 Interest expense 4,616,000 5,228,000 5,476,000 5,457,000 Net interest income 5,483,000 5,552,000 5,610,000 5,970,000 Provision for possible loan losses 285,000 310,000 360,000 360,000 Investment securities gains 0 0 17,000 7,000 Other income 1,006,000 1,028,000 1,103,000 996,000 Other expenses 4,067,000 4,082,000 4,038,000 4,631,000 Income taxes 651,000 654,000 722,000 562,000 Net income 1,486,000 1,534,000 1,610,000 1,420,000 Earnings per share assuming full dilution $0.46 $0.48 $0.51 $0.45 1994 --------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter Interest income $ 8,497,000 $ 8,645,000 $ 9,146,000 $ 9,816,000 Interest expense 3,620,000 3,654,000 3,930,000 4,220,000 Net interest income 4,877,000 4,991,000 5,216,000 5,596,000 Provision for possible loan losses 192,000 248,000 167,000 158,000 Investment securities gains (losses) 81,000 45,000 0 (363,000) Other income 1,029,000 951,000 970,000 1,125,000 Other expenses 3,911,000 3,871,000 3,919,000 3,971,000 Income taxes 578,000 556,000 628,000 571,000 Net income 1,306,000 1,312,000 1,472,000 1,658,000 Earnings per share assuming full dilution $0.41 $0.41 $0.46 $0.51 REPORT OF INDEPENDENT AUDITORS - ------------------------------ To the Stockholders and Board of Directors: We have audited the accompanying consolidated balance sheet of Peoples Bancorp Inc. and Subsidiaries as of December 31, 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Peoples Bancorp Inc. and Subsidiaries for the years ended December 31, 1994 and 1993, were audited by other auditors whose report dated January 26, 1995, expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Peoples Bancorp Inc. and Subsidiaries at December 31, 1995 and the consolidated results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP Ernst & Young LLP Charleston, West Virginia January 25, 1996
AVERAGE BALANCES AND ANALYSIS OF NET INTEREST INCOME (Dollars in Thousands) 1995 1994 1993 Average Average Average Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate Balance Expense Rate Securities : - --------------------- Taxable $ 95,056 $ 6,633 7.0% $ 77,811 $ 5,229 6.7% $ 79,086 $ 5,959 7.5% Nontaxable (2) 23,761 2,117 8.9% 23,647 2,278 9.6% 26,895 2,608 9.7% -------- ------- ----- -------- ------- ----- -------- ------- ----- Total 118,817 8,750 7.4% 101,458 7,507 7.4% 105,981 8,567 8.1% -------- ------- ----- -------- ------- ----- -------- ------- ----- Loans (3) (4): - -------------- Commercial 113,782 11,254 9.9% 105,290 8,896 8.5% 96,262 7,962 8.3% Real estate 156,598 13,657 8.7% 146,966 12,311 8.4% 135,612 11,492 8.5% Consumer 96,604 9,618 10.0% 85,219 7,645 9.0% 74,408 7,191 9.7% Valuation reserve (6,719) (6,680) (6,095) -------- ------- ----- -------- ------- ----- -------- ------- ----- Total 360,265 34,529 9.6% 330,795 28,852 8.7% 300,187 26,645 8.9% -------- ------- ----- -------- ------- ----- -------- ------- ----- Money Market: - ------------- Interest-bearin deposits 526 22 4.2% 1,734 66 3.8% 8,562 209 2.4% Federal funds sold 13,464 796 5.9% 10,615 422 4.0% 17,706 623 3.5% -------- ------- ----- -------- ------- ----- -------- ------- ----- Total 13,990 818 5.8% 12,349 488 4.0% 26,268 832 3.2% -------- ------- ----- -------- ------- ----- -------- ------- ----- Total earning assets 493,072 44,097 8.9% 444,602 36,847 8.3% 432,436 36,044 8.3% -------- ------- ----- -------- ------- ----- -------- ------- ----- Other assets 34,910 35,422 32,580 -------- -------- -------- Total assets $527,982 $480,024 $465,016 -------- -------- -------- Deposits: - --------- Savings $ 68,867 2,307 3.4% $ 75,422 2,106 2.8% $ 72,999 2,107 2.9% Interest-bearing demand 92,280 3,228 3.5% 85,326 2,212 2.6% 80,100 1,998 2.5% Time 222,898 12,849 5.8% 187,842 9,298 4.9% 196,374 9,750 5.0% -------- ------- ----- -------- ------- ----- -------- ------- ----- Total 384,045 18,384 4.8% 348,590 13,616 3.9% 349,473 13,855 4.0% Borrowed Funds: - --------------- Short-term 19,993 1,010 5.1% 10,953 337 3.1% 9,186 203 2.2% Long-term 22,612 1,383 6.1% 24,614 1,471 6.0% 19,611 1,205 6.1% -------- ------- ----- -------- ------- ----- -------- ------- ----- Total 42,605 2,393 5.6% 35,567 1,808 5.1% 28,797 1,408 4.9% -------- ------- ----- -------- ------- ----- -------- ------- ----- Total interest- bearing liabilities 426,650 20,777 4.9% 384,157 15,424 4.0% 378,270 15,263 4.0% -------- ------- ----- -------- ------- ----- -------- ------- ----- Noninterest-bearing demand deposits 46,876 46,224 41,621 Other liabilities 5,396 5,029 4,320 -------- -------- -------- Total liabilities 478,922 435,410 424,211 Stockholders' equity 49,060 44,614 40,805 Total liabilities -------- -------- -------- and stockholders' equity $527,982 $480,024 $465,016 ======== ======== ======== Interest rate spread $23,320 4.0% $21,423 4.3% $20,781 4.3% ------- ----- ------- ----- ------- ----- Interest revenue/earning assets 8.9% 8.3% 8.3% Interest expense/earning assets 4.2% 3.5% 3.5% Net yield on earning ----- ----- ----- assets (net interest margin) 4.7% 4.8% 4.8% ===== ===== ===== Average balances of investment securities based on historical cost. Computed on a fully tax equivalent basis using a tax rate of 34%. Interest income was increased by $705,000, $743,000 and $733,000 for 1995, 1994 and 1993, respectively. Nonaccrual and impaired loans are included in the average balances listed. Related interest income on nonaccrual loans prior to the loan being put on nonaccrual status is included in loan interest income. At December 31, 1995, 1994 and 1993, nonaccrual loans outstanding were $482,000, $902,000 and $1,416,000, respectively. Loan fees included in interest income for 1995, 1994 and 1993 were $741,000, $659,000 and $558,000, respectively.
RATE VOLUME ANALYSIS/MATURITIES TABLES Rate Volume Analysis - -------------------- (Dollars in Thousands) Change in Income/Expense Rate Effect Volume Effect 1995 1994 1993 1995 1994 1993 1995 1994 1993 Investment income: - ------------------ Taxable $ 1,404 $ (730) $ (419) $ 207 $ (635) $ (225) $ 1,197 $ (95) $ (194) Nontaxable (161) (330) (266) (172) (17) (26) 11 (313) (240) ------- ------- ------- ------- ------- ------- ------- ------- ------- Total 1,243 (1,060) (685) 35 (652) (251) 1,208 (408) (434) Loan income: - ------------ Commercial 2,358 934 (80) 1,601 174 (1,200) 757 760 1,120 Real estate 1,346 819 (824) 519 (133) (645) 827 952 (179) Consumer 1,973 454 (239) 890 (541) (721) 1,083 995 482 ------- ------- ------- ------- ------- ------- ------- ------- ------- Total 5,677 2,207 (1,143) 3,010 (500) (2,566) 2,667 2,707 1,423 ------- ------- ------- ------- ------- ------- ------- ------- ------- Money market funds 330 (344) (655) 247 151 (583) 83 (495) (72) ------- ------- ------- ------- ------- ------- ------- ------- ------- Total interest income 7,250 803 (2,483) 3,292 (1,001) (3,400) 3,958 1,804 917 ======= ======= ======= ======= ======= ======== ======= ======== ======== Interest expense: - ----------------- Savings 201 (1) (88) 395 (70) (454) (194) 69 366 Interest-bearing demand deposits 1,016 214 (312) 824 80 (496) 192 134 184 Time 3,551 (452) (2,931) 1,665 (30) (1,422) 1,886 (422) (1,509) Short-term borrowings 673 134 (59) 294 90 (53) 379 44 (6) Long-term borrowings (88) 266 766 33 (34) (40) (121) 300 806 ------- ------- ------- ------- ------- ------- ------- ------- ------- Total interest expense 5,353 161 (2,624) 3,211 36 (2,465) 2,142 125 (159) ======= ======= ======== ======= ======= ======== ======= ======= ======= $ 1,897 $ 642 $ 141 $ 81 $(1,037) $ (935) $ 1,816 $ 1,679 $ 1,076 ======= ======= ======= ======= ======= ======= ======= ======= ======= The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the dollar amounts of the change in each.
