A Special Meeting of Shareholders (the “Special Meeting”) of Peoples Bancorp Inc. (“Peoples”) will be held in the Delta Queen Room of the Holiday Inn, 701 PikeLafayette Hotel, 101 Front Street, in Marietta, Ohio (Interstate 77, Ohio exit 1)45750, on Monday, December 22, 2008, at 10:00 a.m., Eastern Standard Time, for the following purposes: 1. To elect the following directors for terms of three years each: Nominee Term Expires In ------------------------------------------------------------------ Carl L. Baker, Jr. (for re-election) 2009 George W. Broughton (for re-election) 2009 Wilford D. Dimit (for re-election) 2009 Richard Ferguson (for re-election) 2009 2. To consider and vote upon a proposal to approve the Peoples Bancorp Inc. 2006 Equity Plan. 3.

Action may be taken on the foregoing proposals at the Special Meeting on the date specified, or on any date to which, would clarify when a Leadership Director is toby original or later adjournment, the Special Meeting may be elected by Peoples' directors as well as the role of the Leadership Director in providing a bridge between the independent directors and management. 4. To transact any other business which properly comes before the Annual Meeting or any adjournment.adjourned.  If you were a shareholder of record at the close of business on February 13, 2006,November 10, 2008, you will be entitled to vote in person or by proxy at the Annual Meeting. Special Meeting and any adjournment thereof.

We are sending you this proxy statementProxy Statement and the enclosedaccompanying proxy card because the Board of Directorsto you as a shareholder of Peoples Bancorp Inc. ("Peoples", an Ohio corporation (“Peoples”) is soliciting your proxy to vote at, in connection with the Annualsolicitation of proxies for the Special Meeting of Shareholders (the "Annual Meeting"“Special Meeting”), to be held in the Delta Queen Room of the Lafayette Hotel, 101 Front Street, Marietta, Ohio 45750, on Thursday, April 13, 2006,Monday, December 22, 2008, at 10:00 a.m., Eastern Daylight Savings Time, or at any adjournment. The Annual Meeting will be held in the Ball RoomStandard Time.  Peoples’ Board of the Holiday Inn, 701 Pike Street in Marietta, Ohio (Interstate 77, Ohio exit 1). This proxy statement summarizes information that you will need in order to vote. Peoples has four wholly-owned subsidiaries, Peoples Bank, National Association ("Peoples Bank"), Peoples Investment Company, PEBO Capital Trust I and PEBO Capital Trust II. Peoples Bank also owns an insurance agency subsidiary, Peoples Insurance Agency, Inc., and an asset management subsidiary. Peoples Investment Company also owns a capital management subsidiary. Peoples also established Peoples Bancorp Foundation, Inc., as an independent charitable foundation to provide financial assistance and grants to local organizations. Mailing - ------- We mailed this proxy statement and the accompanying proxy card on or about March __, 2006, to all shareholders entitled to vote their common sharesDirectors is soliciting proxies for use at the Annual Meeting. We also sent with the proxy statement Peoples' 2005 Annual Report to Shareholders and Form 10-K for the Year Ended December 31, 2005 (the "2005 Annual Report to Shareholders") and Peoples' 2005 Summary Annual Report. Additional copies of Peoples' Annual Report on Form 10-K for the fiscal year ended December 31, 2005, may be obtained, without charge, upon written request to: Rhonda L. Mears, Corporate Secretary, 138 Putnam Street, P.O. Box 738, Marietta, Ohio 45750-0738. The Form 10-K is also on file with the Securities and Exchange Commission (the "SEC") and is available on the SEC's website at www.sec.gov. Householding of AnnualSpecial Meeting, Materials - ---------------------------------------- The SEC has implemented rules regarding the delivery of proxy materials (i.e., annual reports and proxy statements, proxy statements combined with a prospectus, or any information statements provided to shareholders) to households. This method of delivery, often referred to as "householding," would permit Peoples to send a single annual report and/or a single proxy statement to any household at which two or more different shareholders reside if Peoples reasonably believes such shareholders are members of the same family or otherwise share the same address or that one shareholder has multiple accounts. In each case, the shareholder(s) must consent to the householding process. Each shareholder would continue to receive a separate notice of any meeting of shareholders and proxy card. The householding procedure is intended to reduce the volume of duplicate information shareholders receive and reduce Peoples' expenses. Peoples may institute householding in the future and will notify registered shareholders affected by householding at that time. Many broker/dealers and other holders of record have instituted householding. If your family has one or more "street name" accounts under which you beneficially own common shares of Peoples, you may have received householding information from your broker/dealer, financial institution, or other nominee in the past. Please contact the holder of record directly if you have questions, require additional copies of this proxy statement, Peoples' 2005 Annual Report to Shareholders or Peoples' 2005 Summary Annual Report, or if you wish to revoke your decision to household and thereby receive multiple copies. You should also contact the holder of record if you wish to institute householding. These options are available to you at any time. VOTING INFORMATION Who can vote at the Annual Meeting? - -----------------------------------adjournment thereof.  Only shareholders of record atas of the close of business on February 13, 2006, areNovember 10, 2008, which we refer to as the record date, will be entitled to receive notice of and to vote at the AnnualSpecial Meeting.  The proxy solicitation materials for the Special Meeting will be distributed to shareholders of record on or about November 24, 2008.

Each shareholder is entitled to one vote for each common share held on November 10, 2008.  At the close of business on February 13, 2006,November 10, 2008, there were 10,584,55310,426,095 common shares outstanding and entitled to vote.  EachThe common share entitlesshares are the holder to one vote on each matter to be voted upon at the Annual Meeting. There is no cumulative voting with respect to the electiononly class of directors. stock of Peoples presently outstanding.

If you were the record holder of common shares of Peoples as of November 10, 2008, you may vote your common shares in person by attending the Special Meeting or, notto ensure that your common shares are represented at the Special Meeting, you planmay vote your common shares by signing and returning the accompanying proxy card in the postage-paid envelope provided.

If you hold your common shares in “street name” and wish to attend the Annual Meeting, we urge you to vote in advance by proxy. To do so, you may complete, sign and date the enclosed proxy card and return it in the envelope provided. If you plan to attend the AnnualSpecial Meeting and vote in person, we will give you a ballot when you arrive. If your common shares are held in the name of your broker/dealer, financial institution or other record holder, you must bring an account statement or letter from that broker/dealer,your broker, financial institution or other holder of recordnominee authorizing you to vote on behalf of the record holder.such nominee.  The account statement or letter must show that you were the direct or indirect beneficial owner of the common shares on February 13, 2006,November 10, 2008, the record date for voting. voting at the Special Meeting.

Those common shares represented by properly executed proxy cards that are received prior to the AnnualSpecial Meeting, and not subsequently revoked, will be voted in accordance with your instructions by your "proxy" (one of the individuals named on your proxy card).proxy.  If you submit a valid proxy card prior to the AnnualSpecial Meeting, but do not complete theprovide voting instructions, on the proxy card, your proxy will vote your common shares as recommended by the Board of Directors, except in the case of broker non-votes where applicable, as follows: o "FOR"

Shareholders who submit proxies retain the right to revoke them at any time before they are exercised.  Unless revoked, the common shares represented by such proxies will be voted at the Special Meeting and any adjournment thereof.  You may change your mind after you send in your proxy card by following any one of the following three procedures. To revoke your proxy: o Send in another signed proxy card with a later date, which must be received by Peoples prior to the Annual Meeting; o Send written notice revoking your proxy to the Corporate Secretary of Peoples at 138 Putnam Street, P.O. Box 738, Marietta, Ohio 45750-0738, which must be received prior to the Annual Meeting; or o Attend the Annual Meeting and revoke your proxy in person if your common shares are held in your name. If your common shares are held inat any time before it is actually exercised at the name of your broker/dealer, financial institution or other holder of record and you wish to revoke your proxy in person, you must bring an account statement or letter from the broker/dealer, financial institution or other holder of record indicating that you were the beneficial owner of the common shares on February 13, 2006, the record date for voting. Special Meeting by:

Under Peoples'Peoples’ Code of Regulations, a quorum is a majority of the outstanding common shares outstanding. Common shares may be present in person or represented by proxy will constitute a quorum at the AnnualSpecial Meeting.  Both abstentions and broker non-votes are counted as being present for purposes of determining the presence of a quorum.  Generally, broker non-votes occur whenThere were 10,426,095 Peoples common shares heldoutstanding and entitled to vote on November 10, 2008, the record date.  A majority of the outstanding common shares, or 5,213,048 common shares, present in person or represented by proxy, will constitute a broker/dealerquorum.  A quorum must exist to conduct business at the Special Meeting.

Both the proposal to adopt the amendment to Article FOURTH of Peoples’ Amended Articles of Incorporation to authorize Peoples to issue up to 50,000 preferred shares and the proposal to approve the adjournment of the Special Meeting, if necessary, to solicit additional proxies, in the event there are not sufficient votes at the time of the Special Meeting to adopt the proposal amendment to Article FOURTH of Peoples’ Amended Articles of Incorporation, are “non-routine” items.  Therefore, a broker holding common shares for a beneficial owner are not voted with respectin “street name” may vote on these proposals only if the beneficial owner has provided voting instructions.  A “broker non-vote” occurs when a broker holding common shares for a beneficial owner is unable to vote on a particular proposal because the broker/dealer has not received voting instructions fromproposal is non-routine and the beneficial owner does not provide any voting instructions.

The following sets forth the votes required, and the broker/dealer lacks discretionaryimpact of abstentions and broker non-votes, if any, on the two proposals:

Peoples’ policy is to keep confidential proxy cards, ballots and voting powertabulations that identify individual shareholders.  However, exceptions to this policy may be necessary in some instances to comply with legal requirements and, in the case of any contested proxy solicitation, to verify the validity of proxies presented by any person and the results of the voting.  Inspectors of election and any employees associated with processing proxy cards or ballots and tabulating the vote such common shares. Broker/dealers have discretionary authoritymust acknowledge their responsibility to comply with this policy of confidentiality.

If you are such a participant, you may receive your proxy card separately. If you give no voting instructionsthe proposed amendment to the trusteeArticle FOURTH of Peoples’ Amended Articles of Incorporation to authorize Peoples to issue up to 50,000 preferred shares is not adopted, Peoples will not be able to take advantage of the Retirement Savings Plan,Capital Purchase Program.  While Peoples’ capital position is already sound and well above the trustee will not voteminimums required to be considered well-capitalized under applicable regulatory guidelines, the common shares allocatedBoard of Directors believes that it is advisable to your account undertake advantage of the Retirement Savings Plan. Capital Purchase Program to raise additional capital to ensure that, during these uncertain economic times, Peoples is well-positioned to support its existing operations as well as anticipated future growth.

Peoples will pay the costs of solicitingpreparing, assembling, printing and mailing this Proxy Statement, the accompanying proxy card and other related materials and all other costs incurred in connection with the solicitation of proxies on behalf of the Board of Directors, other than the Internet access and telephone usage charges if a proxy is appointed electronically through a holder of record.mentioned above.  Although we are soliciting proxies by mailing these proxy materials to our shareholders, the directors, officers and employees of Peoples and our subsidiaries also may solicit proxies by further mailings,mailing, personal contact, telephone, facsimile or personal contactelectronic mail without receiving any additional compensation for such solicitations.  PeoplesArrangements will also reimburse our transfer agent, broker/dealers, voting trustees,be made with brokerage firms, financial institutions and other custodians, nominees and fiduciarieswho are record holders of common shares of Peoples for their reasonable costs inthe forwarding the proxyof solicitation materials to the beneficial shareholders. What voteowners of such common shares.  Peoples will reimburse these brokers, financial institutions and nominees for their reasonable out-of-pocket costs in connection therewith.

The Board of Directors believes that the proposed amendment to Article FOURTH of Peoples’ Amended Articles of Incorporation to authorize the issuance of the preferred shares is advisable and in the best interests of Peoples and its shareholders for several reasons.  The authorization of the preferred shares would permit the Board of Directors to issue such preferred shares without shareholder approval or delay and, thereby, provide Peoples with maximum flexibility in growing our business through new loan opportunities as well as structuring acquisitions, joint ventures, strategic alliances, capital-raising transactions and for other corporate purposes.  The preferred shares would enable Peoples to respond promptly to and take advantage of market conditions and other favorable opportunities without incurring the delay and expense associated with calling a special meeting of shareholders to approve a contemplated issuance of shares.  The Board of Directors believes that this will also help to reduce costs because it will not have to seek additional shareholder approval to issue the preferred shares unless it is required to approveobtain shareholder approval for the proposals presented attransaction under the Annual Meeting? - ------------------------------------------------------------------------------- Proposal Number 1: Electionrules of NASDAQ.

The primary objective of the proposed amendment to the Amended Articles of Incorporation to authorize the issuance of preferred shares is to enable Peoples to participate in the U.S. Treasury’s Capital Purchase Program.  On November 3, 2008, Peoples applied to participate in the Capital Purchase Program.  On November 12, 2008, Peoples received preliminary approval of its application.  Peoples proposes to sell $39,000,000 of Senior Preferred Shares to the U.S. Treasury, representing the maximum 3% of Peoples’ total risk-weighted assets which may be sold under the Capital Purchase Program.  Although Peoples is currently well-capitalized under applicable regulatory guidelines, the Board of Directors Under Ohio law and Peoples' Codebelieves it is advisable to take advantage of Regulations, the four nomineesCapital Purchase Program to raise additional capital to ensure that, during these uncertain economic times, Peoples is well-positioned to support its existing operations as well as anticipated future growth.  Because Peoples is not currently authorized to issue preferred shares under its Amended Articles of Incorporation, it is necessary for election as directorsPeoples to amend its Amended Articles of Incorporation to authorize preferred shares in order to participate in the Capital Purchase Program.  However, even if the proposed amendment to Peoples’ Amended Articles of Incorporation is adopted, there can be no assurance that Peoples will issue any senior preferred shares to the U.S. Treasury under the Capital Purchase Program.

The Senior Preferred Shares would be non-voting shares, but would have class whose terms will expirevoting rights on (i) any authorization or issuance of shares ranking senior to the Senior Preferred Shares; (ii) any amendment to the rights of the Senior Preferred Shares; or (iii) any merger, consolidation, share exchange, reclassification or similar transaction which would adversely affect the rights of the Senior Preferred Shares.  In the event that the cumulative dividends described above were not paid in 2009 receivingfull for an aggregate of six dividend periods or more, whether or not consecutive, the greatestauthorized number of votes "FOR" election will be elected as directors. Common shares as to which the authority to vote is withheld will be counted for quorum purposes but will not affect whether a nominee has received sufficient votes to be elected. Proposal Number 2: Approvaldirectors of Peoples Bancorp Inc. 2006 Equity Plan The affirmative vote ofwould automatically be increased by two and the holders of the Senior Preferred Shares would have the right to elect two directors.  The right to elect directors would end when dividends have been paid in full for four consecutive dividend periods.

The Senior Preferred Shares would be redeemable after three years at their issue price, plus any accrued and unpaid dividends.  Prior to the end of three years after the U.S. Treasury’s investment, the Senior Preferred Shares could only be redeemed using the proceeds of an offering of other Tier 1 qualifying perpetual preferred shares or common shares which yields at least 25% of the issue price of the Senior Preferred Shares.  Any such redemption must be approved by Peoples’ primary federal bank regulator-the Federal Reserve Board.  The U.S. Treasury would be permitted to transfer the Senior Preferred Shares to a majoritythird party at any time.

Each financial institution participating in the Capital Purchase Program must also issue a warrant (the “Warrant”) to the U.S. Treasury to purchase a number of common shares having a market price equal to 15% of the aggregate amount of the Senior Preferred Shares purchased by the U.S. Treasury.  The initial exercise price for the Warrant, and the market price for determining the number of common shares subject to the Warrant, will be calculated based on the average of the closing prices of Peoples’ common shares on the 20 trading days ending on the last trading day prior to November 12, 2008, which is the date Peoples’ application for participation in the Capital Purchase Program was preliminarily approved by the U.S. Treasury.  Based on the investment of $39,000,000 which the U.S. Treasury preliminarily approved and the average of the closing prices of Peoples’ common shares on the 20 trading days ended November 11, 2008 ($18.58), the number of Peoples common shares subject to the Warrant will be approximately 314,855, or 3.0%, of the common shares outstanding on November 11, 2008.  The Warrant will have a term of 10 years.  If Peoples completes one or more offerings of other Tier 1 qualifying perpetual preferred shares or common shares on or before December 31, 2009 that result in Peoples receiving aggregate gross proceeds of not less than 100% of the aggregate liquidation preference of the Senior Preferred Shares, the number of common shares underlying the Warrant held by the U.S. Treasury will be reduced by a number of common shares equal to the product of (i) the number of common shares originally underlying the Warrant (taking into account all anti-dilution adjustments) and (ii) 0.5.

To participate in the Capital Purchase Program, Peoples will be required to adopt the U.S. Treasury’s standards for executive compensation and corporate governance, for the period during which the U.S. Treasury holds equity issued under the Capital Purchase Program.  These standards generally apply to the chief executive officer, chief financial officer, plus the next three most highly compensated executive officers.  Peoples would be required to meet certain standards, including: (1) ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial institution; (2) requiring a clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains or other criteria that are votedlater proven to be materially inaccurate; (3) prohibiting certain severance payments to a senior executive, generally referred to as “golden parachute” payments, above specified limits set forth in the U.S. Internal Revenue Code; and (4) agreeing not to deduct for tax purposes executive compensation in excess of $500,000 for each senior executive – for this purpose, all compensation paid to the senior executive for the applicable tax year is taken into account, including certain qualified performance-based compensation normally deductible under Section 162(m) of the U.S. Internal Revenue Code.  The Board of Directors does not anticipate that any material changes would need to be made to Peoples’ existing compensation plans and arrangements to comply with the U.S. Treasury’s standards for executive compensation and corporate governance.

