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
[X] Definitive Proxy Statement RULE 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Section 240.14a-12
PEOPLES OHIO FINANCIAL CORPORATION
(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)(4) and 0-11.
1) Title of each class of securities to which transaction applies: N/A
2) Aggregate number of securities to which transaction applies: N/A
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 is 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: ___________________
October 4, 2005
Dear Peoples Ohio Shareholder:
In addition to the enclosed 2005 annual meeting proxy and annual report, I want
to report important news regarding Peoples Ohio Financial Corporation, and
Peoples Savings Bank.
The Board of Directors of Peoples Ohio Financial Corporation, holding company,
and the Board of Directors of Peoples Savings Bank have approved a definitive
agreement to merge Peoples into MainSource Financial Group (MSFG) of Greensburg,
Indiana, a financial services holding company comprised of smaller community
banks in Indiana and Illinois.
It appears that the timeline for the transition process will extend into the
first quarter of calendar 2006 with various regulatory approvals required as
well as the approval of shareholders of Peoples Ohio Financial Corporation.
While the decision to merge Peoples was a difficult decision in light of our
115-year history of community banking, we believe that now is the right time to
merge and that we found the right partner in MainSource.
Customers and others will see minimal change in the day-to-day operations with
personnel, products, services and access...while we believe the merger creates
significant value for shareholders and greatly improves the liquidity of stock.
Our regular annual meeting, Thursday, October 27, 2005, 3 p.m., at Edison
Community College, Piqua, Ohio, will be held as scheduled. Early next year, a
separate shareholder meeting will be held in order to approve the merger.
Attached to this letter is a news release that provides additional information
on the definitive agreement and more about MainSource.
Sincerely,
Ron Scott
President/CEO
Peoples Ohio Financial Corporation
(Attachment/ News Release)
SEPTEMBER 29, 2005
NEWS RELEASE FOR MORE INFORMATION: RON SCOTT
(937) 339-5000
PEOPLES SAVINGS BOARDS OF DIRECTORS
APPROVE MERGER AGREEMENT
The Board of Directors for Peoples Ohio Financial Corporation (POHF), holding
company, and the Board of Directors for Peoples Savings Bank
(Troy-Piqua-Clayton), have approved a definitive agreement to merge into
MainSource Financial Group (MSFG) of Greensburg, Indiana.
Per terms of the definitive agreement, Peoples Ohio Financial shareholders will
receive approximately $5.60 per share. The exact amount of cash or stock payable
to Peoples' shareholders may be adjusted at the time of closing. In any event,
75% of the total consideration must be paid in shares of MainSource common stock
and there may be allocations of cash or stock made to shareholders to ensure
that this requirement is satisfied.
Additionally, the definitive agreement enables Peoples Saving Bank to become a
chartered, stand-alone commercial bank providing opportunity for enhanced/new
products and services.
Ron Scott remains president and chief executive officer of the bank... positions
he has held for the past 16 years. He also will assume the role of chairman of
the restructured bank board of directors that will retain local self-governance
powers under MainSource ownership.
The timeline for the transition process is expected to extend into the first
quarter of calendar 2006 with various regulatory approvals required as well as
the approval of shareholders of Peoples Ohio Financial Corporation.
In making the announcement, Ron Scott stated that this action obviously is
significant in light of the 115 years Peoples Savings Bank has served the local
communities as an independent, local, community bank.
However, the challenges of remaining completely independent are very
significant. He emphasized fluctuating interest rates, flat yield curve, intense
local competition, costly/time-consuming bank industry regulations, sustainable
earnings, and lack of stock liquidity as major hurdles for future success as an
independent financial institution.
-more-
"Since 1890, Peoples has been "the local bank" and it has had to continually
reinvented itself to remain current, innovative and profitable. We believe that
our partnership with MainSource is the next logical, necessary step in that
process," Scott said.
He also said that Peoples has achieved a merger/partnership relationship that
creates significant value for shareholders and improved liquidity of stock.
He pointed out that customers and others would see minimal change in day-to-day
operations with personnel, products, service, and local access remaining the
same as much as possible.
"We believe that Peoples is a good fit with MainSource...As an organization,
MainSource is simply a Peoples on a bigger scale...a financial services holding
company comprised of small community banks which together can be more
competitive. Troy is probably as large or larger than most communities
MainSource currently serves," Scott explained.
James L. Saner, Sr., President and CEO, MainSource Financial Group, agrees that
Peoples Savings Bank is great addition to the MainSource family of community
banks.
"We are excited to have Peoples join our community banking group...our
philosophies of the role of community banking are very much the same. Both
organizations are focused on local service and access, local community
involvement, and local decision-making," Saner said.
He added that Peoples' history of innovation and success made it an excellent
choice to be the first community bank in Ohio to join MainSource. Saner added
that his company is very impressed with the communities and markets which
Peoples serves and with the current Peoples management/employee team who will be
growing those markets.
While the name of Peoples Saving Bank is expected to change to MainSource Bank
of Ohio when the merger is final (sometime in 2006), both Scott and Saner
indicated that the small-town culture and commitment to service does not change.
Peoples Savings Bank has approximately $200 million in assets and has five
banking centers, ATM locations and wealth management offices in Troy and Piqua
(Miami County, Ohio) and in Clayton (Dayton/Montgomery County, Ohio). Peoples
Ohio stock is traded over-the-counter through market makers.
MainSource Financial Group, Inc. is a community bank financial services holding
company with current assets of $1.7 billion. Through three current banking
subsidiaries, MainSource Bank (Greensburg, Indiana), Peoples Trust Company
(Linton, Indiana) and MainSource Bank of Illinois (Kankatee, Illinois), it
operates 55 offices in 23 Indiana Counties and six offices in three Illinois
counties. Also, MainSource has non-banking
subsidiaries that provide insurance, title, and mortgage services. Shares of
MainSource Financial Group are traded on the NASDAQ stock exchange.
MainSource will be filing a Registration Statement on Form S-4 concerning the
merger with the Securities and Exchange Commission ("SEC"), which will include
the proxy statement that will be mailed to Peoples' shareholders. Peoples urges
shareholders to read these documents because they contain important information.
Shareholders will be able to obtain the documents free of charge, when filed at
the SEC's website, www.sec.gov. In addition, documents filed with the SEC by
MainSource will be available free of charge from the Secretary of MainSource at
201 N. Broadway, P.O. Box 87, Greensburg, IN 47240, telephone (812)663-0157.
Documents filed with the SEC by Peoples Ohio will be available free of charge
from the Secretary of Peoples at 635 South Market Street, Troy, Ohio, telephone
(937)339-5000. Peoples shareholders should read the proxy statement carefully
before making a decision concerning the merger. Copies of all recent proxy
statements and annual reports are also available free of charge from the
respective companies by contacting the company secretary.
MainSource and Peoples and their directors and executive officers may be deemed
to be participants in the solicitation of proxies to approve the merger.
