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
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2)
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Croghan
Bancshares, 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):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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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.
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Form, Schedule or Registration Statement No.:
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Date Filed:
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Croghan Bancshares, Inc.
323 Croghan Street
Fremont, Ohio 43420
(419) 332-7301
NOTICE OF 2009 ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Croghan Bancshares, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the Annual Meeting) of
Croghan Bancshares, Inc. (the Company) will be held at the Fremont Inn (formerly the Holiday
Inn), 3422 North State Route 53, Fremont, Ohio 43420, on Tuesday, May 12, 2009, at 1:00 p.m., local
time, for the following purposes:
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To elect three (3) directors to serve for terms of three (3) years each; and
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2.
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To transact such other business as may properly come before the Annual Meeting
and any adjournment(s) thereof.
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Shareholders of record at the close of business on March 17, 2009, will be entitled to receive
notice of, and to vote at, the Annual Meeting and any adjournment(s) thereof.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF
SHAREHOLDERS OF CROGHAN BANCSHARES, INC. TO BE HELD ON MAY 12, 2009: The Companys proxy statement
for the Annual Meeting, a sample of the form of proxy card sent to shareholders by the Company, and
the Companys Annual Report to the Shareholders of the Company for the fiscal year ended December
31, 2008 are available at:
http://materials.proxyvote.com/227072
.
You are cordially invited to attend the Annual Meeting. The vote of each shareholder is
important, regardless of the number of common shares held. Whether or not you plan to attend the
Annual Meeting, please sign, date and return the accompanying proxy card promptly in the enclosed
envelope. If you attend the Annual Meeting and desire to revoke your proxy, you may do so and vote
in person.
Attendance at the Annual Meeting will not, in and of itself, constitute revocation of a
proxy
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By Order of the Board of Directors,
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/s/ Steven C. Futrell
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Fremont, Ohio
April 6, 2009
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Steven C. Futrell
President and Chief Executive Officer
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TABLE OF CONTENTS
Croghan Bancshares, Inc.
323 Croghan Street
Fremont, Ohio 43420
(419) 332-7301
PROXY STATEMENT FOR
THE 2009 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 12, 2009
SOLICITATION AND VOTING INFORMATION
This Proxy Statement and the accompanying proxy card are being mailed to shareholders of
Croghan Bancshares, Inc., an Ohio corporation (the Company), on or about April 6, 2009, in
connection with the solicitation of proxies by the Board of Directors of the Company for use at the
2009 Annual Meeting of Shareholders of the Company (the Annual Meeting), and at any
adjournment(s) thereof. The Annual Meeting will be held on Tuesday, May 12, 2009, at 1:00 p.m.,
local time, at the Fremont Inn (formerly the Holiday Inn), 3422 North State Route 53, Fremont,
Ohio.
You should mail your completed proxy card to Broadridge Investor Communication Solutions
(Broadridge), using the business reply envelope included with these proxy materials. The Board
of Directors of the Company has appointed IVS Associates, Inc., an independent voting services
company, to serve as Inspector of Election at the Annual Meeting.
Without affecting any vote previously taken, any shareholder who has submitted a signed proxy
card may revoke his or her proxy at any time before it is voted by (1) filing with the Secretary of
the Company, at the address of the Company set forth on the cover page of this Proxy Statement,
written notice of such revocation; (2) executing a later-dated proxy card which is received by
Broadridge or the Company prior to the Annual Meeting; or (3) attending the Annual Meeting and
giving notice of such revocation in person. Attendance at the Annual Meeting will not, in and of
itself, revoke a proxy.
Only shareholders of the Company of record at the close of business on March 17, 2009 (the
Record Date), are entitled to receive notice of, and to vote at, the Annual Meeting and any
adjournment(s) thereof. At the close of business on the Record Date, 1,720,858 common shares of
the Company were outstanding and entitled to vote. Each common share of the Company entitles the
holder thereof to one vote on each matter to be submitted to shareholders at the Annual Meeting. A
quorum for the Annual Meeting requires the presence, in person or by proxy, of a majority of the
outstanding common shares of the Company.
Common shares represented by signed proxy cards that are returned to Broadridge or the Company
prior to the Annual Meeting and not subsequently revoked will be voted by the proxies in accordance
with the instructions on the proxy card. If you submit a valid proxy card prior to the Annual
Meeting but do not indicate on the proxy card how you want your common shares to be voted, the
proxies will vote your common shares as recommended by the Board of Directors, except in the case
of broker non-votes where applicable. If any other matters are properly presented for a vote at
the Annual Meeting or any adjournment(s) of the Annual Meeting, the proxies will vote on those
matters in accordance with their best judgment in light of the conditions then prevailing.
Shareholders who hold common shares of the Company in street name with a broker-dealer, bank
or other holder of record should review the information provided to them by the holder of record.
This information will describe the procedures to be followed in order to instruct the holder of
record how to vote the street name common shares and how to revoke previously given instructions.
Broker/dealers who hold their customers common shares in street name may, under the
applicable rules of the self-regulatory organizations of which the broker/dealers are members, sign
and submit proxies for such common shares and may vote such common shares on routine matters,
including an uncontested election of directors. However, without specific instructions from the
customer who is the beneficial owner of such common shares, broker/dealers may not vote such common
shares on non-discretionary matters, which would include the contested election of directors for
three-year terms expiring in 2012. Proxies signed and submitted by broker/dealers which have not
been voted on certain matters because they have not received specific instructions from their
customers are referred to as broker non-votes. Broker non-votes will be counted toward the
establishment of a quorum for the Annual Meeting.
The Company will bear the costs of preparing and mailing this Proxy Statement, the
accompanying proxy card and any other related materials and all other costs incurred in connection
with the solicitation of proxies on behalf of the Board of Directors. Proxies will be solicited by
mail and may be further solicited, for no additional compensation, by approximately 12 officers,
directors or employees of the Company and The Croghan Colonial Bank, a wholly-owned subsidiary of
the Company (the Bank), by further mailing, by telephone or by personal contact. The Company
does not presently intend to hire a proxy solicitation firm. However, in the event the Company
does decide to hire a proxy solicitation firm to assist with the solicitation of proxies on behalf
of the Board of Directors, the Company estimates that the total fees paid to such firm will not
exceed $15,000. The Company will also pay the standard charges and expenses of brokerage houses,
voting trustees, banks, associations and other custodians, nominees and fiduciaries who are record
holders of common shares not beneficially owned by them for forwarding such materials to and
obtaining proxies from the beneficial owners of such common shares.
A copy of the Annual Report to the Shareholders of the Company for the fiscal year ended
December 31, 2008 (the 2008 fiscal year), is provided with this Proxy Statement.
ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
Election of Directors for Terms Expiring in 2012
In accordance with Article Two of the Amended and Restated Code of Regulations of the Company
(the Regulations), three directors are to be elected at the Annual Meeting for terms of three
years each expiring in 2012, and until their respective successors are elected and qualified. The
three Board nominees standing for election as directors are Michael D. Allen Sr., Stephen A. Kemper
and Thomas W. McLaughlin. It is the intention of the persons named in the accompanying proxy card
to vote the common shares represented by the proxies received pursuant to this solicitation
FOR
the election of the three Board nominees, unless otherwise instructed on the proxy
card.
-2-
The following table sets forth information concerning each Board nominee for election as a
director of the Company for a three-year term expiring in 2012. Unless otherwise indicated, each
person has held his principal occupation for more than five years.
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Director of the
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Company
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Nominee
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Position(s) Held with the Company and
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Continuously
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for Term
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Name and Business Address
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Age
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the Bank and Principal Occupation(s)
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Since (1)
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Expiring In
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Michael D. Allen Sr.
520 Goodrich Road
Bellevue, OH 44811
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63
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Executive Vice President and General
Manager of International Metal Hose
Company, a manufacturer of flexible
conduit and metal tubing located in
Bellevue, Ohio.
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2002
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2012
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Stephen A. Kemper
403 Monroe Street
Bellevue, OH 44811
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69
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Owner and President of Kemper Iron
and Metal Company, a recycler and
scrap processor located in Bellevue,
Ohio.
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1996
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2012
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Thomas W. McLaughlin
416 W. Monroe Street
Monroeville, OH 44847
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56
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Vice President and Chief Financial
Officer of Underground Utilities,
Inc., a construction company located
in Monroeville, Ohio. President and
Chief Executive Officer of Wall
Street Consulting, Inc., a provider
of investment consulting & advisory
services located in Norwalk, Ohio.
Formerly, a Partner of McLaughlin,
Van Dootingh, Mosher & Company
located in Norwalk, Ohio.
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2006
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2012
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(1)
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All directors of the Company also serve as members of the Board of Directors of the Bank.
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All of the above Board nominees have consented to being named in this Proxy Statement and have
agreed to serve as directors of the Company if elected. While it is contemplated that all nominees
will stand for election, if at the time of the Annual Meeting one or more of the nominees should be
unavailable or unable to serve as a candidate for election as a director of the Company, the
proxies named in the accompanying proxy card reserve full discretion to vote the common shares
represented by signed proxy cards for the election of the remaining nominees and any substitute
nominee(s) designated by the Board of Directors. The Board of Directors knows of no reason why any
of the above-mentioned persons would be unavailable or unable to serve if elected to the Board.
Under Ohio law and the Regulations, the three nominees for election as directors who receive the
greatest number of votes will be elected.
The Board of Directors recommends a vote
FOR
the election of the three Board nominees
as directors of the Company for three-year terms expiring in 2012.
-3-
Shareholder Nominations
Jared E. Danziger and Samuel R. Danziger have nominated Nathan G. Danziger for election as a
director of the Company at the Annual Meeting. Although the nomination of Mr. Danziger is not
required to be disclosed in the Companys proxy statement under applicable rules and regulations of
the Securities and Exchange Commission (the SEC), the nomination was made in accordance with
Article Two of the Regulations of the Company. The Companys historical practice has been to
include information in the proxy statement regarding any candidates nominated in accordance with
Article Two of the Regulations, even though Article Two does not require the inclusion of such
information. Consistent with this historical practice, the Company has included information
regarding the nomination of Nathan G. Danziger in this Proxy Statement.
The proposed Nominee is as follows:
Nathan G. Danziger
3014 Pembroke Drive, Toledo, Ohio 43606
Age: 69
Occupation: Chartered Life Underwriter (CLU)
Ownership of the Companys common shares: 2,889 shares owned of record for over one year
The proxy card included with this Proxy Statement lists only those individuals nominated by
the Companys Board of Directors and does not include Nathan G. Danziger. The Company intends to
oppose any effort by Jared E. Danziger, Samuel R. Danziger and Nathan G. Danziger (the Danzigers)
to elect Nathan G. Danziger, including any proxy solicitation by the Danzigers.