LOAN MATURITIES AT DECEMBER 31, 1995 - ------------------------------------ Due in Due in One Year Due One Year Through After or Less Five Years Five Years Total LOAN TYPE Commercial loans: - ----------------- Fixed $ 3,617 $ 6,927 $ 6,026 $ 16,570 Variable 27,870 13,025 59,841 100,736 -------- -------- -------- -------- 31,487 19,952 65,867 117,306 Real estate loans: - ------------------ Fixed 1,280 4,145 32,716 38,141 Variable 1,173 13,351 107,723 122,247 -------- -------- -------- -------- 2,453 17,496 140,439 160,388 Consumer loans: - --------------- Fixed 4,059 77,665 10,567 92,291 Variable 272 8,068 1,201 9,541 -------- -------- -------- -------- 4,331 85,733 11,768 101,832 -------- -------- -------- -------- Total $ 38,271 $123,181 $218,074 $379,526 ======== ======== ======== ======== MATURITIES OF CERTIFICATES OF DEPOSIT OVER $100,000 AT DECEMBER 31: - ------------------------------------------------------------------- 1995 1994 1993 1992 Under 3 months $18,662 $5,657 $5,761 $7,810 3 to 6 months 9,319 2,149 2,241 5,957 6 to 12 months 5,140 5,868 2,859 2,109 Over 12 months 8,266 12,695 6,939 7,291 -------- -------- -------- -------- Total $41,387 $26,369 $17,800 $23,167 ======== ======== ======== ======== LOAN PORTFOLIO ANALYSIS (Dollars in thousands) 1995 1994 1993 1992 1991 Year-end balances: - ------------------ Commercial, financial and agricultural $117,306 $117,015 $101,633 $91,138 $61,594 Real estate 154,469 150,289 135,704 125,586 140,600 Real estate construction 5,919 2,528 5,421 4,514 6,560 Consumer 95,464 86,098 74,775 66,129 65,714 Credit card 6,368 5,423 4,142 3,768 3,785 -------- -------- -------- -------- -------- Total $379,526 $361,353 $321,675 $291,135 $278,253 ======== ======== ======== ======== ======== Average total loans $366,984 $337,475 $306,282 $291,033 $270,213 Average allowance for loan losses (6,719) (6,680) (6,095) (5,298) (3,945) Average loans, -------- -------- -------- -------- -------- net of allowance $360,265 $330,795 $300,187 $285,735 $266,268 ======== ======== ======== ======== ======== Allowance for loan losses, January 1 $6,783 $6,370 $5,687 $4,273 $4,086 Allowance for loan losses of acquired branch 721 Loans charged off: - ------------------ Commercial, financial and agricultural 256 39 193 1,163 572 Real estate 82 189 143 295 401 Consumer 1,352 842 816 826 1,002 Credit card 113 54 51 33 62 ------- ------ ------ ------ ------ Total 1,803 1,124 1,203 2,317 2,037 ------- ------ ------ ------ ------ Recoveries: - ----------- Commercial, financial and agricultural 111 392 60 241 91 Real estate 60 61 65 110 25 Consumer 251 304 157 267 354 Credit card 9 15 12 5 6 ------- ------ ------ ------ ------ Total 431 772 294 623 476 ------- ------ ------ ------ ------ Net chargeoffs: - --------------- Commercial, financial and agricultural 145 (353) 133 922 481 Real estate 22 128 78 185 376 Consumer 1,101 538 659 559 648 Credit card 104 39 39 28 56 ------ ----- ------ ------ ------ Total 1,372 352 909 1,694 1,561 ------ ----- ------ ------ ------ Provision for loan losses 1,315 765 1,592 2,387 1,748 ------ ----- ------ ------ ------ Allowance for loan losses, December 31 $6,726 $6,783 $6,370 $5,687 $4,273 ====== ====== ====== ====== ====== Allocation of allowance for loan losses at December 31: - ------------------------------------------------------- Commercial $3,440 $3,281 $3,185 $2,651 $1,797 Real estate 1,517 1,828 2,000 1,189 1,108 Consumer 1,519 1,096 987 602 454 Credit card 100 89 166 45 45 Unallocated 150 489 32 1,200 869 -------- ------- ------- -------- -------- Total $6,726 $6,783 $6,370 $5,687 $4,273 ======== ======= ======= ======== ======== Percent of loans to total loans at December 31: - ----------------------------------------------- Commercial 30.9% 32.4% 31.6% 31.3% 22.1% Real estate 40.7 41.6 42.2 43.1 50.5 Real estate, construction 1.5 0.7 1.7 1.6 2.4 Consumer 25.2 23.8 23.2 22.7 23.6 Credit card 1.7 1.5 1.3 1.3 1.4 -------- ------- -------- -------- -------- Total 100.0% 100.0% 100.0% 100.0% 100.0% ======== ======= ======== ======== ======== Ratio of net chargeoffs to average total loans: - ----------------------------------------------- Commercial 0.04% (0.11)% 0.04% 0.32% 0.18% Real estate 0.01 0.04 0.03 0.06 0.14 Consumer 0.30 0.16 0.22 0.19 0.24 Credit card 0.03 0.01 0.01 0.01 0.02 ------- -------- ------- ------- -------- Total 0.38% 0.10% 0.30% 0.58% 0.58% ======= ======== ======= ======= ======== Nonperforming loans: - -------------------- Nonaccrual loans $482 $902 $1,416 $1,279 $1,301 Loans 90+ days past due 1,236 1,082 896 1,284 1,706 Other real estate owned 45 97 38 49 779 ------ ------ ------- ------- ------- Total $1,763 $2,081 $2,350 $2,612 $3,786 ====== ====== ======= ======= ======= Nonperforming loans as a percent of total loans 0.46% 0.58% 0.73% 0.90% 1.36% ======= ====== ======= ======= ======= Interest income on nonaccrual loans which would have been recorded under the original terms of the loans for 1995, 1994 and 1993 was $19,000 (of which $10,000 was actually recorded), $48,000 (of which $36,000 was actually recorded) and $149,000 (of which $41,000 was actually recorded), respectively. MANAGEMENT'S DISCUSSION AND ANALYSIS Introduction - ------------ The following discussion and analysis of the consolidated financial statements of Peoples Bancorp Inc. (the "Company") is presented to give the reader insight into management's assessment of the financial results. It also recaps the significant events that led to the results. The Company's subsidiaries, The Peoples Banking and Trust Company ("Peoples Bank"), The First National Bank of Southeastern Ohio ("First National") and The Northwest Territory Life Insurance Company, provide financial services to individuals and businesses within our market area. Peoples Bank is chartered by the State of Ohio and subject to regulation, supervision, and examination by the Federal Deposit Insurance Corporation ("FDIC") and the Ohio Division of Banks. First National is a member of the Federal Reserve System and subject to regulation, supervision, and examination by the Office of the Comptroller of the Currency. This discussion and analysis should be read in conjunction with the audited financial statements and footnotes and the ratios, statistics, and discussions contained elsewhere in the Annual Report. Overview of the Income Statement - -------------------------------- The Company recognized an increase in net income of $302,000, or 5.3%, to $6,050,000 in 1995 from $5,748,000 in 1994. Fully tax equivalent net interest income increased $1,897,000 in 1995 compared to 1994, an increase of 8.9%. The yield on interest-earning assets increased from 8.29% in 1994 to 8.94% in 1995, while the interest rate paid on interest-bearing liabilities increased from 4.02% in 1994 to 4.87% in 1995. The increase in net interest income can be attributed primarily to the growth in interest-earning assets outpacing interest-bearing liabilities with interest rates earned and paid, increasing at a consistent spread from 1994 to 1995. The provision for loan losses in 1995 totaled $1,315,000, up from $766,000 in 1994, in response to continued retail loan growth. Non-interest income (excluding gains or losses on sales of investment securities) increased 1.4% to $4,133,000 in 1995, compared to $4,075,000 in 1994. Gains on sales of investment securities totaled $24,000 in 1995, compared to 1994's loss of $237,000. Non-interest expense increased 7.3% in 1995 to $16,818,000, due primarily to the effect of the voluntary early retirement plan offered to qualified employees. Interest Income and Expense - --------------------------- Net interest income represents the amount by which interest income on earning assets exceeds interest paid on interest-bearing liabilities. Interest earning assets include loans and investment securities. Interest-bearing liabilities include interest-bearing deposits and borrowed funds such as Federal Home Loan Bank borrowings. Net interest income remains the primary source of income for the Company. Market changes in interest rates, as well as adjustments in the mix of interest-earning assets and interest-bearing liabilities, continue to impact net interest income. Market rates fluctuated in 1995, as the monetary policies of the Federal Reserve Board resulted in decreases in short-term interest rates. The national prime rate increased early in 1995 to 9.00%, but had decreased to 8.50% by December 31, 1995. The Company's Asset Liability Committee ("ALCO") meets on a regular basis and monitors adjustments in interest rates and sets pricing guidelines for the Company. In 1995, the Company recorded net interest income of $22,615,000, an increase of 9.4% from 1994. Total interest income reached $43,392,000 while interest expense totaled $20,777,000. Included in interest income is $705,000 of tax-exempt income from investments in states and political subdivisions. Since these revenues are not taxed , it is more meaningful to analyze net interest income on a fully-tax equivalent ("FTE") basis. Net interest margin is calculated by dividing FTE net interest income by average interest-earning assets. In 1995, the net interest margin was 4.73%, a decrease of 9 basis points compared to 1994's 4.82%. This decrease is primarily the result of management strategically maintaining interest rates paid on certain deposits, even though market rates had declined in the latter part of 1995, to continue the deposit growth. Management expects interest rate pressures to intensify in the future as they have in recent periods. As a result of increased interest rate