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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12
Merchants Bancorp, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
- --------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3) Filing Party:
- --------------------------------------------------------------------------------
4) Date Filed:
- --------------------------------------------------------------------------------
PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
================================================================================
MERCHANTS BANCORP, INC.
HILLSBORO, OH 45133
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 2004
The annual meeting of shareholders of Merchants Bancorp, Inc. (the
"Company") will be held at The Wooden Spoon Restaurant, 1480 North High Street,
Hillsboro, Ohio 45133, on Tuesday, April 27, 2004 at 10:00 a.m., for the purpose
of considering and acting upon the following:
1. To elect members of Class I of the Board of Directors as recommended by the
Board of Directors and designated in the attached Proxy Statement;
2. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed March 23, 2004 as the record date for the
determination of shareholders entitled to notice of and to vote at the annual
meeting. As of the record date there were 2,666,650 shares of the Company's no
par value common stock outstanding. The stock transfer books of the Company will
not be closed prior to the meeting.
A copy of the Company's Annual Report, which includes the Company's audited
Balance Sheets as of December 31, 2003 and 2002, the related audited Statements
of Income, Statements of Changes in Shareholders' Equity, and Statements of Cash
Flows for each of the three years ended December 31, 2003, is enclosed.
By order of the Board of Directors,
James D. Evans
Secretary
YOUR VOTE IS IMPORTANT, EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY
REVOKE YOUR EXECUTED PROXY AT ANY TIME BEFORE IT IS EXERCISED BY NOTIFYING THE
SECRETARY OF THE COMPANY OF YOUR INTENTION AT OR PRIOR TO THE MEETING. IF YOUR
STOCK IS HELD IN MORE THAN ONE (1) NAME, ALL PARTIES MUST SIGN THE PROXY FORM.
================================================================================
Merchants Bancorp, Inc.
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Merchants Bancorp,
Inc. (the "Company") in connection with the solicitation of proxies to be used
in voting at the annual meeting of shareholders of the Company to be held on
April 27, 2004 at The Wooden Spoon Restaurant, 1480 North High Street,
Hillsboro, Ohio 45133, commencing at 10:00 a.m. The enclosed proxy is solicited
by the Board of Directors and Officers (hereinafter sometimes referred to as
"Management") of the Company. Merchants Bancorp, Inc. is the sole shareholder of
Merchants National Bank, Hillsboro, Ohio (the "Bank"). As a holder of Company
common stock, you have the right to attend the annual meeting of shareholders
and vote your shares in accordance with your desire. This Proxy Statement and
the enclosed form of proxy is first sent or delivered to the Company's
shareholders on or about April 5, 2004, and the Company is bearing all costs in
connection with this solicitation.
ELECTION OF DIRECTORS AND VOTING PROCEDURES
Shareholders of record on March 23, 2004 are entitled to vote on the
election of the Class I Directors. The shares represented by the accompanying
proxy will be voted as directed if the proxy is properly signed and received by
the Company prior to the annual meeting. Any proxy not designating a vote for,
against or an abstention from any particular proposal will be voted for the
proposal in accordance with Management's recommendations. All shareholders
choosing to give Management their proxies should send their completed proxy form
to the Company in the stamped, self-addressed envelope that is enclosed with
this Proxy Statement. Shareholders have the power to revoke their proxy at any
time prior to the vote by (a) attending the meeting or any adjournment thereof
and advising the Secretary of the Board of Directors of the Company (the
"Secretary") of your intent to vote the shares; (b) by delivering notice in
writing to the Secretary of the revocation of your proxy; or (c) by executing
and delivering a subsequently executed proxy. Unless you revoke your proxy in
one of the manners described above, the proxy holders have the authority to vote
the shares for which the proxy is given at the meeting as scheduled and at any
adjournment thereof.
The Company's Articles of Incorporation currently authorize 4,500,000
Common Shares, all of which are without par value. As of March 23, 2004,
2,666,650 of these Common Shares were issued and outstanding. Each Share of
Common Stock of the Company entitles the holder thereof to one (1) vote on all
matters, except with respect to the election of directors, and a majority of the
votes cast at a meeting of the shareholders will decide every question or matter
submitted to the shareholders, unless as otherwise expressly required by Ohio
law or by the Company's Articles of Incorporation. With respect to the election
of directors, shareholders are entitled to vote their shares cumulatively,
provided that notice of this intention is given by any shareholder of the
Company to the President, the Secretary or any Vice President of the Company not
less than 48 hours before the time fixed for holding a meeting of the
shareholders for the purpose of electing directors. In the event that a
complying notice is provided to the Company, the Secretary shall announce the
availability of cumulative voting upon the convening of the meeting of the
shareholders. If cumulative voting is permitted, each shareholder voting
cumulatively may cast the number of shares he owns times the number of Directors
to be elected in favor of one nominee or allocate such votes among all of the
nominees as he or she determines. The discretionary authority to vote any and
all shares cumulatively on behalf of shareholders submitting proxies in
connection with the Annual Meeting is provided under the Form of Proxy attached
hereto.
In accordance with the Company's Code of Regulations, the Board of
Directors, which currently consists of nine (9) membership positions, is
staggered into three separate classes, designated as Class I, Class II and Class
III. Each class consists of approximately one-third of the total number of
directors as
2
fixed from time-to-time by the Directors or the shareholders. Directors serve
staggered three-year terms, so that directors of one class are elected at each
annual meeting of shareholders. Consequently, the term of office of one class
expires each year. Shareholders will elect the Class I Directors at the
forthcoming Annual Meeting, whose term will expire in the year 2007. There is
currently one vacancy in Class III which the Board is attempting to fill. No
qualified individual has been found to date to fill this vacancy. The nominees
for election to Class I are Messrs. Paul W. Pence, Jr., James R. Vanzant, and
Robert Hammond. Proxies in the form solicited hereby which are returned to the
Company will be voted in favor of the three (3) nominees specified above unless
otherwise instructed by the shareholder, and such proxies cannot be voted for a
greater number of persons than the number of nominees named herein. Abstentions
and shares not voted by brokers and other entities holding shares on behalf of
beneficial owners will not be counted and will have no effect on the outcome of
the election. The nominees receiving the three (3) highest totals of votes cast
in the election will be elected as Directors.