The Board of Directors and management of the Company oppose the election of Nathan G. Danziger
because they do not believe that the election of Mr. Danziger would be in the best interests of the
Company and its shareholders as a group.
The Board of Directors believes that Mr. Danzigers goals
and strategies for the Company, as expressed in past proxy solicitation materials, and certain
proposals supported by Mr. Danziger, are contrary to the best interests of the Company and its
shareholders as a group.
The Company estimates that it will spend approximately $5,000 in additional solicitation costs
in opposing the proxy solicitation by Mr. Danziger. This estimate includes attorneys fees and
printer costs incurred in connection with the preparation and filing of preliminary proxy materials
with the SEC and the preparation of additional disclosures in the proxy statement as required by
SEC rules governing proxy contests. However, this estimate excludes amounts normally expended by
the Company in preparing its proxy solicitation materials in the absence of a proxy contest and the
costs represented by salaries and wages of regular employees and officers of the Company engaged in
the solicitation process. Also, these costs do not include any costs associated with any potential
litigation that may arise in connection with the proxy solicitation. In the event the Company
hires a proxy solicitation firm to assist with soliciting proxies on behalf of the Board of
Directors, the Company could spend up to $15,000 in additional solicitation costs.
The Board of Directors recommends that the Companys shareholders vote
AGAINST
the
election of Nathan G. Danziger at the Annual Meeting and in connection with any proxy solicitation
by the Danzigers.
-4-
Continuing Directors
The following table sets forth information concerning the current directors whose terms will
continue after the Annual Meeting. Unless otherwise indicated, each person has held his or her
principal occupation for more than five years.
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Director of the
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Company
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Position(s) Held with the Company and
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Continuously
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Term
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Name and Business Address
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Age
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the Bank and Principal Occupation(s)
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Since (1)
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Expires In
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James E. Bowlus
610 N. Wilson
Avenue Fremont, OH 43420
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60
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President and Treasurer of Fremont
Candy & Cigar, Inc. located in
Fremont, Ohio.
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2000
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2010
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James R. Faist
1445 Majestic Drive
Fremont, OH 43420
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61
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Vice President of Finance of Crown
Battery Manufacturing Company
located in Fremont, Ohio
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2007
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2010
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Steven C. Futrell
323 Croghan Street
Fremont, OH 43420
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63
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President and Chief Executive
Officer of the Company and the Bank
since 2001. From 1999 to 2001,
served as Vice President of Small
Business Lending for KeyBank located
in Dayton, Ohio.
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2001
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2011
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Claire F. Johansen
5600 Seneca CR 19
Tiffin, OH 44883
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55
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Owner of Lane of Dreams Farm LLC, an
equestrian training center located
in Tiffin, Ohio. Formerly,
President of COOA Holdings Company,
a philanthropic organization located
in Tiffin, Ohio, and President of
Ohio Outdoor Advertising Corp., a
billboard advertising company
located in Fremont, Ohio, which has
since been acquired by Lamar
Advertising.
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2000
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2011
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Daniel W. Lease
2276 E. State Street
Fremont, OH 43420
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60
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President of KL&L, Inc., a
refractory construction company
located in Braddock, Pennsylvania.
Vice President of Administration/CFO
of Whetstone Technology, LLC, a
refractory products manufacturer
located in Cabot, Pennsylvania.
Formerly, the President of Wahl
Refractories, Inc. located in
Fremont, Ohio.
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1994
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2010
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Allan E. Mehlow
122 South Wilson Avenue
Fremont, OH 43420
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54
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Chief Financial Officer of The
Mosser Group/WMOG Inc. located in
Fremont, Ohio. Previously served as
Vice President and Treasurer of the
Company and Senior Vice President
and Chief Financial Officer of the
Bank from 2001 to March 2006.
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2000
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2010
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Gary L. Zimmerman
1201 Oak Harbor Road
Fremont, OH 43420
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62
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President of Swint-Reineck Hardware,
Inc., a retail hardware facility
located in Fremont, Ohio.
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1991
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2011
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(1)
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All directors of the Company also serve as members of the Board of Directors of the Bank.
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Relationships Among Directors and Executive Officers
There are no family relationships among any of the directors, nominees for election as
directors and executive officers of the Company.
Sales and Purchases of Company Common Shares by Directors
The following table sets forth information regarding all common shares of the Company
purchased or sold since January 1, 2007, by each director of the Company and each person nominated
by the Board of Directors for election as a director of the Company:
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Name and
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Principal Residence Address
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Date of Sale or Purchase
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Number of Shares
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Michael D. Allen Sr.
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Purchase on June 27, 2008
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100
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5639 SR 113
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Purchase on September 26, 2008
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100
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Bellevue, OH 44811
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Purchase on November 4, 2008
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200
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Purchase on December 16, 2008
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100
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James E. Bowlus
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Purchase on August 21, 2007
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125
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460 Kingsgate Drive
Fremont, OH 43420
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James R. Faist
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Purchase on March 14, 2007
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250
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119 Canterbury Drive
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Purchase on May 8, 2008
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250
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Fremont, OH 43420
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Purchase on February 4, 2009
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300
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Steven C. Futrell
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Purchase monthly through the Banks 401(k) plan
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77
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297 Greenbriar Circle
Fremont, OH 43420
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Claire F. Johansen
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Purchase on November 29, 2007
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385
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5600 Seneca CR 19
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Purchase on August 7, 2008
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103
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Tiffin, OH 44883
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Stephen A. Kemper
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Purchase on June 30, 2008
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200
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455 W. Main Street
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Purchase on September 29, 2008
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200
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Bellevue, OH 44811
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Purchase on December 22, 2008
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200
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Daniel W. Lease
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Purchase on August 22, 2008
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200
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2276 East State Street
Fremont, OH 43420
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Thomas W. McLaughlin
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Purchase on August 7, 2008
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200
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2221 Cole Creek Drive
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Purchase on November 13, 2008
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200
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Norwalk, OH 44857
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Allan E. Mehlow
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Purchase monthly through the Banks 401(k) plan
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106
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2569 Fangboner Road
Fremont, OH 43420
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-6-
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Name and
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Principal Residence Address
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Date of Sale or Purchase
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Number of Shares
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Gary L. Zimmerman
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No transactions
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N/A
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133 Wisteria Drive
Fremont, OH 43420
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Compensation of Directors
During the 2008 fiscal year, each director received a fee of $800 for attendance at each
meeting of the Board of Directors of the Bank and a fee of $400 for attendance at each committee
meeting. No compensation was paid to directors for attendance at meetings of the Board of
Directors of the Company. Directors who are also officers of the Company or the Bank do not
receive compensation for attendance at committee meetings.
The following table contains information regarding the compensation awarded or paid to, or
earned by, the Companys directors during the 2008 fiscal year.
Director Compensation
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Fees Earned or Paid
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All Other
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in Cash
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Compensation
|
|
Total
|
Name (1)
|
|
($)
|
|
($)
|
|
($)
|
Michael D. Allen Sr.
|
|
$
|
14,400.00
|
|
|
$
|
0
|
|
|
$
|
14,400.00
|
|
James E. Bowlus
|
|
$
|
20,400.00
|
|
|
$
|
0
|
|
|
$
|
20,400.00
|
|
James R. Faist
|
|
$
|
14,400.00
|
|
|
$
|
0
|
|
|
$
|
14,400.00
|
|
Claire F. Johansen
|
|
$
|
17,600.00
|
|
|
$
|
0
|
|
|
$
|
17,600.00
|
|
Stephen A. Kemper
|
|
$
|
14,400.00
|
|
|
$
|
0
|
|
|
$
|
14,400.00
|
|
Daniel W. Lease
|
|
$
|
12,800.00
|
|
|
$
|
0
|
|
|
$
|
12,800.00
|
|
Thomas W. McLaughlin
|
|
$
|
13,200.00
|
|
|
$
|
0
|
|
|
$
|
13,200.00
|
|
Allan E. Mehlow
|
|
$
|
14,000.00
|
|
|
$
|
0
|
|
|
$
|
14,000.00
|
|
Gary L. Zimmerman
|
|
$
|
14,400.00
|
|
|
$
|
0
|
|
|
$
|
14,400.00
|
|
|
|
|
(1)
|
|
Steven C. Futrell is not included in this table because he served as a named executive
officer of the Company during the 2008 fiscal year, and the fees paid to Mr. Futrell in his
capacity as director of the Bank are fully reflected in the Summary Compensation Table on page
18 of this Proxy Statement.
|
-7-
CORPORATE GOVERNANCE
Director Independence
The Board of Directors of the Company affirmatively determines whether each director of the
Company is independent based on the definition of an independent director set forth in NASDAQ
Marketplace Rule 4200(a)(15). In making this determination, the Board of Directors considered any
transactions, relationships or arrangements between each director (including his or her family
members and affiliates) and the Company or the Bank, including those described under Related Party
Transactions On page 10 of this Proxy Statement. Based on these considerations, the Board of
Directors has determined that each of the following individuals who served as a director during the
2008 fiscal year qualifies as an independent director:
|
|
|
|
|
|
|
Michael D. Allen Sr.
|
|
Stephen A. Kemper
|
|
|
James E. Bowlus
|
|
Daniel W. Lease
|
|
|
James R. Faist
|
|
Thomas W. McLaughlin
|
|
|
Claire F. Johansen
|
|
Gary L. Zimmerman
|
The Board of Directors has determined that (a) Steven C. Futrell is not independent because he
serves as President and Chief Executive Officer of the Company and the Bank, and (b) Allan E.
Mehlow is not independent because he formerly served as Vice President and Treasurer of the Company
and Senior Vice President and Chief Financial Officer of the Bank until February 20, 2006, and
served as a consultant to the Company and the Bank through March 31, 2007.
Director Nominations
The Company does not currently have a separate nominating committee of the Board of Directors.
Instead, all of the independent directors of the Company meet in executive session to consider and
recommend nominees for election or re-election to the Board of Directors of the Company. The Board
of Directors believes that the independent directors as a group are able to perform the nominating
functions in a fair and impartial manner. As a result, the Board of Directors believes it is
unnecessary to create a separate nominating committee at this time.
In September of 2005, the Board of Directors adopted a written policy governing the nomination
of candidates for election to the Board of Directors of the Company. A copy of the nomination
policy is attached to this Proxy Statement as
Appendix A
. Pursuant to the nomination
policy, individuals who are nominated for election to the Board of Directors must possess certain
minimum qualities, including personal integrity, ethical character, sound judgment and a general
appreciation and understanding of the major issues facing public companies of a size and
operational scope similar to the Company. In addition, the nomination policy requires the
independent directors to consider the contributions that a candidate can be expected to make to the
collective functioning of the Board of Directors based upon the totality of the candidates
credentials, experience and expertise, the composition of the Board of Directors at the time and
other relevant circumstances.