Information about the participants may be obtained through the SEC's website
from the definitive proxy statement filed with the SEC on April 29, 2005, with
respect to MainSource and the definitive proxy statement filed with the SEC on
September 24, 2004, with respect to Peoples.
PEOPLES OHIO FINANCIAL CORPORATION
635 SOUTH MARKET STREET
TROY, OHIO 45373
(937) 339-5000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 27, 2005
The Annual Meeting of Shareholders of Peoples Ohio Financial
Corporation (the "Company") will be held at Edison Community College located at
1973 Edison Drive, Piqua, Ohio on Thursday, October 27, 2005, at 3:00 p.m. to
consider and act on the following matters:
1. Election of three Directors for two-year terms expiring in
2007.
2. Ratify the selection of BKD, LLP as the independent registered
public accounting firm of the Company for the year ending June
30, 2006.
3. Conduct such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on September 12,
2005, as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting and at any adjournments thereof.
A copy of the Company's Annual Report which includes financial
statements for the fiscal year ended June 30, 2005, is enclosed.
By Order of the Board of Directors
/s/ LINDA A. DANIEL
Linda A. Daniel
Secretary
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED POSTPAID ENVELOPE.
Troy, Ohio October 4, 2005
PEOPLES OHIO FINANCIAL CORPORATION
635 SOUTH MARKET STREET
TROY, OHIO 45373
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
GENERAL
- --------------------------------------------------------------------------------
We are sending you this Proxy Statement and the enclosed proxy card
because the Board of Directors of Peoples Ohio Financial Corporation (the
"Company" "we" or "us") is soliciting your proxy to vote at the 2005 Annual
Meeting of Shareholders (the "Annual Meeting"). This Proxy Statement summarizes
the information you need to know to vote at the Annual Meeting.
You are invited to attend our Annual Meeting on October 27, 2005
beginning at 3:00 p.m., local time. The Annual Meeting will be held at Edison
Community College, 1973 Edison Drive, Piqua, Ohio.
This Proxy Statement and the enclosed form of proxy is expected to be
mailed to shareholders on or about October 4, 2005.
- --------------------------------------------------------------------------------
SOLICITATION AND VOTING
- --------------------------------------------------------------------------------
SHAREHOLDERS ENTITLED TO VOTE
Holders of record of common stock of the Company at the close of
business on September 12, 2005 (the "Record Date") are entitled to vote at the
Annual Meeting. Each share of common stock of the Company is entitled to one
vote.
Pursuant to the Company's Amended and Restated Code of Regulations
("Code of Regulations"), shareholders are not entitled to cumulate their votes
for the election of Directors.
As of the Record Date, the Company had 7,331,629 common shares issued
and outstanding.
VOTING PROCEDURES
Unless you hold your shares in the Company's Employee Stock ownership
Plan and Trust ("ESOP"), you can vote on matters to come before the Annual
Meeting in one of two ways:
o you can come to the Annual Meeting and cast your vote there;
or
o you can vote by signing and returning the enclosed proxy card.
If you do so, the individuals named as proxies on the card
will vote your shares in the manner you indicate.
You may also choose to vote for all of the nominees for Director and
each proposal by simply signing, dating and returning the enclosed proxy card
without further direction. All signed and returned proxies that contain no
direction as to vote will be voted FOR each of the nominees for Director and FOR
each of the proposals.
1
If you plan to attend the Annual Meeting and vote in person, you should
request a ballot when you arrive. HOWEVER, IF YOUR SHARES ARE HELD IN THE NAME
OF YOUR BROKER, BANK OR OTHER NOMINEE, THE INSPECTOR OF ELECTION WILL REQUIRE
YOU TO PRESENT A POWER OF ATTORNEY OR PROXY IN YOUR NAME FROM SUCH BROKER, BANK
OR OTHER NOMINEE FOR YOU TO VOTE SUCH SHARES AT THE ANNUAL MEETING. Please
contact your broker, bank or nominee.
VOTING PROCEDURES FOR SHARES IN THE COMPANY'S ESOP
If you participate in the Company's ESOP, please return your proxy card in
the enclosed envelope on a timely basis to ensure that your proxy is voted. If
you own or are entitled to give voting instructions for shares in the ESOP and
do not vote your shares or give voting instructions, generally, the plan trustee
will vote your shares in the same proportion as the shares for all plan
participants for which voting instructions have been received. Holders of shares
in the ESOP will not be permitted to vote such shares at the Annual Meeting, but
their attendance is encouraged and welcome.
REQUIRED VOTE
The presence, in person or by proxy, of the holders of a majority of
the votes entitled to be cast by the shareholders at the Annual Meeting is
necessary to constitute a quorum. Abstentions and broker "non votes" are counted
as present and entitled to vote for purposes of determining a quorum. A broker
"non vote" occurs when a broker, bank or other nominee holding shares for a
beneficial owner does not vote on a particular proposal because such broker,
bank or nominee does not have discretionary authority to vote and has not
received instructions from the beneficial owner.
Once a quorum is achieved, a plurality of votes cast is all that is
necessary for the election of Directors. Abstentions and broker "non votes" will
not be counted as votes either "for" or "against" any Director. As to
ratification of BKD, LLP and all other matters that may come before the Annual
Meeting, the affirmative vote of a majority of votes cast is necessary for the
approval of such matters. Abstentions and broker "non votes" are again not
counted for purposes of approving the matter or any other matters coming before
the Annual Meeting.
REVOKING A PROXY
If you give a proxy, you may revoke it at any time before it is
exercised. You may revoke your proxy at any time prior to its exercise by:
o sending in another proxy with a later date;
o providing written notification of the revocation to the
Company's Secretary in writing at Peoples Ohio Financial
Corporation, 635 South Market Street, Troy, Ohio, 45373; or
o appearing in person at the Annual Meeting and revoking the
proxy.
If you choose to revoke your proxy by attending the Annual Meeting, you
must vote in accordance with the rules for voting at the Annual Meeting.
Attending the Annual Meeting alone will not constitute revocation of a proxy.
COST OF PROXY SOLICITATION
We will pay the expenses of soliciting proxies. Proxies may be
solicited on our behalf by Directors, officers or employees in person or by
telephone, mail or telegram. We do not intend to engage a proxy solicitation
firm to assist us in the distribution and solicitation of proxies. The Company
will also request persons, firms and corporations holding shares in their names
for other beneficial owners to send proxy materials to such beneficial owners.
The Company will reimburse these persons for their expenses.
INSPECTOR OF ELECTION
Your proxy returned in the enclosed envelope will be delivered to the
Company's transfer agent, Registrar and Transfer Company ("R&T"). The Board of
Directors has designated R&T to act as inspectors of election and to tabulate
the votes at the Annual Meeting. R&T is not otherwise employed by, or a Director
of, the Company or any of its affiliates. After the final adjournment of the
Annual Meeting, the proxies will be returned to the Company.