The following tables set forth information with respect to each Class I
Director, each of whom is a nominee for re-election at the forthcoming Annual
Meeting, and with respect to incumbent Directors in Classes I and II of the
Board of Directors who are not nominees for re-election at the Annual Meeting.
NAME AND AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- -------------------------------------------------------------------------------------------
CLASS I DIRECTORS (TERM EXPIRES 2004)
- -------------------------------------------------------------------------------------------
Paul W. Pence, Jr., 52 President and CEO of the Company and Merchants 1981
National Bank, its wholly-owned subsidiary
James R. Vanzant, 56 Highland County Health Commissioner 1992
Veterinarian (part-time practice)
Robert Hammond, 60 Attorney, Sole Practitioner 1994
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
EACH OF THE NOMINEES TO CLASS I OF THE BOARD OF DIRECTORS
CLASS II DIRECTORS (TERM EXPIRES 2005)
- --------------------------------------------------------------------------------------
William Butler, 67 President, Union Stock Yards 1983
Charles A. Davis, 68 Retired - Charles Davis Motor Sales 1983
Jack Walker, 75 Retired - Insurance Consultant 1974
CLASS III DIRECTORS (TERM EXPIRES 2006)
- --------------------------------------------------------------------------------------
Donald Fender, Jr., 65 Realtor 1972
Richard S. Carr, 57 Farmer and President of Seven Star Entertainment, 2002
a company which owns and operates movie theaters.
(1) There is currently one vacancy in Class III on the Board of Directors of
the Company. The Board, through its Nominating Committee, is actively
seeking an individual to fill this open position.
3
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's sole business activity is the operation of its subsidiary
banking operation, Merchants National Bank, sometimes hereinafter referred to
individually as the "Bank" or collectively with the Company as the "Company."
The Boards of Directors of the Bank and the Company are comprised of the same
persons at the present time. Disclosure of information regarding committees is
therefore presented for both the Company and the Bank. The Board of Directors of
the Company conducts its business through regular and special meetings. During
the fiscal year ended December 31, 2003, the Board of Directors of the Company
held a total of twenty-four (24) regular meetings and two (2) special meetings.
Each director of the Company attended at least 75 percent of the total meetings
of the Board and committees on which such Board member served during this
period. Neither the Board nor any committee thereof has implemented a formal
policy regarding director attendance at the Annual Meeting, although such
attendance is expected. Typically, the Board holds its annual organization
meeting directly following the Annual Meeting, which results in most directors
being able to the attend the Annual Meeting. In 2003, all Directors attended the
Annual Meeting.
The Board of Directors of the Company operates through standing Nominating
and Governance, Audit and Compensation Committees. The Nominating and Governance
Committee was organized by the Board during the fourth quarter and did not meet
in 2003. This Committee considers and proposes director nominees to the full
Board of Directors for election at the Annual Meeting; selects candidates to
fill Board vacancies as they may occur; makes recommendations to the Board
regarding Board committee memberships; and performs any other functions or
duties deemed appropriate. The Nominating and Governance Committee is chaired by
Mr. Hammond and otherwise includes Messrs. Fender and Carr. The Committee
operates under a written charter, a copy of which is attached hereto as Appendix
B. This charter is not available for on-line viewing on any website of the
Company or otherwise. Each member of the Committee is independent in accordance
with Rule 4200(A)(15) of the National Association of Securities Dealers listing
standards. While the Nominating and Governance Committee will consider
nominating persons recommended by shareholders, it has not actively solicited
recommendations from the Company's shareholders for nominees nor established any
procedures for this purpose. The Committee has determined that based upon the
Company's size and the accessibility of the directors and executive management
to the shareholders, no such policy or procedures are presently required.
However, shareholders may also nominate persons for election to the Board of
Directors by following the procedures contained in the Company's Code of
Regulations. These procedures are discussed more thoroughly in this proxy
statement under the section captioned "Shareholder Proposals for Next Year's
Annual Meeting of Shareholders." The identification and evaluation of all
candidates for nominee to the Board of Director are undertaken on an ad hoc
basis within the context of the Corporation's strategic initiatives at the time
a vacancy occurs on the Board. In evaluating candidates, the Committee considers
a variety of factors, including the candidate's integrity, independence,
qualifications, skills, experience (including experiences in finance and
banking), familiarity with accounting rules and practices, and compatibility
with existing members of the Board. Other than the foregoing, there are no
stated minimum criteria for nominees, although the Committee may consider such
other factors as it may deem at the time to be in the best interest of the
Company and its shareholders, which factors may change from time to time.
The Audit Committee has been established by and amongst the Board of
Directors for the purpose of overseeing the accounting and financial reporting
process of the issuer and audits of the financial statements of the issuer. This
Committee, which met 12 times during 2003, is comprised of the following seven
(7) directors: Donald Fender, Jr.; Richard S. Carr; James R. Vanzant; Robert
Hammond; William Butler; Charles A. Davis; and Jack Walker, each of whom is
independent in accordance with
4
Rule 4200(A)(15) of the National Association of Securities Dealers listing
standards. This Committee also operates under a written charter, a copy of which
is attached hereto as Appendix A. Pursuant to its charter, the Committee is
vested with the exclusive authority to approve and retain the independent
auditor with respect to all audit and permissible non-audit services provided
thereby. In fulfilling its oversight duties, this Committee reviews with the
auditors the plan and scope of the audit and audit fees; reviews the guidelines
established for the dissemination of financial information; meets periodically
with the independent and internal auditors, the Board and management to monitor
the adequacy of reporting, internal controls and compliance with Company
policies; reviews consolidated financial statements; and performs any other
functions or duties deemed appropriate by the Board.
The Compensation Committee, which met one time during 2003, is comprised of
the following four (4) nonemployee, independent directors: Donald Fender, Jr.;
James R. Vanzant; William Butler; and Charles A. Davis. An overview of the
functions performed by the Compensation Committee is provided below as part of
the Report of the Compensation Committee.
AUDIT COMMITTEE REPORT
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and to issue
a report thereon. The Committee's responsibility is to monitor and oversee the
processes.
In this context, the Committee has met and held discussions with management
and the independent accountants. Management represented to the Committee that
the Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Committee has reviewed and
discussed the consolidated financial statements with management and the
independent accountants. The Committee discussed with the independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61 (communication with Audit Committees).