pressure, the Company has utilized several balance sheet growth strategies to increase the volume of both interest-earning assets and interest-bearing liabilities, and as a result, the volume of net interest income to overall operations. More detailed analysis of several categories within interest-earning assets and interest-bearing liabilities reveals changes in mix and shifts in interest rates. In 1995, average balances in commercial loans increased $8,492,000 or 8.1% while the average yield on those loans increased from 8.5% in 1994 to 9.9% in 1995. Average real estate loan balances grew $9,632,000 or 6.6% to $156,598,000. Net interest income earned on real estate loans grew $1,346,000 to $13,657,000, an increase of 10.9%, while the average yield grew 34 basis points to 8.72%. Consumer loans continued to grow in the markets we serve, increasing $11,385,000 or 13.4% to an average of $96,604,000 in 1995. Average yield on consumer loans reached 9.96%, an increase of 99 basis points over the previous year's average yield of 8.97%. The Company has been able to meet its operating goals through the growth of the loan portfolio at competitive but profitable yields. The Company experienced increases in interest costs of funding sources as well. The Company priced its deposit products aggressively in 1995, which resulted in the growth of certain interest-bearing liabilities. Interest costs on traditional deposit products increased 88 basis points compared to 1994. The most significant component of interest expense in 1995 related to interest paid on time deposits (i.e., certificates of deposits). In 1995, the Company paid interest of $12,849,000, or 5.76%, on average time deposit balances of $222,898,000. In 1994, the average rate paid on time deposits totaled 4.95% on average balances of $187,842,000. Average interest-bearing demand deposit balances grew 8.1% to $92,280,000 in 1995, which can be attributed to aggressive pricing on money market accounts. Interest costs increased on these accounts due to the growth in average balances as well as the Company's arrangement of a high volume, fixed-rate pricing contract with a major customer. In 1995, the Company increased its utilization of short-term borrowed funds. Historically the Company's cash management services offered to a variety of business customers have provided short-term funding, specifically overnight repurchase agreements. In 1995, the Company's average balances of overnight repurchase agreements increased 9.1% to $9,908,000. The average rate paid in 1995 on overnight repurchase agreements totaled 4.01%, up from 1994's average rate of 2.67%. These rates are based on selected indices which rose proportionately in 1995. The most significant change in short-term borrowings interest expense was incurred through Federal Home Loan Bank ("FHLB") advances, which totaled $21,216,000 at December 31, 1995. Average short-term FHLB balances totaled $8,110,000 in 1995 at an average cost of 6.13%. Management plans to maintain access to FHLB borrowings as an appropriate funding source. Interest expense on long-term borrowings did not change significantly. The rate paid on average long-term borrowings totaled 6.11% in 1995, an increase of 13 basis points compared to 1994's average rate of 5.98%. The majority of the Company's long-term borrowings are fixed rate FHLB borrowings. Non-Interest Income - ------------------- Several categories of non-interest income had increases in 1995 compared to 1994. The Company's Investment and Trust Division, with a strong boost to non-interest income, continued its earnings trend. The fee structure for fiduciary activities is based primarily on the fair value of assets being managed, which totaled approximately $390 million at December 31, 1995, an increase of nearly $60 million from the previous year-end. As a result of the increases in market values and increases in the number of accounts served, income from fiduciary activities totaled $1,751,000, an increase of 9.0% compared to 1994. In 1995, account service charge income increased $109,000 or 7.5% to $1,565,000. Several factors contributed to this growth, but is primarily due to increased revenues from electronic banking fees and other cost-recovery based fees and charges. The Company will continue to explore new methods of enhancing non-interest income in the future. Both traditional and non-traditional financial service products are being analyzed for future inclusion in the array of products currently being offered by the Company. Non-Interest Expense - -------------------- Maintaining acceptable levels of non-interest expense is one of the many performance goals for the Company. In 1995, non-interest expense totaled $16,818,000, an increase of 7.3% over 1994. Two significant occurrences impacted non-interest expense in 1995: increased expense incurred as a result of a voluntary early retirement program and a reduction in FDIC insurance premiums. On September 29, 1995, the Company announced a voluntary early retirement program to certain qualifying employees representing approximately seven percent of the Company's employee base. In addition to rewarding long-time employees for their valuable years of service, the program was designed to position the Company to manage the future challenges facing the banking industry. All employees eligible for the program accepted the offer and as a result, the Company recognized a charge to salaries and employee benefits of $777,000. The Company anticipates future benefits in terms of reduced non-interest expense and increased efficiencies. Management expects a payback of this expense within the next three years. Non-interest expense was decreased in 1995 by the long-awaited reduction in insurance premiums paid on Bank Insurance Fund ("BIF") deposits. In the third quarter, the Company received a $260,000 refund on previously paid insurance premiums to the BIF. In connection with the refund, the Company's annual premium rate charged per $100 of BIF deposits has been decreased from $0.23 to $0.04. In 1995, the Company incurred BIF insurance expense of $481,000, a decrease of $391,000, or 44.8% compared to 1994. Lower BIF premiums in the future should improve the Company's efficiency ratios. Other categories within non-interest expense remained at levels comparable to 1994. Depreciation expense on furniture and fixtures increased 14.7% to 794,000 in 1995, due mostly to increased investment in technology and other customer-service enhancements. Management feels that, in the future, non-interest expense can be leveraged to enhance customer service and improve market share. In October 1995, the FASB approved SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS No. 123 defines a fair value based method of accounting for an employee stock option or similar equity instrument or allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("Opinion No. 25"). SFAS No. 123 is effective for transactions entered into in fiscal years that begin after December 15, 1995. Under the fair value based method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. Under the intrinsic value based method, compensation cost is the excess, if any, of the quoted market price of the stock at grant date or other measurement date over the amount an employee must pay to acquire the stock. The Company maintains fixed price stock option plans which have no intrinsic value at the grant date, and under Opinion No. 25, compensation expense is recognized for them. As permitted by SFAS No. 123, the Company will continue to account for stock-based compensation under Opinion No. 25, and accordingly, will disclose in the future pro forma net income and earnings per share as if the fair value based method of accounting, as defined in SFAS No. 123, had been applied. Return on Assets - ---------------- For the year ended December 31, 1995, return on average assets ("ROA") was 1.15%, down five basis points from 1994's ratio of 1.20%. This decline in ROA was primarily due to the decrease in the net yield on earning assets and the expense related to the early retirement program. With the reduction of BIF premium rates and the continual review for opportunities to improve the efficiency of its operations, management expects ROA to increase in 1996. Return on Equity - ---------------- Over the past five years, the Company's return on average stockholders' equity ("ROE") has remained relatively constant. This ratio was 12.33% in 1995, down 55 basis points from 1994. This decrease is primarily the result of the impact on net income of the early retirement program and the decline in the net yield on earning