2
OTHER MATTERS
The Board of Directors is not aware of any other matters to come before the
Annual Meeting. However, if any other matters should properly come before the
Annual Meeting, or any adjournment thereof, including matters relating to the
conduct of the Annual Meeting, it is intended that the shares represented by
properly-executed proxies will be voted in respect thereof in accordance with
the judgment of the person or persons voting the proxies.
- --------------------------------------------------------------------------------
GOVERNANCE OF THE COMPANY
- --------------------------------------------------------------------------------
COMPOSITION OF THE BOARD OF DIRECTORS
During 2005, the Board of Directors met a total of eight times. In
addition, the Board of Directors has authorized various Committees to manage
distinct matters of the Company. These Committees include the Audit Committee
and Compensation Committee. Membership on each of the Committees, and number of
Committee and Board meetings held during the fiscal year ending June 30, 2005,
is set forth in the table below. All of our Directors attended 75 percent or
more of the meetings of the Board and the Board Committees on which they served
in fiscal year 2005.
<Table>
<Caption>
NAME BOARD AUDIT COMPENSATION
---- ----- ----- ------------
Cooper- Chairman of the Board X X X
Klockner X X
McGraw X
Robinson X X
Scott X
Wilcox X X X
Meetings during fiscal year 2005 8 8 1
</Table>
THE AUDIT COMMITTEE
The Audit Committee is responsible for recommending the annual
appointment of the public accounting firm to be our outside auditors, subject to
approval of the Board of Directors and shareholders. The Committee is
responsible for the following tasks:
o maintaining a liaison with the outside auditors;
o reviewing the adequacy of internal controls;
o reviewing with management and outside auditors financial
disclosures of the Company; and
o reviewing any material changes in accounting principles or
practices used in preparing statements.
3
THE COMPENSATION COMMITTEE
The Compensation Committee is responsible for establishing annual and
long-term performance goals for the Chief Executive Officer (Mr. Scott) and also
approves the Chief Executive Officer's salary and other incentive compensation.
The Committee's functions include:
o awarding shares or options under the Company's stock option
plan;
o determining compensation to be paid pursuant to the Company's
incentive plan; and
o publishing an annual Executive Compensation Committee Report
for the shareholders.
The Committee is aided in performing these functions by counsel.
During fiscal year 2005, the Board of Directors acted as the nominating
committee for selecting nominees for election as Directors. As a result, there
is no charter for a nominating committee.
The Board of Directors believes it is appropriate that the Board as a
whole functioned as a nominating committee during fiscal year 2005, as the Board
of Directors believes that allowing the full Board of Directors to act as a
nominating committee does not permit management to exercise undue control over
the Director nomination process. Moreover, the Board of Directors believes that
all of the Directors have significant expertise in the operations and needs of
the Company and its Board of Directors, and have valuable insights to offer
regarding the value that qualified Directors can bring to the Company.
In its deliberations, the Board of Directors, functioning as a
nominating committee, considers the candidate's knowledge of the banking
business and involvement in community, business and civic affairs. Any nominee
for Director chosen by the Board of Directors, acting as a nominating committee,
must be highly qualified with regard to some or all the attributes listed in the
preceding sentence. In searching for qualified Director candidates to fill
vacancies, the Board of Directors, acting as a nominating committee, solicits
its then current Directors for the names of potential qualified candidates.
Moreover, the Board of Directors, acting as a nominating committee, may ask
Directors to pursue their own business contacts for the names of potentially
qualified candidates. The Board of Directors, acting as a nominating committee,
would then consider the potential pool of Director candidates, select the top
candidate based on the candidates' qualifications and the Board's needs, and
conduct a thorough investigation of the proposed candidate's background to
ensure there is no past history that would cause the candidate not to be
qualified to serve as Director of the Company. The Board of Directors, acting as
a nominating committee, will consider the nomination of Director candidates
recommended by shareholders in the same manner in which the Board of Directors
would evaluate nominees for Director recommended by the Board of Directors.
Recommendations to the Board of Directors, acting as a nominating committee,
from shareholders regarding candidates must be delivered to the Company's
Secretary no later than June 30 of the year in which such shareholder proposes
that the recommended candidate stand for election.
The Company's Code of Regulations sets forth procedures that must be
followed by shareholders seeking to make nominations for Directors.
The Company's Code of Regulations provides that candidates for
Directors at an annual meeting may be nominated by any shareholder by filing the
names of such candidates with the Secretary of the Company at least sixty days
prior to the first anniversary of the most recent annual meeting held for
election of Directors; provided, however, that if the annual meeting for the
election of Directors in any year is not held on or before the thirty first day
following such anniversary, then written notice must be received within a
reasonable time prior to the date of such annual meeting.
BOARD POLICIES REGARDING COMMUNICATIONS WITH THE BOARD OF DIRECTORS AND
ATTENDANCE AT ANNUAL MEETINGS
The Company's Board of Directors maintains an informal process for
shareholders to communicate with the Board of Directors. Shareholders wishing to
communicate with the Company's Board should send any communication to the
Secretary of the Company. Any such communication must state the number of shares
beneficially owned by the shareholder making the communication. The Secretary of
the Company will forward such
4
communication to the full Board of Directors or to any individual Director or
Directors to whom the communication is directed unless the communication is
unduly hostile, threatening, illegal or similarly inappropriate, in which case
the Company's Secretary has the authority to discard the communication or take
appropriate legal action regarding the communication.
The Company does not have a policy regarding Board member attendance at
annual meetings of shareholders. All Company Directors attended the 2004 annual
meeting of shareholders.
DIRECTORS' COMPENSATION
The Directors and Chairman of the Company received $3,000 and $4,000,
respectively, for serving on the Company's Board of Directors during fiscal year
2005. In addition, Company Directors who are not also employees of the Company
or Bank ("Outside Directors") receive $500 per Company committee meeting or
Company Board meeting attended. Those Directors who also serve on the Bank's
Board of Directors received $10,000 for serving in such capacity during 2005. In
addition, Outside Directors receive $300 per Bank committee meeting or Bank
Board meeting attended. In addition, the Company maintains a Stock-Based
Incentive Plan for Directors.
STOCK-BASED INCENTIVE PLAN. The Company maintains the Incentive Plan
for both Directors and employees which vest and become exercisable over three
years (prior to 2003, options granted were fully exercisable on the date of
grant). Under the plan each non-employee Directors was granted 1,500 common
shares during fiscal year 2005.
- --------------------------------------------------------------------------------
CODE OF ETHICS
- --------------------------------------------------------------------------------
The Board of Directors has not yet adopted a code of ethics under
applicable SEC regulations governing the Company's principal executive officer
and principal financial officers or persons performing similar functions. The
Board has not felt the need to adopt such a code of ethics for several reasons.
First, the Company's principal executive officer and principal financial officer
are also executive officers of the Bank and the Bank has adopted a Code of
Ethics and Conflicts of Interests Policy that governs matters such as conflicts
of interests, acceptance of gifts, and loans to executive officers. Second, the
Company and the Bank are already subject to extensive regulation and supervision
by federal and state banking regulators.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- --------------------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who own more than 10% of any
registered class of the Company's equity securities, to file reports of
ownership and changes of ownership with the SEC. The Company assists its
Directors and executive officers in completing and filing of such reports.