The foregoing description of the Capital Purchase Program is based on the proposalinformation currently available regarding the Capital Purchase Program and does not purport to approvebe complete in all respects.  The terms of the Capital Purchase Program, including the terms of the Senior Preferred Shares and of the Warrant, are set forth in the form of Securities Purchase Agreement--Standard Terms, form of Letter Agreement, form of Standard Provisions of the Senior Preferred Shares, form of Warrant and related documentation made publicly available by the U.S. Treasury and to be executed by the U.S. Treasury and each participating institution.

The Board of Directors does not intend to issue any preferred shares for any defensive or anti-takeover purpose or with features intended specifically to make any attempted acquisition of Peoples Bancorp Inc. 2006 Equity Plan is necessarymore difficult.  Rather, the Board of Directors intends to approveissue preferred shares to facilitate business and loan growth and for the 2006 Equity Plan. Broker non-votes will not be treated as votes cast. Abstentions will be treated as votes castpurpose of facilitating acquisitions, joint ventures, strategic alliances, capital-raising transactions and willfor other corporate purposes.  The issuance of preferred shares in connection with these purposes could nonetheless have the effect of a vote "AGAINST" the proposal. Proposal Number 3: Adoptionmaking an acquisition of Amendments to Sections 2.06, 2.07, 3.01Peoples more difficult.

Peoples’ Amended Articles of Incorporation and 3.04 of the Code of Regulations The affirmative votecontain other provisions which could potentially make a change of control of Peoples more difficult.  These provisions include:

Certain state laws make a change in control of an Ohio corporation more difficult, even if desired by the holders of a majority of the corporation’s shares.  Provided below is a summary of the Ohio anti-takeover statutes.

The full text of the proposed amendment to Article FOURTH of Peoples’ Amended Articles of Incorporation is attached to this Proxy Statement as Appendix A.  If the proposed amendment is adopted, Peoples’ Board of Directors would be authorized to issue preferred shares in one or more series, from time to time, with full or limited voting power, or without voting power (in addition to such voting power as is provided to the holders of preferred shares for purposes of Article SEVENTH of Peoples’ Amended Articles of Incorporation), and with all designations, preferences and relative, participating, optional or other special rights and privileges of, and qualifications, limitations or restrictions upon the preferred shares, as may be provided in the amendment or amendments adopted by Peoples’ Board of Directors. Notwithstanding the foregoing, the voting rights of any series of preferred shares may not be greater than the voting rights of Peoples’ common shares, except to the extent specifically required with respect to any series of preferred shares which may be designated for issuance to the U.S. Treasury under the Capital Purchase Program. The authority of Peoples’ Board of Directors includes, but is not limited to, the determination or fixing of the following with respect to preferred shares of any series:

In the event there are not sufficient votes at the time of the Special Meeting to adopt the proposed amendmentsamendment to Sections 2.06, 2.07, 3.01Article FOURTH of Peoples’ Amended Articles of Incorporation, Peoples’ management may propose to adjourn the Special Meeting to a later date or dates in order to permit the solicitation of additional proxies.  Under Ohio law and 3.04the provisions of Peoples'Peoples’ Code of Regulations. The effectRegulations, no notice of an abstention or a broker non-vote isadjourned meeting need be given to you if the samedate, time and place of the adjourned meeting are fixed and announced at the Special Meeting.

In order to permit proxies that have been received by Peoples at the time of the Special Meeting to be voted for an adjournment, if necessary, Peoples has submitted the proposal to adjourn the Special Meeting to you as a separate matter for your consideration.

In this proposal, Peoples is asking you to authorize the holder of any proxy solicited by its Board of Directors to vote "AGAINST"in favor of adjourning the proposal. Special Meeting and any later adjournments.  If Peoples’ shareholders approve the proposal to adjourn the Special Meeting, Peoples could adjourn the Special Meeting, and any adjourned session of the Special Meeting, to use the additional time to solicit additional proxies in favor of the proposal to amend Article FOURTH of Peoples’ Amended Articles of Incorporation, including the solicitation of proxies from the shareholders that have previously voted against such proposal to amend Article FOURTH of Peoples’ Amended Articles of Incorporation.  As a result, even if proxies representing a sufficient number of votes against the proposal to amend Article FOURTH of Peoples’ Amended Articles of Incorporation have been received, Peoples could adjourn the Special Meeting without a vote on the proposal to amend Article FOURTH of Peoples’ Amended Articles of Incorporation and seek to convince the holders of those common shares to change their votes to votes in favor of the adoption of the amendment to Article FOURTH of Peoples’ Amended Articles of Incorporation.

The following table sets forth, as of February 13, 2006November 3, 2008 (except as otherwise noted), certain information concerning the beneficial ownership of common shares by the only personsentities known by Peoples to be the beneficial owner of more than 5% of thePeoples’ outstanding common shares: Name and Address of Amount and Nature of Beneficial Owner Beneficial Ownership Percent of Class (1) ---------------- -------------------- ---------------- Peoples Bank - Trustee 138 Putnam Street P.O. Box 738 Marietta, OH 45750-0738 1,174,016 (2) 11.09% Franklin Resources Inc. Charles B. Johnson Rupert H. Johnson, Jr. Franklin Advisory Services, LLC One Franklin Parkway San Mateo, CA 94403-1906 909,947 (3) 8.60% (1) The "Percent of Class" computation is based on 10,584,553 common shares outstanding on February 13, 2006. (2) Includes Peoples Bank's beneficial ownership through Peoples Financial Advisors, a division of Peoples Bank in the following manner: 131,316 common shares with shared investment and sole voting power; 704,400 common shares with shared investment and voting power; 286,214 common shares with sole voting and investment power; and 52,086 common shares with sole investment and shared voting power. The officers and directors of Peoples Bank and Peoples disclaim beneficial ownership of the common shares beneficially owned by Peoples Bank through Peoples Financial Advisors. (3) Based on information contained in a Schedule 13G amendment, dated February 13, 2006, filed with the SEC on behalf of Franklin Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin Advisory Services, LLC to report beneficial ownership of common shares of Peoples as of December 31, 2005. These common shares are reported to be beneficially owned by one or more open or closed-end investment companies or other managed accounts which are advised by Franklin Advisory Services, LLC or Franklin Templeton Portfolio Advisors, Inc., which are investment adviser subsidiaries of Franklin Resources, Inc. Such advisory contracts generally grant to the respective investment adviser subsidiary all voting and/or investment power over the common shares owned by the advisory clients. However, the Schedule 13G amendment reports that to the extent that the underlying client under a managed account investment management arrangement advised by Franklin Templeton Portfolio Advisors, Inc. has retained voting power over any common shares, Franklin Templeton Portfolio Advisors, Inc. disclaims any power to vote or direct the vote of such common shares. The Schedule 13G amendment reports that Franklin Advisory Services, LLC had sole voting power as to 905,647 common shares and sole investment power as to 908,747 common shares and Franklin Templeton Portfolio Advisors, Inc. had sole voting (except as previously noted) and sole investment power as to 1,200 common shares. For purposes of the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Charles B. Johnson and Rupert H. Johnson, Jr. are reported to be the principal stockholders of Franklin Resources, Inc. and together with Franklin Resources, Inc. each may be deemed to be, for purposes of Rule 13d-3 under the Exchange Act, the beneficial owner of the common shares held by persons and entities advised by the investment adviser subsidiaries of Franklin Resources, Inc. However, each of Franklin Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr., Franklin Advisory Services, LLC and Franklin Templeton Portfolio Advisors, Inc. expressly disclaimed any pecuniary interest or beneficial ownership in any of the common shares covered by the Schedule 13G amendment and they believe they are not a "group" within the meaning of Rule 13d-5 under the Exchange Act.

The following table sets forth, as of February 13, 2006,November 3, 2008, certain information with respect to the common shares beneficially owned by each current director of Peoples, by each nominee for election as a directorcurrent executive officer of Peoples by each individual named in the Summary Compensation Table and by all current executive officers and directors of Peoples as a group:

The SEC has implemented rules regarding the delivery of proxy materials to households.  This method of delivery, often referred to as “householding,” would permit Peoples to send a single annual report, proxy statement or Notice of Internet Availability of Proxy Materials, as applicable, to any household at which two or more different shareholders reside if Peoples reasonably believes such shareholders are members of the Exchange Act requiressame family or otherwise share the same address or that Peoples' directors, executive officersone shareholder has multiple accounts.  In each case, the shareholder(s) must consent to the householding process, and greater-than-10% beneficial owners file reports withmay at any time request that Peoples promptly deliver to such shareholder(s) a separate copy of the SEC reporting their initial beneficial ownershipproxy materials subject to householding.  Each shareholder would continue to receive a separate notice of meeting of shareholders and proxy card.  The householding procedure is intended to reduce the volume of duplicate information shareholders receive and reduce Peoples’ expenses.  Peoples does not currently practice householding, but may institute householding in the future and will notify registered shareholders affected by householding at that time.

Many brokers, financial institutions and other nominees have instituted householding.  If your family has one or more “street name” accounts under which you beneficially own common shares and any subsequent changes in their beneficial ownership. Specific due datesof Peoples, you may have been established by the SEC, and Peoples is required to disclose in this proxy statement any late reports. To Peoples' knowledge, based solely on a review of reports furnished to Peoples and written representations that noreceived householding information from your broker, financial institution or other reports were required, during the 2005 fiscal year, all Section 16(a) filing requirements applicable to its officers, directors and greater-than-10% beneficial owners were complied with, except: o Paul T. Theisen filed late one Form 4 covering four transactions related to the same day exercise of options and sale of the underlying common shares (which occurred on February 8, 2005, and were reported on February 15, 2005); and o John W. Conlon filed late one Form 4 reporting the disposition of common shares held in Mr. Conlon's accountnominee in the Peoples Bancorp Inc. Retirement Savings Plan (which occurred on July 27, 2005, and was reported on October 7, 2005). TRANSACTIONS INVOLVING MANAGEMENT On January 26, 2005, Peoples Bank purchased real estate and the building located on it from First Settlement, Inc., a corporation as to which Wilford D. Dimit, a director of Peoples, is the President and a controlling shareholder. The real estate is contiguous to the main office of Peoples Bank in Marietta, Ohio. The purchase price for the real estate and building of $400,000 was determined through an arm's length negotiation and was acquired to add office space necessary for continual growth of Peoples' operations. From January 26, 2005 through March 31, 2005, Peoples Bank leased to First Settlement, Inc. space within the building on the first floor on a month-to-month basis for purposes of continued operation of a restaurant. These lease payments were in the aggregate amount of $2,000. Mr. Dimit sold the restaurant in April 2005. These transactions were pre-approved by the Board of Directors of Peoples Bank andpast.  Please contact your nominee directly if you have been approved by the Audit Committee of the Board of Directors of Peoples. On September 14, 2005, the Board of Directors appointed David T. Wesel as an executive officer of Peoples and of Peoples Bank, effective January 1, 2006. David T. Wesel is the son of Joseph H. Wesel, a director and Chairman of the Board of Peoples. Effective January 1, 2006, David T. Wesel assumed the positions of Executive Vice President of Peoples and of Peoples Bank and President of the Peoples Financial Advisors division of Peoples Bank. Prior to that time, David T. Wesel had served as Vice President of Peoples Bank and Sales Manager of Peoples Financial Advisors, but was not an executive officer of Peoples or Peoples Bank. David T. Wesel received compensation in excess of $60,000 during the 2005 fiscal year. Paul T. Theisen is Of Counsel to, and an independent contractor with, TheisenBrock, A Legal Professional Association, which rendered legal services to Peoples and our subsidiaries during the 2005 fiscal year and continues to render legal services to Peoples and our subsidiaries. Since 1998, Mr. Theisen has not been a partner, controlling shareholder or executive officer or otherwise been related to or held any interest in TheisenBrock, other than as Of Counsel and an independent contractor (and has not individually performed legal services for Peoples or any of our subsidiaries). During the 2005 fiscal year, Peoples Bank entered into banking transactions, in the ordinary course of business and in compliance with applicable federal and state laws and regulations, with certain executive officers and directors of Peoples, with members of their immediate families, and with corporations or organizations as to which directors of Peoples serve as executive officers or beneficially own more than 10% of the equity securities. It is expected that similar banking transactions will be entered into in the future. Payments from Peoples Bank to such persons in connection with the deposit of funds or Peoples Bank's acting in an agency capacity have been made on substantially the same terms as those prevailing at the time for comparable transactions with persons not affiliated with Peoples or our subsidiaries. Loans to such persons have been made on substantially the same terms, including the interest rate charged and the collateral required, as those prevailing at the time for comparable transactions with persons not affiliated with Peoples or our subsidiaries. These loans have been subject to, and are presently subject to, no more than a normal risk of uncollectibility, and present no other unfavorable features. The aggregate amount of loans to directors and executive officers of Peoples, and affiliates of these directors and executive officers of Peoples, as a group at December 31, 2005, was $6,730,937. As of the datequestions, require additional copies of this proxy statement all of the loans described in this paragraph were performing in accordance with their original terms. PROPOSAL NUMBER 1: ELECTION OF DIRECTORS As of the date of this proxy statement, there were 11 members of the Board of Directors - four directors in the class whose terms expire at the Annual Meeting, three in the class whose terms expire in 2007 and four in the class whose terms expire in 2008. The death of Robert E. Evans on June 15, 2005, created a vacancy in the class whose terms expire in 2007. However, upon unanimous recommendation by the Governance and Nominating Committee and as permitted by Section 2.02 of Peoples' Code of Regulations, on February 9, 2006, the Board of Directors fixed the number of directors at 11, reflecting the number of individuals currently serving as directors. The Board of Directors proposes that each of the four nominees identified below be re-elected for a new three-year term and until his successor is duly elected and qualified or until his earlier resignation, removal from office or death. The Governance and Nominating Committee recommended each nominee. The four nominees for election as directors in the class whose terms expire in 2009 receiving the greatest number of votes will be elected. Common shares represented by properly executed and returned proxy cards will be voted as specified or if no instructions are given, "FOR" the electionyou wish to revoke your decision to household and thereby receive multiple copies of the Boardproxy materials.  You should also contact your nominee if you wish to institute householding.

Any shareholder who will continue to serve after the Annual Meeting. Unless otherwise indicated, each individual has had the same principal occupation for more than five years.

Director Position(s) Held with Peoples and Our Continuously Term Name Age Principal Subsidiaries and Principal Occupation(s) Since Expiring In ------- --- --------------------------------------------------- ------------ ------------ Mark F. Bradley 36 Chief Executive Officer since May 2005, President since 2003 2008 June 2004, Chief Operating Officer from July 2003 to May 2005, Director since February 2003, Executive Vice President and Chief Integration Officer from April 2002 to July 2003, and Controller from 1997 to 2001, of Peoples; Chief Executive Officer since May 2005, President since 2002, Chief Operating Officer from 2002 to May 2005, and Controller from 1997 to 2001, of Peoples Bank; Director of Peoples Bancorp Foundation Inc. since December 2003; President since January 2006 and a Director since January 2004 of Peoples Insurance Agency, Inc. (1) Frank L. Christy 58 President of Christy & Associates, Inc., a business 1999 2008 development company located in Marietta, Ohio; President of Lafayette Center, Inc., owner and operator of a retail shopping center located in Marietta, Ohio from January 1988 to December 2005; President of Riverbank Restaurants, Inc., owner and operator of a lodging facility located in Charleston, West Virginia; Chairman of Caron Products and Services, Inc., a manufacturer and distributor of chillers and incubators for scientific work, located in Marietta, Ohio; and Chairman of Rossi Pasta Ltd., a manufacturer and distributor of gourmet pasta and sauce located in Marietta, Ohio. Robert W. Price 42 General Manager, Shelly Materials, Inc., Findlay District, a 2000 2007 division of The Shelly Company, since 2002. The Shelly Company is an asphalt and construction materials company headquartered in Thornville, Ohio, and a wholly-owned subsidiary of Oldcastle Materials Group, a division of CRH, plc. Formerly President of Smith Concrete and related companies. Theodore P. Sauber 72 Vice President of T.C.K.S., Inc., a holding company for 2004 2008 McDonald's restaurants in Ohio and West Virginia. Trustee of Rio Grande University; a member of the Ohio University Trustees Academy; and past chairman of the Athens (Ohio) Chamber of Commerce. Director of Peoples Bancorp Foundation Inc. since December 2003. (1) Paul T. Theisen 75 Attorney-At-Law. Currently active as a mediator and 1980 2007 arbitrator. For more than 40 years, was a litigator with TheisenBrock, A Legal Professional Association, Marietta, Ohio, and has been Of Counsel to, and an independent contractor with, that firm since 1998. Vice Chairman of the Board since June 2005, and Leadership Director since December 2005, of Peoples. (1) Joseph H. Wesel 76 President of W.D.A., Inc., Marietta, Ohio, a real estate 1980 2008 holding company; Chairman and Chief Executive Officer of Marietta Automotive Warehouse, Inc., Marietta, Ohio, an automotive parts wholesaler, from 1978 until June 2001; Chairman of the Board from 1991 until July 2003 and since June 2005, Leadership Director from July 2003 to December 2005, and Vice Chairman of the Board from July 2003 to June 2005, of Peoples. (1) Thomas J. Wolf 59 Principal shareholder of six holding companies for 13 2004 2007 McDonald's restaurants in Kentucky and West Virginia; Board member of each of Our Lady of Bellefonte Hospital in Ashland, Kentucky, since 2002; the Ashland Alliance (chamber of commerce for Boyd and Greenup Counties, Kentucky), since 2002; the Ronald McDonald House in Huntington, West Virginia, since 1998; and the David School based in David, Kentucky, since 1999. - ---------------------- (1) Also a director of Peoples Bank.