-8-
The independent directors consider nominees proposed by shareholders of the Company in the
same manner as nominees proposed by the Board of Directors. Section 2.04 of the Regulations
prescribes the method by which a shareholder may nominate a candidate for election to the Board of
Directors. Nominations for the election of directors at an annual meeting, other than those made
by or on behalf of the existing Board of Directors of the Company, must be made in writing and must
be received by the Secretary of the Company on or before the December 31
st
immediately
preceding the annual meeting, or within a reasonable time as determined by the Board of Directors.
Such notification must contain the following information:
|
|
|
The name, age, business or residence address of each nominee;
|
|
|
|
|
The principal occupation or employment of each nominee;
|
|
|
|
|
The number of common shares of the Company owned beneficially and/or of record by
each nominee; and
|
|
|
|
|
The length of time each nominee has owned such shares.
|
Pursuant to SEC rules adopted in 2002, the Company is required to disclose in the proxy
statement for its annual meeting the name of a candidate nominated by a shareholder or group of
shareholders, the name of the shareholder or group of shareholders nominating such candidate and
whether the independent directors chose to nominate the candidate if each of the following
requirements are satisfied:
|
|
|
The shareholder nomination is received by the Company no later than the
120
th
calendar day before the first anniversary of the date on which the
Company mailed its proxy statement to shareholders for the previous years annual
meeting;
|
|
|
|
|
The shareholder or group of shareholders making the recommendation have owned more
than 5% of the Companys outstanding common shares for at least one year as of the date
the recommendation is made;
|
|
|
|
|
The shareholder or group of shareholders making the recommendation, if not
registered holders, provide proof to the Company that the shareholder or group satisfy
the required ownership percentage and holding period as of the date of recommendation;
and
|
|
|
|
|
The Company receives the written consent of both the nominating shareholder or group
and the candidate with respect to the disclosure in the Companys proxy statement.
|
It has been the policy of the Board of Directors, both before and after the SEC adopted its
rule on shareholder nominations, to disclose in the proxy statement for its annual meeting the name
of any candidate nominated by a shareholder or group of shareholders in accordance with Section
2.04 of the Regulations of the Company.
Communications with the Board of Directors
The Board of Directors provides a process for shareholders to send written communications to
the Board or any of the directors. Shareholders should address such written communications to the
Board of Directors (or an individual director), c/o Secretary, Croghan Bancshares, Inc., 323
Croghan Street, Fremont, Ohio 43420. All written communications will be forwarded by the Secretary
of the Company to the Board or the individual directors, as applicable, without any screening.
-9-
Related Party Transactions
Pursuant to the Audit Committee Charter, the Companys Audit Committee is responsible for
reviewing and overseeing the procedures designed to identify related party transactions that are
material to the Companys consolidated financial statements or otherwise require disclosure under
applicable laws and rules adopted by the SEC, and the Audit Committee has the authority to approve
such related party transactions. In addition, on an annual basis, each director and executive
officer of the Company must complete a Director and Officer Questionnaire and a Related Interest
Questionnaire that require disclosure of any transaction, arrangement or relationship with the
Company or the Bank during the last fiscal year in which the director or executive officer, or any
member of his or her immediate family, had a direct or indirect material interest. Any
transaction, arrangement or relationship disclosed by a director or executive officer in the
Questionnaires is reviewed and considered by the Board of Directors in making independence
determinations with respect to directors and resolving any conflicts of interest that may be
implicated.
During the Companys 2008 and 2007 fiscal years, the Bank entered into banking-related
transactions in the ordinary course of business with certain executive officers, directors and
principal shareholders of the Company (including certain executive officers of the Bank), members
of their immediate families and corporations or organizations with which they are affiliated. It
is expected that similar transactions will be entered into in the future. Loans to such persons
have been made on substantially the same terms, including the interest rate charged and collateral
required, as those prevailing at the time for comparable transactions with persons not affiliated
with the Company or the Bank. These loans have been, and are presently, subject to no more than
the normal risk of collectibility and present no other unfavorable features. The outstanding
principal balance of loans to directors, executive officers and principal shareholders of the
Company (including certain executive officers of the Bank) and their associates as a group at
December 31, 2008, was $1,101,000. As of the date of this Proxy Statement, all of these loans were
performing loans.
MEETINGS AND COMMITTEES OF THE BOARD
Board of Directors
The Board of Directors of the Bank met twelve (12) times during 2008. Meetings of the Board
of Directors of the Company were held immediately following all twelve (12) of these occasions.
Each director attended at least seventy-five percent (75%) of the total number of meetings of the
Board of Directors and meetings of committees on which each such director served.
It is the policy of the Board of Directors of the Company to encourage all directors to attend
the Annual Meeting of Shareholders. All of the Companys directors attended the 2008 Annual
Meeting of Shareholders.
Audit Committee
The Board of Directors has an Audit Committee that is comprised of Michael D. Allen Sr.,
Daniel W. Lease, and Thomas W. McLaughlin. The Audit Committee operates under a written charter
adopted by the Board of Directors. A copy of the Audit Committee Charter is attached to this Proxy
Statement as
Appendix B
. The Audit Committee met nine (9) times during the 2008 fiscal
year.
-10-
The purpose of the Audit Committee is to oversee the accounting and financial reporting
processes of the Company, the annual audits of the Companys financial statements, and the
Companys internal audit function; to review the adequacy of the Companys system of internal
controls; to select, retain and oversee the Companys independent auditor; and to establish
procedures for the receipt and treatment of complaints received by the Company regarding
accounting, internal accounting controls, auditing matters or other compliance matters. In
addition, the Audit Committee reviews and pre-approves all audit services and permitted non-audit
services to be performed by the Companys independent auditor.
Audit Committee Independence
: The Companys Board of Directors reviewed the relationships
among the Company and the three members of the Audit Committee, Mr. Allen, Mr. Lease, and Mr.
McLaughlin, and determined that all three members of the Audit Committee are independent and are
able to exercise independent judgment in carrying out their responsibilities as directors and as
members of the Audit Committee. In making such determination, the Company relied upon the
independence standards for audit committee members under NASDAQ Marketplace Rule 4350(d)(2).
Audit Committee Financial Experts
: SEC rules require the Company to disclose whether it has
an audit committee financial expert serving on its audit committee. The Board of Directors has
determined that each of Messrs. Lease and McLaughlin is an audit committee financial expert as
defined in the SEC rule. Mr. Lease has been a Certified Public Accountant since 1976, has served
as Chief Financial Officer of Whetstone Technology, LLC since 2001, and served as President and
Chief Executive Officer of Wahl Refractories, Inc. prior to 2001. Mr. McLaughlin has been a
Certified Public Accountant since 1976, has served as Vice President and Chief Financial Officer of
Underground Utilities, Inc. since December 2005, and practiced in the public accounting profession
for more than 30 years prior to joining Underground Utilities, Inc.
Compensation Committee
The Board of Directors has a Compensation Committee that is presently comprised of Michael D.
Allen Sr., James E. Bowlus, and Daniel W. Lease. None of Messrs. Allen, Bowlus or Lease served as
an officer or employee of the Company or the Bank during the 2008 fiscal year, and none of these
individuals is a former officer of the Company or the Bank. The Compensation Committee met a total
of three (3) times during the 2008 fiscal year.
The Compensation Committee operates under a written charter adopted by the Board of Directors.
A copy of the Compensation Committee Charter is attached to this Proxy Statement as
Appendix
C
. The primary purpose of the Compensation Committee is to discharge the responsibilities of
the Board of Directors relating to the compensation of the Companys Chief Executive Officer and
other executive officers. The Compensation Committee is responsible for reviewing with the
Companys management and approving the overall compensation policy for the executive officers of
the Company and such other employees of the Company and its subsidiary that the Compensation
Committee deems appropriate. In addition, the Compensation Committee is responsible for reviewing
and recommending to the independent members of the Board of Directors for approval the salary,
bonuses and all other compensation and benefits to be provided to the Companys Chief Executive
Officer and other executive officers.
Compensation Committee Independence
: The Companys Board of Directors reviewed the
relationships among the Company and the three members of the Compensation Committee, Mr. Allen, Mr.
Bowlus, and Mr. Lease, and determined that all three members of the Compensation Committee are
independent and are able to exercise independent judgment in carrying out their responsibilities as
directors and as members of the Compensation Committee. In making such determination, the Company
relied upon the independence standards under the NASDAQ Marketplace Rules.
-11-
EXECUTIVE OFFICERS
The following are the executive officers of the Company and the Bank, all of whom are elected
annually and serve at the pleasure of the Board of Directors of the Company and the Bank:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position and Business Background
|
Jodi A. Albright
|
|
|
45
|
|
|
Ms. Albright is Vice President/Retail
Services Manager of the Bank and has served
in such position since November 2001. She
previously served as Vice President/Chief
Deposit Officer at Clyde Savings Bank,
Fremont, Ohio, from 1998 to 2001.
|
|
|
|
|
|
|
|
Thomas J. Elder Jr.
|
|
|
61
|
|
|
Mr. Elder is Senior Vice President/Chief
Lending Officer of the Bank and has served in
such position since May 2008. He joined the
bank in February 2003 and served as Vice
President/Chief Lending Officer of the Bank
from October 2003 to May 2008. He has also
served as Vice President of the Company since
July 2006. He previously served as
President, CEO, and Senior Loan Officer at
The Exchange Bank, Luckey, Ohio, from 1995 to
2002.
|
|
|
|
|
|
|
|
Steven C. Futrell
|
|
|
63
|
|
|
Mr. Futrell is President and Chief Executive
Officer of the Company and the Bank and has
served in such position since May 2001. He
previously served as Vice President of Small
Business Lending at KeyBank, Dayton, Ohio,
from 1999 to 2001.
|
|
|
|
|
|
|
|
Barry F. Luse
|
|
|
56
|
|
|
Mr. Luse is Vice President/Trust Officer of
the Bank and has served in such position
since 1993. He joined the Bank in 1990 and
served as Trust Officer of the Bank from 1990
to 1993. He has also served as Secretary of
the Company since March 2001. Mr. Luse is a
lawyer and has been a member of the Ohio Bar
since 1983.
|
|
|
|
|
|
|
|
Kendall W. Rieman
|
|
|
38
|
|
|
Mr. Rieman is Vice President and Chief
Financial Officer/Chief Operations Officer of
the Bank and has served in such position
since June 2006. He has also served as
Treasurer of the Company since July 2006. He
previously served as Senior Vice President
and Chief Financial Officer at Thumb National
Bank and Trust Company, Pigeon, Michigan,
from 1995 to 2006.
|
-12-
COMPENSATION OF EXECUTIVE OFFICERS
Provided below is an overview of the Companys compensation policies and practices for its
executive officers, including the named executive officers. As used in this Proxy Statement, the
term named executive officers refers to the Companys Chief Executive Officer and those other
executive officers of the Company included in the Summary Compensation Table on page 18 of this
Proxy Statement.