The Company's independent accountants have also undertaken to provide the
Committee with the written disclosures and the letter required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
and the Committee discussed with the independent accountants that firm's
independence. The Committee has considered whether the provision of non-audit
services by the independent accountants to the Company and its subsidiaries is
compatible with maintaining the independence of the independent accountants.
Based upon the Committee's discussion with management and the independent
accountants and the Committee's review of the representation of management and
the report of the independent accountants to the Committee, the Committee
recommended that the Board of Directors include the audited consolidated
financial statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2003 filed with the Securities and Exchange Commission.
THIS REPORT IS SUBMITTED BY THE AUDIT COMMITTEE MEMBERS:
DONALD FENDER, JR.; RICHARD S. CARR; JAMES R. VANZANT; ROBERT HAMMOND; WILLIAM
BUTLER; CHARLES A. DAVIS; AND JACK WALKER
5
INDEPENDENT PUBLIC ACCOUNTANT
The Board of Directors has selected the firm of Deloitte & Touche LLP to
continue to serve as its independent public accountant for the current fiscal
year. Representatives of Deloitte & Touche LLP do not currently intend to be
present in person at the annual meeting of shareholders, but may otherwise be
available by telephone, if necessary. If present, however, they will have the
opportunity to make a statement if they desire to do so and will also be
available to respond to any appropriate questions. Deloitte & Touche LLP billed
the aggregate fees shown below for audit, audit related, tax, and all other
services rendered to the Company and its subsidiary for each of the last two
fiscal years. Audit fees for both years include fees billed in connection with
the audit of the Company's annual financial statements, as well as fees billed
for the review of the unaudited financial statements contained in the Company's
periodic reports on Form 10-Q filed with the Securities and Exchange Commission.
Fees listed under "Audit-Related Fees" relate primarily to assurances provided
to the Company in connection with each of the audits. Fees indicated under "All
Other Fees" for each of 2003 and 2002 relate to the internal auditing
"Co-Source" arrangement, pursuant to which Deloitte & Touche LLP coordinates and
oversees certain internal auditing functions performed by personnel of the
Company. Deloitte & Touche LLP will not provide these internal auditing services
during the present fiscal year. "All Other Fees" for 2002 also includes fees
related to a special audit of the Company's financial statements in connection
with the registration of its common shares with the U.S. Securities and Exchange
Commission during fiscal year 2002. Tax fees for 2002 and 2003 include fees
billed in connection with general tax preparation assistance. Additionally, tax
fees for 2002 includes $5,500 related to the implementation of franchise tax
reduction measures.
2003 2002
-------- --------
AUDIT FEES $ 98,000 $ 94,348
AUDIT-RELATED FEES $ 5,700 $ 9,000
TAX FEES $ 14,500 $ 19,040
ALL OTHER FEES $ 45,294 $127,416
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
To the Company's knowledge, except as noted below, no person or entity owns
beneficially, directly or indirectly, 5 percent or more of the Company's common
stock as of March 7, 2003.
Amount and Nature of % of
Name and Address of Beneficial Owner Beneficial Ownership Class
- ------------------------------------ -------------------- -----
Donald E. Fender, Jr. 407,000 Shares(1) 15.26%
221 North High Street
Hillsboro, Ohio 45133-1179
- -------------------------------
(1) Includes 377,000 shares held by the Donald E. Fender, Jr. Revocable Trust,
for which Mr. Fender serves as trustee, and 30,000 shares held jointly by
Mr. Fender with his spouse.
6
MANAGEMENT
The following table sets forth, as of March 7, 2003, information as to the
beneficial ownership of the Company's Common Stock by each Director and Named
Executive Officer and All Directors and Executive Officers as a group.
SHARES OF COMPANY COMMON PERCENTAGE OF BENEFICIAL
NAME STOCK OWNED BENEFICIALLY OWNERSHIP
- --------------------- ------------------------ -------------------------
William Butler(1) 41,230 1.55%
Charles A. Davis 1,500 0.06%
Jack Walker(2) 21,780 0.82%
Paul W. Pence, Jr. 7,655 0.29%
James R. Vanzant 1,500 0.06%
Robert Hammond(3) 2,500 0.09%
Donald Fender, Jr.(4) 407,000 15.26%
James D. Evans(5) 11,804 0.44%
Richard S. Carr(6) 8,400 0.32%
------- -----
ALL DIRECTORS AND EXECUTIVE 503,369 18.88%
OFFICERS AS A GROUP (9 PERSONS)
- ---------------------------
(1) Includes 30 shares held jointly by Mr. Butler with his spouse, 20,600
shares held by the William R. Butler Revocable Trust, for which Mr. Butler
serves as trustee, and 20,600 shares held by the Janet Sue Butler Revocable
Trust, for which Mr. Butler's spouse serves as trustee.
(2) Includes 10,890 shares held by the Jack E. Walker Trust, for which Mr.
Walker serves as trustee, and 10,890 shares held by the Patricia C. Walker
Trust, for which Mr. Walker's spouse serves as trustee.
(3) Includes 1,500 shares held individually by Mr. Hammond and 1,000 shares
held jointly by Mr. Hammond with his spouse.
(4) Includes 377,000 shares held by the Donald E. Fender, Jr. Revocable Trust,
for which Mr. Fender serves as trustee, and 30,000 shares held jointly by
Mr. Fender with his spouse.
(5) Includes 11,600 shares held jointly by Mr. Evans with his spouse, and 204
shares held jointly Mr. Evans with other members of his immediate family.
(6) Includes 2,700 shares held individually by Mr. Carr, 2,700 shares held
individually by Mr. Carr's spouse, and 3,000 shares held jointly by Mr.
Carr with his spouse.
EXECUTIVE COMPENSATION AND RELATED ITEMS
The following tables set forth information with respect to the Executive
Officers of the Company.
POSITIONS HELD WITH THE COMPANY PRESENT
NAME AND AGE AND BANK POSITION HELD SINCE
- ----------------- ------------------------------------- -------------------
Paul W. Pence, Jr. President and Chief Executive Officer 1981
52
James D. Evans Executive Vice President 1987
54
Each individual has held the position noted during the past five years. The
term of each executive officer is subject to annual renewal by resolution of the
Board of Directors of the Company. The following remuneration table sets forth
all direct remuneration paid by the Bank during the last three
7
fiscal years to the Company's President and Chief Executive Officer and
Executive Vice President. No other officers' total compensation exceeded
$100,000 during the last three years.