assets. Several other factors affected stockholders' equity in 1995, but they partially offset each other. Stockholders' equity increased due to the adjustment in the net unrealized holding gain, net of deferred income taxes, on available-for-sale securities, which totaled $2,469,000 at December 31, 1995, compared to prior year's net unrealized holding loss of $1,030,000, or an increase of $3,499,000. As the fair value of the Company's investment portfolio increased throughout 1995, the adjustment caused average stockholders' equity to increase over $800,000. This increase in equity was offset by the purchase of 87,340 of the Company's common shares for its treasury. The Company paid $1,940,000 for these treasury shares in 1995, increasing its total investment in treasury shares to $3,670,000 at December 31, 1995. The acquisition of any treasury shares in the future will depend on market conditions. Management believes ROE is an important measure of an organization's strength and will continue to monitor the performance of the Company in relation to stockholders' equity, and expects ROE to increase in 1996. Federal Income Tax Expense - -------------------------- Although federal income taxes totaled $2,589,000 in 1995, an increase of $256,000 compared to 1994's total of $2,333,000, the Company's effective tax rate remained relatively constant at 30% in 1995 and 1994. Overview of Balance Sheet - ------------------------- In 1995, the Company continued its recent growth trend, as total assets increased 9.1% to $543,430,000 at year-end 1995. Since December 31, 1994, the Company's asset growth has occurred primarily in the area of investment securities, which increased $32,343,000, or 32.5% to $131,762,000 at year-end 1995, and total loans, which increased $18,173,000, or 5.0%, to nearly $380 million. These increases in assets were funded by the growth of deposits and short-term borrowings. Total deposits increased 6.3% to $429,077,000. In 1995, the Company utilized additional borrowings from the FHLB, as short-term borrowings increased 68.3% to $33,276,000 at December 31, 1995. Long-term borrowings, comprised mostly of FHLB borrowings with maturities greater than one year, remained relatively constant, totaling $23,142,000 at December 31, 1995. Stockholders' equity increased $5,839,000, or 12.8%, to $51,474,000 at December 31, 1995. Certain components of stockholders' equity and all per share information have been adjusted for the 10% stock dividend issued to shareholders of record as of October 10, 1995. The Company also purchased $1,940,000 of treasury shares in 1995, bringing the total balance of treasury shares to $3,679,000. Please see the Consolidated Statements of Stockholders' Equity found on page 16 in this Report for additional information regarding the changes in stockholders' equity. Cash and Cash Equivalents - ------------------------- The Company's cash and cash equivalents totaled $20,994,000 at December 31, 1995, a decrease of $3,707,000 compared to year-end 1994. Management directed liquid funds into higher interest-earning assets such as investment securities and loans. Management feels the liquidity needs of the Company are satisfied by the current balance of cash and cash equivalents, readily available access to traditional and non-traditional funding sources, and the portion of the investment and loan portfolios that mature within one year. These sources of funds should enable the Company to meet cash obligations and off-balance sheet commitments as they come due. Investment Securities - --------------------- The most significant area of asset growth in 1995 occurred in investment securities, which increased $32,343,000, or 32.5%, to $131,762,000. At December 31, 1995, all investment securities were classified as available-for-sale. At December 31, 1994, the Company had total available-for-sale securities of $90,172,000 and held-to-maturity securities of $9,247,000. In October 1995, FASB approved a one-time holiday from SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities", which placed restrictions on held-to-maturity securities. Entities had a one-time opportunity to restructure their portfolios from approximately November 15 to December 31, 1995. Specifically, the FASB decided that entities could sell or transfer securities from their held-to-maturity portfolio without calling into question either their intent to hold other debt securities to maturity in the future or their past financial reporting. Upon analysis of the Company's investment portfolio, management decided to take advantage of the one-time holiday from SFAS No. 115 and transfer all held-to-maturity securities to the available-for-sale category. Management believes this action will favorably impact the overall flexibility of the Company and interest rate risk management opportunities of the Company. A closer look at the specific components of the Company's investment portfolio reveals a significant increase in investments in U.S. Agency mortgage-backed securities. At December 31, 1995, the Company had a fair value investment of $33,711,000 in these securities, up from year-end 1994's total of $11,452,000. These acquisitions reflect a portion of the strategy implemented by the Company in 1995 to increase incremental amounts of net interest income by investing in higher-yield instruments. Investments in U.S. Treasury securities increased $3,606,000, a result of additional investments as well as the adjustment in interest rates, which caused the fair value of these instruments to increase throughout 1995. The other major categories of the investment portfolio did not significantly change. Management monitors the earnings performance and liquidity of the investment portfolio on a regular basis through the ALCO meetings. The group also monitors net interest income, sets pricing guidelines, and manages interest rate risk for the Company. Through active balance sheet management and analysis of the investment securities portfolio, the Company maintains sufficient liquidity to satisfy depositor requirements and the various credit needs of its customers. Loans - ----- Loan volume continues to grow, reflecting the additional credit opportunities provided within the markets served. Total loans increased by $18,173,000 or 5.0% to $379,526,000. During 1995, the Company refined its procedures for classifying loans. Accordingly, prior period loan amounts have been reclassified to conform to the 1995 presentation. At December 31, 1995, commercial loans remained relatively unchanged at $117,306,000, compared to $117,015,000 at December 31, 1994. Commercial loan demand continues to be strong in several of our markets, particularly in the Licking County loan production office located in central Ohio. Established in 1993, this office has initiated increases in both the number of customers served as well as loan balances in this market, one of the leading growth markets in the State of Ohio. The Company is proud of the customer relationships we have developed in the Licking County office. Real estate loans to our retail customers continue to be the most significant portion of the loan portfolio. Total real estate loans reached $154,469,000 at December 31, 1995, an increase of 2.8% compared to year-end 1994. Management believes mortgage lending will remain a vital part of the lending operation of the Company as individuals continue to aggressively seek refinancing of their current mortgages. In addition, in early 1996, the Company initiated a fixed-rate equiline program designed to capture a significant share of the home equiline market in the areas we serve. The financial services industry has experienced recent increases in consumer debt and the Company is no exception as its consumer lending has grown to meet the customers' demands. The Company's credit card balances at December 31, 1995, were $6,368,000, up 17.4% from year-end 1994's balance of $5,423,000. In an effort to spur additional credit card activity and better serve the credit needs of our customers, the Company offered several new products, including a no-fee credit card, increased credit limits to qualified customers, and specialty credit cards issued to specific organizational groups. Management is pleased with the performance of the credit card portfolio and continues to evaluate new opportunities. Although credit card loans contributed to the overall growth in consumer lending, the largest contribution to personal loans has been through the Company's indirect lending area. At December 31, 1995, the Company had indirect loan balances of $62,647,000, up 13.5% from year-end 1994's