Objectives of the Companys Compensation Programs
The primary objective of the Companys compensation programs is to provide competitive
compensation to attract, retain and motivate qualified employees who will contribute to the
long-term success of the Company. In furtherance of this objective, the Company regularly
evaluates the compensation provided to the Companys executive officers to ensure that it remains
competitive in relation to the compensation paid to similarly situated executive officers at other
financial institutions of comparable size and performance. In addition, the Company endeavors to
ensure that the compensation provided to the Companys executive officers is internally equitable
based upon the skill requirements and responsibilities associated with each executive position.
The Companys compensation programs are designed to reward each executive officers job
performance and contributions to the Company. These factors are generally determined in the
subjective judgment of the Compensation Committee for the Chief Executive Officer and with the
benefit of performance reviews and salary recommendations by the Chief Executive Officer and the
Companys human resources department for other executive officers.
In making compensation decisions, the Compensation Committee places significant emphasis on
Company performance relative to the Companys industry and peers. The Compensation Committee
generally has not considered stock price as an indicator of Company performance in making
compensation decisions because the price of the Companys common shares is subject to a variety of
factors outside the Companys control.
Administration of the Companys Compensation Programs
The Companys compensation programs for its executive officers are generally administered by
or under the direction and supervision of the Companys Compensation Committee. The Companys
Compensation Committee is responsible for reviewing and recommending to the independent members of
the Board of Directors for approval the salary, bonuses and all other compensation and benefits to
be provided to the Companys Chief Executive Officer and other executive officers.
The Companys Chief Executive Officer and human resources manager annually review the
compensation and performance of each executive officer of the Company (other than the Chief
Executive Officer, whose compensation and performance is reviewed by the Compensation Committee).
The results of these reviews are communicated to the Compensation Committee, along with
recommendations regarding compensation adjustments for the ensuing year. The Compensation
Committee either approves the recommended compensation adjustments or makes modifications in its
discretion. The Compensation Committee then makes its final recommendations to the independent
members of the Board of Directors for approval.
-13-
In setting salaries for the Companys executive officers and other employees, the Compensation
Committee and human resources manager use pay ranges that are established based on publicly
available market data regarding compensation paid to similarly situated executive officers and
employees at other companies. Pay ranges are established and adjusted annually with the assistance
of an outside consulting firm, Findley Davies, which utilizes market data from the following
publicly available compensation surveys:
|
|
|
Watson Wyatt
|
|
|
|
|
Ohio Bankers League
|
|
|
|
|
Employers Association of Northwest Ohio
|
For each employee position or category within the Company, the pay range that is established
includes a minimum, a mid-point and a maximum salary. Although the Compensation Committee
generally does not target a specific point within the pay range for executive officer salaries, the
Compensation Committee strives to ensure that its executive officer compensation remains
competitive with the compensation provided by other financial institutions with which the Company
competes for executive talent.
Components of 2008 Executive Compensation
There are four general components to the annual compensation that the Company provides to its
executive officers:
|
|
|
base salary
|
|
|
|
|
cash bonuses
|
|
|
|
|
retirement and death benefits
|
|
|
|
|
perquisites and other benefits
|
Historically, the Companys compensation programs have focused on cash compensation as opposed
to equity compensation. At the 2002 Annual Meeting, the shareholders of the Company adopted the
2002 Croghan Bancshares, Inc. Stock Option Plan, pursuant to which the Company may grant stock
options to executive officers, directors and other key employees. To date, however, no awards have
been granted under the 2002 Stock Option Plan.
Base Salary
:
Base salary represents the primary component of annual compensation paid to the Companys
executive officers. When recommending an executive officers salary within the pay range
established by peer group comparison data, the Compensation Committee primarily considers the
executive officers job performance and contribution to the objectives of the Company. As
discussed above, these factors are determined in the subjective judgment of the Compensation
Committee for the Chief Executive Officer and with the benefit of performance reviews and salary
recommendations by the Chief Executive Officer for other executive officers of the Company and the
Bank. To a lesser extent, the Compensation Committee also considers local and national economic
conditions and future business prospects of the Bank in setting base salary levels.
-14-
Cash Bonuses
:
Discretionary Bonuses.
The Company and the Bank occasionally award discretionary cash bonuses
to its executive officers to attract new executive officers, to reward exceptional job performance
or to address special circumstances. Discretionary bonuses are awarded on a limited basis and are
not contemplated or anticipated when setting annual compensation for the Companys executive
officers.
Performance-Based Bonuses.
Effective January 1, 2003, the Bank introduced the Performance
Compensation for STAKEHOLDERS program in which all employees, including the named executive
officers, participate. Pursuant to this program, employees of the Company and the Bank are
eligible to receive annual cash bonuses based on the attainment of established Company-wide
performance goals. These goals focus on four general areas of Company performance growth,
profitability, loan quality and productivity. Performance targets and bonus levels under the
program are established at the start of the each fiscal year through a collaborative effort
involving management and the Compensation Committee, and are subject to final approval by the Board
of Directors.
The bonuses awarded under the STAKEHOLDERS program have not represented a material component
of annual compensation for the Companys executive officers or other employees. In the six years
since the program was implemented, the Companys executive officers and other employees earned cash
bonuses under the program in three years (2004, 2005 and 2007). The cash bonuses earned under the
program amounted to 0.8% of base salary in 2004, 0.5% of base salary in 2005, and 0.8% of base
salary in 2007.
None of the executive officers of the Company received bonuses under the STAKEHOLDERS program
for the 2008 fiscal year. Messrs. Rieman, Elder and Luse received bonuses of $952, $803, and $778,
respectively, under the STAKEHOLDERS program for the 2007 fiscal year, while Mr. Futrell elected
not to receive any bonus under the STAKEHOLDERS program for the 2007 fiscal year.
Retirement and Death Benefits
:
Supplemental Executive Retirement Plan.
In 1999, the Bank established a non-qualified
Supplemental Executive Retirement Plan (the SERP) for the benefit of six executive officers and
former executive officers of the Bank, including the Banks Vice President and Trust Officer, Barry
F. Luse. None of the named executive officers of the Company other than Mr. Luse have participated
in the SERP. Each of the SERP participants, including Mr. Luse, entered into an Executive
Supplemental Retirement Plan Agreement effective April 29, 1999 (the 1999 SERP Agreements).
Pursuant to the 1999 SERP Agreements, the Bank was required to make an annual allocation to a
pre-retirement account for each participant, which was a liability reserve account established on
the books of the Bank. The amount of the annual allocation was tied to the amount of the Banks
earnings on certain life insurance contracts. The 1999 SERP Agreements represented unfunded,
non-qualified benefit arrangements, and the Bank had no obligation to set aside any funds with
which to pay its obligations under the agreements. However, the Bank purchased split-dollar life
insurance policies with respect to all of the participants in the SERP in order to fund the Banks
obligations under the 1999 SERP Agreements.
-15-
Pursuant to the terms of the 1999 SERP Agreements, each participant was entitled to receive
the balance in his pre-retirement account in ten equal annual installments following (a) the
participants retirement upon reaching the normal retirement age of 65 or the early retirement age
of 62 or (b) termination of the participants employment as a result of a disability. In the event
a participant was discharged without cause prior to reaching the age of 65, the 1999 SERP
Agreements provided that the participant would be entitled to receive a percentage of his
pre-retirement account based on his total years of service to the Bank. If the participant died
prior to receiving the full amount of his pre-retirement account, then the unpaid balance would be
paid in a lump sum to the participants beneficiaries.
Under the 1999 SERP Agreements, each participant was also entitled to receive an index
retirement benefit tied to the benefits payable under certain life insurance contracts. The 1999
SERP Agreements provided that the index retirement benefit would be payable annually until the
participants death, commencing (a) immediately following retirement upon reaching the normal
retirement age, (b) in the event of the participants early retirement, following the participant
reaching the age of 65, or (c) immediately following the termination of the participants
employment as a result of a disability. In the event a participant was discharged without cause
prior to reaching the age of 65, then the 1999 SERP Agreements provided that the participant would
be entitled to receive a percentage of the index retirement benefit (upon reaching the age of 65)
based on his total years of service to the Bank. Following a change in control of the Company, if
the participant was subsequently discharged without cause, the participant would be entitled to
all benefits under the SERP Agreement upon reaching the age of 62. A participant would forfeit all
benefits under the SERP Agreement if he was discharged by the Bank at any time for cause or
voluntarily terminated his employment with the Bank prior to reaching the age of 62.
The 1999 SERP Agreements were designed to provide an annual targeted retirement benefit to the
participants. However, the benefits were not guaranteed and were dependent upon the earnings from
the related life insurance policies compared to the average yield on two-year Treasury notes. Due
to the manner in which the allocations and payments were calculated, the allocations and payments
under the 1999 SERP Agreements have varied significantly from the targeted benefit amounts. As a
result, in December 2008, the Bank and each of the remaining SERP participants entered into a First
Amendment to Executive Supplemental Retirement Plan Agreement (SERP Amendment). Each SERP
Amendment effectively terminates the participants 1999 SERP Agreement in exchange for a lump sum
payment of an amount equal to the present value of the future retirement benefits that he would
have been entitled to receive under his 1999 SERP Agreement. The lump sum payment under each SERP
Amendment is payable in one or two annual installments (as selected by the participant) beginning
in 2009.
Split-Dollar Life Insurance Policies
. The Bank maintains a split-dollar life insurance policy
on behalf of Mr. Luse, in his capacity as Vice President/Trust Officer of the Bank. Pursuant to
the terms of an Endorsement Method Split Dollar Plan Agreement between Mr. Luse and the Bank, Mr.
Luse has the right to designate a beneficiary or beneficiaries to receive his share of the proceeds
of the policy, which is an amount equal to 80% of the net at-risk insurance portion of the proceeds
payable upon death (
i.e.
, total proceeds less the cash value of the policy). The Bank is entitled
to receive the remaining proceeds payable under the policy upon Mr. Luses death. The Endorsement
Method Split Dollar Plan Agreement will remain in effect following Mr. Luses retirement or
termination of employment unless he is terminated by the Bank for cause. If Mr. Luses share of
the proceeds under the split-dollar life insurance policy were computed as of December 31, 2008,
his share would have been $224,000.