SUMMARY COMPENSATION TABLE(3)
ALL OTHER
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
NAME AND
PRINCIPAL POSITION YEAR SALARY BONUS
- ------------------- ---- -------- -------
Paul W. Pence, Jr. 2003 $151,330 $ 9,594 $ 12,314(1)
President and Chief 2002 $146,896 $93,212 $ 2,696
Executive Officer 2001 $137,261 $87,023 $ 12,037
James D. Evans 2003 $125,198 $ 7,938 $ 3,756(2)
Executive V.P. 2002 $122,446 $61,693 $ 2,309
2001 $113,558 $57,597 $ 10,302
(1) This amount includes premiums for term-life insurance in the amount of
$360, health insurance premiums for Mr. Pence and his immediate family in
the amount of $9,713, long-term disability insurance premiums in the amount
of $1,543, and Company contributions to its 401(k) plan on behalf of Mr.
Pence in the amount of $698.
(2) This amount includes premiums for term-life insurance in the amount of
$360, long-term disability insurance premiums in the amount of $1,277, and
Company contributions to its 401(k) plan on behalf of Mr. Evans in the
amount of $2,119.
(3) PURCHASES UNDER THE COMPANY'S EXECUTIVE INVESTMENT PLAN ARE NOT REFLECTED
ON THE SUMMARY COMPENSATION TABLE. In 2003, the Board approved acquisitions
of mutual fund shares subject to option under the plan as follows: (1)
qualifying fund shares in the amount of $85,000 were purchased for the
option account of Paul W. Pence, Jr.; and (2) qualifying fund shares in the
amount of $74,000 were purchased for the option account of James Evans.
Under the terms of the option grants, 20% of the mutual fund shares are
currently vested and subject to exercise at 25% of their fair market value.
For more information about the operation of the Executive Investment Plan,
see the Report of the Compensation Committee.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
There are no employment or change in control contracts between the Company
and any of its named executive officers.
DEFINED BENEFIT PLAN DISCLOSURE
The Company has a defined benefit plan available for participation by all
employees of the Company. Each employee of the Bank who is at least 21 years of
age and has completed one year of "eligibility service" is entitled to
participate in the Plan, and all contributions become fully vested following
five years of service. Pursuant to the Plan, the Bank contributes to a separate
trust account on behalf of employees of the Bank an amount determined by an
independent actuary necessary to provide the benefits set forth in the Plan.
Benefits from the Plan become available to the employee upon retirement, or in
the event of death or disability. If employment is terminated prior to normal
retirement, the employee receives all "vested" contributions based upon an
established vesting schedule.
8
YEARS OF CREDITED SERVICE
---------------------------------------------------------------------------------------------
AVERAGE ANNUAL
SALARY 10 15 20 25 30 35
- -------------- ------ ------ ------ ------ ------ ------
$ 10,000 900 1,350 1,800 2,250 2,700 3,150
$ 25,000 2,250 3,375 4,500 5,625 6,750 7,875
$ 50,000 5,186 7,779 10,372 12,965 15,558 18,151
$ 75,000 9,061 13,592 18,122 22,653 27,183 31,714
$100,000 12,936 19,404 25,872 32,340 38,808 45,276
$125,000 16,811 25,217 33,622 42,028 50,433 58,839
$150,000 20,686 31,029 41,372 51,715 62,058 72,401
$175,000 24,561 36,842 49,122 61,403 73,683 85,964
$200,000 28,436 42,654 56,872 71,090 85,308 99,526
$250,000 28,436 42,654 56,872 71,090 85,308 99,526
Compensation covered under the Plan includes the average of the taxable
wage bases in effect under Section 230 of the Social Security Act for each year
in the 35-year period ending with the year in which the Plan member attains his
social security retirement age. In determining a Plan member's covered
compensation for any 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 beginning of the Plan year for which the determination
is made.
Benefits for unmarried individuals are calculated on a straight-annuity
amount, and benefits for married individuals are in the form of a qualified
joint and survivor annuity of equivalent actuarial value to the pension
otherwise payable, providing for a reduced pension payable to the plan member
during his life, and after his death providing that one-half of that reduced
pension will continue to be paid during the life of, and to, the spouse to whom
he was married. Optional structures for benefit calculations are available to
Plan members pursuant to the Plan, subject to certain restrictions. Benefits are
not subject to reduction for social security or other offset amounts.
Credited service under the plan for Paul W. Pence, Jr. at the end of 2003
was 24 years, and credited service under the plan for James D. Evans at the end
of 2003 was 17 years.
COMPENSATION OF DIRECTORS
Directors are paid an annual retainer of $9,000, $300 per Regular Meeting
of the Board of Directors (held twice per month), $300 for each Special Meeting
of the Board of Directors, if any, and $300 for each Committee Meeting attended.
Directors of the Company are permitted, at their election, to defer some or
all of their retainer and meeting fee compensation pursuant to the Merchants
National Bank Directors' Deferred Compensation Plan. This plan provides an
avenue for members of the Board of Directors to accumulate additional retirement
income by making elective contributions into an unfunded, nonqualified deferred
compensation plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, the following individuals served as members of
the Compensation Committee: Donald Fender, Jr., Charles A. Davis, William Butler
and James R. Vanzant. Some of the Directors who served on the Compensation
Committee, and the companies with which they are associated, were customers of
and have had banking transactions with the Bank in the ordinary course of the
Bank's business in the past and up to the present time. All loans and
commitments for loans included
9
in such transactions were made on substantially the same terms including
interest rates and collateral as were prevailing at the time for comparable
transactions with other persons. In the opinion of the Board of Directors of the
Bank, these loans and commitments for loans do not involve more than a normal
risk of collectibility or present other unfavorable features.
The Company and/or the Bank have had, and expect to have in the future,
banking transactions in the ordinary course of its business with such directors,
and their associates, on substantially the same terms, including interest rates
and collateral on loans, as those prevailing at the same time for comparable
transactions with others. It is intended that such transactions will not involve
more than the normal risk of collectibility or present other unfavorable
features.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Company, with respect to all employees,
has the responsibility of implementing the compensation policies and practices
as established by the Board of Directors. At the direction of the Board of
Directors, the Compensation Committee has prepared the following report
regarding executive compensation.