Other than the father-son relationship between Joseph H. Wesel, a director of Peoples, and David T. Wesel, an executive officer of Peoples, there are no family relationships among any of the directors, nominees for election as directors and executive officers of Peoples. Please see Peoples' Annual Report on Form 10-K for the fiscal year ended December 31, 2005, for information on Peoples' executive officers. THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD Independence of Directors - ------------------------- The rules of the NASDAQ Stock Market (the "NASDAQ Rules") require that a majority of Peoples' Board of Directors be independent directors. The definition of independence for purposes of the NASDAQ Rules includes a series of objective tests, such as the director is not an employee of Peoples or any of our subsidiaries and has not directly or indirectly engaged in various types of business dealings with Peoples or any of our subsidiaries and the director does not have an immediate family member who is employed by Peoples or any of our subsidiaries as an executive officer. In addition, as further required by the NASDAQ Rules, the Board of Directors has made a subjective determination as to each independent director that no relationships exist which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, the Board of Directors has reviewed, considered and discussed each director's business and personal relationships, both direct or indirect, with Peoples and our subsidiaries and the compensation and other payments each director and the immediate family members of each director have, both directly or indirectly, received from or made to Peoples and our subsidiaries and presently expect to receive from or make to Peoples and our subsidiaries. Based on that review, consideration and discussion, the Board of Directors has determined that at least a majority of its members are independent and that each of the following directors has no financial or personal ties, either directly or indirectly, with Peoples or our subsidiaries (other than compensation as a director of Peoples and our subsidiaries, banking relationships in the ordinary course of business with Peoples Bank and ownership of common shares of Peoples as described in this proxy statement) and thus qualifies as independent: Carl L. Baker, Jr.; George W. Broughton; Frank L. Christy; Richard Ferguson; Robert W. Price; Theodore P. Sauber; Paul T. Theisen; and Thomas J. Wolf. While Paul T. Theisen is Of Counsel to, and an independent contractor with, the law firm of TheisenBrock, Mr. Theisen has not been a partner, controlling shareholder or executive officer or otherwise been related to or held any interest in TheisenBrock, other than as Of Counsel and an independent contractor (and has not individually performed services for Peoples or any of our subsidiaries), since 1998. The Board of Directors has determined that Wilford D. Dimit does not qualify as an independent director under the applicable NASDAQ Rules due to the transactions between Peoples Bank and First Settlement, Inc. described above in "TRANSACTIONS INVOLVING MANAGEMENT". The Board of Directors has determined however, that those transactions do not disqualify Mr. Dimit from being independent for the purposes of Rule 10A-3 under the Exchange Act, which applies to directors serving on the Audit Committee. On September 14, 2005, the Board of Directors appointed David T. Wesel as an executive officer of Peoples and of Peoples Bank, effective January 1, 2006. Joseph H. Wesel is the father of David T. Wesel. The Board of Directors has determined that due to his relationship to David T. Wesel, Joseph H. Wesel no longer qualifies as an independent director either under the applicable NASDAQ Rules or for purposes of Rule 16b-3 under the Exchange Act or Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), each of which applies to directors serving on the Compensation Committee. However, the Board of Directors has determined that Joseph T. Wesel qualified as an independent director prior to January 1, 2006, the date his son became an executive officer. Leadership Director and Executive Sessions - ------------------------------------------ The directors elect a Leadership Director who is responsible for providing a bridge between the independent directors and Peoples' management. The Leadership Director presides at all executive sessions of the independent directors (without management present). The Leadership Director also serves as the Chairman of the Governance and Nominating Committee of the Board of Directors. Joseph H. Wesel served as Leadership Director until December 8, 2005. Paul T. Theisen has served as the Leadership Director since December 8, 2005. In accordance with applicable NASDAQ Rules, the independent directors were given the opportunity to meet in executive session at the end of each meeting and at such other times as the independent directors deemed necessary. The independent directors met in executive session a total of four times during 2005. Meetings of the Board and Attendance at Annual Meetings of Shareholders - ----------------------------------------------------------------------- The Board of Directors held a total of 13 meetings during the 2005 fiscal year. Each incumbent director attended 80% or more of the aggregate of the total number of meetings held by the Board of Directors and the total number of meetings held by all committees of the Board of Directors on which he served, in each case during his period of service. Peoples encourages all incumbent directors and director nominees to attend each annual meeting of shareholders. All but one of the then incumbent directors and director nominees, who were also directors at the time, attended Peoples' last annual meeting of shareholders held on April 14, 2005. Communications with the Board of Directors - ------------------------------------------ Although Peoples has not to date developed formal processes by which shareholders may communicate directly with directors, it believes that the informal process, in which any communication sent to the Board of Directors either generally or in care of the Chief Executive Officer, the Corporate Secretary or another corporate officer is forwarded to all members of the Board, has served the needs of the Board and Peoples' shareholders. There is no screening process, and all shareholder communications that are received by officers for the attention of the Board of Directors are forwarded to the members of the Board. Not having found any problems with shareholder communications with directors under the existing process, the Governance and Nominating Committee has not found it necessary to develop more specific procedures. Until other procedures are developed and posted on the "Corporate Governance & Ethics" page of Peoples' website at www.peoplesbancorp.com, any communication to the Board of Directors or to individual directors may be mailed to the Board or an individual director, in care of Peoples' Corporate Secretary, at Peoples' headquarters in Marietta, Ohio. The mailing envelope must contain a clear notation indicating that the enclosed letter is a "Shareholder-Board Communication" or "Shareholder-Director Communication." In addition, communication via Peoples' website may be used. Correspondence through the "Investor Relations - Shareholder Contacts" page of the website is also directed to the Corporate Secretary. All such communications, whether via mail or the website, must identify the author as a shareholder and clearly state whether the intended recipients are all members of the Board of Directors or just certain specified individual directors. The Corporate Secretary will make copies of all such communications and circulate them to the appropriate director or directors without any screening. Committees of the Board - ----------------------- The Board of Directors has four standing committees: the Audit Committee, the Compensation Committee, the Executive Committee, and the Governance and Nominating Committee. Audit Committee - --------------- The Audit Committee is organized and conducts its business pursuant to a written charter adopted by the Board of Directors. A current copy of the charter of the Audit Committee is posted on the "Corporate Governance & Ethics" page of Peoples' website at www.peoplesbancorp.com. At least annually, the Audit Committee reviews and reassesses the adequacy of its charter and recommends any proposed changes to the full Board of Directors for approval. The Audit Committee is responsible for: o overseeing the accounting and financial reporting processes of Peoples; o overseeing the audits of the consolidated financial statements of Peoples; o appointing, compensating and overseeing the work of the independent registered public accounting firm employed by Peoples for the purpose of preparing or issuing an audit report or performing related work; o pre-approving all audit and non-audit services provided by the independent registered public accounting firm; o establishing procedures for the receipt, retention and treatment of complaints received by Peoples regarding accounting, internal accounting controls or auditing matters; and o assisting the Board of Directors in the oversight of: o the performance of Peoples' internal auditors and independent registered public accounting firm, o the independent registered public accounting firm's qualifications and independence; and o Peoples' compliance with ethics policies and legal and regulatory requirements. The Audit Committee will also carry out such other responsibilities as may be delegated to the Audit Committee by the full Board of Directors. The Audit Committee held seven meetings during the 2005 fiscal year. The Audit Committee's report relating to the 2005 fiscal year appears on pages 49 through 50. The members of the Audit Committee are: Richard Ferguson (Chairman); Wilford D. Dimit (Vice Chairman); Carl L. Baker, Jr.; George W. Broughton; Frank L. Christy; Theodore P. Sauber; and Thomas J. Wolf. Each individual also served on the Audit Committee throughout the entire 2005 fiscal year. Each member of the Audit Committee qualifies as independent for purposes of Rule 10A-3 under the Exchange Act. Further, each member of the Audit Committee, with the exception of Wilford D. Dimit, qualifies as an independent director under the applicable NASDAQ Rules. With respect to Mr. Dimit, current NASDAQ Rules permit, under exceptional and limited circumstances, one member of the Audit Committee to be a director who does not meet the independence requirements of the applicable NASDAQ Rules, if (i) that director meets the criteria of Rule 10A-3 and is not a current officer or employee of Peoples or any of our subsidiaries (or a family member of such an officer or employee), and (ii) the Board of Directors has determined that such director's committee membership is required by the best interests of Peoples and its shareholders. The Board of Directors has made such a determination with regard to Mr. Dimit. Prior to the transactions between Peoples Bank and First Settlement, Inc. described above in "TRANSACTIONS INVOLVING MANAGEMENT," Mr. Dimit had qualified as an independent director under the applicable NASDAQ Rules. However, the $400,000 purchase price for the real estate and building represented more than 5% of the consolidated gross revenues of First Settlement, Inc. for the fiscal year completed prior to the transaction and more than 5% of its consolidated gross revenues for the fiscal year in which the transaction occurred. Accordingly, this non-compensatory payment causes Mr. Dimit not to qualify as independent under the NASDAQ Rules. The Board of Directors has determined that the continued membership of Mr. Dimit on the Audit Committee is in the best interests of Peoples and its shareholders due to Mr. Dimit's experience as Chairman of the Audit Committee from April 1997 to February 2005, and a member of the Audit Committee since January 1993, during which time he has been instrumental to the conduct of the business of the Audit Committee. Each member of the Audit Committee has substantial background and experience as the chief executive officer or active leader of his respective business or professional interest. Under SEC rules, Peoples is required to disclose whether it has an "audit committee financial expert" serving on its Audit Committee. While the Board of Directors believes that each member of the Audit Committee is highly qualified to discharge his duties, it has identified Richard Ferguson as a particular member of the Audit Committee qualifying as an "audit committee financial expert" under the SEC's rules. Upon recommendation of the Governance and Nominating Committee, the Board of Directors has determined that Mr. Ferguson's background, knowledge, qualifications and experience, professional and otherwise, qualify him as an audit committee financial expert. The Board of Directors has further determined that Mr. Ferguson qualifies as "financially sophisticated" for purposes of the applicable NASDAQ Rules. The Board of Directors has also determined that each other member of the Audit Committee is capable of (i) understanding accounting principles generally accepted in the United States ("US GAAP") and financial statements, (ii) assessing the general application of US GAAP in connection with the accounting for estimates, accruals and reserves, (iii) analyzing and evaluating Peoples' consolidated financial statements, (iv) understanding internal control over financial reporting, and (v) understanding audit committee functions, all of which are attributes of an "audit committee financial expert" under the SEC's rules. None of the members of the Audit Committee is affiliated with Peoples or any of our subsidiaries other than in his capacity as a member of the Board of Directors of Peoples (and committees thereof) and, in the case of Messrs. Dimit, Broughton, and Sauber, a member of the board of directors of Peoples Bank (and committees thereof). No member of the Audit Committee has received or accepted, directly or indirectly, any consulting, advisory, or other compensatory fee from Peoples or any of our subsidiaries other than ordinary fees received in his capacity as a director of Peoples (and committee member) and, in the case of Messrs. Dimit, Broughton, and Sauber, as a director of Peoples Bank (and committee member). Compensation Committee - ---------------------- The Compensation Committee is comprised of five directors who qualify as independent directors under the applicable NASDAQ Rules, outside directors for purposes of Section 162(m) of the Internal Revenue Code, and non-employer directors for purposes of Rule 16b-3 under the Exchange Act: Frank L. Christy (Chairman); Carl L. Baker, Jr.; George W. Broughton; Robert W. Price; and Paul T. Theisen. Messrs. Baker, Christy and Price also served on the Compensation Committee throughout the entire 2005 fiscal year. Mr. Broughton was appointed to the Compensation Committee on August 11, 2005. Mr. Theisen was appointed to the Compensation Committee on November 10, 2005. Joseph H. Wesel served as a member of the Compensation Committee during the entire 2005 fiscal year and as the Chairman until December 8, 2005, when he was succeeded in that position by Mr. Christy. Mr. Wesel qualified as an independent director while he served on the Compensation Committee. Wilford D. Dimit had served as a member of the Compensation Committee prior to transactions between First Settlement, Inc. and Peoples Bank described above in "TRANSACTIONS INVOLVING MANAGEMENT." Although Mr. Dimit resigned from the Compensation Committee effective February 9, 2005, he did not participate in the discussions or deliberations of the Compensation Committee from and after January 26, 2005. The Compensation Committee is organized and conducts its business pursuant to a written charter adopted by the Board of Directors. A current copy of the charter of the Compensation Committee is posted on the "Corporate Governance & Ethics" page of Peoples' website at www.peoplesbancorp.com. The Compensation Committee periodically reviews and reassesses the adequacy of its charter and recommends any proposed changes to the full Board of Directors for approval. The purpose of the Compensation Committee is to review and approve, on behalf of the Board of Directors, management recommendations regarding all forms of compensation, including stock-based compensation, to be provided to the executive officers and directors of Peoples and our subsidiaries and all bonus and equity-based compensation, incentives, perquisites, employee benefits, salary programs and human resources policies and procedures for all employees of Peoples and our subsidiaries. The Compensation Committee is responsible for reviewing and approving goals and objectives relevant to the compensation of Peoples' executive officers and other officers designated by the Board of Directors, evaluating such officers' performance in light of those goals and objectives and determining compensation based on that evaluation. The Compensation Committee administers Peoples' Amended and Restated 1993 Stock Option Plan (the "1993 Plan"), 1995 Stock Option Plan (the "1995 Plan"), 1998 Stock Option Plan (the "1998 Plan") and 2002 Stock Option Plan (the "2002 Plan") and any other plans requiring Compensation Committee administration and approves awards as required to comply with applicable securities and tax laws. If the Peoples Bancorp Inc. 2006 Equity Plan is approved by the shareholders at the Annual Meeting, the Compensation Committee will also administer that plan. The Compensation Committee will undertake such other responsibilities as the full Board of Directors may prescribe. The Compensation Committee held nine meetings during the 2005 fiscal year. The Compensation Committee's report on executive compensation appears on pages 17 through 23. Executive Committee The Executive Committee is comprised of five directors: Mark F. Bradley (Chairman); Wilford D. Dimit; Robert W. Price; Paul T. Theisen; and Joseph H. Wesel. The Executive Committee is authorized to act in the intervals between meetings of the directors on matters delegated by the full Board of Directors. There were no meetings of the Executive Committee during the 2005 fiscal year. Governance and Nominating Committee - ----------------------------------- The members of the Governance and Nominating Committee are: Paul T. Theisen (Chairman); George W. Broughton; Wilford D. Dimit; and Robert W. Price. Each of these individuals also served on the Governance and Nominating Committee throughout the entire 2005 fiscal year. Joseph H. Wesel served as a member of the Governance and Nominating Committee during the entire 2005 fiscal year and as Chairman until December 8, 2005, when he was succeeded in that position by Mr. Theisen. The Board of Directors has determined that each of the members of the Governance and Nominating Committee, with the exception of Mr. Dimit, qualifies as an independent director under applicable NASDAQ Rules. The Board of Directors has also determined that Mr. Wesel qualified as an independent director while he served on the Governance and Nominating Committee. Current NASDAQ Rules permit, under exceptional and limited circumstances, one member of the Governance and Nominating Committee to be a director who does not meet the independence requirements of the applicable NASDAQ Rules if (i) that director is not a current officer or employee of Peoples or any of our subsidiaries (or a family member of such an officer or employee) and (ii) the Board of Directors has determined that such director's committee membership is required by the best interests of Peoples and its shareholders. The Board of Directors has made such a determination with regard to Mr. Dimit due to his experience as a member of the Executive Committee since 2004 and a member of the Governance and Nominating Committee since its inception in 2003. The Governance and Nominating Committee is organized and conducts its business pursuant to a written charter adopted by the Board of Directors. The purposes of the Governance and Nominating Committee are: o to identify qualified candidates for election, nomination or appointment to the Board of Directors and recommend to the full Board a slate of director nominees for each annual meeting of the shareholders of Peoples or as vacancies occur; o to make recommendations to the full Board of Directors and the Chairman of the Board regarding assignment and rotation of members and chairs of committees of the Board; o to oversee matters of corporate governance, including an evaluation of Board performance and processes; o to review with the Chairman of the Board, or another director designated by the full Board, issues involving potential conflicts of interest and/or any change of status of directors pursuant to applicable law and the applicable provisions of Peoples' Code of Ethics for Directors, Officers and Employees or Peoples' Code of Regulations; o to recommend the number of members to serve on the Board of Directors; o to periodically review Peoples' Code of Ethics for Directors, Officers and Employees and recommend to the full Board changes, as necessary; and o to undertake such other responsibilities as may be referred to the Governance and Nominating Committee by the full Board of Directors or the Chairman of the Board. The charter of the Governance and Nominating Committee is posted on the "Corporate Governance & Ethics" page of Peoples' website at www.peoplesbancorp.com. The Governance and Nominating Committee periodically reviews and reassesses the adequacy of its charter and recommends any proposed changes to the full Board of Directors for approval. The Governance and Nominating Committee held three meetings during the 2005 fiscal year. Nominating Procedures - --------------------- As described above, Peoples has a standing Governance and Nominating Committee that has the responsibility to identify and recommend individuals qualified to become directors. Each candidate must satisfy the eligibility requirements set forth in Peoples' Code of Regulations. To be eligible for election as a director, an individual must be a shareholder of Peoples. In addition, the individual must either (i) serve as chief executive officer or in another position of active leadership with a business or professional interest located within the geographic area served by Peoples and our subsidiaries or (ii) serve as an executive officer of Peoples or one of our subsidiaries. However, the qualification in the preceding sentence does not apply to individuals elected as initial directors of Peoples in 1980. An individual will not be eligible for nomination and re-election as a director after five years has passed since the individual ceased to hold the executive or leadership position satisfying the eligibility requirement. This five-year limitation does not apply, however, to an individual who retires from service as the Chairman of the Board or the Chief Executive Officer of Peoples. When considering potential candidates for the Board of Directors, the Governance and Nominating Committee strives to assure that the composition of the Board, as well as its practices and operation, contribute to value creation and to the effective representation of Peoples' shareholders. The Governance and Nominating Committee may consider those factors it deems appropriate in evaluating director candidates including judgment, skill, diversity, strength of character, experience with businesses and organizations comparable in size or scope to Peoples, experience and skill relative to other Board members, and specialized knowledge or experience. Depending upon the current needs of the Board of Directors, certain factors may be weighed more or less heavily by the Governance and Nominating Committee. In considering candidates for the Board of Directors, the Governance and Nominating Committee evaluates the entirety of each candidate's credentials and, other than the eligibility requirements set forth in Peoples' Code of Regulations, does not have any specific minimum qualifications that must be met by a Governance and Nominating Committee-recommended nominee. However, the Governance and Nominating Committee does believe that all members of the Board should have the highest character and integrity; a reputation for working constructively with others; sufficient time to devote to Board matters; and no conflict of interest that would interfere with performance as a director. The Governance and Nominating Committee considers candidates for the Board of Directors from any reasonable source, including shareholder recommendations. The Governance and Nominating Committee does not evaluate candidates differently based on who has made the recommendation. The Governance and Nominating Committee has the authority under its charter to hire and pay a fee to consultants or search firms to assist in the process of identifying and evaluating candidates. No such consultants or search firms have been used to date and, accordingly, no fees have been paid to consultants or search firms. Shareholders may recommend director candidates for consideration by the Governance and Nominating Committee by writing to the Corporate Secretary of Peoples at Peoples' executive offices in Marietta, Ohio, giving the candidate's name, age, business address, residence address, principal occupation or employment and number of common shares beneficially owned. The recommendation should also describe the qualifications, attributes, skills or other qualities of the recommended director candidate. A written statement from the candidate consenting to be named as a director candidate and, if nominated and elected, to serve as a director should accompany any such recommendation. Shareholders who wishwishes to nominate an individual for election as a director at an annual meeting of the shareholders of Peoples must comply with Peoples'the provisions of Peoples’ Code of Regulations regardinggoverning shareholder nominations.  Shareholder nominations must be made in writing and delivered or mailed to the Corporate Secretary of Peoples not less than 14 days nor more than 50 days prior to any meeting of shareholders called for the election of directors.  However, if less than 21 days'days’ notice of the meeting is given to the shareholders, the nomination must be maileddelivered or deliveredmailed to the Corporate Secretary of Peoples not later than the close of business on the seventh day following the day on which the notice of the meeting was mailed to the shareholders.  Nominations for thePeoples’ 2009 Annual Meeting mustof Shareholders is currently scheduled to be received by March 31, 2006.held on April 23, 2009.  Each shareholder nomination must contain the following information to the extent known by the nominating shareholder: o the name, age, business address and residence address of each proposed nominee; o the principal occupation or employment of each proposed nominee; o the number of common shares beneficially owned by each proposed nominee and by the nominating shareholder; and o any other information required to be disclosed with respect to a nominee for election as a director under the SEC's proxy rules.