Executive officers, directors and greater that 10% shareholders are required by
regulation to furnish the Company with copies of all Section 16(a) reports they
file.
Based on its review of the copies of the reports it has received and
written representations provided to the Company from the individuals required to
file the reports, the Company believes that all executive officers, directors
and greater that 10% shareholders filed all reports required on a timely basis
pursuant to Section 16(a) of the Securities Exchange Act of 1934.
5
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PRINCIPAL HOLDERS OF COMMON STOCK
- --------------------------------------------------------------------------------
The following table sets forth information with respect to ownership of
the common stock of the Company by any person (including any "group" as that
term is used in Section 13d-3 of the Securities Exchange Act of 1934) who is
known to the Company to be the beneficial owner of more than 5% of the
outstanding common stock. The information in the following chart comes from the
stock ledger of the Company and any required ownership reports received by the
Company as of the Record Date and is believed to be accurate.
<Table>
<Caption>
Amount and
Name and Address Nature of Beneficial Percent
of Beneficial Owner Ownership (1) of Class
- ------------------- -------------------- --------
E. Joseph Lowe 698,052 9.52%
901 N. Miami Avenue
Miami, Florida 33136
Ronald B. Scott 520,420(2) 6.65%
194 Littlejohn Road
Troy, Ohio 45373
</Table>
(1) Except as otherwise noted, all beneficial ownership is direct and each
beneficial owner exercised sole voting and investment power over the
shares.
(2) Rule 13d-3(d)(1) under the Securities Exchange Act of 1934 requires the
inclusion in "beneficial ownership" of shares of common stock which may be
acquired by the exercise of options, within 60 days. President Scott has
immediately exercisable options to acquire 267,050 shares, which amount is
included in his holdings.
6
- --------------------------------------------------------------------------------
ITEM 1. ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Company's Code of Regulations provides that the Board of Directors
shall be composed of six members and shall be divided into two classes. The
members of each class are elected for a term of two years. One class is elected
annually.
Three Directors will be elected at the Annual Meeting to serve two-year
terms and until their successors are elected and qualified. The Board of
Directors serving as the Nominating Committee has nominated the following
current Directors:
Thomas E. Robinson
Donald Cooper
Richard W. Klockner
There are no arrangements known to management between the persons named
and any other person pursuant to which such nominees were selected. The Board of
Directors will not consider nominees recommended by shareholders unless such
nomination is made directly by the shareholders in accordance with the
procedures provided in the Company's Code of Regulations, described above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
THE ABOVE NOMINEES FOR DIRECTOR UNDER ITEM 1.
The persons named in the enclosed proxy intend to vote for the election
of named nominees, unless the proxy is marked by the shareholder to the
contrary. If any nominee is unable to serve, all valid proxies will be voted for
the election of such substitutes as the Board of Directors may recommend. The
Board knows of no reason why any nominee might be unavailable to serve.
7
- --------------------------------------------------------------------------------
NOMINEES WHOSE TERMS WILL EXPIRE IN 2006
- --------------------------------------------------------------------------------
<Table>
<Caption>
NAME AND AGE AS OF POSITION, PRINCIPAL OCCUPATION,
THE ANNUAL MEETING BUSINESS EXPERIENCE AND DIRECTORSHIP
------------------ ------------------------------------
Thomas E. Robinson 74 THOMAS E. ROBINSON has been a
director of the Bank since 1996. He
is a retired executive. Mr. Robinson
is active in a number of charitable
boards and foundations including the
Ruth Lyons Children's Fund, and is a
past member of the Troy Foundation.
He is also an Ambassador for Upper
Valley Medical Center. He served as
an Advisory Board member from 1995
until 1996 when he was appointed to
the full board.
Donald Cooper 76 DONALD COOPER has been a director of
the Bank since 1989. He is the
president of Captor Corporation, Tipp
City, Ohio, a manufacturer of
specialized electronic components.
Mr. Cooper is also a member of the
Tipp City Rotary Club and supports
Tipp City community projects.
Richard W. Klockner 76 RICHARD W. KLOCKNER has been a
director of the Bank since 1996. He
is owner and president of Klockner &
Associates, a civil engineering
company located in Troy. Mr. Klockner
is a member of the Miami County Home
Builders Association, Professional
Land Surveyors of Ohio, and the Ohio
Society of Professional Engineers. He
served as an advisory board member
from 1985 until 1996 when he was
appointed to the full board.
</Table>
8
- --------------------------------------------------------------------------------
CONTINUING DIRECTORS WITH TERMS EXPIRING 2007
- --------------------------------------------------------------------------------
<Table>
<Caption>
NAME AND AGE AS OF POSITION, PRINCIPAL OCCUPATION,
THE ANNUAL MEETING BUSINESS EXPERIENCE AND DIRECTORSHIP
------------------ ------------------------------------
William J. McGraw, III 57 WILLIAM J. MCGRAW, III has been a
director of the Bank since 1977. He is an
attorney and president of Dungan &
LeFevre Co., L.P.A., the Troy Ohio Law
firm, which represents the Company as
general counsel. Mr. McGraw was past
president of the Troy Area Chamber of
Commerce and the Troy Noon Optimist Club,
and founding chairman of Leadership Troy.
He is a past chairman of the board of
trustees of Upper Valley Medical Centers,
and currently serves as a trustee of the
Troy Development Council. Mr. McGraw also
serves as Secretary and Director of the
Company's service corporation.
Ronald B. Scott 58 RONALD B. SCOTT has been a director of
the Bank since 1991. He has served as
President and Chief Executive Officer of
the Company since December, 1990. He also
serves as President and as a Director of
its service corporation. Mr. Scott has
been employed with the Company since 1987
and previously served as a Senior Vice
President and Chief Financial Officer of
the Company. Mr. Scott is a past Chairman
of the Troy Area Chamber of Commerce. He
currently serves as a Trustee of the Troy
Foundation and Vice President of the Paul
Duke Foundation. He is a member of the
Troy Development Council and is Vice
Chairman of the Tax-Incentive Review
Council of Miami County.
James S. Wilcox 58 JAMES S. WILCOX has been a director of
the Bank since 1996. He is the retired
vice president of finance and chief
financial officer for PMI Food Equipment
Group headquartered in Troy. Mr. Wilcox
serves on the boards of MVPS, and
Tropitone Corporation. He served as an
Advisory Board member from 1989 until
1996 when he was appointed to the full
board.
</Table>
9
- --------------------------------------------------------------------------------
ITEM 2 RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
The Board of Directors, upon the recommendation of its Audit Committee,
has appointed BKD, LLP to serve as the Company's independent registered public
accounting firm for 2006 and is seeking the ratification of the appointment of
BKD, LLP by our shareholders.