balance of $55,180,000. This growth can be attributed to the Company's commitment to quality customer service and the continued strong demand for indirect loans in the markets served by the Company. In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage Servicing Rights" ("SFAS No. 122"). SFAS No. 122 amends SFAS No. 65 and requires financial institutions to recognize as separate assets rights to service mortgage loans for others, whether those rights were acquired through purchase or through the origination and subsequent sale of loans with servicing rights retained. SFAS No. 122 is to be applied prospectively for years beginning after December 15, 1995, with earlier application encouraged. Historically, the Company has not engaged in significant secondary market activity, therefore, management anticipates this adoption will be immaterial to the Company's financial statements. Loan Concentration - ------------------ The Company does not have a concentration of its loan portfolio in any one industry. At December 31, 1995, real estate lending continued to be the most significant part of our loan portfolio representing 42.2% of total loans, while commercial, financial, and agricultural loans totaled 30.9%. Allowance for Loan Losses - ------------------------- The allowance for loan losses as a percentage of total loans decreased from 1.88% at year-end 1994 to 1.77% at December 31, 1995. The total dollar amount of the reserve decreased $57,000 over the same period. The Company's 1995 provision for loan losses totaled $1,315,000, while gross chargeoffs were $1,803,000 and recoveries amounted to $431,000. In 1994, the Company had gross chargeoffs of $1,124,000 and recoveries of $772,000. A significant portion of the Company's chargeoffs in 1995 occurred in consumer lending. Increased loan activity, especially in the indirect lending area, resulted in gross chargeoffs of $1,465,000 in 1995, up 63.5% compared to 1994. As a result, management has increased its allocation of the allowance to consumer loans to address this exposure, but expects the rate of chargeoffs to remain steady or decrease in this area. Commercial loan chargeoffs totaled $256,000 while recoveries were $111,000. Real estate loan chargeoffs and recoveries were insignificant. Management continually monitors the loan portfolio through its credit review department and loan loss committee to determine the adequacy of the allowance for loan losses and considers it to be adequate at December 31, 1995. Nonaccrual loans and those loans 90 days past due totaled $482,000 and $1,236,000, respectively, at December 31, 1995. Nonperforming loans as a percentage of outstanding loans was 0.46% at year-end 1995, compared to 0.57% at December 31, 1994. On January 1, 1995, the Company adopted SFAS No. 114, "Accounting by Creditors for Impairment of a Loan", which established new accounting and reporting criteria for all loans determined to be impaired. SFAS No. 114 requires that impaired loans be measured based on the present value of expected future cash flows, discounted at the effective interest rate of the loan, or, as a practical expedient, the loan may be valued at the fair value of the collateral if the loan is collateral dependent. SFAS No. 114 does not apply to large groups of smaller-balance homogeneous loans, such as mortgage and consumer loans, which are evaluated collectively for impairment. Management considers such factors as past payment history, recent economic developments, current and projected financial condition and other relevant information to determine whether a loan is impaired. Impairment is determined on a loan-by-loan basis and generally consists of non-homogeneous (large commercial) loans that have been placed on non-accrual status. However, a loan will be identified and reported as impaired when it is probable that a creditor will be unable to pay all principal and interest amounts due according to the contractual terms of the loan agreement. The adoption of SFAS No. 114 did not have a material effect on the Company's financial position, results of operations, accounting policies, or the determination of the adequacy of the allowance for loan losses. Impaired loans at December 31, 1995, the average investment in impaired loans during 1995, and the interest income recognized on impaired loans for the year then ended were immaterial to the Company's financial statements. As of December 31, 1995, management has identified performing loans totaling $2,041,000 to one of the Company's directors which are considered to be potential problem loans. The borrower has encountered financial difficulties during the past few years with some improvement in 1995. Management does not anticipate any losses resulting from this relationship. Funding Sources - --------------- The Company considers deposits and short-term and long-term borrowings when evaluating funding sources. Traditional deposits continue to be the most significant source of funds for the Company and the expansion of the deposit base bolstered the asset growth of the Company. In 1995, total deposits grew 6.3%, with the majority of the growth occurring in time deposits. The most significant change to the Company's funding sources in 1995 occurred through increased balances in short-term borrowings, which primarily consist of FHLB borrowings. In the third quarter, the Company implemented a growth strategy designed to enhance net interest income and other performance ratios. Short-term borrowings were used to fund the balance sheet growth and, as a result, short-term borrowings increased $13,509,000 in 1995 to $33,276,000. Management plans to maintain access to FHLB borrowings as an appropriate funding source. In addition to increased use of short-term borrowings with the FHLB, the Company's balances in federal funds purchased and securities sold under agreements to repurchase also grew. The balances of these funds were $12,060,000 at year-end 1995, an increase of 30.1% compared to 1994, reflecting the Company's intentions to grow its cash management services program for both new and existing commercial customers. The Company continues to explore improved methods of providing cash management services to these customers through enhanced systems and products. In addition to the FHLB short-term borrowings, the Company also continues to access long-term FHLB borrowings. This allows the Company to obtain reliable funds at fixed and indexed rates for longer periods of time than other traditional deposit products, creating the opportunity to match longer term fixed rate mortgages and other extended-maturity asset commitments against a similar funding source. The net decrease of 1.8% in 1995 in long-term FHLB borrowings is a result of an additional $2,500,000 in borrowings and principal paydowns of $3,015,000. Total long-term FHLB borrowings totaled $21,582,000 at December 31, 1995. The acquisition of approximately $75 million in deposits from an unaffiliated financial institution is expected to provide additional funding sources. The majority of the deposits to be assumed by the Company are time deposits. This acquisition is expected to close during the first half of 1996. Capital/Stockholders' Equity - ---------------------------- The capital position of the Company remains strong. Total stockholders' equity increased 12.8% to $51,474,000 at December 31, 1995. Stockholders' equity increased in 1995 for several reasons, including the retention of net income. The Company paid dividends of $1,948,000 in 1995, a dividend payout ratio of 32.20%, up from 1994's payout ratio of 29.26%. Management feels this is an acceptable payout ratio for the Company and anticipates similar payout ratios in future periods. The Company's capital strength is apparent when measured to standards of capital adequacy mandated by the banking industry. Bank regulators have established "risk-based" capital requirements designed to measure capital adequacy. Risk-based capital ratios reflect the relative risks of various assets banks hold in their portfolios. A weight category of either 0% (lowest risk assets), 20%, 50%, or 100% (highest risk assets) is assigned to each asset on the balance sheet. The Company's risk-based capital ratio of 13.85% at December 31, 1995 is well above the minimum standard of 8%. The Company's Tier 1 capital ratio of 12.60% also exceeded the regulatory minimum of 4%. The leverage ratio at December 31, 1995 was 8.81%, also above the minimum standard of 3%. These ratios provide quantitative data demonstrating the strength and future opportunities for use of the Company's capital base. Management continues