-16-
Supplemental Death Benefit Agreements.
The Bank has entered into Supplemental Death Benefit
Agreements with certain of its executive officers, including the Companys President and Chief
Executive Officer, Steven C. Futrell, and the Companys Vice President and Chief Lending Officer,
Thomas J. Elder, Jr. Pursuant to the Supplemental Death Benefit Agreements, the Bank has agreed to
make a lump sum payment of $25,000 to each executive officers beneficiaries upon his or her death.
The supplemental death benefit will be forfeited in the event the executive officer is terminated
by the Bank at any time for cause.
Perquisites and Other Benefits
:
The Company provides its executive officers with certain perquisites and other benefits that
the Compensation Committee believes are reasonable to enable the Company to attract and retain
qualified executive officers and to promote business development activities by the executive
officers in the communities served by the Bank. In accordance with past practice, the Company
approved cash bonuses in 2008 to reimburse certain executive officers, including certain named
executive officers, for the cost of dues to the Fremont Country Club and the Catawba Island Club.
The Compensation Committee believes that these perquisites and other benefits are reasonable in
amount and consistent with those provided by similarly situated financial institutions in the
Companys market area.
The executive officers of the Company are eligible to participate in the Banks 401(k) Profit
Sharing Plan on the same basis as all full-time employees of the Bank. For each executive officer
or other employee who participates in the 401(k) Profit Sharing Plan, the Bank matches 50% of
contributions up to 6% of the participants annual compensation, with a maximum match of 3% of
annual compensation.
The executive officers of the Company are also eligible to participate in all of the employee
benefit plans, such as medical, dental, group term life insurance, and disability insurance, which
are generally available to all employees of the Company and the Bank on a non-discriminatory basis.
Tax Considerations
Under Section 162(m) of the Internal Revenue Code, a limitation is placed on the tax
deductibility of executive compensation paid by publicly-held corporations for individual
compensation to certain executive officers in excess of $1,000,000 in any taxable year. No
executive officer of the Company received compensation during the Companys 2008 fiscal year that
would be non-deductible under Section 162(m).
-17-
Summary Compensation Table
The following table contains information regarding the compensation awarded to or earned by
the named executive officers of the Company during the fiscal years ended December 31:
Summary Compensation Table
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Non-Equity
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Incentive Plan
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All Other
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Name and
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Salary
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Bonus
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Compensation
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Compensation
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Total
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Principal Position
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Year
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($)
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($)
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($) (1)
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($)
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($)
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Steven C. Futrell
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2008
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$
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214,500
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(2)
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$
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7,500
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$
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0
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$
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16,046
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(3)
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$
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238,046
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President and
Chief
Executive Officer
of the Company and
the Bank
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2007
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$
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205,250
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(4)
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$
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0
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$
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0
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$
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14,198
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(5)
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$
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219,448
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Kendall W. Rieman
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2008
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$
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119,000
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$
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0
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$
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0
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$
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8,910
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(6)
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$
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127,910
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Vice President
and
Treasurer of the
Company and Vice
President, Chief
Financial Officer,
and Chief
Operations Officer
of the Bank
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2007
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$
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114,000
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$
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0
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$
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952
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$
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6,424
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(7)
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$
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121,376
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Thomas J. Elder Jr.
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2008
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$
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110,000
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$
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2,000
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$
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0
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$
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3,373
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(8)
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$
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115,373
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Vice President
of
the Company and
Vice President and
Chief Lending
Officer of the Bank
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2007
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$
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100,385
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$
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0
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$
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803
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$
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2,665
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(8)
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$
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103,853
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Barry F. Luse
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2008
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$
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99,600
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$
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0
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$
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0
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$
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9,678
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(9)
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$
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109,278
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Vice President
and Secretary of
the Company and
Vice President
and Trust
Officer of the
Bank
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2007
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$
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95,800
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$
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0
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$
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778
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$
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7,349
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(10)
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$
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103,927
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-18-
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(1)
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No bonuses were earned by any of the named executive officers under the Banks Performance
Compensation for STAKEHOLDERS program for the 2008 fiscal year. Represents amounts earned
by the named executive officers under the Banks Performance Compensation for STAKEHOLDERS
program for the 2007 fiscal year.
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(2)
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Includes director fees of $9,600 paid to Mr. Futrell for attendance at meetings of the Board
of Directors of the Bank.
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(3)
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Includes (a) $9,403 reimbursed to Mr. Futrell for the payment of club dues and (b) $6,643 of
matching contributions made by the Bank to the 401(k) Profit Sharing Plan on behalf of Mr.
Futrell.
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(4)
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Includes director fees of $9,600 paid to Mr. Futrell for attendance at meetings of the Board
of Directors of the Bank.
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(5)
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Includes (a) $8,834 reimbursed to Mr. Futrell for the payment of club dues and (b) $5,364 of
matching contributions made by the Bank to the 401(k) Profit Sharing Plan on behalf of Mr.
Futrell.
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(6)
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Includes (a) $5,294 reimbursed to Mr. Rieman for the payment of club dues and (b) $3,616 of
matching contributions made by the Bank to the 401(k) Profit Sharing Plan on behalf of Mr.
Rieman.
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(7)
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Includes (a) $4,977 reimbursed to Mr. Rieman for the payment of club dues and (b) $1,447 of
matching contributions made by the Bank to the 401(k) Profit Sharing Plan on behalf of Mr.
Rieman.
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(8)
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Represents matching contributions made by the Bank to the 401(k) Profit Sharing Plan on
behalf of Mr. Elder.
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(9)
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Includes (a) $4,190 of matching contributions made by the Bank to the 401(k) Profit Sharing
Plan on behalf of Mr. Luse, (b) $242, representing the amount of the premium deemed to have
been paid by the Bank on behalf of Mr. Luse under the split-dollar life insurance policy
maintained by the Bank (
see
the discussion under the heading
Split-Dollar Life Insurance
Policy
on page 16 for more detail), and (c) $5,246, representing the amount allocated by the
Bank to Mr. Luses pre-retirement account under Mr. Luses SERP Agreement (
see
the
discussion under the heading
Supplemental Executive Retirement Plan
on page 15 for more
detail).
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(10)
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Includes (a) $3,585 of matching contributions made by the Bank to the 401(k) Profit Sharing
Plan on behalf of Mr. Luse, (b) $288, representing the amount of the premium deemed to have
been paid by the Bank on behalf of Mr. Luse under the split-dollar life insurance policy
maintained by the Bank (
see
the discussion under the heading
Split-Dollar Life Insurance
Policy
on page 16 for more detail), and (c) $3,476, representing the amount allocated by the
Bank to Mr. Luses pre-retirement account under Mr. Luses SERP Agreement (
see
the
discussion under the heading
Supplemental Executive Retirement Plan
on page 15 for more
detail).
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Equity-Based Awards and Holdings
No awards have been granted to date under the 2002 Croghan Bancshares, Inc. Stock Option Plan,
and no other equity-based awards have been granted to any of the executive officers of the Company.
-19-
Employment Agreement with Steven C. Futrell
The Bank entered into an Employment Agreement with Steven C. Futrell on August 29, 2007, with
respect to his service as President and Chief Executive Officer of the Company and the Bank (as
amended, the Futrell Agreement). The Futrell Agreement supersedes and replaces the Employment
Agreement, dated as of April 16, 2004, between the Bank and Mr. Futrell. The Futrell Agreement was
subsequently amended in 2008 to comply with the requirements of Section 409A of the Code and the
Treasury Regulations promulgated thereunder.
The Futrell Agreement provides for an initial term of three (3) years. After the initial
three-year term, the Futrell Agreement will remain in effect unless and until (a) the Bank enters
into a new agreement with Mr. Futrell, (b) the Bank and Mr. Futrell execute a written extension of
the Futrell Agreement, or (c) either the Bank or Mr. Futrell elects not to enter into a new
agreement or extend the Futrell Agreement and gives notice of such election to the other party.
Pursuant to the Futrell Agreement, Mr. Futrell is entitled to receive an annual base salary
during the term of the Futrell Agreement. The annual base salary was initially set at $194,900,
effective January 1, 2007, and is subject to periodic adjustment during the term of the Futrell
Agreement in accordance with the salary administration program currently in effect for all Bank
employees. Mr. Futrell is also entitled to participate in the various employee benefit plans,
programs and arrangements available to senior officers of the Bank.
Upon certain types of termination of employment, including a termination by the Bank without
cause or a termination by Mr. Futrell constituting good reason, Mr. Futrell will be entitled to
receive certain severance benefits, including (a) a payment equal to two (2) times his annual base
salary, (b) a payment equal to fourteen percent (14%) of his annual base salary to compensate Mr.
Futrell for matching contributions the Bank would have paid to his account under the Banks
tax-qualified retirement plan had he remained employed by the Bank for an additional twenty-four
(24) months, and (c) continuation of health and welfare benefits for a period of twenty-four (24)
months following termination at the same premium cost to Mr. Futrell and the same coverage level as
in effect immediately preceding the date of termination.
Under the terms of the Futrell Agreement, the Bank will have cause, in the discretion of the
Board of Directors of the Bank, to terminate Mr. Futrells employment upon:
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Mr. Futrells willful and material failure to perform his duties under the Futrell
Agreement, other than any failure resulting from Mr. Futrells disability, as
determined by the Board of Directors;
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Mr. Futrells conviction of a felony or a crime involving moral turpitude; or
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Mr. Futrells fraud or personal dishonesty.
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Under the terms of the Futrell Agreement, Mr. Futrell may terminate his employment with the
Bank for good reason for any action or inaction that constitutes a material breach by the Bank,
or any successor, of the Futrell Agreement that occurs without the consent of Mr. Futrell.
However, prior to terminating his employment with the Bank for good reason, Mr. Futrell must give
notice to the Bank of the condition giving rise to the material breach by the Bank or its successor
and give the Bank an opportunity to cure the condition within 30 days following receipt of the
notice from Mr. Futrell.
-20-
If Mr. Futrell is terminated by the Bank within twenty-four (24) months after a merger or
other change in control transaction, the amount of Mr. Futrells severance payment will increase to
three (3) times his annual base salary, the payment to compensate Mr. Futrell for the loss of
matching contributions the Bank would have paid to his account under the Banks tax-qualified
retirement plan will increase to twenty-one percent (21%) of his annual base salary, and Mr.
Futrell will be entitled to the health and welfare benefits as described above for a period of
thirty-six (36) months following termination.
The Futrell Agreement requires that any payment required to be delayed pursuant to Section
409A of the Internal Revenue Code will be delayed for a period of six months following Mr.