FEES
The aggregate fees billed for professional services rendered for the
Company by BKD, LLP for the years ended June 30, 2005, and 2004 were as follows:
<Table>
<Caption>
2005 2004
------- -------
Audit Fees $52,500 $45,220
Audit-Related Fees 14,065 2,700
Tax Fees 6,325 26,280
All Other Fees -- --
------- -------
Total $72,890 $74,200
======= =======
</Table>
The Audit Fees for the years ended June 30, 2005 and 2004, were for
professional services rendered in connection with the audits of the consolidated
financial statements of the Company and assistance with the review of documents
filed with the Ohio Department of Financial Institutions (DFI), OTS and the SEC.
The Audit Related Fees for the years ended June 30, 2005 and 2004, were
for consultation concerning financial accounting issues and related services in
connection with quarterly financial information filed with the DFI, OTS and the
SEC.
The Tax Fees for the years ended June 30, 2005 and 2004, were for
services related to tax compliance, including the preparation of income tax
returns.
The Board has established pre-approval policies and procedures with
respect to engagement of accountants to render audit and non-audit services. All
auditing services and non-audit services provided by BKD, LLP, for the year
ending 2005, have been approved by the audit committee.
The Audit Committee of the Board believes that the non-audit services
provided by BKD, LLP are compatible with maintaining that firm's independence.
The affirmative vote of a majority of votes cast on this proposal,
without regard to abstentions or broker "non-votes," is required for the
ratification of the appointment of BKD, LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF
THE ABOVE NAMED INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM UNDER ITEM 2.
10
- --------------------------------------------------------------------------------
SECURITY OWNERSHIP OF DIRECTORS, NOMINEES FOR DIRECTORS
MOST HIGHLY COMPENSATED EXECUTIVE OFFICERS AND
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
- --------------------------------------------------------------------------------
The following table indicates, as of the Record Date the number and
percentage of outstanding common shares beneficially owned by each Director of
the Company, by each nominee for election to the Board of Directors, and by all
Directors and executive officers of the Company as a group.
<Table>
<Caption>
Common Stock
Beneficially Owned(1)
---------------------
Name Amount Percent
---- --------- -------
Ronald B. Scott 520,420(2) 6.65%
Thomas E. Robinson 355,000(2) 4.84%
William J. McGraw 300,184(2) 4.09%
Donald Cooper 275,978(2) 3.76%
Richard W. Klockner 241,756(2) 3.28%
James S. Wilcox 106,848(2) 1.46%
All Directors and executive officers as
a group 1,864,069 24.25%
</Table>
(1) Except as otherwise noted, all beneficial ownership is direct and each
beneficial owner exercised sole voting and investment power over the shares.
(2) Rule 13d-3(d)(1) under the Securities Exchange Act of 1934 requires the
inclusion in "beneficial ownership" of shares of common stock which may be
acquired by the exercise of options within 60 days. President Scott has
immediately exercisable options to acquire 267,050 shares; Mr. Robinson has
immediately exercisable options to acquire 3,000 shares; Mr. McGraw has
immediately exercisable options to acquire 16,500 shares; Mr. Cooper has
immediately exercisable options to acquire 7,500 shares; Mr. Klockner has
immediately exercisable options to acquire 31,500 shares; and, Mr. Wilcox
has immediately exercisable options to acquire 6,000 shares, all of which
amounts are included in their respective holdings. See also "Principal
Holders of Common Stock," above.
- --------------------------------------------------------------------------------
CHANGE IN CONTROL
- --------------------------------------------------------------------------------
On September 28, 2005, the Company entered into an Agreement and Plan
of Merger (the "Merger Agreement") with MainSource Financial Group, Inc. The
Merger Agreement provides that the Company will be merged with and into
MainSource, with MainSource being the surviving corporation. The Bank shall
immediately thereafter merge with and into a to-be-formed interim Ohio
commercial bank and wholly-owned subsidiary of MainSource. As a result of the
transactions, the Bank will become a wholly owned subsidiary of MainSource.
The Company's stockholders will receive, in exchange for shares of
Company stock, shares of MainSource common stock or cash, or a combination of
stock and cash, subject to MainSource's ability to limit such stock
consideration to 75% of the total consideration. The stock portion of the
consideration furnished to the Company's shareholders is intended to qualify as
a tax-free transaction.
The transaction is subject to certain conditions as further described
in the Merger Agreement, including the prior approval of the Company's
shareholders at a future special shareholders meeting to be called by the
11
Company's Board of Directors, and applicable regulatory authorities. The merger
is anticipated to close in the first quarter of 2006. A copy of the Merger
Agreement was included as an exhibit to the Company's Current Report on Form
8-K, filed on September 29, 2005, a copy of which can be obtained free of charge
at www.sec.gov.
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
In addition to the President and Chief Executive Officer, Ronald B.
Scott, the Company has the following executive officers:
RICHARD J. DUTTON, 42, is Vice President and Treasurer of the Company. Mr.
Dutton joined the Bank as Vice President and Chief Financial Officer in July
2002. Prior to joining the Company, Mr. Dutton was employed by BKD, LLP (and
predecessor firms) for 17 years most recently as the partner in charge of the
Firm's Kentucky/Southern Indiana Financial Institution Practice. He was
appointed by the Board of Directors as Vice President and Treasurer of the
Company in September 2002.
LINDA A. DANIEL, 57, is Secretary of the Company. Ms. Daniel has also served the
Company as Vice President of Marketing since March 1999. Prior to joining the
Bank, Ms. Daniel was employed by Upper Valley Medical Center for 11 years and
served as Vice-President of Communications from 1995 to 1999.
12
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The following table shows, for the years ended June 30, 2005, 2004 and
2003, the cash compensation paid by the Bank, as well as certain other
compensation paid or accrued for those years, to the Chief Executive Officer and
other executive officers ("Named Executive Officers") who accrued salary and
bonus in excess of $100,000 in fiscal year 2005.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
Long Term
Compensation All Other
Annual Compensation Awards Compensation
--------------------- ------------ ------------
Name and Principal Position Year Salary($) Bonus($) Options ($)(1)
---- --------- -------- ------- ------------
Ronald B. Scott 2005 $171,559 $ 19,556 13,500 $ 7,607
President, Chief 2004 157,246 38,776 13,500 4,320
Executive Officer 2003 156,000 50,130 13,500 5,083
and Director
Richard J. Dutton 2005 $132,704 $ 13,046 9,000 $ 2,749
Vice President, 2004 114,789 30,100 9,000 2,768
Treasurer 2003 110,000 -- 9,000 9,055
Linda A. Daniel 2005 $ 93,420 9,000 6,800 $ 4,775
Secretary 2004 90,233 23,200 6,800 4,403
2003 84,695 30,000 6,800 4,470
</Table>
- ----------
(1) Represents the value of the allocation at the allocation date to the
Employee Stock Ownership Plan account and Bank's matching contribution
to 401(k). In addition, during 2003, Mr. Dutton received $9,055 as
reimbursement for moving expenses and Ms. Daniel receives a $1,000
annual stipend as Secretary to the Corporation.