to evaluate risk-based capital ratios and the capital position of the Company as part of its strategic planning process. Equity was affected in 1995 by SFAS No. 115, which requires an equity adjustment for unrealized holding gains or losses for the fair value of available-for-sale securities, net of deferred income taxes. Since all of the investment securities in the Company's portfolio are classified as available-for-sale, both the investment and equity sections of the Company's balance sheet are more sensitive to the changing fair values of investments experienced during 1995. At December 31, 1994, the Company had a net unrealized holding loss on available-for-sale securities of $1,030,000. At December 31, 1995, the Company had a net unrealized holding gain of $2,469,000, an increase of $3,499,000 during the year. Management feels the status of the investment markets do not substantially affect the Company's equity, as it continues to provide a strong base for expansion of operations as well as potential for growth in both new and existing markets. The level of stockholders' equity will be impacted in the future by changes in the volume and market values of available-for-sale securities. Liquidity - --------- Liquidity measures an organization's ability to meet cash obligations as they come due. During the year ended December 31, 1995, the Company generated cash flows from operations of $9,373,000, used net cash flows of $26,979,000 (net of cash flow proceeds from maturities and sales of investment securities) to acquire investment securities, and generated cash flows from financing activities of $34,506,000. The Consolidated Statements of Cash Flows presented on page 17 of the consolidated financial statements provides analysis of the Company's cash flow activity. Additionally, management considers that portion of the investment securities and loan portfolios that mature within one year as part of our liquid assets. The Company's liquidity is monitored by the ALCO, which establishes ranges of acceptable liquidity. The current liquidity position is adequate to fund off-balance sheet commitments and liabilities as they come due. Please see additional discussion of off-balance sheet commitments in Note 9 of the Notes to the Consolidated Financial Statements. Effects of Inflation on Financial Statements - -------------------------------------------- Substantially all of the Company's assets relate to banking and are monetary in nature. Therefore, they are not impacted by inflation in the same manner as companies in capital intensive industries. During a period of rising prices, a net monetary asset position results in loss in purchasing power and conversely a net monetary liability position results in an increase in purchasing power. In banks, monetary assets exceed monetary liabilities and therefore, as prices have increased over the past year, financial institutions experienced a modest decline in the purchasing power of their assets. Interest Rate Sensitivity - ------------------------- The following table presents the Company's interest rate sensitivity position at December 31, 1995 (dollars in thousands): 0 - 3 4 - 12 1 - 5 Over 5 Months Months Years Years Total --------- -------- --------- --------- --------- Interest earning assets: - ------------------------ Investment securities (all securities classified as available-for-sale): Taxable $4,391 $3,479 $40,276 $59,842 $107,988 Tax-exempt 554 1,544 9,279 12,397 23,774 ------- ------- -------- -------- --------- Total 4,945 5,023 49,555 72,239 131,762 Federal funds sold 3,500 3,500 Loans 132,287 125,060 95,679 26,500 379,526 Interest-bearing deposits with banks 243 243 ------- ------- -------- -------- --------- Total 140,975 130,083 145,234 98,739 515,031 ------- ------- -------- -------- --------- Interest-bearing liabilities: - ----------------------------- Deposits 217,271 73,636 88,103 379,010 Federal funds purchased 1,133 1,133 Securities sold under agreements to repurchase 10,927 10,927 Short-term Federal Home Loan Bank borrowings 21,216 21,216 Long-term Federal Home Loan Bank borrowings 744 2,307 11,314 7,217 21,582 Other long-term borrowings 1,560 1,560 -------- ------- ------- ------ -------- Total 252,851 75,943 99,417 7,217 435,428 -------- ------- ------- ------ -------- Interest sensitivity $(111,876) $54,140 $45,817 $91,522 $79,603 ========== ======= ======= ======= ======= The Interest Rate Sensitivity table above shows that the Company is in a net asset sensitivity position. In theory, this means that if interest rates increase, the Company's net income will increase over time. Conversely, if interest rates decline, so too will net income. The above table allocates interest rate sensitivity within various time frames. Within zero to three months, the Company is liability sensitive and all other categories are asset sensitive. Management monitors the asset and liability sensitivity through the ALCO and uses this data to make appropriate strategic decisions. In addition to the interest rate sensitivity schedule and asset/liability repricing schedules, management has recently added simulation modeling to its analysis of interest rate risk. This combination provides dynamic information concerning the Company's balance sheet structure in different interest rate environments. When using simulation modeling, assumptions based on anticipated market pricing are made to interest-earning assets and interest-bearing liabilities. These adjustments more accurately determine the interest rate risk of the Company. In 1996, the Company expects in-house technology to provide more flexible simulation modeling to assist the ALCO in terms of balance sheet structure and interest rate risk management. As part of its asset/liability strategies, the Company may use certain off-balance sheet derivatives to manage interest rate risks. In February 1995, the Company paid a $195,000 premium for interest rate floors with a total notional value of $20 million. The interest rate floors require the counter-party to pay the difference between the specified floor rate and an index rate. The Company receives nothing if the index rate exceeds the specified floor rate. The Company is subject to the risk that the effect of changes in interest rates will cause the Company to earn less than the current market rates on the commercial loans associated with these floors. These interest rate floors also subject the Company to the risk that the counter-parties may fail to perform. To minimize this credit risk, the Company only enters into these types of transactions with high-quality, financially secure financial institutions. The exposure to credit risk is substantially less than the notional principal amounts since only the interest rate differential is received and the premium was paid at the inception. These agreements expire in February 1998 and they did not materially affect net income for 1995. Outlook for 1996 - ---------------- 1996 should be an exciting year for the Company. Many goals have been established for future operations, most of which focus on customer service enhancement. In addition to providing superior customer service, management feels growth into new markets, as well as further penetration into existing markets, is a priority of the Company. In the first half of the year, three full-service offices will be added in Pomeroy, Gallipolis, and Rutland, Ohio, extending the markets served by the Company into southern Ohio and contiguous areas of West Virginia. These offices, along with approximately $75 million in deposits, will be acquired from an unaffiliated financial institution. The transaction is subject to regulatory approval. The new offices reflect the continuing commitment to expansion of the Company's markets in southeastern Ohio and beyond. In late 1995, one of the Company's banking subsidiaries was awarded insurance agency powers in the State of Ohio. Northwest Territory Life Insurance Agency, Inc. and Northwest Territory Property and Casualty Insurance Agency, Inc. (the "Agencies"), subsidiaries of The First National Bank of Southeastern Ohio, received Certificates of Qualification to provide full life and property product lines to consumers in Ohio. These Agencies are the first in Ohio to be affiliated with a financial institution. Although management does not expect a material impact on the results of 1996 operations, the Agencies are poised to produce significant income growth and long-term value to the Company. Internal development as well as external affiliation and acquisition will be used to achieve these goals. The operating plan for 1996 