Each nomination must be accompanied by the written consent of the proposed nominee to serve as a director of Peoples if elected.  Nominations not made in accordance with Peoples'the above requirements and Peoples’ Code of Regulations will not be considered. Code of Ethics - -------------- In accordance with applicable NASDAQ Rules and rules of the SEC, the Board of Directors has adopted the Code of Ethics for Directors, Officers and Employees of Peoples Bancorp Inc. and its Affiliates, which is available on the "Corporate Governance & Ethics" page of Peoples' website at www.peoplesbancorp.com. REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION Policy - ------ Peoples' cash compensation package for its executive officers consists of two components: (i) base salary; and (ii) annual performance-based bonuses. Peoples also grants stock options to its executive officers as a means to promote ownership of common shares. The Compensation Committee is comprised of independent, non-employee directors and operates under a charter approved by the Board of Directors. The Compensation Committee is responsible for the review, approval and administration of the base salary level and annual bonus compensation programs as well as the stock option program for executive officers. In determining compensation levels, the Compensation Committee considers: salary and bonus levels which will attract and retain qualified executives when considered with the other components of Peoples' compensation structure; specific annual performance criteria; and rewarding executive officers for continuous improvement in their respective areas which contribute to increases in shareholder value. The Compensation Committee met nine times during the 2005 fiscal year. Peoples' philosophy for granting options is based on the principle of encouraging key employees, including executive officers, to remain with Peoples and become owners with a long-term interest in the Peoples' overall performance while incenting those individuals to manage with a view toward maximizing long-term shareholder value creation. Section 162(m) of the Internal Revenue Code prohibits Peoples from claiming a deduction on its federal income tax return for compensation in excess of $1 million paid for a given fiscal year to the Chief Executive Officer (or person serving in that capacity) at the close of the fiscal year and the four most highly compensated officers of Peoples, other than the Chief Executive Officer, at the end of the fiscal year. The $1 million compensation deduction limitation does not apply to "performance-based compensation". Due to the fact that all executive officers receive compensation at levels substantially below the $1 million deductibility limit, the Compensation Committee does not propose at this time to present for shareholder approval performance goals such as those provided in the performance compensation program described below under "Annual Bonuses." The design and administration of Peoples' 1995 Plan, 1998 Plan, and 2002 Plan are intended to comply with Section 162(m) so that any compensation, which may be received by executive officers of Peoples under those plans, will qualify as "performance-based". The Compensation Committee will rely, from time to time, upon the guidance of Peoples' General Counsel regarding the appropriateness of presenting the performance compensation program, or any similar plan, to shareholders. Base Salary - ----------- Executive officers' base salaries are determined by evaluating the most recent comparative peer data and the role and responsibilities of their respective positions. During the latter part of the 2004 fiscal year, the Compensation Committee engaged the services of Clark Consulting, a compensation consulting firm, to perform competitive peer analysis of executive compensation. In conjunction with Peoples, Clark Consulting identified a group of 15 peer financial institution holding companies based on market capitalization, geographic location, performance, and similarity in lines of business. The peer group represents publicly-traded financial institution holding companies with total asset size from slightly over $900 million to slightly under $3.5 billion. This comparative data does not include the compensation paid by all of the companies that are included in the NASDAQ Bank Stocks Index, which is used for comparative purposes in the performance graph that appears on page 34. The information gathered from the analysis was used to determine the competitiveness of compensation for executive officers relative to other financial institution holding companies of comparable size and overall performance. The information was used to determine the 2005 compensation for the executive officers. On December 9, 2004, the Compensation Committee established base salaries for executive officers for the 2005 fiscal year. Individual salary increases are reviewed annually and are based on Peoples' overall performance and the executive's attainment of specific individual business objectives during the preceding year. Specific individual business objectives for fiscal year 2006 have been established for each executive officer. These objectives are both quantitative in nature, such as sales and revenue goals and cost containment; and also qualitative in nature, such as the development and retention of key staff, assessment and development of quality products and services, and management effectiveness. Annual Bonuses - -------------- Executive officers are eligible to earn annual bonuses under the performance compensation program. On January 13, 2005, the Compensation Committee established a bonus matrix, for the 2005 fiscal year, comprised of three financial components: (i) Earnings Per Share; (ii) Return On Average Equity; and (iii) Non-interest Income Leverage Ratio which is a measure of non-interest income relative to operating non-interest expense. The weightings for Earnings Per Share and Return On Average Equity were 45% each and the Non-interest Income Leverage Ratio was weighted at 10%. The performance goals established for each of the financial components, if attained, make available an incentive pool of bonus payments. Annual performance goals were established for Robert E. Evans, in his capacity at the time as Chairman of the Board and Chief Executive Officer, and for Mark F. Bradley, in his capacity at the time as President and Chief Operating Officer, directly related to the above-mentioned financial performance measurements, all of which are quantitative in nature and designed to promote shareholder value. The annual bonus was weighted 90% for attainment of these financial components and 10% for individual performance. These individuals could receive a maximum payout of 100% of their respective annual base salaries. Annual performance goals were also established for each other executive officer, the nature of which differed depending upon the officer's job responsibilities. Goals were both quantitative in nature, such as sales and revenue goals and cost containment; and also qualitative in nature, such as the development and retention of key staff, assessment and development of quality products and services, and management effectiveness. Annual bonuses for executive officers were weighted with a 75% weighting for attainment of the previously mentioned financial components and the remaining 25% based on the attainment of specific individual goals. The maximum cash payout which these individuals could receive was 70% of their respective annual base salaries. At the end of each fiscal year, the extent to which Peoples' and individual goals are actually achieved is measured. If all goals are satisfied, the executive officer receives a target bonus amount. To the extent goals are partially met, then only that portion as expressed in the bonus matrix is paid out. If goals are exceeded, a higher portion of the bonus matrix is paid out up to the maximum established amount. Executive officers are required to defer 25% of their incentive compensation for a period of three years and have the option to defer any remaining incentive compensation until they reach retirement age. Interest is accrued at 50% of Peoples' return on average equity achieved during the calendar year. The objective of the performance compensation program is to promote shareholder value. In that regard, in 2003, the Compensation Committee implemented a concept of "absolute minimum", whereby if 85% of the Earnings Per Share financial component minimum, defined as one penny in earnings per share improvement over the previous fiscal year, is not achieved there will be no annual bonus payment to executive officers, regardless of the level of achievement in respect of their individual performance goals. The Compensation Committee waived the "absolute minimum" requirement in respect of the 2004 fiscal year, on an exception basis, due to the fact non-recurring charges related to the repositioning of Peoples' investment portfolio caused 2004 Earnings Per Share to be lower than results from normal operations. The Compensation Committee believed that individual incentive bonuses should be paid because many successful results were achieved through normal operations. This waiver allowed the named executive officers to receive the portion based on the level of achievement of their individual performance goals, but not the portion related to Peoples' corporate results. Incentive bonuses earned for individual performance in the 2005 fiscal year were determined by the Compensation Committee on February 9, 2006, and [were paid] [will be paid] to the named executive officers in March 2006 in the total amount of $236,768. The program will operate in a similar manner for the 2006 fiscal year. Option Grants - ------------- Options to purchase common shares are granted annually to executive officers. Grants are made to executive officers at an exercise price of 100% of the fair market value of the underlying common shares on the date of grant. Grants are made with a three-year cliff-vesting requirement in order to more closely align the benefits to the executive officer with the interests of the shareholders. Peoples' philosophy in granting options is to increase executive ownership of common shares. Peoples therefore believes that the executive officers will have an incentive to manage with a view toward maximizing long-term shareholder value. In determining the total number of options to be granted annually to all recipients, including executive officers, the Compensation Committee considers the executive officer's individual performance as well as the performance of Peoples during the immediately preceding fiscal year. The Compensation Committee establishes guidelines for the number of common shares available for the granting of options to each executive officer based on: individual job performance; Peoples' financial performance; and evaluation of competitive peer data for similar grants. These option grants provide incentive for the creation of shareholder value since the full benefit of the grant to each executive officer can only be realized with an appreciation in the price of Peoples' common shares. The Compensation Committee believes the options granted to executive officers mutually align the interests of the executive officers with those of the shareholders. The objective of the stock option program is to promote shareholder value. In that regard, in 2003, the Compensation Committee implemented a restriction of "absolute minimum", whereby if 85% of the Earnings Per Share minimum (defined as one penny in earnings per share improvement over the previous fiscal year) for the prior fiscal year is not achieved, there will be no option grants to executive officers. The Compensation Committee waived the absolute minimum requirement in respect of the 2004 fiscal year, on an exception basis, due to the fact non-recurring charges related to the repositioning of Peoples' investment portfolio caused 2004 Earnings Per Share to be lower than results from normal operations. The Compensation Committee believed that individual option grants should be paid because many successful results were achieved through normal operations. This waiver allowed the named executive officers to receive the portion based on the level of achievement of their individual performance goals, but not the portion related to Peoples' corporate results. Stock option grants earned in respect of the 2005 fiscal year were made by the Compensation Committee to the named executive officers in February 2006 and covered an aggregate of 10,896 common shares. The options were valued using the market price of a common share of stock on the date of grant. On August 11, 2005, the Compensation Committee engaged the services of Clark Consulting, a compensation consulting firm, to perform a review of Peoples' current deferred compensation plans to ensure compliance with Section 409A of the Internal Review Code. The Compensation Committee intends to administer these plans to avoid or minimize the effect of Section 409A and, if necessary, will amend or recommend the amendment of these plans to comply with Section 409A before December 31, 2006 (or a later date specified by the Internal Revenue Service). The Compensation Committee subsequently retained Clark Consulting to design a new equity plan for implementation in 2006. The proposed Peoples Bancorp Inc. 2006 Equity Plan is discussed under "PROPOSAL NUMBER 2: APPROVAL OF PEOPLES BANCORP INC. 2006 EQUITY PLAN" beginning at page 35. On December 29, 2005, the Compensation Committee approved the acceleration of the vesting schedule with regard to all unvested options previously granted to employees of Peoples and our subsidiaries, including executive officers of Peoples, and subsidiary directors pursuant to Peoples' various stock option plans. Except for the acceleration of vesting, these options will continue to be governed by their original terms and conditions. As a result of the vesting acceleration, options to purchase an aggregate of 161,514 common shares became exercisable as of December 29, 2005. Vesting of these options was to occur over the next six years, with the majority previously scheduled to vest in 2006. Included in the options for which vesting was accelerated were options held by the following individuals who served as executive officers of Peoples during the 2005 fiscal year: Name of Individual Aggregate Number of Options Accelerated ------------------ --------------------------------------- Mark F. Bradley 7,526 David B. Baker 6,711 John W. Conlon 8,227 Larry E. Holdren 8,206 Carol A. Schneeberger 8,017 Joseph S. Yazombek 8,847 As previously reported, effective January 1, 2006, David B. Baker ceased to serve as an executive officer of Peoples and David T. Wesel became an executive officer of Peoples. Executive Officer Perquisites - ----------------------------- Based on business need, on a case-by-case basis, the Compensation Committee grants the use of a company-paid automobile and country club membership to selected executive officers to further business development on behalf of Peoples. Personal use of such perquisites is either reimbursed to Peoples or paid by the executive officer. Other Compensation - ------------------ The executive officers participate in the Peoples Bancorp Inc. Retirement Savings Plan on the same basis as all other employees. Peoples "matches" certain employee contributions to the Retirement Savings Plan. The matching amounts for the individuals named in the Summary Compensation Table are included under the caption "All Other Compensation" in that table. The executive officers also participate in the Peoples Bancorp Inc. Retirement Plan on the same basis as all other employees. Annual pension benefits are payable under the Retirement Plan upon retirement based upon specified compensation and years of service classifications. The executive officers are also eligible to participate in the employee benefit programs maintained by Peoples, including life, medical and dental insurance plans, on the same terms as all other employees. Chief Executive Officer's Compensation - -------------------------------------- The 2005 base salaries for Robert E. Evans and Mark F. Bradley were determined by evaluating the most recent comparative peer data and the role and responsibilities of their respective positions. During latter part of the 2004 fiscal year, the Compensation Committee engaged the services of Clark Consulting, a compensation consulting firm, to perform competitive peer analysis of executive compensation. In conjunction with Peoples, Clark Consulting identified a group of 15 peer financial institution holding companies based on market capitalization, geographic location, performance, and similarity in lines of business. The peer group represents publicly-traded financial institution holding companies with total asset size from slightly over $900 million to slightly under $3.5 billion. The information gathered from the analysis was used to determine the competitiveness of compensation for Robert E. Evans and Mark F. Bradley relative to other financial institution holding companies of comparable size and overall performance. The information was used to determine the 2005 compensation for both individuals. On December 9, 2004, the Compensation Committee established base salaries for Robert E. Evans and Mark F. Bradley for the 2005 fiscal year. On May 31, 2005, Robert E. Evans retired and resigned from his position as Chief Executive Officer and as an employee of each of Peoples and Peoples Bank. The compensation he received following his retirement is described below under "Other Compensation to Mr. Evans." As part of a succession plan announced in February 2005, Mark F. Bradley, who had served as President and Chief Operating Officer, was named Chief Executive Officer of both Peoples and Peoples Bank, succeeding Mr. Evans effective May 31, 2005. In light of his increased job responsibilities as President and Chief Executive Officer, the Compensation Committee determined that Mr. Bradley's annualized base salary should be increased from $200,000 to $225,000 effective June 1, 2005. This placed Mr. Bradley's base salary just below the median of base salaries of chief executive officers paid by those financial institution holding companies selected for peer comparison. The Compensation Committee considered the following factors in determining the base salary for 2006 for Mr. Bradley in his capacity as Peoples' President and Chief Executive Officer: Peoples' success in achieving its 2005 fiscal year established financial targets and the median level of compensation paid to Chief Executive Officer's of financial institution holding companies selected for peer comparison. Based on these factors, the Compensation Committee determined on February 9, 2006, Mr. Bradley's base salary should be increased from $225,000 to $250,000 effective January 1, 2006. This still placed Mr. Bradley's annual base salary just below the median of base salaries of chief executive officers paid by those financial institution holding companies selected for peer comparison. For the 2005 fiscal year, Mr. Bradley was eligible to earn a cash bonus under the performance compensation program ranging up to 100% of his base salary and options up to 140% of base salary based on the attainment of established performance goals. The options were valued using the market price of a common share of stock on the date of grant. The Compensation Committee certified that based on Peoples' and Mr. Bradley's individual performance during the 2005 fiscal year, he earned a bonus under the performance compensation program of $60,000. Likewise, he also earned options totaling 2,970 common shares. Both the bonus and options were earned in respect to the 2005 fiscal year. The options were granted in February 2006. The bonus [was paid] [will be paid] in March 2006. In recognition of Mr. Bradley's role and importance to Peoples' success and promotion of shareholder value, Peoples provided him with a country club membership in 2005. Other Compensation to Mr. Evans - ------------------------------- On May 31, 2005, Robert E. Evans retired and resigned from his position as Chief Executive Officer and as an employee of each of Peoples and Peoples Bank. Mr. Evans continued to serve as Chairman of the Board and a non-employee director of each entity thereafter. On May 31, 2005, the Board of Directors of Peoples, upon the recommendation of the Compensation Committee, approved the payment of a monthly fee to Mr. Evans in his capacities as Chairman of the Board of Peoples and Peoples Bank. The monthly fee was to be $8,333, effective June 1, 2005. Mr. Evans was to receive no separate compensation for attending meetings of any committees of either board of directors or for other services provided as a member of either board. He received a payment of $8,333 on June 15, 2005, for his services as Chairman of the Board of Peoples and Peoples Bank. On June 9, 2005, the Board of Directors, upon the recommendation of the Compensation Committee, approved a Director Retirement Plan for the benefit of Mr. Evans in recognition of his 35 years of service with the organization and his direct responsibility for its substantial success and growth. The Director Retirement Plan was intended to provide Mr. Evans with a monthly benefit for life, commencing July 1, 2005, and, if she survived him, a reduced monthly benefit for Mr. Evans' spouse for her life. The monthly benefit to be paid to Mr. Evans was to increase each year and was to be $1,156 per month for the 2005 calendar year. Similarly, the monthly benefit, payable to Mr. Evans' spouse upon Mr. Evans' death was to generally increase each year and was $662 per month for the 2005 calendar year. During 2005, six payments were made to Mr. Evans' spouse under the plan. On June 9, 2005, the Board of Directors, upon the recommendation of the Compensation Committee, also approved the payment of a benefit in the amount of $145,000 under the deferred compensation agreement, dated November 18, 1976, between Mr. Evans and The Peoples Banking and Trust Company (now known as Peoples Bank, National Association), as amended December 26, 1978 and March 22, 1979. The deferred compensation agreement provided for the accrual of $5,000 for Mr. Evans' account upon the completion of each year of service to Peoples Bank until he reached normal retirement age (65). As of May 31, 2005, a total of $141,667 had been accrued for Mr. Evans' account and the Compensation Committee and the Board of Directors both felt it was appropriate to credit Mr. Evans' account with the full $5,000 annual amount in respect of the year of his retirement. In connection with the benefit payment, the deferred compensation agreement was terminated effective June 9, 2005. To the extent that the effect of Mr. Evan's retirement was specifically addressed under any of the other employee benefit programs in which he participated at the time of his retirement, those terms continued to apply. On June 15, 2005, Mr. Evans died. Change in Control Agreements - ---------------------------- In 2004, the Compensation Committee engaged the services of Clark Consulting to explore whether change in control agreements would be appropriate for executive officers. Based upon a recommendation from Clark Consulting, the Compensation Committee supported the development and implementation of change in control agreements for all executive officers to promote shareholder value should a change in control occur. In August 2004, Peoples entered into change in control agreements with Robert E. Evans (which expired upon his retirement), Mark F. Bradley, John W. Conlon, Carol A. Schneeberger, David B. Baker, and Larry E. Holdren to encourage those executive officers to continue their employment with Peoples in the event Peoples is acquired by another entity. The agreements were not undertaken in the belief a change in control was imminent or expected. An executive officer's base annual compensation for purposes of his or her change in control agreement is the average annualized compensation paid by Peoples which was includible in the executive officer's gross income prior to any deferred arrangements during the most recent five taxable years ending before the date of the change in control. Generally, the agreements provide for severance compensation to those executive officers if their employment is terminated by Peoples or its successors for any reason other than cause within six months prior to or within 24 months after a defined change in control occurs. In addition, compensation will be paid if the executive officer voluntarily terminates employment during the same periods because of a decrease in the executive officer's base annual compensation without the executive officer's consent; a material reduction in the importance of the executive officer's job responsibilities without the executive officer's consent, other than by reason of termination for cause or by reason of disability, retirement or death; geographical relocation of the executive officer without executive officer's consent to an office more than 50 miles from the executive officer's current location; or failure by Peoples to obtain assumption of the agreement by its successor. Under the agreements, a change in control is deemed to occur in the event of a change of ownership of Peoples which must be reported to the SEC as a change of control, including but not limited to the acquisition by any person, entity, or group of beneficial ownership of 25% or more of Peoples' voting securities or all or substantially all of the assets of Peoples. Under the agreements, severance provisions include: (i) a lump sum cash payment of two and one-half times base annual compensation for Mr. Bradley and two times base annual compensation for Mr. Conlon, Ms. Schneeberger, Mr. Baker, and Mr. Holdren, in each case payable within thirty days following the termination date; (ii) continuing participation in life, medical, and dental insurance for twelve months substantially in the form and expense to the executive officer as that received on the date of termination; and (iii) the executive officer entering into a non-compete agreement for twelve months immediately following the date of termination. In the case of Mr. Bradley, the duration of the non-compete agreement and the continuing participation in life, medical, and dental insurance is 15 months immediately following the date of termination. During 2005, management changes occurred which impacted those individuals covered by change in control agreements. On September 14, 2005, it was announced David B. Baker would no longer serve as an Executive Vice President of Peoples and Peoples Bank effective January 1, 2006. The change in control agreement with David B. Baker was terminated on January 1, 2006. On September 14, 2005, it was also announced David B. Baker would be succeeded by David T. Wesel effective January 1, 2006. On December 8, 2005, the Compensation Committee authorized the execution on behalf of Peoples, on or about January 3, 2006, of a change in control agreement with David T. Wesel when he became an executive officer. The terms of David T. Wesel's change in control agreement are the same as those in the change in control agreements entered into in August 2004 with David B. Baker, John W. Conlon, Larry E. Holdren, and Carol A. Schneeberger. Compensation Committee Interlocks and Insider Participation - ----------------------------------------------------------- Each of Frank L. Christy, Carl L. Baker, Jr., Robert W. Price and Joseph H. Wesel served as a member of the Compensation Committee for the entire 2005 fiscal year. Mr. Wesel served as Chairman until December 8, 2005, when he was succeeded in that position by Frank L. Christy. George W. Broughton joined the Compensation Committee on August 11, 2005 and Paul T. Theisen joined the Compensation Committee on November 10, 2005. Wilford D. Dimit served on the Compensation Committee until his resignation on February 9, 2005. None of the individuals serving on the Compensation Committee has been an officer or employee of Peoples or any of our subsidiaries. In addition, no executive officer of Peoples has served on any board of directors or compensation committee of any entity that compensates any member of the Compensation Committee. David T. Wesel, who is the son of Joseph H. Wesel, was appointed to the positions of Executive Vice President of Peoples and of Peoples Bank and President of the Peoples Financial Advisors division of Peoples Bank, effective January 1, 2006. Prior to that time, he had served as a Vice President of Peoples Bank and Sales Manager of Peoples Financial Advisors, but was not an executive officer of Peoples or Peoples Bank. During the 2005 fiscal year, David T. Wesel received compensation in excess of $60,000. While Paul T. Theisen is Of Counsel to, and an independent contractor with, the law firm of TheisenBrock, Mr. Theisen has not been a partner, controlling shareholder or executive officer or otherwise been related to or held any interest in TheisenBrock, other than as Of Counsel and an independent contractor (and has not individually performed services for Peoples or any of our subsidiaries), since 1998. On January 26, 2005, Peoples Bank purchased real estate and the building located on it from First Settlement Inc., a corporation as to which Wilford D. Dimit is the President and the controlling shareholder. The purchase price for the real estate and building was $400,000 and was determined through an arm's length negotiation. From January 26, 2005 through March 31, 2005, Peoples Bank leased to First Settlement, Inc. space within the building on a month-to-month basis for purposes of continued operation of a restaurant. These lease payments were in the aggregate amount of $2,000. Mr. Dimit sold the restaurant in April 2005. Mr. Dimit resigned from the Compensation Committee effective February 9, 2005 and did not participate in the discussions or deliberations of the Compensation Committee from and after January 26, 2005. Conclusion - ---------- We have reviewed all components of the compensation of the individuals named in the Summary Compensation Table, including base salary, annual bonus and long-term equity compensation in the form of option grants, accumulated realized and unrealized stock option gains, the dollar value to the individual and cost to Peoples of all perquisites and other personal benefits and the projected payout obligations under change in control scenarios. Based on this review, we find each such individual's total compensation (and, in the case of change in control scenarios, the potential payouts) in the aggregate to be reasonable and not excessive. Furthermore, we believe that the compensation paid to all executive officers is consistent with Peoples' goals and objectives. Submitted by the Compensation Committee of Peoples' Board of Directors: Frank L. Christy (Chairman since December 8, 2005); Joseph H. Wesel (member until December 31, 2005 and Chairman until December 8, 2005); Carl L. Baker, Jr.; George W. Broughton (member since August 11, 2005); Robert W. Price; and Paul T. Theisen (member since November 10, 2005). COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS Summary of Cash and Other Compensation - -------------------------------------- The following table shows, for the last three fiscal years, the cash compensation paid by Peoples and our subsidiaries, as well as other compensation paid or accrued for those years, to each individual who served as Chief Executive Officer of Peoples during the 2005 fiscal year and the four other most highly compensated executive officers of Peoples during the 2005 fiscal year. SUMMARY COMPENSATION TABLE