13
STOCK OPTIONS GRANTED IN FISCAL YEAR 2005
The following table sets forth information regarding stock options
awarded each of the named executive officers during fiscal year 2005. These
grants are also reflected in the summary compensation table. The potential
realizable values for the option grants are shown based on compound annual rates
of stock price appreciation of 5% and 10% from the grant date to the expiration
date. The assumed rates of appreciation are prescribed by the proxy rules
administered by the SEC, are for illustration purposes only and they are not
intended to predict future stock prices, which will depend upon market
conditions and the Company's future performance and prospects.
<Table>
<Caption>
Potential realizable value
% of total at assumed annual rate of
options stock price appreciation
granted to Exercise for option term
Options employees in price Expiration ---------------------------
granted fiscal 2005 ($/Share) date 5% ($) 10% ($)
------- ------------ --------- ---------- ---------- ---------
Ronald B. Scott 13,500 30.0% $ 4.20 9/29/2014 $ 36,659 $ 90,365
Richard J. Dutton 9,000 20.0 4.20 9/29/2014 23,773 60,243
Linda A. Daniel 5,700 12.7 4.20 9/29/2014 15,056 38,154
</Table>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
This table gives information for options exercised by each of the named
executive officers in fiscal 2004 and the value (stock price less exercise
price) of the remaining unexercised options held by such officers as of June 30,
2004.
<Table>
<Caption>
Number of securities Value of unexercised
underlying unexercised in-the-money options
options at 6/30/05(#) at 6/30/05($)(1)
Shares acquired Value Exercisable/ Exercisable/
Name on exercise(#) realized($) unexercisable unexercisable
- ---- --------------- ------------ ---------------------- --------------------
Ronald B. Scott 53,600 $139,968 267,050/40,500 $405,357/$ -
Richard J. Dutton - - 0/27,000 -/6,030
Linda A. Daniel - - 23,264/19,300 9,098/4,556
</Table>
- ----------
(1) An option is "in-the-money" if the fair value of the underlying shares
exceeds the exercise price of the option. The figure represents the value of
the unexercised options, determined by multiplying the number of
in-the-money unexercised options by the difference between the exercise
price of the option and the $4.10 market price for the common shares on June
30, 2005.
14
- --------------------------------------------------------------------------------
REPORT OF THE COMPENSATION COMMITTEE
- --------------------------------------------------------------------------------
The Compensation Committee reviews the compensation levels of the
executive officers, including the Chief Executive Officer, each year. The
Compensation Committee utilizes independent surveys of compensation of officers
in the thrift industry, taking into account comparable asset bases and
geographic locations. Based on the foregoing factors, the Compensation Committee
establishes the compensation of the Chief Executive Officer and the overall
budget for compensation of all other executive officers.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS GENERALLY
The Compensation Committee's executive compensation policies are
designed to provide competitive levels of compensation that will attract and
retain qualified executives and will reward individual performance, initiative
and achievement, while enhancing overall corporate performance and shareholder
value. The compensation program for executive officers consists of three
elements - a base salary component, a performance cash bonus and a grant of
stock options.
The objectives of the performance bonuses are to motivate and reward
the executive officers in connection with the accomplishment of annual
objectives of the Company, to reinforce a strong performance orientation with
differentiation and variability in individual awards based on contribution to
annual and long-range business results and to provide a competitive compensation
package that will attract, reward and retain individuals of the highest quality.
Performance bonuses are granted based upon objectives set by management.
The objectives of the stock options are to motivate and reward the
executive officers based on each individual's contribution to the total
performance of the Company and to reinforce a strong performance orientation.
DETERMINATION OF CEO'S COMPENSATION
Mr. Scott's compensation was based upon an evaluation of his
performance by the Company's Compensation Committee, as well as the Company's
long-term performance measured by earnings, capital growth, return on assets,
return on equity, asset quality and total shareholder return. The Board of
Directors also evaluated past stated objectives developed by the Compensation
Committee and Mr. Scott and his success in achieving these objectives. These
objectives included measuring The Company's performance against its peer group
in total shareholder return, return on assets, return on equity, earnings and
asset quality of the Company. The Compensation Committee believes that the level
of compensation paid to Mr. Scott in 2005 was fair and reasonable when compared
with compensation levels in the thrift industry reported in various independent
surveys. The compensation earned by Mr. Scott in fiscal year 2005 reflects the
significant management and leadership responsibilities required of him and the
effective manner in which those responsibilities were fulfilled.
COMPENSATION COMMITTEE
Thomas E. Robinson
James S. Wilcox
Donald Cooper
COMPENSATION COMMITTEE INTERLOCKS
During the last fiscal year, no member of the Compensation Committee
was a current or former executive officer or employee of the Company or had a
reportable business relationship with the Company.
15
- --------------------------------------------------------------------------------
PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The following graph and table show the cumulative total return on the
Company's (prior to 2002 the Bank's) common shares for the last five fiscal
years ended June 30, 2005, compared to the cumulative total return of (i) the
SNL Securities All Publicly Traded Thrifts Index and (ii) the Russell 2000
Index.
Cumulative total return on the shares or the indices equals the total
increase in value since June 30, 2000, assuming reinvestment of all dividends
paid on the shares or the index, respectively. The graph and table were prepared
assuming that $100 was invested at the closing price on June 30, 2000 in the
Banks shares and in each of the indices. The shareholder returns shown on the
performance graph are not necessarily indicative of the future performance of
the Company's shares or of any particular index.
(STOCK PERFORMANCE GRAPHIC)
<Table>
<Caption>
Peoples Ohio Financial
PRICING DATE Corporation* Ohio Thrift Russell 2000
------------ ---------------------- ----------- ------------
6/30/2000 100 100 100.00
6/29/2001 73 117 101
6/28/2002 83 153 92
6/30/2003 107 170 90
6/30/2004 109 221 121
6/30/2005 111 222 132
</Table>
* Prior to June 30, 2002, the financial performance is that of the Bank.
16
- --------------------------------------------------------------------------------
REPORT OF THE AUDIT COMMITTEE
- --------------------------------------------------------------------------------
The Audit Committee for the year ended June 30, 2005 was comprised of
three Directors: Messrs. Wilcox, Cooper, and Klockner. Members of the Company's
Audit Committee are considered "independent" under Rule 4200(a)(15) of the
National Association of Securities Dealers' listing standards. The Board has
determined that Mr. Wilcox qualifies as an "audit committee financial expert" as
defined by SEC rules. The Audit Committee is responsible for overseeing the
Company's accounting functions and controls, as well as recommending to the
Board of Directors an accounting firm to audit the Company's financial
statements. The Audit Committee of the Company adopted a charter to set forth
its responsibilities (the "Charter"). A copy of the Charter is attached to this
Proxy as Appendix A.