Compensation Philosophy - The employee compensation program of the Company
has been designed to:
- Support a policy that rewards all employees for positive corporate
performance;
- Motivate all employees to advance the strategic business goals of the
Company; and
- Provide competitive compensation opportunities that allow the Company
to compete for and retain talented employees who are critical to the
Company's long-term success.
The Compensation Committee annually evaluates the performance and considers
compensation adjustments for all employees. The President and Executive Vice
President present recommended hourly and salaried employees compensation
adjustments to the committee.
The executive officers review with the committee the performance for the
prior year of key officers of the company. At this time, individual improvement
and development needs and job targets for the coming year for the key officers
are discussed with the committee.
A critical function of the Compensation Committee is to conduct reviews,
assemble compensation survey data and make a recommendation to the full Board of
Directors regarding executive compensation. The Compensation Committee then
presents to the Board of Directors a report on recommended adjustments in the
level of compensation and benefits for executive officers and for all employees.
Final disposition of these recommendations of the committee rests solely with
the Company's Board of Directors. The primary compensation for the named
executive officers is comprised of three principal components: (1) salary; (2)
distributions pursuant to the Company's Profit Sharing Bonus Plan; and (3)
compensation deferrals under the Company's Executive Investment Plan.
Salary. It is the Compensation Committee's policy that a competitive base
salary is essential in order to retain quality executive personnel. The salary
for each named executive officer is determined annually based upon the
Committee's consideration of two primary factors: competitive compensation
levels; and individual performance. As a method for determining competitive
salary levels, the Committee reviews various reports of peer data and
compensation surveys sponsored by trade and consulting groups within the
financial services industry. The reports and surveys utilized by the Committee
generally break down overall compensation data
into subcategories based upon the relative asset size of the various respondent
institutions. The Committee primarily utilizes the compensation data
10
within its respective asset category. For purposes of salary determinations made
for the previous year, the reports and surveys included the following: the 2003
Compensation & Benefits Survey compiled by the Ohio Bankers League, the Illinois
Bankers Association and the Michigan Bankers Association; the Crowe, Chizek and
Company LLP 2003 Financial Institution Compensation Survey; and the Delves Group
BAI 2003 Key Executive Total Compensation Survey (East-North Central Region
data). Based upon a detailed analysis of the report data, the Committee
determines an appropriate competitive salary range for each named executive
officer. The exact placement of each named executive officer within the
pre-established range is determined by a final subjective evaluation by the
Committee of the performance of the executive during the prior year. Following
this review and determination process, the Committee submits its salary
recommendations to the full Board of Directors, which retains authority to
review and approve all compensation recommendations made by the Committee.
Profit Sharing Bonus Plan. It is the Compensation Committee's policy that a
significant portion of employee compensation should be payable annually in the
form of a bonus based principally upon the overall financial performance of the
Company.
The Company adopted its Profit Sharing Bonus Plan in May, 1988. This plan
is based on a formula using the company's return on equity to establish a "
bonus pool" which is distributed among all eligible full and part time
employees. To be eligible to participate, an employee must be employed on
December 31st of the plan year. To determine a participant's bonus payment under
the plan, each participant receives one "share" for every $100 of his or her
gross earnings for the calendar year. At the end of the year, the number of
shares accumulated by each employee are added together to compute the total
number of shares participating in the plan for that calendar year. The bonus
pool is then distributed to participants on a per share basis.
As a general matter, resolutions adopted by the full Board of Directors
effectively allow the named executive officers to participate in the Profit
Sharing Bonus Plan at higher levels than provided for general participants.
Additional compensation provided to the named executive officers pursuant to
these resolutions comes from outside of the general bonus pool, and these
functional modifications in no way affect amounts received by general
participants under the plan. Pursuant to these resolutions, Paul W. Pence, Jr.
effectively participates in the Plan at 2.5 times the amount calculated for him
under the general formula of the Plan. Under the same resolutions, James D.
Evans effectively participates at 2.0 times the amount otherwise calculated for
allotment to him under the Plan's general formula. However, with respect to the
2003 Plan year only, the Compensation Committee recommended, and the full Board
approved, a resolution which suspended the increased levels of participation
under the Plan for Messrs. Pence and Evans. Consequently, in 2003, Messrs. Pence
and Evans participated in the Plan under the Plan's general formula. With
respect to the 2004 Plan year, it is anticipated that Mr. Pence and Mr. Evans
will participate at their previous levels.
Executive Investment Plan. Effective January 1, 1997, the Company
implemented an Executive Investment Plan (the "EIP"). The EIP is structured as a
nonqualified deferred compensation plan, pursuant to which executive officers
and other key employees who occupy senior managerial and professional positions
with the Company are periodically granted options to purchase certain investment
securities purchased and held by the Company. As a condition to the grant of an
option, a participant may be required to enter into a covenant not to compete
with the Company or into an agreement to remain in the employ of the Company for
at least six months.
This plan is structured to defer recognition of taxable income by the
employee until the option is exercised. Pursuant to the EIP, options can be
exercised during a period ranging from six months after the date of grant, to,
in some cases, five years after the optionee's termination of employment.
However, individual grants made pursuant to the EIP may provide that the options
vest in periodic increments.
11
Investment securities initially available for purchase pursuant to the options
consist of publicly traded mutual funds of varying investment risk. However,
once a specific grant become 60% vested, participants are then permitted to
redirect the investment from the pre-established mutual funds into individual
equity securities of their choosing. Options granted under the EIP provide for
an initial exercise price of 25% of the fair market value of the investment
securities on the date of grant and are periodically adjusted to maintain the
exercise price at 25% of the current fair market value. The fair market value of
options vested during a particular year over the periodically recalculated
exercise price equals the value of the compensation deferred for that year. In
2003, the Board approved acquisitions of fund shares subject to option under the
EIP as follows: (1) qualifying fund shares in the amount of $85,000 were
purchased for the option account of Paul W. Pence, Jr.; and (2) qualifying fund
shares in the amount of $74,000 were purchased for the option account of James
Evans. Each of these options vests over a six-year period as follows: (1) 20%
each year for the first three years following the date of grant; and (2) 13 1/3%
each year thereafter until fully vested.