Annual Compensation ------------------- Long Term Compensation All Other Salary Awards Compensation ------------------------- ------------- --------------------------- Interest on Common Shares Deferred Directors' Underlying Incentive Name and Principal Position Year Base Salary Fees (4) Bonus (5) Options (6) Payment (7) All Other --------------------------- ---- ----------- -------- --------- --------------- ------------- ---------- Robert E. Evans 2005 $ 147,747 $ 8,333 - - $ 1,231 $ 21,221(8) Chairman of the Board and 2004 $ 300,000 $ 16,600 $ 24,300 1,238 $ 3,253 $ 23,141 Chief Executive Officer (1) 2003 $ 300,000 $ 16,600 - - $ 2,843 $ 20,822 Mark F. Bradley 2005 $ 214,583 - $ 60,000 2,970 $ 962 $ 11,546 President and 2004 $ 169,950 $ 16,850 $ 9,007 459 $ 1,109 $ 7,385 Chief Operating Officer (2) 2003 $ 165,000 $ 15,750 - - 969 $ 8,139 Joseph S. Yazombek 2005 $ 195,000 - $ 47,190 2,388 $ 6,379 $ 11,083(8) Executive Vice President/ 2004 $ 160,680 - $ 23,299 1,215 $ 4,417 $ 9,474 Chief Lending Officer 2003 $ 156,000 - - - $ 3,860 $ 9,429 John W. Conlon 2005 $ 183,000 - $ 30,378 1,535 $ 2,557 $ 10,524(8) Chief Financial Officer and Treasurer 2004 $ 153,000 - $ 23,715 1,235 $ 2,483 $ 6,120 2003 $ 150,000 - - - $ 2,170 $ 7,083 Carol A. Schneeberger 2005 $ 160,000 - $ 37,600 1,903 $ 1,734 $ 6,784(8) Executive Vice President, Operations 2004 $ 151,700 - $ 15,170 792 $ 1,240 $ 6,068 2003 $ 148,000 - - - $ 1,083 $ 7,542 David B. Baker 2005 $ 160,000 - $ 31,520 1,592 $ 5,612 $ 6,400(8) Executive Vice President (3) 2004 $ 156,060 - $ 8,739 456 $ 4,480 $ 6,242 2003 $ 153,000 - - - $ 3,914 $ 6,120 - --------------------- (1) Mr. Evans served as Chairman of the Board of Peoples from July 2003 until June 15, 2005, and as Chief Executive Officer from 1980 until May 31, 2005. He retired from his position as Chief Executive Officer and as an employee of Peoples on May 31, 2005, but continued to serve as Chairman of the Board and a non-employee director until his death on June 15, 2005. Mr. Evans also served as President of Peoples from 1980 until June 2004. (2) Mr. Bradley has served as Chief Executive Officer of Peoples since May 31, 2005 and as President since June 2004. He served as Chief Operating Officer from July 2003 until May 31, 2005 and as Executive Vice President and Chief Integration Officer from April 2002 until July 2003. (3) Mr. Baker served as Executive Vice President of Peoples and Peoples Bank from February 1999 until December 31, 2005 and as President of Peoples Financial Advisors from February 2000 until December 31, 2005. Effective January 1, 2006, Mr. Baker assumed a non-executive role as Senior Financial Advisor of Peoples Financial Advisors. (4) Represents the aggregate fees received by Mr. Evans (prior to his death) and Mr. Bradley for services rendered as a director of Peoples and our subsidiaries. (5) Represents incentive bonuses earned under the performance compensation program, and are reported for the fiscal year for which the incentive bonuses were earned. Incentive bonuses are traditionally paid during the first quarter of the following fiscal year; however, executive officers of Peoples are required to defer 25% of their incentive bonus for a period of three years and have the option to defer any remaining incentive compensation until they reach retirement age. The amounts shown include the deferred portion of the incentive bonus earned by each individual: (a) Mr. Evans - $0 in 2005 and $6,075 in 2004; (b) Mr. Bradley - $15,000 in 2005 and $2,252 in 2004; (c) Mr. Yazombek - $11,798 in 2005 and $5,825 in 2004; (d) Mr. Conlon - $7,595 in 2005 and $5,929 in 2004; (e) Ms. Schneeberger - $9,400 in 2005 and $3,793 in 2004; and (f) Mr. Baker - $7,880 in 2005 and $2,185 in 2004. (6) Options are reported for the fiscal year for which they were earned. Options are traditionally granted during the first quarter of the following fiscal year. (7) Represents the amount of interest accrued during the fiscal year on the cumulative amount of incentive bonus deferred by each individual under the terms of the performance compensation program. Interest is accrued at a rate equal to 50% of Peoples' return on average equity achieved during each calendar year during the deferral period. As of December 31, 2005, interest in the following aggregate amounts had been accrued for the benefit of the named individuals and will be payable in accordance with the terms of the performance compensation program: (a) Mr. Evans - $7,327; (b) Mr. Bradley - $3,040; (c) Mr. Yazombek - $14,656; (d) Mr. Conlon - $7,210; (e) Ms. Schneeberger - $4,057; and (f) Mr. Baker - $14,006. As of December 31, 2005, the following aggregate amounts of incentive bonus and interest had been accrued for the benefit of the named individuals and will be payable in accordance with the terms of the performance compensation program: (a) Mr. Evans - $0.00; (b) Mr. Bradley - $17,655; (c) Mr. Yazombek - $117,127; (d) Mr. Conlon - $46,948; (e) Ms. Schneeberger - $31,835; and (f) Mr. Baker - $103,041. (8) "All Other" for the 2005 fiscal year includes the following contributions by Peoples to the Peoples Bancorp Inc. Retirement Savings Plan on behalf of each of the named individuals to match their pre-tax elective deferral contributions (included under "Salary"): (a) Mr. Evans - $7,118; (b) Mr. Bradley - $8,400; (c) Mr. Yazombek - $7,800; (d) Mr. Conlon - $8,400; (e) Ms. Schneeberger - $6,784; and (f) Mr. Baker - $6,400.

For Mr. Evans, "All Other" also includes for each year the amount of $5,000, which was accrued, pursuant to the terms of the deferred compensation agreement between Mr. Evans and Peoples Bank which is described below under "Deferred Compensation Agreement." On June 9, 2005, the Board of Directors, upon the recommendation of the Compensation Committee, approved the payment of a benefit in the amount of $145,000 under the deferred compensation agreement. As of May 31, 2005, a total of $141,667 had been accrued for his account and the Compensation Committee and the Board of Directors both felt it was appropriate to credit Mr. Evans' account with the full $5,000 annual amount which would have otherwise accrued for his account in the year of his retirement. "All Other" does not include the $145,000 paid to Mr. Evans under the terms of the deferred compensation agreement. In connection with the benefit payment, the deferred compensation agreement was terminated effective June 9, 2005. "All Other" does not include amounts paid to Mr. Evans' spouse under the director retirement plan for the benefit of Mr. Evans, which is described below under "Director Retirement Plan." "All Other" for the 2005 fiscal year also includes earnings in the amount of $8,184 and $1,022, respectively, for Messrs. Evans and Bradley, accrued during the 2005 fiscal year on the cumulative amount of directors' fees deferred under the terms of the Deferred Compensation Plan for Directors of Peoples Bancorp Inc. and Subsidiaries. These earnings represent dividends credited on common shares accrued to Messrs. Evans' and Bradley's accounts. These dividends are converted into a common share equivalent based on the fair market value of a common share as of the first business day of the following calendar quarter and during the 2005 fiscal year, an aggregate of 201 common shares and 37 common shares were accrued, respectively, to Messrs. Evans' and Bradley's accounts. As of August 9, 2005, an aggregate of 14,860 common shares accrued in Mr. Evans' account were distributed as a result of his death. As of December 31, 2005, an aggregate of 1,414 common shares were accrued for Mr. Bradley's account. "All Other" for the 2005 fiscal year also includes country club dues of $919, $2,124, $3,283 and $2,124, respectively, for Messrs. Evans, Bradley, Yazombek and Conlon. Grant of Options - ---------------- Options were granted on February 9, 2006, to each of the individuals named in the Summary Compensation Table (other than Robert E. Evans) based on the individual's performance during the 2005 fiscal year. The following table summarizes information concerning the individual grants of options made to each of the named individuals in respect of the 2005 fiscal year. Peoples has never granted stock appreciation rights.