In connection with the audited financial statements contained in the
Company's 2005 Annual Report on Form 10-K for the fiscal year ended June 30,
2005 the Audit Committee reviewed and discussed the audited financial statements
with management and BKD, LLP. The Audit Committee discussed with BKD, LLP the
matters required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards, AU Section 380). The Audit Committee has also received the
written disclosures and the letter from BKD, LLP required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees)
and has discussed with them their independence.
Based on its review of the financial statements and its discussions
with management and the representative of BKD, the Audit Committee did not
become aware of any material misstatements or omissions in the financial
statements. Accordingly, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Annual Report
on Form 10-K for the year ended June 30, 2005, to be filed with the Securities
and Exchange Commission.
Audit Committee
James S. Wilcox
Donald Cooper
Richard W. Klockner
- --------------------------------------------------------------------------------
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
BKD, LLP conducted the independent audit of the Company for the year
ended June 30, 2005, and the Board of Directors has selected BKD as the
independent registered public accounting firm of the Company for the fiscal year
ending June 30, 2006. Management of the Company expects that a representative of
BKD will be present at the Annual Meeting and will have the opportunity to make
a statement and respond to appropriate questions.
17
- --------------------------------------------------------------------------------
TRANSACTIONS WITH DIRECTORS AND OFFICERS
- --------------------------------------------------------------------------------
Currently, the Bank makes loans to Directors who are not full-time
employees of the Bank and or Company in the ordinary course of business and on
the same terms and conditions, including interest rates and collateral, as those
of comparable loans to other persons. The Bank also has a policy whereby it will
make loans to its full-time employees, including Directors and employees who are
full-time employees, at an interest rate that is 1% less than the interest rate
charged for comparable loans to other persons. This 1% reduction in interest
rate is subject to the condition that the employees sign an agreement that the
interest rate will be increased by 1% should the employee's employment with the
Bank terminate for any reason.
The following table sets forth certain information regarding loans made
on terms more favorable than those offered to the public to executive officers
and Directors of Company whose indebtedness to the Company exceeded $60,000 at
any time since July 1, 2005:
<Table>
<Caption>
Largest Balance
Rate balance during at
Date of year ended June 30,
Name Position Originated Loan Type Interest 6/30/05 2005
- ---- -------- ----------- ---------- -------- -------------- -------
Ronald B. Scott President, CEO 11/02/93 Mortgage (Residence) 6.000% $ 38,018 $ 30,905
3/29/01 Equity Line of Credit 4.750% 159,554 158,793
10/03/03 Line of Credit 10.00% 5,000 5,000
Richard J. Dutton Vice President, 8/09/02 Mortgage (Residence) 5.50% 384,949 --
Chief Financial 8/09/02 Equity Line of Credit 4.75% 47,424 --
Officer 1/15/03 Line of Credit 10.00% 1,800 171
4/04/05 Mortgage (Residence) 5.25% 400,000 397,611
4/04/05 Equity Line of Credit 5.00% 29,608 27,608
Linda A. Daniel Vice President, 1/15/03 Line of Credit 10.00% -- --
4/15/04 Mortgage (Residence) 4.00% 219,578 206,806
6/07/04 Consumer 4.75% 18,746 --
</Table>
None of the outstanding loans to Directors and executive officers
involve more than the normal risk of collectibility or present other unfavorable
features, and all are current in their payments.
- --------------------------------------------------------------------------------
RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
In fiscal year 2005, Dungan & LeFevre Co., L.P.A., the law firm in
which William J. McGraw, a Director of the Company and of the Bank, is an
attorney and President, performed legal services related to loan transactions,
paid by borrowers of the Bank totaling $57,364, services primarily related to
litigation in which the Bank was involved totaling $23,887 and annual retainer
and non litigation related services to the Bank and Company totaling $34,048.
Title Safe Agency, Inc., is a real estate title insurance agency
wholly-owned by Dungan & LeFevre. In fiscal year 2005, Title Safe Agency
performed services for the Company related to loan transactions, such as title
insurance and commitments, title examinations and post-closing services.
Borrowers of the Bank paid Title Safe Agency $125,094 for services related to
their loan transactions.
18
- --------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
- --------------------------------------------------------------------------------
Any proposal which a shareholder wishes to have included in the
Company's proxy materials for the Company's Annual Meeting of shareholders to be
held in 2006 must be received at the main office of the Company at 635 South
Market Street, Troy, Ohio 45373, no later than June 6, 2006. The Board of
Directors will review each proposal so received to determine if it satisfies the
criteria established by applicable law for inclusion in the Company's 2006 proxy
materials.
On May 21, 1998, the Securities and Exchange Commission adopted an
amendment to Rule 14a-4, as promulgated under the Securities and Exchange Act of
1934. The amendment to 14a-4(c)(1) governs the Company's use of its
discretionary proxy voting authority with respect to a shareholder proposal
which the shareholder has not sought to include in the Company's proxy
statement. The amendment provides that if a proponent of a proposal fails to
notify the Company at least 45 days prior to the month and day of mailing of the
prior year's proxy statement, then the management proxies will be allowed to use
their discretionary voting authority when the proposal is raised at the meeting,
without any discussion of the matter in the proxy statement.
With respect to the Company's 2006 annual meeting of shareholders, if
the Company is not provided notice of a shareholder proposal which the
shareholder has not previously sought to include in the Company's proxy
statement by August 21, 2006, the management proxies will be allowed to use
their discretionary authority as outlined above.
19
Appendix A
PEOPLES OHIO FINANCIAL CORPORATION
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
1. PURPOSE
The Audit Committee is a committee of the Board of Directors. The primary
function of the Audit Committee is to assist the Board of Directors in
fulfilling its oversight responsibilities by monitoring the following processes:
1. the financial information which will be provided to shareholders,
governmental or regulatory bodies, the public, and others;
2. the Company's auditing, accounting, and financial reporting process;
3. the systems of internal controls related to finance, accounting, legal
compliance, regulatory compliance and ethics that management and the
Board of Directors have established, and
4. the audit process.
The Audit Committee's primary duties and responsibilities are to:
1. serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system;
2. review and appraise the audit efforts of the Company's independent
accountants and the internal auditors; and
3. provide an open avenue of communication among the independent
accountants, financial and senior management, internal auditors, and the
Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
THE AUDIT COMMITTEE SHOULD BE COMPRISED OF THREE OR MORE DIRECTORS AS DETERMINED
BY THE BOARD. EACH MEMBER WILL BE INDEPENDENT OF THE MANAGEMENT OF THE COMPANY
AND FREE OF ANY RELATIONSHIP THAT, IN THE OPINION OF THE BOARD OF DIRECTORS,
WOULD INTERFERE WITH THEIR EXERCISE OF INDEPENDENT
JUDGMENT AS A COMMITTEE MEMBER.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the members
of the Committee may designate a Chair by majority vote of the full Committee
membership.
The duties and responsibilities of a member of the Audit Committee are in
addition to those duties set out for a member of the Board of Directors.