Discussion of CEO Compensation - Effective January 1, 2003, the
Compensation Committee recommended and the Board approved the increase in the
base salary of the Chief Executive Officer to $151,330. This increase reflected
consideration of competitive data reported in the compensation surveys discussed
above and the Committee's subjective assessment of the CEO and recognition of
the Company's performance during 2002. With respect to competitive compensation
data reviewed by the Committee, in all cases the base salary of the CEO was
ultimately set below the median level of base salaries reported by respondent
institutions within the relevant asset categories. All compensation granted to
the CEO pursuant to the Company's Profit Sharing Bonus Plan for fiscal year
2003, in the amount of $9,594, was calculated in accordance with the formula
provided under the plan and the relevant resolutions of the Company's Board of
Directors.
THIS REPORT ON COMPENSATION IS SUBMITTED BY THE COMPENSATION COMMITTEE MEMBERS:
DONALD FENDER, JR., CHAIRMAN, CHARLES A. DAVIS, WILLIAM BUTLER AND JAMES R.
VANZANT
12
PERFORMANCE GRAPH - FIVE-YEAR SHAREHOLDER RETURN COMPARISON
The following graph provides a comparative presentation of the Company's
cumulative five-year shareholder returns on an indexed basis with the NASDAQ
Bank Index and the Russell 2000. Specifically, the graph compares the value of
$100 invested at the close of business on December 31, 1998, in the Company's
stock, the NASDAQ Bank Index and the Russell 2000.
[PERFORMANCE GRAPH]
ASSUMES $100 INVESTED ON JANUARY 1, 1998
IN MERCHANTS BANCORP, INC. COMMON STOCK,
THE NASDAQ BANK INDEX & THE RUSSELL 2000
*TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
-------- -------- -------- -------- -------- --------
MERCHANTS BANCORP, INC. $ 100.00 $ 178.93 $ 161.74 $ 163.90 $ 145.85 $ 137.26
NASDAQ BANK INDEX $ 100.00 $ 94.29 $ 106.23 $ 113.06 $ 113.74 $ 143.45
RUSSELL 2000 $ 100.00 $ 119.59 $ 114.43 $ 115.60 $ 90.65 $ 131.78
13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Some of the directors, officers and principal shareholders of the Company
and/or the Bank and the companies with which they are associated were customers
of and have had banking transactions with the Bank in the ordinary course of the
Bank's business in the past and up to the present time. All loans and
commitments for loans included in such transactions were made on substantially
the same terms, including interest rates and collateral, as were prevailing at
the time for comparable transactions with other persons. In the opinion of the
Board of Directors of the Bank, these loans and commitments for loans do not
involve more than a normal risk of collectibility or present other unfavorable
features.
The Company and/or the Bank have had, and expect to have in the future,
banking transactions in the ordinary course of its business with directors,
officers, principal shareholders and their associates, on substantially the same
terms, including interest rates and collateral on loans, as those prevailing at
the same time for comparable transactions with others. It is intended that such
transactions will not involve more than the normal risk of collectibility or
present other unfavorable features.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership of Company stock, and certain changes in ownership, with the
Securities and Exchange Commission. Officers, Directors and greater than ten
percent shareholders are required by regulation of the SEC to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the Company
or written representations that no Form 5s, (Annual Statement of Beneficial
Ownership of Securities) were required, the Company believes that during 2003
all Section 16(a) filing requirements applicable to its officers, Directors and
ten percent beneficial owners were satisfied.
SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING OF SHAREHOLDERS
If any shareholder of the Company wishes to submit a proposal to be
included in next year's Proxy Statement and acted upon at the Annual Meeting to
be held in 2005, the proposal must be received by James Evans, Secretary of the
Board of Directors, at the principal executive offices of Merchants Bancorp,
Inc., 100 North High Street, Hillsboro, Ohio 45133, prior to the close of
business on December 6, 2004. On any other proposal raised by a shareholder for
the next year's annual meeting, the Company intends that proxies received by it
will be voted in the interest of the Company in accordance with the judgment of
the Board of Directors of the Company and the proposal will be considered
untimely, unless notice of the proposal is received by the Company not later
than February 19, 2005.
The Company's Code of Regulations establishes advance notice procedures as
to the nomination, other than by or at the direction of the Board of Directors,
of candidates for election as directors. In order to nominate a director for
election at a meeting of the shareholders, it is necessary that you notify the
Company in writing not fewer than 14, nor more than 50, days prior to the
meeting unless the Company provides shareholders less than 21 days notice of the
meeting. In such instances, notice of the nominations must be delivered or
mailed to the Company not later than the seventh day after the notice of the
meeting was mailed, or public disclosure of such meeting was provided. In
addition, the notice must meet all other requirements contained in our Code of
Regulations. Any shareholder who wishes to take such action should obtain a copy
of the Code of Regulations and may do so by written request addressed
14
to the Secretary of the Board of Directors at the principal executive offices of
the Company provided above.
The Board of Directors has not yet established a formal process for
shareholders to send communications to the Board. The Board of Directors has
determined that, in light of the general accessibility of the directors in the
community, no formal shareholder communication process is required at this time.
Nonetheless, shareholders are encouraged to send written communications
regarding the operation or governance of the Company to the attention of Paul W.
Pence, Jr., President, Chief Executive Officer and Board member, at the main
office of the Company.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters
that may come before the meeting. However, the enclosed Proxy will confer
discretionary authority with respect to matters which are not known to the Board
of Directors at the time of printing hereof and which may properly come before
the meeting. A copy of the Company's 2003 report filed with the Securities and
Exchange Commission, on Form 10-K, is available without charge to shareholders.
Address all requests, in writing, for this document to Mr. Paul W. Pence,
President, Merchants Bancorp, Inc., 100 North High Street, Hillsboro, Ohio
45133.
By Order of the Board of Directors of
Merchants Bancorp, Inc.
James D. Evans, Secretary
15
APPENDIX A
MERCHANTS BANCORP, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
16
MERCHANTS BANCORP, INC.
AUDIT COMMITTEE CHARTER
STATEMENT OF POLICY
The purpose of the audit committee is to oversee the Corporation's accounting
and financial reporting processes and the audits of the Corporation's financial
statements. The audit committee shall provide assistance to the board of
directors in fulfilling its oversight responsibilities by reviewing the
financial reports and related financial information provided by the Corporation
to governmental agencies or the general public, the Corporation's system of
internal controls and the effectiveness of its control structure, the
Corporation's compliance with designated laws and regulations, and the
Corporation's accounting, internal and external auditing and financial reporting
processes. In discharging its responsibilities, the audit committee shall:
- Serve as an independent and objective party to oversee the
Corporation's accounting and financial reporting processes, internal
control system, and the audits of the Corporation's financial
statements.