Futrells separation from service (or, if earlier, his death). Any payment so delayed will be
accumulated and paid in a single lump sum on the first day of the seventh month following his
separation from service.
In the event that any payments or distributions to Mr. Futrell under the Futrell Agreement or
any other plan or arrangement maintained by the Bank or any of its affiliates would be subject to
the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended, then
the Futrell Agreement provides for the total payments and/or distributions to be reduced to an
amount equal to one dollar ($1.00) less than the amount which would cause the payments and/or
distributions to be subject to the excise tax.
Under the Futrell Agreement, a voluntary termination from service by Mr. Futrell will
constitute a retirement if he has attained the age of fifty-five (55) and completed six (6)
consecutive years of service. If the Bank provides medical insurance that permits retired
employees of the Bank to participate in such plan at the retirees expense, Mr. Futrell, if retired
(as defined in the Futrell Agreement), will be eligible to participate at his own expense. If the
Bank does not provide medical insurance that permits retired employees of the Bank to participate
in such plan, the Bank will pay to Mr. Futrell, if retired (as defined in the Futrell Agreement), a
payment intended to compensate him for that portion of any health insurance premium paid by Mr.
Futrell for comparable private family medical insurance coverage which exceeds the premiums he
would have otherwise paid for coverage under the Banks plan.
The Futrell Agreement also contains confidentiality and noncompetition provisions which
prevent Mr. Futrell from disclosing confidential proprietary information about the Bank and from
competing with the Bank within a fifty (50) mile radius of Fremont, Ohio during the term of his
employment and, if his employment is terminated by the Bank for cause or by Mr. Futrell without
good reason, for an additional twenty-four (24) months thereafter.
-21-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the Record Date, no person or entity beneficially owned more than five percent (5%) of
the outstanding common shares of the Company.
The following table sets forth, as of the Record Date, certain information concerning the
beneficial ownership of common shares by each director of the Company, by each person nominated by
the Board of Directors for election as a director of the Company, by each of the named executive
officers of the Company and by all current executive officers and directors of the Company as a
group:
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Name of
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Amount and Nature of
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Percent of
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Beneficial Owner
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Beneficial Ownership (1)
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Class (2)
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Michael D. Allen Sr.
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3,000
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(3
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James E. Bowlus
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30,425
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(4)
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1.8
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%
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Thomas J. Elder Jr.
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173
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(3
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James R. Faist
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800
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(5)
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(3
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)
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Steven C. Futrell
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1,264
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(6)
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(3
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Claire F. Johansen
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2,616
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(3
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Stephen A. Kemper
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10,959
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(7)
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(3
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Daniel W. Lease
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3,200
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(8)
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(3
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Thomas W. McLaughlin
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600
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(3
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Allan E. Mehlow
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1,660
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(3
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Kendall W. Rieman
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575
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(3
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Gary L. Zimmerman
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840
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(3
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All current executive
officers and
directors as a group
(14 persons)
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59,892
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3.5
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%
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(1)
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Unless otherwise noted, the beneficial owner is the owner of record and has sole voting and
investment power with respect to all of the common shares reflected in the table and none of
the common shares are pledged as security.
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(2)
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The percent of class is based upon 1,720,858 common shares of the Company outstanding on the
Record Date.
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(3)
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Reflects ownership of less than 1% of the outstanding common shares of the Company.
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(4)
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Includes 300 shares owned by Mr. Bowlus wife, as to which she exercises sole voting and
investment power.
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(5)
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All shares are held in a trust for which Mr. Faist and his wife are co-trustees and as to
which they exercise shared voting and investment power.
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(6)
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Includes 800 shares owned jointly by Mr. Futrell and his wife, as to which they exercise
shared voting and investment power.
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(7)
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Includes 2,647 shares owned by Mr. Kempers wife, as to which she exercises sole voting and
investment power.
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(8)
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Includes 3,000 shares owned jointly by Mr. Lease and his wife, as to which they exercise
shared voting and investment power.
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-22-
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Companys knowledge, based solely on a review of reports to the Company and written
representations that no other reports were required, during the 2008 fiscal year, the officers and
directors of the Company complied with all filing requirements applicable to officers, directors,
and beneficial owners of more than 10% of the outstanding common shares of the Company under
Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), except that
Thomas W. McLaughlin, a director of the Company and the Bank, filed late one Form 4, reporting his
purchase of 200 common shares on August 20, 2008.
AUDIT COMMITTEE DISCLOSURE
In accordance with the Audit Committee Charter and the requirements of the Sarbanes-Oxley Act
of 2002 and related SEC rules, all services to be provided by the Companys independent auditors
are subject to pre-approval by the Audit Committee. This includes audit services, audit-related
services, tax services and other services. In some cases, the pre-approval of services is provided
by the full Audit Committee. In other cases, Daniel W. Lease, as Chairman of the Audit Committee,
has the delegated authority to pre-approve additional services, and such pre-approvals are then
communicated to the full Audit Committee. All (100%) of the audit services, audit related
services, tax services and other services provided by the Companys independent auditors, Clifton
Gunderson LLP, during 2008 were pre-approved by the Audit Committee.
The Sarbanes-Oxley Act and related SEC rules prohibit the Company from obtaining certain
non-audit services from its auditing firm in order to avoid potential conflicts of interest. The
Company has not obtained any of these prohibited services from Clifton Gunderson LLP since these
rules went into effect.
The following table lists the fees that the Company paid or accrued for the audit and other
services provided by Clifton Gunderson LLP for the following fiscal years:
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2008
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2007
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Audit Fees
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$
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95,750
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$
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90,200
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Audit-Related Fees
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29,500
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24,800
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Tax Fees
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12,650
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13,400
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All Other Fees
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0
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0
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$
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137,900
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$
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128,400
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Audit Fees
: This category includes the audit of the Companys annual financial statements,
review of financial statements included in the Companys Quarterly Reports on Form 10-Q, and
services that are normally provided by the independent auditors in connection with statutory and
regulatory filings or engagements for those fiscal years. This category also includes advice on
audit and accounting matters that arose during, or as a result of, the audit or the review of
interim financial statements and the preparation of the annual management letter on internal
control matters.
-23-
Audit-Related Fees
: This category consists of assurance and related services provided by
Clifton Gunderson LLP that are reasonably related to the performance of the audit or review of the
Companys financial statements and are not reported under Audit Fees. The services provided by
Clifton Gunderson LLP under this category include: the annual audit of the Banks 401(k) Profit
Sharing Plan, including review of the related Form 11-K for both years; reporting on the controls
placed in operation and tests of operating effectiveness of the Banks trust department for both
years; and a review of the Banks general computer controls, in 2008.
Tax Fees
: This category consists of professional services rendered by Clifton Gunderson LLP
for tax compliance, tax advice, and tax planning. The services provided by Clifton Gunderson LLP
under this category include tax return preparation and miscellaneous technical tax advice.
All Other Fees
: None.
AUDIT COMMITTEE REPORT
In fulfilling its oversight responsibilities with respect to the Companys audited financial
statements for the year ended December 31, 2008, the Audit Committee has:
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reviewed and discussed the Companys audited financial statements with management;
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discussed with Clifton Gunderson LLP, the Companys independent auditor, the matters
required to be discussed by Statement on Auditing Standards No. 61, as amended, as
adopted by the Public Company Accounting Oversight Board; and
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received the written disclosures and the letter from the Companys independent
auditor required by applicable requirements of the Public Company Accounting Oversight
Board regarding the independent auditors communications with the Audit Committee
concerning independence, and has discussed with the Companys independent auditor the
independent auditors independence.
|
Based on the reviews and discussions referred to above, the Audit Committee recommended to the
Board of Directors of the Company (and the Board of Directors has approved) that the audited
financial statements be included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2008, for filing with the SEC.
Submitted by the members of the Audit Committee.
[Michael D. Allen Sr., Daniel W. Lease (Chairman) and Thomas W. McLaughlin]
INDEPENDENT AUDITORS
The Board of Directors of the Company intends to appoint the firm of Clifton Gunderson LLP to
serve as independent auditors for the Company for the 2009 fiscal year. Clifton Gunderson LLP has
served as independent auditors for the Company since 1995. The Board of Directors expects that
representatives from Clifton Gunderson LLP will be present at the Annual Meeting, will have the
opportunity to make a statement if they desire to do so and will be available to respond to
appropriate questions.
-24-
SHAREHOLDER PROPOSALS FOR 2010 ANNUAL MEETING
Any qualified shareholder who desires to present a proposal for consideration at the 2010
Annual Meeting of Shareholders must submit the proposal in writing to the Secretary of the Company.
To be eligible for inclusion in the Companys notice of meeting, proxy statement and proxy card
relating to the 2010 Annual Meeting, a proposal must be received by the Secretary of the Company no
later than December 7, 2009. Upon receipt of a shareholder proposal, the Company will determine
whether or not to include the proposal in the proxy materials in accordance with applicable SEC
rules.
The SEC has promulgated rules relating to the exercise of discretionary voting authority under
proxies solicited by the Board of Directors. If a shareholder intends to present a proposal at the
2010 Annual Meeting and does not notify the Secretary of the Company of the proposal on or before
February 20, 2010, the proxies solicited by the Board of Directors for use at the 2010 Annual
Meeting may be voted on the proposal in the event it is presented at the meeting, without any
discussion of the proposal in the Companys proxy materials.
ANNUAL REPORT ON FORM 10-K
The Company will provide without charge to any shareholder of record on March 17, 2009, upon
the written request of any such shareholder, a copy of the Companys Annual Report on Form 10-K,
including financial statements and schedules thereto, required to be filed under the Exchange Act
for the Companys fiscal year ended December 31, 2008. Such written request should be directed to
Barry F. Luse, Secretary, Croghan Bancshares, Inc., 323 Croghan Street, Fremont, Ohio 43420;
Telephone No.: (419) 332-7301.
REPORTS TO BE PRESENTED AT THE ANNUAL MEETING
The Companys Annual Report for the year ended December 31, 2008, containing financial
statements for such year and the signed opinion of Clifton Gunderson LLP, independent certified
public accountants, with respect to such financial statements will be presented at the Annual
Meeting. The Companys Annual Report is not to be regarded as proxy soliciting material, and the
Companys management does not intend to solicit any action from the shareholders with respect to
such Annual Report.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no other business to
be presented for action by the shareholders at the Annual Meeting other than as set forth in this
Proxy Statement. However, if any other matter is properly presented at the Annual Meeting, or at
any adjournment(s) thereof, it is intended that the persons named as proxies in the enclosed proxy
card may vote the common shares represented by such proxy on such matters in accordance with their
best judgment in light of the conditions then prevailing.