anticipates net interest income to remain at levels similar to December 31, 1995. The acquisition of $75 million in deposits could enhance net interest income depending on how quickly the Company can invest the acquired deposits in interest-earning assets with acceptable yields. Movements in interest rates continue to impact the performance of financial institutions. However, the Company does not manage its balance sheet based upon interest rate forecasts. Through its ALCO, management evaluates the balance sheet and monitors earnings performance, as well as effectiveness of its liquidity policy. The group also monitors net interest income, sets pricing guidelines, and manages interest rate risk for the Company. Although net interest income remains a vital portion of the earnings of the Company, management expects other operational areas to provide additional revenues or cost savings to enhance net income. The Company's recent investments in technology will be complemented in 1996 with the purchase of a broad, PC-based customer service representative ("CSR") system, which will connect our CSR's to the Company-wide electronic network and provide virtually all employees access to this electronic environment. The CSR project, expected to be fully implemented in mid-1996, is another phase in the integration of the Company's financial information. When finished, the system will enhance customer service as product information will be more readily available to all CSR's. Electronic communication is the future of a competitive business, and through increased investment in technology, the Company anticipates a virtual electronic financial institution in the future. Costs will be reduced via decreased paper usage and other efficiencies. Non-interest income continues to be a priority for enhancement of earnings. As the Company expands into new products and markets and increases existing market penetration, it is vital to determine the appropriate cost-recovery for the services the Company provides. With the potential earnings from the addition of the Agencies to the Company's operations, future non-interest income should increase. The fee income generated by the Investment and Trust Division as well as other fee income from electronic banking, service charges, etc., helps offset the expense incurred to deliver that particular service or product. In addition to the employees of the Agencies, the Company has over 50 employees licensed to sell annuities. An outside firm has been engaged to provide additional products to meet our customers' financial needs. This program has been successful for the Company in the past and management expects earnings streams to be level or improve from this program in the future. The rapid changes in banking coupled with increased competition from all arenas have caused our organization to reevaluate the way in which we do business. A strong customer focus has been identified as a key to the continued future growth of the Company. Out of this evaluation process the "Customer First" concept was born. The basic premise of Customer First is that a customer's total financial needs can best be met through one financial consultant with whom they have built a relationship. The goal is to create a staff of associates well trained in multiple product lines to serve the changing needs of our customers over their lifetimes. The Company benefits by increased sales to a core of loyal, well-satisfied customers who seek our counsel for all their financial needs. The customer benefits by having a "Personal Banker" they know and trust to facilitate their one-stop banking, whatever the need may be. Recently our associates have begun the Customer First program and will continue this program in the future. Comparison of 1994 to 1993 - -------------------------- The Company achieved an increase in net income of $677,000 or 13.4% in 1994. Net income totaled $5,748,000, which provided primary and fully diluted earnings per share of $1.80 and $1.79, respectively, for the year ended December 31, 1994. Assets grew 7.0% in 1994 to over $498 million, providing a return on average assets of 1.20%. Net income to average stockholders' equity totaled 12.88% in 1994, compared to 12.43% the prior year. Total stockholders' equity increased 6.7% to $45,635,000 at December 31, 1994. In 1994, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities", which requires that debt and equity securities be classified into three different categories: held-to-maturity, available-for-sale, and trading securities. The Company adopted SFAS No. 115 on January 1, 1994, and classified the majority of its investment portfolio in the available-for-sale classification, with unrealized holding gains and losses excluded from earnings and reported as a separate component of stockholders' equity. As a direct result of SFAS No. 115, as market values of investment securities dropped in 1994, the Company's equity decreased. At December 31, 1994, the Company had a net unrealized holding loss on available-for-sale securities (net of deferred income taxes) of $1,030,000. The year ended December 31, 1994, offered strong loan growth, as total loans outstanding grew nearly $40 million (or 12.3%) to $361,353,000. Several factors contributed to overall loan growth in 1994. The first full year of operation for the Company's Licking County loan production office opened new markets for business and real estate loans. Also, many individuals actively looked to refinance home mortgages in 1994 and the Company was successful in capturing many of these loans. Increased loan demand resulted in growth in interest-bearing assets and a corresponding increase in interest-bearing liabilities. Average interest-earning assets increased $12,166,000 in 1994, or 2.8%, while interest-bearing liabilities increased $5,887,000, or 1.6%, resulting in an increase in net interest-earning assets. The Company also changed its mix in interest-earning assets, as average loan balances grew $31,193,000 to $337,475,000. Average balances in lower-yielding assets such as interest-bearing deposits with other banks and federal funds sold decreased nearly $14 million to $12,349,000. This shift allowed the Company to sustain net interest margin. Non-interest income (excluding gains on sales of investment securities) increased $168,000 (or 4.3%) to $4,075,000, due primarily to revenue generated from fiduciary activities and service charges on deposit accounts. Non-interest expense increased $548,000 (or 3.6%) to $15,672,000. December 31, 1994, marked the first full-year of depreciation for bank premises, furniture, and equipment acquired in relation to the five-story addition to the downtown Marietta banking facility and the seven-lane motor banking facility located at Second and Scammel Streets in downtown Marietta. Other categories of non-interest expense did not experience dramatic changes in 1994. In 1994, the Company recorded net losses of $237,000 resulting from the sales of investment securities. Management elected to sell some of the lower yielding investments in its available-for-sale portion of the portfolio and replace those securities with higher-yielding investments. This opportunity to improve the overall yield of the portfolio was available due to dramatic increases in market interest rates during 1994. In 1993, the Company recorded gains of $45,000 on the sales of investment securities. DIRECTORS - --------- Peoples Bancorp Inc. - -------------------- Jewell Baker Co-Owner, B & N Coal Company Dennis D. Blauser President, Blauser Energy Corp. George W. Broughton Executive Vice President and Director of Sales and Marketing Broughton Foods Company Wilford D. Dimit Owner, First Settlement Square Robert E. Evans President and Chief Executive Officer Barton S. Holl Chairman of the Board Logan Clay Products Norman J. Murray Retired, The Airolite Company James B. Stowe Chairman of the Board Stowe Truck and Equipment Company Paul T. Theisen Attorney, Theisen, Brock, Frye, Erb, & Leeper Co., L.P.A. Thomas C. Vadakin President, Vadakin, Inc. Joseph H. Wesel, Chairman President Marietta Automotive Warehouse, Inc. DIRECTORS EMERITUS Carl L. Broughton R. Neil Christy William K. Hamer William E. McKinney Fred R. Price The Peoples Banking and Trust Company - ------------------------------------- Dave M. Archer President, Pioneer Pipe, Inc. Dennis D. Blauser President, Blauser Energy Corp. George W. Broughton Executive Vice President and Director of Sales and Marketing Broughton Foods Company Wilford D. Dimit Owner, First Settlement Square Robert E. Evans President and Chief Executive Officer Brenda