OPTION GRANTS IN LAST FISCAL YEAR (1) Number of % of Total Common Shares Options Granted Grant Date Underlying to Employees Exercise Price Expiration Present Name Options Granted (2) in Fiscal Year ($/Share) Date Value (3)(4) - ---- ------------------- -------------- --------- ---- ------------ Robert E. Evans - - - - - Mark F. Bradley 2,970 6.96% $28.25 2/9/2016 $22,000 Joseph S. Yazombek 2,388 5.60% $28.25 2/9/2016 $18,000 John W. Conlon 1,535 3.60% $28.25 2/9/2016 $11,000 Carol A. Schneeberger 1,903 4.46% $28.25 2/9/2016 $14,000 David B. Baker 1,592 3.73% $28.25 2/9/2016 $12,000 - --------------------- (1) Reflects individual grants of options made to each of the named executive officers in respect of the 2005 fiscal year. (2) All options were granted under the 2002 Stock Option Plan, and become exercisable as to 100% of the common shares on the third anniversary of the grant date. If employment with Peoples and its subsidiaries is terminated by reason of death, disability, or retirement in accordance with the standard retirement policies of Peoples or its subsidiaries, vesting is accelerated and the option becomes exercisable in full for a period of 12 months from the date of termination of employment, subject to the stated expiration date of the option. If employment is voluntarily terminated, only those options exercisable on the date of termination remain exercisable and may be exercised for a period of 12 months from the date of termination, subject to the stated expiration date of the option. No option may be exercised after the date of termination if termination is for "cause". In the event of a "change in control" (as defined in the 2002 Stock Option Plan), the options will automatically vest and become exercisable in full. (3) Dollar amounts are reported to the nearest $1,000. (4) Option values reflect the Black-Scholes model output for options. The assumptions used in the model were expected volatility of 26.0%, risk-free rate of 4.37%, dividend yield of 2.61% and expected life of 6.5 years. No adjustments have been made to the model valuation for non-transferability or risk of forfeiture.

Option Exercises and Holdings - ----------------------------- The following table summarizes information concerning options exercised during, and unexercised options held as of the end of, the 2005 fiscal year by each of the named individuals.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES (1) Number of Number of Common Shares Underlying Value of Unexercised In-the Common Unexercised Options Money Options Shares at Fiscal Year End (2) at Fiscal Year End (3) Underlying ------------------------------- ------------------------------ Options Value Name Exercised Realized Exercisable Unexercisable Exercisable Unexercisable - ------------------------------------------------------------------------------------ ------------------------------ Robert E. Evans 25,000 $209,451 28,621(4) - $163,535 - Mark F. Bradley 816 $ 8,408 26,139 - $272,491 - Joseph S. Yazombek - - 33,042 - $312,626 - John W. Conlon 14,549 $168,308 17,092 - $136,496 - Carol A. Schneeberger 12,618 $146,480 19,051 - $179,788 - David B. Baker 3,978 $ 40,821 25,139 - $460,846 - --------------------- (1) The information included in this table does not reflect the options granted on February 9, 2006 in respect of the 2005 fiscal year since these options were not outstanding on December 31, 2005. (2) These numbers have been adjusted to reflect stock dividends issued by Peoples since the respective grant dates of the options. (3) "Value of Unexercised In-the-Money Options at Fiscal Year End" is based upon the fair market value of Peoples' common shares on December 31, 2005 ($28.53) less the exercise price of options that were in the money at the end of the 2005 fiscal year. (4) Options granted to Mr. Evans exercisable by the Estate of Robert E. Evans for a period of 1 year from the date of Mr. Evans' retirement on May 31, 2005 as permitted under the terms of the 2002 Plan.

Equity Compensation Plan Information - ------------------------------------ Peoples has five equity compensation plans under which common shares are authorized for issuance to directors, officers or employees in exchange for goods or services: o the 1993 Plan; o the 1995 Plan; o the 1998 Plan; o the 2002 Plan; and o the Deferred Compensation Plan for Directors of Peoples Bancorp Inc. and Subsidiaries (the "Director Deferred Compensation Plan"). The following table summarizes equity compensation plan information for these plans as a group as of December 31, 2005. Each of these plans was approved by the shareholders of Peoples.

EQUITY COMPENSATION PLAN TABLE Number of common shares remaining available for future Number of common shares issuance under equity to be issued Weighted-average compensation plans upon exercise of exercise price of (excluding common shares outstanding options, outstanding options, reflected in warrants and rights warrants and rights column (a)) Plan category (a) (b) (c) - ------------------------- --------------------- --------------------- --------------------------- Equity compensation plans approved by shareholders... 531,144 (1) $20.41 (2) 311,731 (3) Equity compensation plans not approved by shareholders............... -- -- -- Total...................... 531,144 $20.41 311,731 --------------------- (1) Includes 18,949 common shares issuable upon exercise of options granted under the 1993 Plan, 105,045 common shares issuable upon exercise of options granted under the 1995 Plan, 124,744 common shares issuable upon exercise of options granted under the 1998 Plan, 227,094 common shares issuable upon exercise of options granted under the 2002 Plan and 55,312 common shares reflecting common share equivalents attributable to compensation deferred by directors participating in the Director Deferred Compensation Plan and accrued to their respective accounts. (2) Represents the weighted-average exercise price of options outstanding under the 1993 Plan, the 1995 Plan, the 1998 Plan and the 2002 Plan. The common shares reflecting common share equivalents attributable to compensation deferred by directors participating in the Director Deferred Compensation Plan are not included in this calculation. (3) Includes 33,423 common shares remaining available for future issuance under the 1998 Plan, 250,851 common shares remaining available for future issuance under the 2002 Plan and 27,457 common shares remaining available for future issuance under the Director Deferred Compensation Plan, in each case excluding the common shares shown in footnote (1). Other than the common shares shown in footnote (1), no further common shares were available for issuance under the 1993 Plan or the 1995 Plan as of December 31, 2005.

Pension Plan The following table shows the estimated annual pension benefits payable upon retirement at age 65 on a lifetime annuity basis under the Peoples Bancorp Inc. Retirement Plan, a funded, noncontributory pension plan (the "Pension Plan"), to a covered participant in specified compensation and years of service classifications.

PENSION PLAN TABLE Years of Service at Normal Retirement Annualized Average Monthly Compensation -------------------- ----------- ----------- ---------- ---------- ------------- 15 20 25 30 35 ----------- ----------- ---------- ----------- ------------- $125,000 $31,486 $41,981 $52,476 $ 62,972 $62,972 $150,000 $38,611 $51,481 $64,351 $ 77,222 $77,222 $175,000 $45,736 $60,981 $76,226 $ 91,472 $91,472 $200,000 $52,861 $70,481 $88,101 $105,772 $105,772 $225,000 $55,711 $74,281 $92,851 $111,422 $111,422 and over (1) --------------------- (1) Applicable provisions of the Internal Revenue Code currently limit the amount of annual compensation used to determine plan benefits under a defined benefit pension plan, such as the Pension Plan, and the amount of plan benefits payable annually under such a plan. The Pension Plan is operated in compliance with these provisions.

Benefits listed in the Pension Plan Table are not subject to deduction for Social Security benefits or other amounts and are computed on a lifetime annuity basis. Monthly benefits upon normal retirement (age 65) are based upon 40% of "average monthly compensation" plus 17% of the excess, if any, of "average monthly compensation" over "covered compensation". For purposes of the Pension Plan, "average monthly compensation" is based upon the monthly compensation (including regular salary and wages, overtime pay, bonuses and commissions) of an employee averaged over the five consecutive credited years of service which produce the highest monthly average within the last ten years preceding retirement and "covered compensation" is the average of the 35 years of social security wage bases prior to social security retirement age. As of the end of the 2005 fiscal year, annualized "covered compensation" for Mr. Bradley was $89,700, Mr. Yazombek $75,540, Mr. Conlon $59,772, Ms. Schneeberger $79,512 and Mr. Baker $61,872. 2005 annualized average monthly compensation, to the extent determinable, for purposes of the Pension Plan, for Mr. Bradley was $229,253, Mr. Yazombek $195,941, Mr. Conlon $213,997, Ms. Schneeberger $79,512 and Mr. Baker $61,872. As of the end of the 2005 fiscal year, credited years of service for Mr. Bradley were 14, Mr. Yazombek 22, Mr. Conlon 23, Ms. Schneeberger 29 and Mr. Baker 31. Deferred Compensation Agreement - ------------------------------- On November 18, 1976, The Peoples Banking and Trust Company (now known as Peoples Bank, National Association) entered into a deferred compensation agreement with Robert E. Evans, which was subsequently amended on December 26, 1978 and March 22, 1979. Under the deferred compensation agreement, Mr. Evans agreed to serve Peoples Bank as an employee until he reached age 65 or until his earlier retirement, disability or death, and agreed not to engage in activities in competition with Peoples Bank. The deferred compensation agreement provided for the accrual of $5,000 for Mr. Evans' account upon the completion of each year of service to Peoples Bank until he reached normal retirement age (65). Mr. Evans retired from his position as Chief Executive Officer and as an employee of Peoples on May 31, 2005. As of that date, a total of $141,667 had been accrued for Mr. Evans' account, and the Compensation Committee and the Board of Directors both felt it was appropriate to credit Mr. Evans' account with the full $5,000 annual amount in respect of the year of his retirement. On June 9, 2005, the Board of Directors, upon the recommendation of the Compensation Committee, approved the payment of a benefit in the amount of $145,000 under the deferred compensation agreement and the agreement was terminated. Change in Control Arrangements - ------------------------------ In order to further motivate executive officers to act in the best interests of the shareholders and to remain competitive in its executive compensation package, Peoples offered change in control agreements to executive officers of Peoples and entered into agreements with Robert E. Evans, Mark F. Bradley, David B. Baker, John W. Conlon, Larry E. Holdren and Carol A. Schneeberger during early August 2004. During 2005, management changes occurred which impacted those individuals covered by change in control agreements. Mr. Evans' change in control agreement was terminated effective May 31, 2005, concurrent with his retirement. On September 14, 2005, it was announced Mr. Baker would no longer serve as an executive officer of Peoples and Peoples Bank, and would be succeeded by David T. Wesel as an Executive Vice President of Peoples and Peoples Bank, effective January 1, 2006. The change in control agreement with Mr. Baker was terminated on January 1, 2006. On December 8, 2005, the Compensation Committee authorized the execution, on or about January 3, 2006, of a change in control agreement with Mr. Wesel when he became an executive officer. The terms of Mr. Wesel's change in control agreement are the same as those in the change in control agreements entered into in August 2004 with David B. Baker, John W. Conlon, Larry E. Holdren, and Carol A. Schneeberger. Each agreement provides that, if the executive officer is terminated by Peoples or its successors for any reason other than cause (as described below), or by the executive officer for good reason (as described below), within six months prior to or within 24 months after a change in control, Peoples will pay the following benefits: o As to Mark F. Bradley, Peoples will o pay to Mr. Bradley, in a lump sum within 30 days following the termination date, an amount equal to two and one-half (2.5) times the amount of Mr. Bradley's base annual compensation; and o provide life, medical and dental insurance substantially in the form and expense to Mr. Bradley as received prior to the termination date for a period of 15 months from the date of termination of employment; and o As to John W. Conlon, Larry E. Holdren, Carol A. Schneeberger and David T. Wesel, Peoples will o pay to the executive officer, in a lump sum within 30 days following the termination date, an amount equal to two (2) times the amount of his or her base annual compensation; and o provide life, medical and dental insurance substantially in the form and expense to the executive officer as received prior to the termination date for a period of one year from the date of termination of employment. An executive officer's base annual compensation for purposes of his or her change in control agreement is the average annualized compensation paid by Peoples which was includible in the executive officer's gross income prior to any deferred arrangements during the most recent five taxable years ending before the date of the change in control. Change in control is defined in the agreements as: o the acquisition of beneficial ownership of 25% or more of Peoples' voting securities by a person or entity or group of affiliated persons or entities; o the acquisition of all or substantially all of the assets of Peoples by any person or entity or group of affiliated persons or entities; o execution of an agreement by Peoples to merge, consolidate or combine with an unaffiliated entity if the Board of Directors of Peoples immediately prior to the transaction will constitute less than the majority of the Board of Directors of the surviving, new or combined entity or less than 75% of the outstanding voting securities of the surviving, new or combined entity will be beneficially owned by the shareholders of Peoples immediately prior to the transaction, and the agreement is not terminated with or without consummation of the transaction; o execution of an agreement by Peoples to transfer all or substantially all of its assets other than to a wholly-owned subsidiary and the agreement is not terminated without consummation of the transaction; or o a change in the majority of the directors of Peoples to individuals who were not members of the Board of Directors on the date of each agreement and were not nominated by a vote of the Board of Directors which included the affirmative vote of a majority of such members or other individuals so nominated. An executive officer will be deemed terminated for cause in the event of gross negligence or neglect of duties; commission of a felony or a gross misdemeanor involving moral turpitude; fraud, disloyalty, dishonesty or willful violation of any law or significant policy of Peoples; or issuance of an order by the banking regulators of Peoples for removal of the executive officer. An executive officer will be deemed to have terminated his or her employment for good reason if, without the executive officer's consent: o the executive officer is assigned material duties or responsibilities inconsistent with the executive officer's positions, or the executive officer's reporting responsibilities, titles, or offices are reduced other than by reason of termination for cause or by reason of disability, retirement or death; o the executive officer's base salary is reduced; o the executive officer's benefits under any benefit plans are reduced; o Peoples failed to obtain the assumption of, or the agreement to perform, the executive officer's agreement by any successor; o the executive officer is reassigned to an office location 50 miles or more form the current office location of the executive officer; or o the executive officer consents to any relocation and Peoples fails to pay for all reasonable moving expenses and to indemnify the executive officer against any loss realized on the sale of the executive officer's principal residence in connection with any such change of residence. If the executive officer receives a change in control benefit, the executive officer is subject to a non-compete agreement under which the executive officer is not permitted to engage in the business of banking, or any other business in which Peoples directly or indirectly engages during the term of the executive officer's agreement in the geographic market of Peoples on the termination date. This period of non-competition will be 15 months for Mark F. Bradley and one year for each of John W. Conlon, Larry E. Holdren, Carol A. Schneeberger and David T. Wesel. Executive Officer Perquisites - ----------------------------- Based on business need, on case-by-case basis, the Compensation Committee grants the use of a company-paid automobile and country club membership to selected executive officers to further business development on behalf of Peoples. Personal use of such perquisites is either reimbursed to Peoples or paid by the executive officer. The aggregate incremental cost to Peoples of perquisites and other personal benefits paid to each of the individuals named in the Summary Compensation Table for each of the three years presented did not exceed $10,000. Other Executive Compensation - ---------------------------- The executive officers participate in the Peoples Bancorp Inc. Retirement Savings Plan on the same basis as all other employees. Peoples "matches" certain employee contributions to the Retirement Savings Plan. The matching amounts for the individuals named in the Summary Compensation Table are included under the caption "All Other Compensation" in that table. The executive officers are also eligible to participate in the employee benefit programs maintained by Peoples, including life, medical and dental insurance plans, on the same terms as all other employees. Directors' Compensation - ----------------------- Fees Each director of Peoples, other than Mark F. Bradley and Robert E. Evans, receives a quarterly cash fee. Effective May 1, 2005, the amount of this quarterly fee was increased from $850 to $1,000 per calendar quarter. In addition, each director, other than Mark F. Bradley and Robert E. Evans, is compensated for each meeting of the Peoples Board of Directors attended. Effective May 1, 2005, this fee was increased from $600 to $1,000 per Board meeting attended. Directors are also compensated for each committee meeting they attend. Members of the Executive Committee and the Governance and Nominating Committee receive $100 for each committee meeting of less than 30 minutes attended and $200 for each committee meeting of 30 minutes or more attended. Effective May 1, 2005, the fee for attending Compensation Committee meetings of 30 minutes or more increased from $200 to $500 per meeting while the fee for attending meetings of less than 30 minutes remained at $100 per meeting. The Chairman of the Compensation Committee receives an additional cash fee of $750 per quarter. Effective May 1, 2005, the fee for attending Audit Committee meetings of 30 minutes or more increased from $400 to $500 per meeting while the fee for attending meetings of less than 30 minutes remained at $100 per meeting. The Chairman of the Audit Committee receives an additional cash fee of $1,250 per quarter. Each director of Peoples, other than Mark F. Bradley and Robert E. Evans (prior to his death), who also served as a director of Peoples Bank received $600 per calendar quarter and $400 for each regular monthly meeting of the Peoples Bank board of directors attended during the 2005 fiscal year. Mr. Bradley received no compensation as a director of Peoples Bank. Prior to his death, Mr. Evans received no compensation as a director of Peoples Bank except as described in the next paragraph. In addition, each director of Peoples who also served as a Peoples Bank committee member received $100 for each committee meeting of less than 30 minutes attended, or $200 for each committee meeting of 30 minutes or more attended, during the 2005 fiscal year. On May 31, 2005, the Board of Directors of Peoples, upon the recommendation of the Compensation Committee, approved the payment of a monthly fee to Robert E. Evans in his capacities as Chairman of the Board of Peoples and of Peoples Bank. The monthly fee approved was $8,333, to be effective June 1, 2005. Mr. Evans was to receive no separate compensation for attending meetings of any committees of either board of directors or for other services provided as a member of either board. Mr. Evans received $8,333 under this arrangement prior to his death. In addition to fees received for service to Peoples as a director, Mr. Wolf received $150 for each meeting of the Peoples Bank Kentucky/Huntington Leadership Advisory Board he attended during the 2005 fiscal year. Directors who travel a distance of fifty miles or more to attend a board or committee meeting of Peoples or Peoples Bank receive a $50 travel fee. A single travel fee of $50 is paid for multiple meetings occurring on the same day. Directors who stay overnight to attend a meeting are reimbursed the actual cost of overnight accommodations. The following table summarizes the aggregate amount of the quarterly fees and meeting fees (including travel fees) paid or payable to each incumbent director and to Robert E. Evans (prior to his death) for service on the Peoples Board of Directors and, if applicable, the board of directors of Peoples Bank or the Peoples Bank Kentucky/Huntington Leadership Advisory Board during the 2005 fiscal year:

Peoples Board Fees Peoples Bank Board Fees ---------------------------------------------- ----------------------------------------- Board and Committee Board and Committee Name Quarterly Fees (1) Meeting Fees (2) Quarterly Fees Meeting Fees (2) - ---- ------------------ ------------------- -------------- ---------------- Carl L. Baker, Jr. $ 3,850 $ 17,450 $ - $ - Mark F. Bradley $ - $ - $ - $ - George W. Broughton $ 3,850 $ 16,700 $ 2,400 $ 15,900 Frank L. Christy $ 3,850 $ 15,600 $ - $ - Wilford D. Dimit $ 3,850 $ 14,800 $ 2,400 $ 15,800 Robert E. Evans (3) $ - $ - $ - $ - Richard Ferguson $ 7,600 $ 14,950 $ - $ - Robert W. Price $ 3,850 $ 13,250 $ - $ - Theodore P. Sauber $ 3,850 $ 12,250 $ 2,400 $ 10,950 Paul T. Theisen $ 3,850 $ 13,450 $ 2,400 $ 12,800 Joseph H. Wesel $ 6,100 $ 15,400 $ 2,400 $ 13,700 Thomas J. Wolf $ 3,850 $ 13,700 $ - $ - -------------------- (1) Includes quarterly fee of $1000 paid to each director, $1250 quarterly fee paid to the Chairman of the Audit Committee and $750 quarterly fee paid to the Chairman of the Compensation Committee. (2) Includes board and committee meeting attendance and travel fees. (3) Pursuant to an arrangement effective June 1, 2005, Mr. Evans was paid a monthly fee of $8,33.33 in his capacity as chairman of the Board of Peoples and of Peoples Bank prior to his death. This amount is not included in the table.