IT IS IMPORTANT THAT PROXY CARDS ARE SIGNED AND RETURNED PROMPTLY. EVEN IF YOU PLAN TO ATTEND
THE ANNUAL MEETING IN PERSON, PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD
PROMPTLY. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU
WISH TO DO SO.
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April 6, 2009
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By Order of the Board of Directors,
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/s/ Steven C. Futrell
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Steven C. Futrell, President & Chief Executive Officer
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-25-
Appendix A
CROGHAN BANCSHARES, INC.
POLICY FOR NOMINATIONS OF CANDIDATES FOR
ELECTION TO THE BOARD OF DIRECTORS
The Board of Directors of Croghan Bancshares, Inc. (Croghan), believes that members of Croghans
Board of Directors must posses certain basic personal and professional qualities in order to
discharge their fiduciary duties properly, to provide effective oversight of the management of
Croghan, and to monitor Croghans adherence to principles of sound corporate governance. As a
result, all persons nominated to serve as Directors to Croghans Board of Directors in accordance
with the by-laws should possess the minimum qualifications described in this policy. However, in
addition to such minimum qualifications, Croghan will consider the contributions that a candidate
can be expected to make to the collective functioning of the Board of Directors based upon the
totality of the candidates credentials, experience and expertise, the composition of the Board of
Directors at the time and other relevant circumstances.
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1.
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Integrity
. All candidates must be individuals of personal integrity and
ethical character and individuals who value and appreciate such qualities in
others.
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2.
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A
bsence of Conflicts of Interest
. Candidates must not have any
interests that would materially impair his or her ability to (i) exercise
independent judgment or (ii) otherwise discharge the fiduciary duties owed as a
director to Croghan and its shareholders.
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3.
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Fair and Equal Representation
. Candidates must be able to represent
fairly and equally all shareholders of Croghan without favoring or advancing
any particular shareholder or other constituency of Croghan.
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4.
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Achievement
. Candidates must have demonstrated achievement in one or
more fields of business, professional, governmental, communal, scientific or
educational endeavor.
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5.
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Oversight
. Candidates must have sound judgment, borne of management or
policy-making experience (which may be as an advisor or consultant), that
demonstrates an ability to function effectively in an oversight role.
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A-1
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6.
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Business Understanding
. Candidates must have a general appreciation and
understanding of major issues facing public companies of a size and operational
scope similar to Croghan. These include:
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contemporary governance concerns;
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regulatory obligations of a bank holding company, a bank, and a public issuer;
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strategic business planning;
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competition in the financial institutions industry and in a global economy;
and
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basic concepts of corporate finance.
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7.
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Available Time
. Candidates must have, and be prepared to devote,
adequate time to the Board and its committees. Each candidate must be available
to attend substantially all meetings of the Board of Directors and any
Committees on which the candidate will serve, as well as Croghans Annual
Meeting of Shareholders.
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8.
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Limited Exceptions
. Under exceptional and limited circumstances,
Croghan may approve the candidacy of a nominee who does not satisfy all of
these requirements if the Board of Directors believes the service of such
nominee is in the best interests of Croghan.
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9.
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Additional Qualifications
. In approving candidates for election as
director, Croghan will also assure the following:
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At least a majority of the directors serving at any time on the Board of
Directors are independent, as defined under the rules of the principal stock
market on which Croghans common shares are listed for trading;
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At least three of the directors satisfy the financial literacy requirements
required for service on the audit committee;
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At least one of the directors qualifies as an audit committee financial expert
under the rules of the Securities and Exchange Commission;
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At least some of the independent directors have experience as senior
executives of a public or substantial private company; and
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At least some of the independent directors have general familiarity with an
industry or industries in which Croghan conducts a substantial portion of its
business or in related industries.
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10.
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Diversity
. Croghan will seek to promote through the nominations process
an appropriate diversity on the Board of Directors of professional background,
experience, expertise, perspective, age, gender, ethnicity, and country of
citizenship.
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A-2
Appendix B
CROGHAN BANCSHARES, INC.
AUDIT COMMITTEE CHARTER
(Revised January 13, 2009)
This Charter governs the operations of the Audit Committee (the Committee) of the Board of
Directors (the Board) of Croghan Bancshares, Inc. (the Company). The purpose of the Committee
is to oversee the accounting and financial reporting processes of the Company, the annual audits of
the Companys financial statements and the Companys internal audit function; to review the
adequacy of the Companys system of internal controls; to select, retain and oversee the Companys
independent auditor; and to establish procedures for the receipt and treatment of complaints
received by the Company regarding accounting, internal accounting controls, auditing matters or
other compliance matters. In so doing, the Committee will maintain a free and open means of
communication among the directors, the independent auditors, the internal auditors and the
Companys management.
The Committee shall serve at the pleasure of the Board. The Committee shall consist of at least
three members of the Board, each of whom shall be appointed annually by the Board. Unless a chair
of the Committee has been appointed by the Board, the members of the Committee may designate a
chair by majority vote of the full Committee membership.
Each member of the Committee shall be free of any relationship that, in the opinion of the Board,
may interfere with the exercise of his or her independent judgment in carrying out the
responsibilities of a director. All Committee members must:
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satisfy the standards of independence prescribed by the applicable rules of The
Nasdaq Stock Market, Inc.;
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satisfy the independence standards specified in the applicable rules and regulations
of the Securities and Exchange Commission (the SEC), including Rule 10A-3 under the
Securities Exchange Act of 1934, as amended; and
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be financially literate and able to read and understand fundamental financial
statements, including the Companys balance sheet and statements of operations,
stockholders equity and cash flows.
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The Board will determine whether at least one member of the Committee qualifies as an audit
committee financial expert in compliance with the criteria established by the SEC. The existence
of such a member, including his or her name and whether or not he or she is independent, will be
disclosed in periodic filings as required by the SEC.
No member of the Committee shall simultaneously serve on the audit committee of more than two other
public companies.
B-1
III.
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MEETINGS AND MINUTES
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The Committee shall meet on at least a quarterly basis and at such other times as the Committee
deems necessary to fulfill its responsibilities set forth in this Charter. Content of the agenda
for each meeting should be set by the Committee chair. A majority of the Committee members shall
constitute a quorum for the transaction of business. The Committee shall meet in a separate
executive session with the independent auditors at least once each year and at other times when
considered appropriate to review any matters that the Committee believes should be discussed
privately. Members will strive to be present at all meetings. As necessary or desirable, the
Committee may request that members of management, the internal auditors and/or the independent
auditors be present at Committee meetings. The Committee shall maintain written minutes of its
meetings and shall submit the minutes to, or otherwise report to and discuss the matters from each
Committee meeting with, the Board.
In discharging its oversight responsibilities, the Committee is authorized and empowered to
investigate any matter brought to its attention with full access to all books, records, facilities,
and personnel of the Company; to engage independent legal counsel and other advisers as it
determines necessary to discharge its responsibilities; and to demand and receive funding by the
Company for the payment of ordinary administrative expenses of the Committee that are necessary or
appropriate in carrying out the Committees duties.
The primary responsibility of the Committee is to oversee the Companys accounting and financial
reporting process on behalf of the Board and report the results of their activities to the Board.
While the Committee has the oversight responsibilities and powers set forth in this Charter, it is
not the duty of the Committee to plan or conduct audits or to determine that the Companys
financial statements are complete and accurate and are in accordance with generally accepted
accounting principles. These are the responsibilities of the Companys independent auditors and
management.
In carrying out its responsibilities, the Committee believes its policies and procedures should
remain flexible, in order to best react to changing conditions and circumstances. The Committee
should take appropriate actions to set the overall corporate tone for quality financial
reporting, sound business risk practices, and ethical behavior. The following shall be the
principal duties and responsibilities of the Committee. These duties and responsibilities are set
forth as a guide with the understanding that the Committee may supplement them as appropriate in
view of changing business, legal, regulatory, or other conditions.
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1.
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The Committee shall review and reassess the adequacy of this Charter
periodically as conditions dictate, but at least annually, and shall obtain the
approval of the Board for any amendments to this Charter.
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2.
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The Committee shall be directly responsible for the selection, retention and,
when appropriate, termination of the Companys independent auditor, the setting of the
independent auditors compensation, and the oversight of the work of the independent
auditor, including resolution of disagreements between management and the independent
auditors regarding financial reporting. These powers shall rest solely with the
Committee, and the independent auditor shall report directly to the Committee.
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B-2
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3.
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The Committee shall pre-approve all audit services and all permitted non-audit
services to be performed by the independent auditor to the Company or its subsidiary
and shall not engage the independent auditor to perform the specific non-audit services
prohibited by law or regulation. The Committee may delegate pre-approval authority to
a member of the Committee, provided that the decisions of any Committee member to whom
pre-approval authority is delegated must be presented to the full Committee at its next
meeting. The Committee may establish pre-approval policies and procedures in
compliance with the rules established by the SEC.
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4.
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Before each audit begins, the Committee shall discuss annually with the
companys contracted auditors (both internal and external), the overall scope and plans
for their respective audits, including the adequacy of staffing and compensation. The
Committee shall also address the coordination of the audit efforts to assure best
completeness of coverage, reduction of redundant efforts, and the effective use of
audit resources.
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5.
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The Committee shall review with the independent auditor: (a) the scope and
results of the independent audit; (b) any problems or difficulties that the independent
auditor encountered in the course of the audit, such as restrictions on the scope of
work or access to required information, and managements response; and (c) any comments
or suggestions regarding improvements that could be made to the internal controls
and/or accounting practices and procedures of the Company.
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6.
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At least annually, the Committee shall consider the independence of the
independent auditor, including whether the provision by the independent auditor of
non-audit services is compatible with independence. The Committee shall also ensure
that the independent auditor submits to the Committee periodically (but at least
annually) a written statement of all relationships between the independent auditor and
the Company and its subsidiary, consistent with Independence Standards Board Standard
1, as such standard may be modified or supplemented, and engage in active dialog with
the independent auditor about all significant relationships the auditor has with the
Company and its subsidiary to determine the auditors independence. The Committee
shall also establish policies for the hiring of employees or former employees of the
independent auditor.
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7.
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The Committee shall meet with the independent auditor, without management
present, to discuss the results of their examination, their evaluation of the Companys
internal controls, and the overall quality of the Companys financial reporting. The
Committees review should include the matters required to be discussed by Statement on
Auditing Standards No. 61 and an explanation from the independent auditor of the
factors considered by the independent auditor in determining the audits scope. The
Committee shall confirm with the independent auditor that no limitations have been
placed on the scope or nature of its audit.
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8.