F. Jones, M.D. Medical Director Marietta Opthamology Associates, Inc. Harold D. Laughlin Owner, Laughlin Music and Vending Service Rex E. Maiden President, Maiden & Jenkins Construction Co. Norman J. Murray, Chairman Retired, The Airolite Company T. Pat Sauber Owner, McDonald's Restaurants James B. Stowe Chairman of the Board Stowe Truck and Equipment Company Paul T. Theisen Attorney, Theisen, Brock, Frye, Erb, & Leeper Co., L.P.A. Thomas C. Vadakin President, Vadakin, Inc. Joseph H. Wesel President Marietta Automotive Warehouse, Inc. DIRECTORS EMERITUS Carl L. Broughton R. Neil Christy William K. Hamer William E. McKinney The First National Bank of Southeastern Ohio - -------------------------------------------- Larry J. Armstrong Armstrong and Smith Carl Baker, Jr. Co-Owner, B & N Coal Company Robert E. Evans President and Chief Executive Officer Peoples Bancorp Inc. Wilfred O. Hill Retired, Oil and Gas Charles R. Hunsaker General Counsel 0H. Clayton John Vice Chairperson James D. McKinney Retired Superintendent Morgan County Schools Carol A. Schneeberger, Chairperson Vice President, Operations Peoples Bancorp Inc. Paul T. Theisen Attorney, Theisen, Brock, Frye, Erb, & Leeper Co., L.P.A. Rick D. Turner President and Chief Executive Officer DIRECTORS EMERITUS Marcus Gant Arthur W. Gilchrist OFFICERS - -------- Peoples Bancorp Inc. - -------------------- OFFICERS Robert E. Evans President and Chief Executive Officer Carol A. Schneeberger Vice President Operations Rolland B. Swart Vice President Business Development Charles R. Hunsaker General Counsel John W. Conlon Chief Financial Officer Jeffrey D. Welch Treasurer RobRoy Walters Controller Ruth I. Otto Corporate Secretary Karen V. Clark Auditor Johanna Burke Assistant Auditor Teresa A. Pyles Security Officer Mark F. Bradley Manager of Accounting and External Reporting The Peoples Banking and Trust Company - ------------------------------------- EXECUTIVE OFFICERS Robert E. Evans President and Chief Executive Officer David B. Baker President, Investment and Trust Division John W. Conlon Chief Financial Officer and Treasurer Larry E. Holdren Executive Vice President Director of Human Resources Robert A. McKnight Executive Vice President Lending Robert W. Mingus Executive Vice President President, Athens/Meigs Division Joseph S. Yazombek Executive Vice President Mortgage Lending BANKING AND LENDING John A. King Vice President and Executive Officer Nelsonville Office William L. Malster Vice President David M. Redrow Vice President/Licking Co. Jerald L. Post Vice President RobRoy Walters Controller David L. Batten Assistant Vice President Susan L. Corcoran Assistant Vice President Operations Joseph P. Flinn Assistant Vice President Personal Loan Manager Sondra K. Herlan Loan Officer Paul A. Huffman Assistant Vice President Operations Mary Ann Mitchell Assistant Vice President Betty L. Reynolds Assistant Vice President Larry P. Smith Assistant Vice President Ruth I. Otto Assistant Secretary Julie I. Giffin Manager, Account Services Cathleen S. Knox Loan Officer/Loan Analyst Cathy J. Linscott Loan Officer Beverly C. Mellinger Loan Officer Charles V. Robinson, Jr. Loan Officer/Credit Administration Jonathan T. Schenz Loan Officer Jeffrey F. Crabill Vice President/Licking Co. Loan Officer Mark F. Bradley Manager of Accounting and External Reporting INFORMATION SYSTEMS R. Joe Cowdery Vice President/Manager Information Systems Michael E. Weaver Manager/Computer Systems LEGAL AND COMPLIANCE Charles R. Hunsaker Vice President and General Counsel Charles Snodgrass Assistant Vice President Teresa A. Pyles Assistant Compliance Officer and Security Officer INVESTMENT AND TRUST DIVISION David B. Baker President, Investment and Trust Division Rose N. Haas Vice President and Investment Officer Jeffrey D. Welch, CPA Vice President and Trust Officer Beth Ann Worthington Vice President Personal Trust Officer Ronald L. Close Financial Planning Officer The First National Bank of Southeastern Ohio - -------------------------------------------- OFFICERS Rick D. Turner President and Chief Executive Officer Kenneth E. Shafer Executive Vice President and Cashier Catherine R. Ogle Vice President/Lending Thomas D. Hesson Assistant Vice President/Operations Kristi A. Schafer Assistant Vice President Marketing and Business Development Michael J. Schramm Assistant Vice President Manager, McConnelsville Office and Security Officer Cheryl Hanson Loan Officer Manager, Chesterhill Office Ruth I. Otto Secretary Karen Mills Assistant Secretary Charles R. Hunsaker General Counsel EX-21 13 SUBSIDIARIES OF PEOPLES BANCORP INC. EXHIBIT 21 - ---------- PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 Subsidiaries of Peoples Bancorp Inc. - ------------------------------------ The following are the only subsidiaries of Peoples Bancorp Inc.: Jurisdiction of Name of Subsidiary Incorporation - ---------------------------------------------------- ------------------ The Peoples Banking and Trust Company Ohio The First National Bank of Southeastern Ohio ("First National Bank") United States Northwest Territory Life Insurance Agency, Inc. (Subsidiary of First National Bank) Ohio Northwest Territory Property & Casualty Life Insurance Agency, Inc. (Subsidiary of First National Bank) Ohio The Northwest Territory Life Insurance Company Arizona EX-23 14 EXHIBIT 23(A)-CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23(a) - ------------- PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 CONSENT OF INDEPENDENT AUDITORS - ------------------------------- We consent to the incorporation by reference in this Annual Report (Form 10-K) of Peoples Bancorp Inc. of our report dated January 25, 1996, included in the 1995 Annual Report to Shareholders of Peoples Bancorp Inc. We also consent to the incorporation by reference in the Registration Statements pertaining to the Amended and Restated Stock Option Plan (Form S-8, No. 33-67878) and the 1995 Stock Option Plan (Form S-8, No. 33-59569) of Peoples Bancorp Inc. of our report dated January 25, 1996, with respect to the consolidated financial statements of Peoples Bancorp Inc. and Subsidiaries incorporated by reference in the Annual Report on Form 10-K for the year ended December 31, 1995. /s/ ERNST & YOUNG LLP Ernst & Young LLP Charleston, West Virginia March 25, 1996 EX-23 15 EXHIBIT 23(B)-CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23(b) PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 CONSENT OF INDEPENDENT ACCOUNTANTS - ---------------------------------- We consent to the incorporation by reference in the registration statement of Peoples Bancorp Inc. on Form S-8 of our report dated January 26, 1995, on our audits of the consolidated financial statements of Peoples Bancorp Inc. as of December 31, 1994, and for the years ended December 31, 1994 and 1993, which report is included in this Annual Report on Form 10-K. /s/ COOPERS & LYBRAND L.L.P. Coopers & Lybrand L.L.P. Columbus, Ohio March 25, 1996 EX-27 16 FINANCIAL DATA SCHEDULE
9 This schedule contains summary financial information extracted from the Form 10-K filed as of December 31, 1995. 0000318300 PEOPLES BANCORP INC. 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 17,251 243 3,500 0 131,762 0 0 379,526 6,726 543,430 429,077 33,276 6,461 23,142 0 0 30,898 20,576 543,430 34,501 6,881 2,010 43,392 18,384 20,777 22,615 1,315 24 16,818 8,639 6,050 0 0 6,050 1.90 1.89 4.73 482 1,236 0 2,041 6,783 1,803 431 6,726 6,726 0 150
EX-99 17 REPORT OF INDEPENDENT ACCOUNTANTS-COOPERS & LYBRAN EXHIBIT 99 - ---------- PEOPLES BANCORP INC. ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1995 To the Stockholders and Board of Directors of Peoples Bancorp Inc. We have audited the accompanying consolidated balance sheet of Peoples Bancorp Inc. and Subsidiaries as of December 31, 1994 and the consolidated statements of income, stockholders' equity, and cash flows for the years ended December 31, 1994 and 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Peoples Bancorp Inc. and Subsidiaries as of December 31, 1994 and the consolidated results of their operations and their cash flows for the years ended December 31, 1994 and 1993 in conformity with generally accepted accounting principles. As discussed in Note 3 to the consolidated financial statements, the Corporation changed its method of accounting for investment securities in 1994. As discussed in Notes 10 and 11, the Corporation changed its methods of accounting for postretirement benefits other than pensions and income taxes in 1993. /s/ COOPERS & LYBRAND L.L.P. Coopers & Lybrand L.L.P. Columbus, Ohio January 26, 1996 -----END PRIVACY-ENHANCED MESSAGE-----