DIRECTOR DEFERRED COMPENSATION PLAN Since 1991, Peoples has maintained the Director Deferred Compensation Plan. Voluntary participation in the Director Deferred Compensation Plan enables a director of Peoples, or of one of our subsidiaries, to defer all or a part of his or her directors' fees, including federal income tax thereon. Since January 2, 1998, directors have been permitted to allocate their deferrals between a cash account (earning interest equal to Peoples Bank's three-year CD interest rate) and a stock account (under which common shares are accrued based on the amount deferred and the fair market value of Peoples' common shares on the date of deferral and dividends credited on common shares accrued and converted into a common share equivalent based on the fair market value of a common share on the date the dividends are credited). The only right a participant has with respect to his cash account and/or stock account is to receive distributions upon retirement from service as a director. Distribution of the deferred amounts is made in a lump sum or annual installments, at the election of the director, beginning in the first year in which the person is no longer a director. The stock account will be distributed only in common shares and the cash account will be distributed only in cash. OPTION GRANTS Pursuant to their respective terms, nonqualified stock options have been automatically granted on an annual basis to non-employee directors of Peoples under the 1993 Plan, the 1995 Plan, the 1998 Plan and the 2002 Plan. No options have been granted to non-employee directors under the 1993 Plan since April 10, 1997; under the 1995 Plan since April 15, 1999; or under the 1998 Plan since March 10, 2000. Options granted under the 1993 Plan, the 1995 Plan, 1998 Plan and the 2002 Plan have an exercise price equal to 100% of the fair market value of the underlying common shares on the date of grant and a ten-year term. Under the 1993 Plan, if a non-employee director ceases to be a director for reasons other than his death, his options may be exercised for a period of three months, subject to their stated term. If a non-employee director dies, his options may be exercised for a period of one year following the date of death, subject to their stated term. Under the 1995 Plan and the 1998 Plan, if a non-employee director ceases to be a director for any reason other than his death or for "cause," his options may be exercised in full until the expiration of the term of the options. However, if the former non-employee director dies prior to the expiration of the term of his options, those options may only be exercised for a period of two years following his death, subject to the stated term of the options. If a non-employee director ceases to be a director for cause, his options will immediately terminate. Pursuant to the terms of the 2002 Plan, each individual then serving as a non-employee director receives an annual grant, on the date of each annual meeting of shareholders of Peoples, of options to purchase 1,155 common shares (as adjusted for the 10% stock dividend issued on June 28, 2002 and the 5% stock dividend issued on August 29, 2003 and as may be further adjusted for future changes in the capitalization of Peoples). All options become 100% exercisable on the first anniversary of the grant date. Under the 2002 Plan, if a non-employee director ceases to be a director due to death, disability (with at least three years service), or retirement (with at least five years of service), his options immediately vest and may be exercised until the earlier of 12 months after ceasing to so serve or the expiration date of the options. If a non-employee director voluntarily ceases service as a director, only those options exercisable on the date of termination may be exercised during the period described in the preceding sentence. If a non-employee director ceases to be a director for cause, his options will terminate immediately. DIRECTOR RETIREMENT PLAN On June 9, 2005, the Board of Directors of Peoples, upon the recommendation of the Compensation Committee, approved a director retirement plan for the benefit of Robert E. Evans in recognition of his 35 years of service with the organization and his direct responsibility for its substantial success and growth. The director retirement plan was intended to provide Mr. Evans with a monthly benefit for life, commencing July 1, 2005, and, if she survived him, a reduced monthly benefit for Mr. Evans' spouse for her life. Mr. Evans passed away before any monthly benefits were paid to him under the director retirement plan. The monthly benefit to be paid to Mr. Evans' spouse generally increases each year and was $662 for the 2005 calendar year and will be $728 for the 2006 calendar year. During 2005, six payments were made to Mr. Evans' spouse under the plan. OTHER BENEFITS The directors are also eligible to participate in the employee benefit programs maintained by Peoples, including life, medical and dental insurance plans, on the same terms as all employees. PERFORMANCE GRAPH The following line graph compares the yearly percentage change in Peoples' cumulative total shareholder return (as measured by dividing (i) the sum of (A) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (B) the difference between the price of Peoples' common shares at the end and the beginning of the measurement period; by (ii) the price of Peoples' common shares at the beginning of the measurement period) against the cumulative return for an index comprised of all domestic common shares traded on the NASDAQ National Market and the NASDAQ Small Cap Market ("NASDAQ Stocks (U.S. Companies)"), and an index comprised of all depository institutions (SIC Code #602) and depository institutions holding companies (SIC Code #671) that are traded on the NASDAQ National Market and the NASDAQ Small Cap Market ("NASDAQ Bank Stocks") for the five-year period ended December 31, 2005. [ACTUAL NUMBERS PLOTTED ON A GRAPH] Peoples NASDAQ STOCK Year Ended Bancorp Inc. (U.S. Companies) NASDAQ Bank Stocks ---------- ------------ ---------------- ------------------ 12/31/2000 $100.00 $100.00 $100.00 12/31/2001 $141.13 $ 79.32 $108.27 12/31/2002 $221.61 $ 54.84 $110.84 12/31/2003 $274.99 $ 81.99 $142.58 12/31/2004 $262.45 $ 89.23 $163.17 12/31/2005 $280.81 $ 91.12 $159.40 Notes: 1. Total return assumes reinvestment of dividends. 2. Fiscal year ending December 31. 3. Return based on $100 invested on December 31, 2000, in Peoples' common shares, an index for NASDAQ Stocks (U. S. Companies), and an index for NASDAQ Bank Stocks. PROPOSAL NUMBER 2: APPROVAL OF PEOPLES BANCORP INC. 2006 EQUITY PLAN General - ------- Upon recommendation by the Compensation Committee, on February 9, 2006, the Board of Directors adopted the Peoples Bancorp Inc. 2006 Equity Plan (the "2006 Plan"), subject to approval by the shareholders of Peoples. The 2006 Plan authorizes the grant or award of (i) Incentive Stock Options; (ii) Nonqualified Stock Options (and together with Incentive Stock Options, the "Options"); (iii) stock appreciation rights ("SARs"); (iv) Restricted Stock; (v) Restricted Performance Stock; (vi) unrestricted Company Stock; and (vii) Performance Units (collectively, the "Awards"). Peoples currently has options outstanding under the 1993 Plan, the 1995 Plan, the 1998 Plan and the 2002 Plan (collectively, the "Predecessor Plans"). No common shares of Peoples ("Company Stock") are available for grant under the 1993 Plan and the 1995 Plan, which have been exhausted and terminated. As of February 13, 2006, (i) options covering _________ shares of Company Stock remained outstanding under the 1993 Plan; (ii) options covering ________ shares of Company Stock remained outstanding under the 1995 Plan; (iii) options covering __________ shares of Company Stock remained outstanding under the 1998 Plan; leaving _____ shares of Company Stock available for new awards under the 1998 Plan, and (iv) options covering _____ shares of Company Stock remained outstanding under the 2002 Plan, leaving _______ shares of Company Stock available for new awards under the 2002 Plan. All aforementioned options covering common shares have been adjusted for the 10 % stock dividend issued on June 28, 2002 and the 5% stock dividend issued on August 29, 2003 and may be subject to further adjustment for future changes in the capitalization of Peoples. The Board of Directors believes it is desirable to continue to have equity-based awards available to be used to recruit new individuals to become employees, or advisors or to serve as directors, and for incentive purposes, where necessary. The 2006 Plan will make shares of Company Stock available for a variety of awards, allowing Peoples to choose the incentives most appropriate to individual circumstances and most likely to benefit Peoples and its shareholders. The 2006 Plan should address the need for equity-based incentive compensation for a number of years. The following summary of the material provisions of the 2006 Plan is qualified in its entirety by reference to the specific provisions of the 2006 Plan, the full text of which is attached to this Proxy Statement as Appendix A. All capitalized terms which are not defined in this summary are defined in the 2006 Plan. Purpose - ------- The purpose of the 2006 Plan is to provide financial incentives for selected Employees, Advisors and Non-Employee Directors, thereby promoting the long-term growth and financial success of Peoples by (i) attracting and retaining Employees, Advisors and Non-Employee Directors of outstanding ability, (ii) strengthening Peoples' capability to develop, maintain, and direct a competent management team, (iii) providing an effective means for selected Employees, Advisors and Non-Employee Directors to acquire and maintain ownership of Company Stock, (iv) motivating Employees to achieve long-range performance goals and objectives, and (v) providing incentive compensation opportunities competitive with peer financial institution holding companies. Effective Date and Expiration of the 2006 Plan - ---------------------------------------------- The 2006 Plan will be effective upon its approval by the shareholders of Peoples. Unless earlier terminated by the Board of Directors, the 2006 Plan will terminate on the tenth anniversary of its effective date. No Award may be made pursuant to the 2006 Plan after its termination date, but Awards made prior to the termination date may extend beyond that date. In addition, no Incentive Stock Options may be granted after February 8, 2016. Administration of the 2006 Plan - ------------------------------- The 2006 Plan is administered by the Compensation Committee (the "Committee") which has the authority to grant Awards to Employees, Advisors and Non-Employee Directors who are members of the board of directors of a subsidiary of Peoples but are not also members of Peoples' Board of Directors ("Subsidiary Directors"). The Board of Directors has the authority to grant Awards to Non-Employee Directors who are members of Peoples' Board of Directors ("Company Directors" and together with the Subsidiary Directors, "Non-Employee Directors"). The Committee, or the Board of Directors, as the case may be, has the full power and authority to interpret and administer the 2006 Plan and to establish and amend rules and regulations for its administration. Any action or decision by the Board of Directors or the Committee shall be final, binding and conclusive with respect to the interpretation of the 2006 Plan and any Award made under it. More specifically, the Committee or the Board of Directors has the authority, in its discretion: o to determine those Employees, Advisors and Non-Employee Directors who will receive an Award; the timing of Awards; the vesting schedule for each Award; and the type of Award to be granted, the number of shares of Company Stock to be subject to each Option and Restricted Stock Award, the value of each Performance Unit and all other terms and conditions of any Award; o to determine and set forth in an award agreement the terms of each Award, including those terms, restrictions, and provisions necessary to cause certain Options to qualify as Incentive Stock Options; o to correct any defect or supply any omission or reconcile any inconsistency in the 2006 Plan or in any award agreement; and o to accelerate (i) the date on which any Option or SAR may be exercised, (ii) the date of termination of the restrictions applicable to a Restricted Stock Award, or (iii) the end of a performance period under a Performance Unit Award, if the Committee or the Board of Directors, as applicable, determines that to do so will be in the best interests of Peoples and the participants in the 2006 Plan. All Awards (i) are subject to the terms and conditions of the 2006 Plan and to such other terms and conditions determined in the sole discretion of the Committee or Board of Directors, as applicable, (ii) need not be uniform among all participants who receive an Award, whether or not similarly situated, (iii) may be granted under two or more provisions of the 2006 Plan, (iv) may be combined in one award agreement, and (v) may contain any combination of Awards granted at one time and on more than one occasion to the same Employee, Advisor or Non-Employee Director. Eligibility and Participation - ----------------------------- All Employees, Advisors and Non-Employee Directors are eligible to participate in the 2006 Plan. For purposes of the 2006 Plan, an "Employee" means an individual who is a common law employee of Peoples or any of our subsidiaries and an "Advisor" is an advisor who renders bona fide services to Peoples and/or one or more of our subsidiaries as an advisory or marketing board member and who is neither an Employee nor a Non-Employee Director, which services are not provided in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for Peoples' securities. Employees may be granted Incentive Stock Options. Employees, Advisors, and Non-Employee Directors may be granted Nonqualified Stock Options, SARs, Restricted Stock, Restricted Performance Stock, unrestricted Company Stock and Performance Units. As of the date of this proxy statement, no determination has been made regarding the identity of the individuals to whom Awards may be granted. Peoples estimates that approximately _____ of its employees and employees of our current subsidiaries will be eligible to receive Awards, including the executive officers of Peoples named in the Summary Compensation Table on page 24. In addition, following the election of four directors at the Annual Meeting, there will be 10 Non-Employee Directors eligible to receive Awards as Company Directors. As of the date of this proxy statement, there were 5 Non-Employee Directors who qualified as Subsidiary Directors. Peoples is unable to reasonably estimate the number of Advisors who will be eligible to receive Awards. The table included under "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS - Grant of Options" at page ___ shows the options granted under the 2002 Plan to the named individuals during the 2005 fiscal year. During the 2005 fiscal year, options covering an aggregate of _____ shares of Company Stock were granted to all current executive officers of Peoples as a group; while options covering an aggregate of _____ shares of Company Stock were granted to all employees, including all current officers who are not executive officers, as a group. As discussed under "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS - Directors' Compensation - Option Grants", pursuant to the terms of the 2002 Plan, each individual then serving as a Company Director receives an annual grant, on the date of each annual meeting of shareholders of Peoples, of options to purchase 1,155 shares of Company Stock (as adjusted for the 10% stock dividend issued on June 28, 2002 and the 5% stock dividend issued on August 29, 2003 and as may be further adjusted for future changes in the capitalization of Peoples). During the 2005 fiscal year, options covering an aggregate of ______ shares of Company Stock were granted to all current Company Directors who are not executive officers as a group. Because Awards will be granted by the Committee to all participants other than Company Directors, and by the Board of Directors to Company Directors, based on a subjective determination of the relative current and future contribution that each individual has made or may make to the long-term welfare of Peoples and our subsidiaries, past awards under the 1993 Plan, the 1995 Plan, the 1998 Plan and/or the 2002 Plan may not be reflective of future Awards. Common Shares Available Under the 2006 Plan - ------------------------------------------- Subject to certain adjustments as described below under "Adjustments," the maximum number of shares of Company Stock that may be issued to participants as Awards will be equal to 500,000 (the "Share Authorization") and may consist of (i) shares of Company Stock previously issued and outstanding and reacquired by Peoples or (ii) authorized but unissued shares of Company Stock not reserved for any other purpose. The following shares of Company Stock will not be counted against the aforementioned Share Authorization: o the number of shares of Company Stock that are subject to an Option or any other Award which is equal to the number of shares of Company Stock tendered by a participant to Peoples in payment of the option price or exercise price of such Option or other Award, as applicable; o the shares of Company Stock subject to an Award which for any reason terminates by expiration, forfeiture, cancellation or otherwise without having been exercised or paid; o the shares of Company Stock withheld from any Award to satisfy a participant's tax withholding obligation or, if applicable, to pay the option price or exercise price of an Option or any other Award; o if a SAR is settled in whole or in part by the issuance of shares of Company Stock, the number of shares of Company Stock which represents the difference between (a) the number of shares of Company Stock which remain subject to such SAR on the date of such settlement and (b) the number of shares of Company Stock actually issued upon settlement of such SAR; or o the number of shares of Company Stock subject to an Option which is equal to the number of shares of Company Stock acquired by Peoples on the open market using the cash proceeds received by it from the exercise of such Option; provided, however, that such Company Stock shall in no event be greater than the number which is determined by dividing (a) the amount of cash proceeds received by Peoples from the participant upon the exercise of such Option by (b) the fair market value of a share of Company Stock on the date of exercise of such Option. If the 2006 Plan is approved by Peoples' shareholders at the Annual Meeting, no further awards will be made under either of the 1998 Plan or the 2002 Plan and awards outstanding under the Predecessor Plans will remain in effect in accordance with their respective terms. Limitation on Awards - -------------------- In addition to the overall Share Authorization under the 2006 Plan, the maximum number of shares of Company Stock for which Options or SARs may be granted to any participant in any one fiscal year is 500,000, subject to adjustment under the terms of the 2006 Plan as described below under "Adjustment." The maximum aggregate dollar value of, and the maximum number of shares of Company Stock subject to, Restricted Stock and Performance Units awarded to any Employee or Advisor with respect to a performance period or restriction period may not exceed $500,000 and 500,000 (subject to adjustment under the terms of the 2006 Plan as described below under "Adjustment") for each fiscal year included in such performance period or restriction period. Options - ------- Nonqualified Stock Options may be granted to any participant under the 2006 Plan. However, Incentive Stock Options may be granted only to Employees of Peoples or of any parent or subsidiary corporation as permitted under the applicable provisions of the Internal Revenue Code. Additionally, grants of Incentive Stock Options will be subject to the restrictions and conditions set forth in the relevant sections of the Internal Revenue Code, including the $100,000 limitation on Incentive Stock Options first becoming exercisable in a calendar year and limitations for employees possessing more than 10% of the total combined voting power of all classes of stock of Peoples or of its parent or subsidiary corporation. Options may be granted for terms of up to, but not exceeding, ten years from the date of grant. Each Option grant is to be evidenced by an award agreement that specifies whether the Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option, the exercise price of the Option, the duration of the Option, the number of shares of Company Stock to which the Option pertains, the conditions upon which the Option will vest and become exercisable, and such other provisions as the Committee or the Board of Directors determines. The Committee or the Board of Directors, as applicable, will determine the exercise price of each Option; however, the exercise price must be at least equal to 100% of the fair market value of the underlying Company Stock as determined on the grant date. For purposes of the 2006 Plan, the "fair market value" of a share of Company Stock on a particular date will generally be the closing price of a share of Company Stock on that particular date on NASDAQ (the "fair market value"). On February 13, 2006, the fair market value of a share of Company Stock was $27.94. The Committee or the Board of Directors may not amend, regrant, or take any action that has the effect of "repricing" an Option under applicable NASDAQ Rules. Once an Option vests, the Option may be exercised at any time during the term of the Option in such manner as specified in the award agreement and upon proper notice to Peoples as specified in the 2006 Plan, but only if as provided in the 2006 Plan, a participant is then, and continually (except for sick leave, military service, or other approved leave of absence) after the grant of the Option has been, an Employee, Advisor, or Non-Employee Director. The exercise price of any Option must be paid in full at the time of exercise (i) in cash; (ii) in