- Review and evaluate the audit procedures and results of the
Corporation's independent auditor and internal audit function.
- Approve, engage and terminate the independent auditor.
- Review and evaluate the independent auditor's qualifications,
performance and independence.
- Review, evaluate and approve any non-audit services the independent
auditor may perform for the Corporation and disclose such approved
non-audit services in periodic reports to shareholders.
- Maintain free and open means of communication between the board of
directors, the independent auditor, the internal auditor, and the
management of the Corporation.
- Maintain free and open means of communication between employees and
the audit committee for the processing of complaints received by the
Corporation regarding questionable accounting or auditing matters,
including suspicions of fraudulent activity.
- At least annually, review and if necessary or appropriate, update this
charter for consideration by the board of directors and perform an
evaluation of the audit committee performance and function.
ORGANIZATION
The members of the audit committee shall be appointed by the board of directors
and may be removed by the board of directors. The audit committee may consult or
retain its own independent legal, accounting or other advisors and shall
determine the degree of independence from the Corporation required of those
advisors. The audit committee shall meet at least four times per year and will
report directly to the full board any issues that arise with respect to the
quality and integrity of the Corporation's general financial performance and
reporting and regulatory compliance. The audit committee may also meet
periodically
17
by itself to discuss matters it determines require private audit committee or
board of directors' attention. Further, the audit committee shall meet
separately with management, with the internal auditor and with the independent
auditor. There will be at least three members of the audit committee. A majority
of the members of the audit committee shall be a quorum to transact business.
RESOURCES AND AUTHORITY OF THE AUDIT COMMITTEE
The audit committee shall have the funding, resources and authority to discharge
its duties and responsibilities without seeking the approval of the board of
directors or management of the Corporation, including (1) the authority, funding
and resources to compensate the independent auditor engaged by the audit
committee for the purpose of preparing or issuing the audit report and
performing other audit, review and attest services for the Corporation, (2) the
authority, funding and resources to select, retain, terminate and approve the
fees and other terms of engagement of, special or independent counsel,
accountants and other advisors as deemed appropriate by the audit committee, and
(3) the authority to pay all its ordinary administrative expenses incurred in
carrying out its duties and responsibilities.
QUALIFICATIONS
The audit committee shall be composed entirely of independent directors,
determined by the board of directors under the Merchants Bancorp, Inc. Corporate
Governance Guidelines. The members of the audit committee, as determined by the
board of directors, shall also meet the independence and financial expertise
requirements of The Nasdaq Stock Market for audit committee members. At least
one member of the audit committee will have past employment experience in
finance or accounting, requisite professional certification in accounting, or
other comparable experience or background which results in the member's
financial sophistication.
INDEPENDENT AUDITORS
The independent auditor shall be engaged by and accountable to the audit
committee. The independent auditor will report directly to the audit committee.
The audit committee shall have the sole authority to engage, compensate,
evaluate and terminate the independent auditor, to review with the independent
auditor the nature and scope of any disclosed relationships or professional
services including all audit engagement fees and terms, and to take appropriate
action to ensure the continuing independence of the auditor. The audit committee
shall pre-approve, or adopt appropriate procedures to pre-approve, all audit and
non-audit services to be provided by the independent auditor. The audit
committee shall also set clear policies and standards relating to the
Corporation's hiring of employees or former employees of the independent auditor
to ensure continued independence throughout the engagement of the independent
auditor.
The audit committee shall, on an annual basis, obtain from the independent
auditor a written disclosure delineating all of its relationships and
professional services as required by Independence Standards Board Standard No.
1, Independence Discussions with Audit Committees. The audit committee shall
engage in a dialogue with the independent auditor with respect to any disclosed
relationships or services that may impact the objectivity and independence of
the independent auditor and be responsible for taking appropriate action to
oversee the independence of the independent auditor. Additionally, the audit
committee will obtain and review a report of the independent auditor describing
its internal quality-control procedures, material issues raised by the most
recent internal quality-control review of the independent auditor or an inquiry
or investigation by a governmental authority involving one or more audits
carried out by the independent auditor in the preceding five years and any steps
or procedures taken to deal with any such issues. After reviewing the
independent auditor's report, the audit committee shall
18
evaluate the auditor's qualifications, performance and independence. The audit
committee shall consider the opinions of management and the internal auditor in
making such evaluation.
As required by law, the audit committee shall confirm the regular rotation of
the lead and concurring audit partner, and consider whether there should be a
regular rotation of the auditor itself.
The independent auditor shall ascertain that the audit committee is made aware
of and timely report to the audit committee all necessary accounting policies
and practices to be used, all alternative treatments of financial information
within generally accepted accounting principles that have been discussed with
management and the risks of using such alternative treatments, and inform the
audit committee of other material written communications between the independent
auditor and management.
The audit committee will have complete oversight of the work done by the
independent auditor for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Corporation, including
resolution of any disagreement between management and the independent auditor
regarding financial reporting.
INTERNAL AUDIT
The internal auditor of the Corporation shall directly report to the chairman of
the audit committee, with administrative oversight provided by an appropriate
executive officer of the Corporation. The audit committee will oversee the
internal audit function and determine that the internal auditor is establishing,
maintaining and executing appropriate audit programs, policies and procedures
that govern the examination and audit of the ledgers, records, procedures and
operations of the Corporation and its affiliates.
COMPLAINT PROCEDURES
The audit committee will establish procedures for the receipt, retention and
treatment of complaints received by the Corporation regarding accounting,
internal accounting controls or auditing matters, and for the confidential,
anonymous submission by employees of the Corporation and its subsidiaries
regarding questionable accounting or auditing matters.
FINANCIAL REPORTING OVERSIGHT
In discharging its responsibilities to oversee governmental and public reporting
of financial information, the audit committee shall:
- Review and discuss the annual audited financial statements, footnotes
and related disclosures included in the Corporation's annual report to
shareholders and its annual report on Form 10-K with financial
management, the independent auditor, and the internal auditor prior to
the release and filing of such documents. Review with the independent
auditor the results of its annual examination of the financial
statements, including their report thereon, and determine its
satisfaction with the disclosures and content of the financial
statements. This review shall cover discussion of all items required
by generally accepted auditing standards regarding required
communications with audit committees. Ascertain that the results of
any internal audit activity or regulatory reports were appropriately
considered in preparing the financial statements.