A-1
III. MEETINGS
THE COMMITTEE SHALL MEET AT LEAST THREE TIMES ANNUALLY, OR MORE FREQUENTLY AS
CIRCUMSTANCES DICTATE. AS PART OF ITS JOB TO FOSTER OPEN COMMUNICATION,
THE COMMITTEE MAY INCLUDE, AS A PART OF EACH MEETING AGENDA, AN EXECUTIVE
SESSION. THIS SESSION MAY BE USED, AS NECESSARY, BY MANAGEMENT, THE INTERNAL
AUDITORS, AND THE INDEPENDENT ACCOUNTANTS TO DISCUSS ANY MATTERS THAT THE
COMMITTEE OR EACH OF THESE GROUPS BELIEVE SHOULD BE DISCUSSED SEPARATELY.
THE COMMITTEE MAY ASK MEMBERS OF MANAGEMENT OR OTHERS TO ATTEND MEETINGS
AND PROVIDE PERTINENT INFORMATION AS NECESSARY.
IV. RESPONSIBILITIES AND DUTIES
In meeting its responsibilities, the Audit Committee is expected to:
1. provide an open avenue of communication between the internal auditors,
the independent accountant, and the Board of Directors;
2. attempt to confirm and assure the objectivity of the internal auditor;
3. attempt to confirm and assure the independence of the independent
accountant, including a review of management consulting services provided
by the independent accountant and related fees;
4. review and update the Committee's charter periodically;
5. recommend to the Board of Directors the independent accountants to be
nominated, approve the compensation of the independent accountant, and
review and approve, if applicable, the discharge of the independent
accountants;
6. review and concur in the appointment, replacement, reassignment, or
dismissal of the internal auditor;
7. review the qualifications of the internal auditor to specific areas
within the audit plan;
8. review with the independent auditor and internal auditor the coordination
of audit efforts to assure completeness of coverage, reduction of
redundant efforts, and the effective use of audit resources;
9. consider, in consultation with the independent accountant and the
internal auditor, the audit scope and plan of the internal auditors and
the independent accountant. Determine if the internal auditor and
independent accountants are utilizing a risk-based approach;
10. Consider and review with the independent accountant and internal auditor:
(a) the adequacy of the Bank's internal controls including
computerized information system controls and security;
(b) any related significant findings and recommendations of the
independent accountant and internal auditing together with
management responses thereto; and
(c) the status of previous audit recommendations and management's
follow up on those recommendations.
11. Review with management and the independent accountant at the completion
of the annual audit:
(a) the Bank's annual financial statements and related footnotes;
(b) the independent accountant's audit of the financial statements and
his or her report thereon;
(c) any significant changes required in the independent accountant's
audit plan;
A-2
(d) any serious difficulties or disputes with management encountered
during the course of the audit;
(e) other matters related to the conduct of the audit which are to be
communicated to the committee under generally accepted auditing
standards;
(f) advise financial management and the independent auditor that they
are expected to provide a timely analysis of significant current
financial reporting issues and practices; and
(g) provide that financial management and the independent auditor
discuss with the audit committee their qualitative judgments about
the appropriateness, not just the acceptability, of accounting
principles and financial disclosure practices used or proposed to
be adopted by the Corporation and, particularly, about the degree
of aggressiveness or conservatism of its accounting principles and
underlying estimates.
12. Review with management and the internal auditor:
(a) regular internal audit reports to management prepared by the
internal auditor, including significant findings and management's
responses to those findings;
(b) any difficulties encountered in the course of their audits,
including any restrictions on the scope of their work or access to
required information; and
(c) the annual internal audit plan and any changes required in the
scope of that plan.
13. Unless otherwise directed by the Board of Directors the Committee may:
(a) review with management, and if necessary, with the Company's
counsel, any legal matter that could have a significant impact on
the Company's financial statements;
(b) review legal and regulatory matters that may have a material
impact on the financial statements, related Company compliance
policies, and programs and reports received from regulators;
(c) meet with the Company's and Bank's regulatory bodies to discuss
the results of their examinations; and
(d) conduct or authorize, if necessary, investigations into any
matters within the Committee's scope of responsibilities. The
Committee shall be empowered to retain independent counsel,
accountants, or others to assist in the conduct of any
investigation.
14. Determine as regards to new transactions or events, the auditor's
reasoning for the appropriateness of the accounting principles and
disclosure practices adopted by the Company.
15. Meet with the internal auditor, the independent accountant, and
management in separate executive sessions to discuss any matters that the
committee or these groups believe should be discussed privately with the
Audit Committee.
16. Report Committee actions to the Board of Directors with such
recommendations as the Committee may deem appropriate.
A-3
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PEOPLES OHIO FINANCIAL CORPORATION
PEOPLES OHIO FINANCIAL CORPORATION ANNUAL MEETING OF SHAREHOLDERS
October 27, 2005
The undersigned shareholder of Peoples Ohio Financial Corporation (the
"Company") hereby constitutes and appoints Ronald B. Scott, Donald Cooper and
William J. McGraw, or any one of them, as the proxy or proxies of the
undersigned with full power of substitution and resubstitution, to vote at the
Annual Meeting of Shareholders of the Company to be held at Edison Community
College, 1973 Edison Drive, Piqua, Ohio, on October 27, 2005, at 3:00 p.m.
Eastern Time (the "Annual Meeting"), all of the shares of the Company's common
stock which the undersigned is entitled to vote at the Annual Meeting, or at any
adjournment thereof, on each of the following proposals, all of which are
described in the accompanying Proxy Statement:
1. The election of three directors:
[ ] FOR all nominees (except as [ ] WITHHOLD authority to
marked to the contrary below): vote for all nominees
listed below:
Thomas E. Robinson
Donald Cooper
Richard W. Klockner
2. The Board of Directors, upon the recommendation of its Audit Committee,
has appointed BKD, LLP to serve as our independent registered public
accounting firm for 2006 and is seeking the ratification of the
appointment of BKD, LLP by our shareholders:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, upon such other business as may properly come
before the Annual Meeting or any adjournments thereof:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors recommends a vote "FOR" the proposals listed above.
UNLESS THIS PROXY IS REVOKED, THE COMMON SHARES REPRESENTED BY THIS PROXY WILL
BE VOTED AS DIRECTED. WHERE NO INSTRUCTIONS ARE INDICATED, PROXIES SOLICITED BY
THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR OF THE PROPOSALS STATED ABOVE.
IMPORTANT: PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE.
At the present time, the Board of Directors knows of no other business
to be presented at the Annual Meeting.
All Proxies previously given by the undersigned are hereby revoked.
Receipt of the Notice of the Annual Meeting of Shareholders of the Company and
of the accompanying Proxy Statement is hereby acknowledged.
Please sign exactly as your name appears on your Stock Certificate(s).
Executors, Administrators, Trustees, Guardians, Attorneys and Agents should give
their full titles.
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Signature Signature
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Print or Type Name Print or Type Name
Dated: Dated:
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PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE U.S.A.