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The Committee shall review with management and the independent auditors the
consolidated financial statements and the disclosures under Managements Discussion and
Analysis of Financial Condition and Results of Operations to be included in the
Companys Annual Report on Form 10-K to be filed with the SEC (or in the annual report
to shareholders if distributed prior to the filing of the Form 10-K), including their
judgment about the quality, not just the acceptability, of the Companys accounting
principles, the reasonableness of significant judgments and accounting estimates, and
the clarity and completeness of the disclosures in the Companys consolidated financial
statements. The Committee shall also discuss the results of the annual audit and any
other matters required to be communicated to the Committee by the
Companys independent auditor under generally accepted auditing standards and other applicable
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B-3
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laws and regulations, including: (a) all critical accounting policies and practices
to be used; (b) all alternative treatments within U.S. generally accepted accounting
principles related to material items that have been discussed with management of the
Company; and (c) other material written communications between the independent
auditor and management of the Company, such as any management letter or schedule of
unadjusted differences. The Committee shall recommend to the Board whether the
Companys audited consolidated financial statements should be included in the Annual
Report on Form 10-K to be filed with the SEC.
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9.
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The Committee shall review the interim financial statements and the disclosures
under Managements Discussion and Analysis of Financial Condition and Results of
Operations with management, and review any communications from the Companys
independent auditors regarding such interim financial statements, before the filing of
the Companys Quarterly Report on Form 10-Q with the SEC. The chair of the Committee
may represent the entire Committee for purposes of this review.
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10.
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The Committee shall prepare the Audit Committee report required to be included
in the Companys annual proxy statement pursuant to the rules and regulations of the
SEC. The name of each Committee member must appear below the report.
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11.
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The Committee shall review and concur in the appointment, replacement,
reassignment or dismissal of the internal auditor, the scope of the internal audit, the
internal audit budget and staffing, internal audit policies, and the internal auditors
compliance with the Institute of Internal Auditors Statements for Professional Practice
of Internal Auditing.
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12.
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The Committee shall review and oversee procedures designed to identify related
party transactions that are material to the Companys consolidated financial
statements or otherwise require disclosure under applicable laws and rules adopted by
the SEC. The Audit Committee shall have the authority to approve any such related
party transactions.
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13.
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The Committee shall establish procedures for the receipt, retention, and
treatment of complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters, as well as for the confidential, anonymous
submission by employees of the Company of concerns regarding questionable accounting or
auditing matters.
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14.
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The Committee shall investigate any matter brought to its attention within the
scope of its duties and perform any other activities consistent with this Charter, the
Companys Code of Regulations and governing law, as the Committee or the Board deems
necessary or appropriate.
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15.
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The Committee shall oversee compliance with the Audit Policy adopted by the
Audit Committee of the Board of Directors of The Croghan Colonial Bank, and any other
policies applicable to the annual independent audit of The Croghan Colonial Bank.
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B-4
Appendix C
CROGHAN BANCSHARES, INC.
COMPENSATION COMMITTEE CHARTER
(Revised February 10, 2009)
This Charter sets forth the purpose, composition, authority and responsibilities of the
Compensation Committee (the Committee) of the Board of Directors (the Board) of Croghan
Bancshares, Inc. (the Company). The purposes of the Committee are (a) to discharge the
responsibilities of the Board relating to the compensation of the Companys Chief Executive Officer
and other executive officers and (b) to review, discuss with the Companys management, and
recommend to the Board of Directors for approval all disclosures regarding executive and director
compensation required to be included in the Companys proxy statement as required by the rules and
regulations of the Securities and Exchange Commission (the SEC).
The Committee shall serve at the pleasure of the Board. The Committee shall consist of at least
three members of the Board, each of whom shall be appointed annually by the Board. Unless a chair
of the Committee has been appointed by the Board, the members of the Committee may designate a
chair by majority vote of the full Committee membership.
Each member of the Committee shall be free of any relationship that, in the opinion of the Board,
may interfere with the exercise of his or her independent judgment in carrying out the
responsibilities of a director. All Committee members must:
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satisfy the standards of independence prescribed by the applicable rules of The
Nasdaq Stock Market, Inc.;
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be Non-Employee Directors as defined in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the Exchange Act);
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be Outside Directors as defined in Section 162(m) of the Internal Revenue Code of
1986, as amended (the Code), and the regulations promulgated thereunder; and
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satisfy any other standards of independence which may be in effect and applicable to
the Committee from time to time, including any such standards under applicable SEC
rules and regulations.
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III.
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MEETINGS AND MINUTES
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The Committee shall meet on at least an annual basis and at such other times as the Committee deems
necessary to fulfill its responsibilities set forth in this Charter. Content of the agenda for
each meeting should be set by the Committee chair. A majority of the Committee members shall
constitute a quorum for the transaction of business. Members will strive to be present at all
meetings.
C-1
As necessary or desirable, the Committee may request that members of management, compensation
consultants, legal advisors or others be present at Committee meetings. The Companys Chief
Executive Officer may not be present during the Committees deliberations regarding his
compensation but may, at the Committees request, be present during the Committees deliberations
(but not during voting) regarding the compensation of the other executive officers of the Company.
The Committee shall maintain written minutes of its meetings and shall submit the minutes to, or
otherwise report to and discuss the matters from each Committee meeting with, the Board.
In discharging its duties and responsibilities, the Committee may, in its sole discretion, employ
an independent compensation consultant to assist in the evaluation of the compensation of the
Companys Chief Executive Officer or other executive officers. The Committee shall also have the
authority to engage other advisers (including legal advisers) as it determines necessary and
appropriate to discharge its responsibilities, and to demand and receive funding by the Company for
the payment of ordinary administrative expenses of the Committee that are necessary or appropriate
in carrying out the Committees duties.
V.
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DUTIES AND RESPONSIBILITIES
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The Committees primary duties and responsibilities are set forth below. The Committee shall also
carry out any other duties and responsibilities delegated to it by the Board from time to time that
are related to the purposes of the Committee.
1.
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The Committee shall review with Company management and approve the overall compensation
policy for executive officers of the Company and such other employees of the Company and its
subsidiary as the Committee deems appropriate.
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2.
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The Committee shall (a) review and approve the performance goals and objectives relevant to
the compensation of the Companys Chief Executive Officer; (b) evaluate the performance of the
Chief Executive Officer in light of those goals and objectives; and (c) set the compensation
of the Chief Executive Officer based on this evaluation. In determining the appropriate
compensation of the Companys Chief Executive Officer, the Committee may consider any matters
that it deems relevant, including but not limited to the performance of the Chief Executive
Officer, the Companys performance, the compensation awarded to the Chief Executive Officer in
past years, the recommendations of independent compensation consultants, and/or compensation
paid to chief executive officers of comparable companies.
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3.
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The Committee shall review and recommend to the Board of Directors for approval the salary,
bonuses and all other forms of compensation to be provided to the Chief Executive Officer and
other executive officers of the Company.
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4.
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The Committee shall administer any equity-based plans or other plans that are required to be
administered by the Committee under applicable laws, rules or regulations, including Rule
16b-3 under the Exchange Act and Section 162(m) of the Code.
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5.
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The Committee shall review, on a periodic basis, the fees paid to directors (including
committee fees), and recommend any changes to the Board.
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6.
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The Committee shall review and recommend to the Board of Directors for approval all
disclosures regarding executive and director compensation to be included in the Companys
proxy statement as required by the rules and regulations of the SEC.
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7.
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The Committee shall review and assess the adequacy of this Charter periodically as conditions
dictate, but at least annually, and shall obtain the approval of the Board for any amendments
to this Charter.
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C-2
REVOCABLE PROXY
CROGHAN BANCSHARES, INC.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 12, 2009.
This Proxy is solicited on behalf of the Board of Directors of Croghan Bancshares, Inc.
The undersigned, having received notice of the 2009 Annual Meeting of Shareholders of Croghan
Bancshares, Inc. to be held at 1:00 p.m., local time, on Tuesday, May 12, 2009, hereby designates
and appoints James E. Bowlus, James R. Faist, and Daniel W. Lease, and each of them, with authority
to act without the others, as attorneys and proxies for the undersigned, with full power of
substitution, to vote all common shares, par value $12.50 per share, of Croghan Bancshares, Inc.,
that the undersigned is entitled to vote at such Annual Meeting or at any adjournment(s) thereof,
with all the powers the undersigned would possess if personally present, such proxies being
directed to vote as specified below and at their discretion on any other business that may properly
come before the Annual Meeting.
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PLEASE MARK VOTES LIKE THIS
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x
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WITHHOLD
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YOUR BOARD
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FOR ALL
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AUTHORITY FOR
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FOR ALL
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RECOMMENDS
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NOMINEES
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ALL NOMINEES
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EXCEPT
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YOU VOTE
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1.
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To elect the three
directors listed below
for three-year terms
expiring in 2012:
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o
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o
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o
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FOR ALL
NOMINEES
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Michael D. Allen, Sr.
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Stephen A. Kemper
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Thomas W. McLaughlin
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INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark For All Except
and write that nominees name in the space provided:
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2.
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At their discretion, the Proxies are authorized to vote upon such other matters as may
properly come before the Annual Meeting or any adjournment(s) thereof.
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PLEASE SEE REVERSE SIDE
THIS PROXY WILL BE VOTED: (1) AS DIRECTED ON THE MATTERS LISTED ON THE REVERSE SIDE; (2) IF
PERMITTED BY APPLICABLE LAW, IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS WHERE
A CHOICE IS NOT SPECIFIED; AND (3) IF PERMITTED BY APPLICABLE LAW, IN THE DISCRETION OF THE PROXIES
ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT(S) THEREOF,
INCLUDING, BUT NOT LIMITED TO, THE ELECTION OF ANY SUBSTITUTE NOMINEE RECOMMENDED BY THE BOARD OF
DIRECTORS IF A NOMINEE FOR ELECTION AS A DIRECTOR NAMED IN THE PROXY STATEMENT IS UNABLE TO SERVE.
The undersigned reserves the right to revoke this Proxy at any time prior to the Proxy being
voted at the Annual Meeting. The Proxy may be revoked by delivering a signed revocation to the
Company at any time prior to the Annual Meeting, by submitting a later-dated Proxy Card, or by
attending the Annual Meeting in person and casting a ballot. The undersigned hereby revokes any
Proxy previously given to vote such shares at the Annual Meeting.
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Date
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Signature of Shareholder
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Signature of Shareholder
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(Please sign this Proxy as your name appears on the stock certificate(s).
JOINT OWNERS SHOULD EACH SIGN PERSONALLY. When signing
as attorney, executor, administrator, trustee, guardian or corporate officer,
please give your full title as such.)
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PLEASE COMPLETE, SIGN, DATE AND MAIL THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
Croghan Bancshares (QB) (USOTC:CHBH)
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