- Review and discuss the quarterly financial results and information
with financial management, the independent auditor, and the internal
auditor to determine that the independent auditor does not take
exception to the disclosure and content of the financial statements on
Form 10-Q, to
19
determine that the results of any internal audit activity or
regulatory reports were appropriately considered in preparing the
financial statements, and to discuss any other matters required to be
communicated to the audit committee by the independent auditor.
- Review and discuss the types of presentation and information to be
included in earnings press releases, and any additional financial
information and earnings guidance that is provided.
- Inquire of management, the internal auditor, and the independent
auditor about significant risks or exposures and discuss guidelines
and policies to govern the steps management has taken to minimize such
risk to the Corporation.
- Review and discuss the form and content of the certification documents
for the quarterly reports on Form 10-Q and the annual report on Form
10-K with the internal auditor, the independent auditor, the chief
financial officer and the chief executive officer.
- Review the basis for the disclosures made in the annual report to
stockholders under the heading Management's Report on Internal
Controls regarding the control environment of the Corporation and the
annual filing required under the Federal Deposit Insurance Corporation
Improvement Act of 1991, if applicable.
Prepare, review and approve the annual proxy statement disclosure regarding the
activities and report of the audit committee for the year.
20
APPENDIX B
MERCHANTS BANCORP, INC.
CHARTER OF THE NOMINATING AND GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS
21
MERCHANTS BANCORP, INC.
NOMINATING AND GOVERNANCE COMMITTEE CHARTER
STATEMENT OF POLICY
The Nominating and Governance Committee shall provide assistance to the board of
directors in fulfilling the board of directors' responsibilities for director
nominations and appointments, and board of directors and corporate governance.
ORGANIZATION
The members of the Nominating and Governance Committee shall be appointed by the
board of directors and may be removed by the board of directors. The Nominating
and Governance Committee shall meet on the call of its chairman. The Nominating
and Governance Committee has the sole authority to retain and terminate any
consulting or search firm to be used to identify director candidates, including
the sole authority to approve the firm's fees and other retention terms. There
will be at least three members of the Nominating and Governance Committee. A
majority of the members of the Nominating and Governance Committee shall be a
quorum to transact business.
QUALIFICATIONS
The Nominating and Governance Committee shall be composed entirely of
independent directors, determined by the board of directors under the Merchants
Bancorp, Inc. Corporate Governance Guidelines.
POWERS, DUTIES, AND RESPONSIBILITIES
In discharging its responsibilities to review, authorize and approve director
nominations and corporate governance, the Nominating and Governance Committee
shall:
- actively seek individuals qualified to become members of the board of
directors;
- from time to time recommend individuals for appointment as directors
by the board of directors;
- recommend to the board of directors the number of directors that shall
constitute the whole board of directors;
- recommend to the whole board of directors nominees for director for
nomination by the board of directors for approval by shareholders at
an annual meeting of shareholders or special meeting of shareholders;
- recommend to the board of directors the establishment, charter and
membership of the various committees of the board of directors;
- recommend to the board of directors corporate governance guidelines
for Merchants Bancorp, Inc.;
22
- consider and advise the board of directors on other matters relating
to the affairs or governance of the board of directors;
- annually review and if necessary or appropriate, update this charter
for consideration by the board of directors;
- annually evaluate the performance and function of the Nominating and
Governance Committee, the board of directors generally and each member
of the board of directors; and
- report the matters considered and actions taken by the Nominating and
Governance Committee to the board of directors.
23
PROXY FOR ANNUAL MEETING OF
MERCHANTS BANCORP, INC.
HILLSBORO, OHIO
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned shareholder of
Merchants Bancorp, Inc., Hillsboro, Ohio, do hereby nominate, constitute, and
appoint Patrick Hays, Joseph P. West, Jr. or Bing Williamson, or any one of them
(with full power of substitution for me and in my name, place and stead) to
vote, including the right to vote cumulatively, all the common stock of said
Company, standing in my name on its books on March 23, 2004, at the Annual
Meeting of its shareholders to be held at The Wooden Spoon Restaurant, 1480
North High Street, Hillsboro, Ohio 45133, on April 27, 2004 at 10:00 a.m. (local
time), or any adjournments thereof with all the powers the undersigned would
possess if personally present as follows:
1. To elect three (3) members of Class I (term to expire 2007) to the Board of
Directors.
Nominees:
Paul W. Pence, Jr.
James R. Vanzant
Robert Hammond
For All Nominees Withhold Authority to Vote For all Nominees Withhold Authority to Vote For an
Individual Nominee
- ---------------------------------- ------------------------------------------- -------------------------------------
(Except as marked to the contrary) TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, CHECK THE "FOR
[ ] [ ] ALL NOMINEES" BOX AND STRIKE A LINE
THROUGH THE NAME OF THE NOMINEE FORM
WHOM AUTHORITY IS BEING WITHHELD.
2. To transact such other business as may properly come before the meeting or
any adjournment thereof.
THIS PROXY CONFERS AUTHORITY TO VOTE "FOR" THE ABOVE NOMINEES UNLESS OTHERWISE
MARKED. IF ANY OTHER BUSINESS IS PRESENTED AT SAID MEETING, THIS PROXY SHALL BE
VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF MANAGEMENT. ALL SHARES
REPRESENTED BY PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED.
The Board of Directors recommends a vote "FOR" directors nominated by the Board
of Directors. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS and
may be revoked prior to its exercise by either written notice or personally at
the meeting or by a subsequently dated proxy.
________________________________________________
________________________________________________
____________________________________________ ______________________________
(STOCKHOLDER SIGNATURE) (DATE)
____________________________________________ ______________________________
(STOCKHOLDER SIGNATURE) (DATE)
Please Print Name(s)________________________
Please Print Number of Shares_______________
(WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, PLEASE
GIVE FULL TITLE. IF MORE THAN ONE TRUSTEE, ALL SHOULD SIGN. ALL JOINT OWNERS
MUST SIGN.)
PLEASE SIGN AND RETURN IMMEDIATELY IN THE ENCLOSED POSTPAID ENVELOPE WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.