previously acquired shares of Company Stock having a fair market value equal to the exercise price on the date of exercise (or the immediately preceding date if the date of exercise is not a trading day); (iii) in a combination of cash and shares; or (iv) by a cashless (broker-assisted) exercise. The exercise price must be fully paid before Peoples will issue or transfer the designated shares of Company Stock. A participant has no shareholder rights with respect to the shares of Company Stock covered by the Option grant until the issuance of such shares to the participant. Notwithstanding the foregoing, the Committee may in its discretion prescribe additional conditions, restrictions or terms on the vesting of an Option, including the full or partial attainment of performance goals. After the Option vests, the Option may be exercised at any time during the term of the Option, in whole or in installments, as specified in the related award agreement. Subject to the terms of the 2006 Plan, the duration of each Option may not be more than ten years from the date of grant. During the period in which the 2006 Plan remains in effect, the maximum aggregate number of shares of Company Stock which may be subject to options granted in any one fiscal year to any one participant will be 500,000, subject to adjustment as described below under "Adjustments." Stock Appreciation Rights (SARs) - -------------------------------- The Committee may award SARs to any participant under the 2006 Plan other than Company Directors. The Board of Directors has the authority to grant SARs to Company Directors. A SAR represents the right to receive payment of an amount equal to (i) the amount by which the fair market value of one share of Company Stock on the trading day immediately preceding the date of exercise of the SAR exceeds the exercise price multiplied by (ii) the number of shares of Company Stock covered by the SAR. An award of a SAR granted under the 2006 Plan will be subject to the terms and conditions prescribed by the Committee or the Board of Directors in an award agreement, which will specify the grant price, the term of the SAR and such other provisions as the Committee or the Board of Directors determines. The shares must be valued at their fair market value on the date of exercise. The Committee may prescribe conditions and limitations on the exercise of any SAR. At the discretion of the Committee or the Board of Directors, the payment upon SAR exercise may be made in cash, shares of Company Stock or a combination thereof, or in any other manner set forth in the award agreement. Each SAR will expire on a date set by the Committee or the Board of Directors at the time of the grant. A SAR is exercisable only by written notice to the Chief Financial Officer of Peoples or the Secretary of the Committee, or his or her designee. To the extent not previously exercised, all SARs will automatically be exercised on the last trading day prior to their expiration, so long as the fair market value of a share of Company Stock exceeds the exercise price, but not if the participant gives proper and timely notice to the contrary to Peoples. During the period in which the 2006 Plan remains in effect, the maximum aggregate number of shares of Company Stock which may be subject to SARs granted in any one fiscal year to any one participant will be 500,000, subject to adjustment as described below under "Adjustments." Restricted Stock and Restricted Performance Stock - ------------------------------------------------- The Committee may award Restricted Stock and/or Restricted Performance Stock to any participant under the 2006 Plan other than Company Directors. The Board of Directors has the authority to grant Restricted Stock and/or Restricted Performance Stock to Company Directors. An award of Restricted Stock granted under the 2006 Plan will be subject to the terms and conditions prescribed by the Committee or the Board of Directors in an award agreement. Each award agreement will specify the period(s) of restriction, the number of shares of Common Stock covered by the Restricted Stock Award, and such other provisions as the Committee or the Board of Directors determines. Among other things, the Committee or the Board of Directors may impose different restriction periods for each Restricted Stock Award or conditions upon the Award including the attainment of performance goals (making the Award a grant of Restricted Performance Stock). Unless otherwise determined by the Committee or the Board of Directors and set forth in a participant's award agreement, the participant will be entitled to receive dividends during the restriction period, will have the right to vote such Restricted Stock and will have all other shareholder rights, with the exception that (i) if any dividends are paid in shares of Company Stock, those shares will be subject to the same restrictions as the shares of Restricted Stock with respect to which they were issued, (ii) the participant will not be entitled to delivery of any stock certificate evidencing the Company Stock underlying the Restricted Stock Award during the restriction period, (iii) Peoples will retain custody of the Restricted Stock during the restriction period, and (iv) a breach of a restriction or a breach of the terms and conditions established by the Committee or the Board of Directors pursuant to the Restricted Stock Award will cause a forfeiture of the Restricted Stock Award. Under the 2006 Plan, the term "Restricted Performance Stock" means Company Stock subject to performance goals and grants of Restricted Performance Stock are subject to the same terms and conditions specified for grants of Restricted Stock. During the period in which the 2006 Plan remains in effect, the maximum aggregate dollar value of, and the maximum number of shares of Company Stock which may be subject to Restricted Stock or Restricted Performance Stock granted in any one fiscal year to any one participant will be $500,000 and 500,000 (subject to adjustment as described below under "Adjustment"), respectively. Unrestricted Company Stock - -------------------------- The Committee may grant unrestricted Company Stock to any participant under the 2006 Plan other than Company Directors on such terms and conditions as the Committee determines, as evidenced by an award agreement. The Board of Directors has the same authority to grant unrestricted Company Stock to Company Directors. Performance Units - ----------------- The Committee may grant Performance Units to any participant under the 2006 Plan other than Company Directors. The Board of Directors has the same authority to grant Performance Units to Company Directors. Each Performance Unit represents the right of a participant to receive an amount equal to the value of the Performance Unit, established by the Committee or the Board of Directors at the time the Award is granted. The Committee or the Board of Directors will determine the maximum dollar value of each Performance Unit and, in the discretion of the Committee or the Board of Directors, the measure of a Performance Unit may be equal to the fair market value of one share of Company Stock. In each award agreement, the Committee or the Board of Directors will establish (i) the performance period during which performance will be measured and (ii) the performance goals for a participant for a particular performance period based upon various performance measures (described below under "General Performance Goals"). Further, the Committee or the Board of Directors will set performance goals in its discretion which will, depending on the extent to which they are met, determine the value and/or number of Performance Units that will be paid out to the participant. After the applicable performance period has ended, the holder of Performance Units will be entitled to receive payout on the value and number of Performance Units earned during such performance period to the extent performance goals have been met. In determining the number of Performance Units to be granted to any participant, the Committee or the Board of Directors will take into account the participant's responsibility level, performance, potential, cash compensation level, other incentive awards, and such other considerations as it deems appropriate. Awards may be paid in cash or shares of Company Stock, or any combination thereof, as determined by the Committee or the Board of Directors. Payment may be made in a lump sum or in installments and will be subject to such other terms and conditions as will be determined by the Committee or the Board of Directors. During the period in which the 2006 Plan remains in effect, the maximum aggregate dollar value of, and the maximum number of shares of Company Stock which may be subject to, Performance Units granted in any one fiscal year to any one participant will be $500,000 and 500,000 (subject to adjustment as described below under "Adjustment"), respectively. General Performance Goals - ------------------------- The performance goals, upon which the payment or vesting of an Award to any Employee that is intended to qualify as "performance-based compensation" under Section 162(m) of the Internal Revenue Code may be based, will be limited to the following performance measures: (i) earnings per share (actual or targeted growth); (ii) net income after capital costs; (iii) net income (before or after taxes); (iv) return measures (including, but not limited to, return on average assets, risk-adjusted return on capital, or return on average equity); (v) efficiency ratio; (vi) full-time equivalency control; (vii) stock price (including, but not limited to, growth measures and total shareholder return); (viii) noninterest income compared to net interest income ratio; (ix) expense targets; (x) operating efficiency; (xi) economic value added or EVA(R); (xii) credit quality measures; (xiii) customer satisfaction measures; (xiv) loan growth; (xv) deposit growth; (xvi) net interest margin; (xvii) fee income; and (xviii) operating expense. For Awards not intended to comply with Section 162(m) of the Internal Revenue Code, the Committee or the Board of Directors may establish performance goals based upon the above enumerated list of performance measures or upon any other performance the Committee or the Board of Directors deems appropriate. In either case, the Committee or the Board of Directors must establish performance goals in writing for each performance period no later than the earlier of (i) 90 days after the beginning of the performance period or (ii) the expiration of 25% of the performance period. Except as otherwise provided in the 2006 Plan or an award agreement, as of the end of each performance period, the Committee or the Board of Directors must certify in writing the extent to which a participant has or has not met the participant's performance goal. To the extent permitted under Section 162(m) of the Internal Revenue Code, if applicable, the Committee or the Board of Directors may disregard or offset the effect of any special charges or gains or cumulative effect of an accounting change in determining the attainment of performance goals. Additionally, to the extent permitted by the Internal Revenue Code, if applicable, the Committee or the Board of Directors must make (i) appropriate adjustments to performance criteria to reflect the effect on any performance criteria of any stock dividend or stock split affecting Company Stock, recapitalization, merger, consolidation, combination, spin-off, distribution of assets to shareholders, exchange of shares or similar corporate change and (ii) similar adjustments to any portion of performance criteria that is not based on Company Stock but which is affected by an event having an effect similar to those just described. Furthermore, any performance measure in the above enumerated list may be used to measure performance with respect to solely Peoples and/or a subsidiary, or relatively between Peoples and/or any subsidiary and one or more unrelated entities. In addition, the Committee or the Board of Directors can apply different performance measures (i) to different participants or groups of participants, and (ii) to results achieved by solely Peoples or any subsidiary, a combination of the two, or any combination of business units within the two. Change in Control - ----------------- Under the 2006 Plan, "change in control" means a change in the ownership or effective control of Peoples or in the ownership of a substantial portion of the assets of Peoples (within the meaning of Section 409A of the Internal Revenue Code). In the event of a change in control where the surviving entity is not Peoples and the surviving entity (the "Acquiror") does not honor or substitute equivalent Awards for outstanding grants of Options, SARs, Restricted Stock, Restricted Performance Stock, or Performance Units, all such Awards will become immediately and fully exercisable or in the case of Restricted Stock, become fully vested and all restrictions will immediately lapse. In the case of Restricted Performance Stock and Performance Units, all outstanding Awards will be deemed to have been fully earned at the maximum payout based on target performance being attained as of the effective date of the change in control. Additionally, the Board of Directors or its designee may, in its sole discretion, provide for a cash payment to be made to each participant for the outstanding Options, Restricted Stock, Restricted Performance Stock, SARs or Performance Units upon the consummation of the change in control, determined on the basis of the fair market value that would be received in such change in control by the holders of Peoples' securities relating to such Awards. Notwithstanding the foregoing, any Option intended to be an Incentive Stock Option under Section 422 of the Internal Revenue Code will be adjusted in a manner to preserve such status. In the event of a change in control where Peoples is the surviving entity, or the Acquiror assumes the outstanding Options, SARs, Restricted Stock, Restricted Performance Stock or Performance Units or substitutes equivalent equity awards relating to the securities of such Acquiror or its affiliates, then all such Awards or substitutes will remain outstanding and be governed by their respective terms and the provisions of the 2006 Plan. In such change in control scenario: o if a participant terminates without cause within 24 months following the change in control, and Peoples is the surviving corporation or the Acquiror assumes the outstanding Awards, then all of the participant's outstanding Options, SARs, Restricted Stock, Restricted Performance Stock, or Performance Units will become immediately and fully exercisable or, in the case of Restricted Stock, become immediately and fully vested. In the case of Restricted Performance Stock and Performance Units, all of the participant's outstanding Awards will be deemed to have been fully earned at the maximum payout based on target performance being attained. In the case of outstanding Options or SARs, the participant may exercise these Options or SARs at any time within one year after such termination, except that an Option or SAR will not be exercisable on any date beyond the expiration date of such Option or SAR or, (i) if the participant is eligible for retirement on the date of such termination or (ii) dies after such termination, the exercise of all outstanding Options or SARs must be in accordance with the 2006 Plan's general termination provisions related to retirement (as further described below in "Termination"); and o if a participant is terminated for cause within 24 months following such change in control and Peoples is the surviving corporation or the Acquiror assumes the outstanding Awards, then any Options or SARs of such participant will expire, any non-vested Restricted Stock, Restricted Performance Stock or Performance Units will be forfeited, and any rights under such Awards will terminate immediately. Subject to all of the foregoing conditions, any outstanding Option or SAR that vests in accordance with a change in control will be governed by the 2006 Plan's general termination provisions (see "Termination" below). Furthermore, Peoples does not have the power to amend or terminate any provision regarding change in control if any such amendment or termination would adversely affect the rights of any participant under the 2006 Plan. Tax Withholding - --------------- Peoples has the power and the right to deduct or withhold, or require a participant to remit to Peoples, the minimum statutory amount to satisfy federal, state and local taxes required by law or regulation to be withheld with respect to any taxable event arising as a result of the 2006 Plan. With respect to withholding required upon any taxable event arising as a result of an Award granted under the 2006 Plan, a participant may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having Peoples withhold shares of Company Stock having a fair market value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction. All such elections will be irrevocable, made in writing and signed by the participant, and will be subject to any restrictions or limitations that the Committee or the Board of Directors, in its sole discretion, deems appropriate. Termination - ----------- Subject to the 2006 Plan and individual award agreements, the following summarizes the effect of various termination events on Awards to participants: o Termination due to death, disability or retirement: All outstanding Awards will become fully vested and, if applicable, exercisable; o Termination due to any reason other than death, disability or retirement: Any unvested or unexercisable Awards on the date of termination will immediately terminate and be of no further force and effect; o Termination for any reason other than death, disability, discharge for cause, or retirement: Any outstanding Options or SARs may be exercised at any time within three months after such termination up to the number of shares of Company Stock covered by such Options or SARs which are exercisable at the date of such termination; provided, however, that no Option or SAR will be exercisable on any date beyond the expiration date of such Option or SAR; o Termination for cause: Any Options or SARs, whether or not then exercisable, will expire and any rights thereunder will terminate immediately, and any non-vested Restricted Stock Awards will immediately be forfeited and any rights thereunder will terminate; o Termination due to death: Any Options or SARs then exercisable may be exercised by the participant's personal representative at any time before the earlier of (i) one year after the participant's death or (ii) the expiration date of the Award; o Termination due to disability or retirement: Any Options or SARs then exercisable may be exercised by the participant at any time before the earlier of (i) one year after the date of termination or (ii) the expiration date of the Award; provided, however, that an Option which is intended to qualify as an Incentive Stock Option will only be treated as such to the extent it complies with the requirements of Section 422 of the Internal Revenue Code; o Termination due to retirement, but death prior to the exercise of all of the participant's outstanding Options or SARs: Such Options or SARs may be exercised by the Participant's personal representative at any time before the earlier of (i) one year after the participant's death or (ii) the expiration date of the Award; provided, however, that, an Option which is intended to qualify as an Incentive Stock Option will only be treated as such to the extent it complies with the requirements of Section 422 of the Code; o Termination at any time during an applicable performance period: Awards of Performance Units will terminate for all purposes, except as may otherwise be determined by the Committee or the Board of Directors; and o Termination at any time following the end of an applicable performance period, but prior to full payment: Awards of Performance Units will terminate. Adjustments - ----------- In the event of any reorganization, recapitalization, reclassification, stock split, stock dividend, distribution, combination of shares, merger, consolidation, rights offering, or any other changes in the corporate structure or shares of Peoples, appropriate adjustments may be made by the Committee or the Board of Directors, as the case may be, (or if Peoples is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) in the aggregate number and kind of shares subject to the 2006 Plan, and the number and kind of shares and the Option price per share subject to outstanding Options or which may be issued under outstanding Restricted Stock Awards or pursuant to unrestricted Company Stock Awards. Subject to the 2006 Plan, appropriate adjustments may also be made by the Committee or the Board of Directors, as the case may be, in the terms of any Awards to reflect such changes and to modify any other terms of outstanding Awards on an equitable basis. Any such adjustments made by the Committee or the Board of Directors will be conclusive and binding for all purposes under the 2006 Plan. Amendment, Suspension, and Termination of the 2006 Plan - ------------------------------------------------------- The Board of Directors, in its discretion, may suspend or terminate the 2006 Plan or any portion of the 2006 Plan at any time and may amend the 2006 Plan from time to time as needed (i) in order that any Awards thereunder shall conform to any change in applicable laws or regulations, or (ii) in any respect deemed by the Board of Directors to be in the best interests of Peoples. Without shareholder approval, no amendment may: (i) increase the number of shares of Company Stock which may be issued under the 2006 Plan (except as provided above in "Adjustments"); (ii) expand the types of awards available to participants under the 2006 Plan; (iii) materially expand the class of Employees and/or Advisors eligible to participate in the 2006 Plan; (iv) materially change the method of determining the exercise price of Options; (v) delete or limit the provision prohibiting the repricing of Options; or (vi) extend the termination date of the 2006 Plan. Additionally, to the extent that shareholder approval is required to satisfy applicable law, regulation or any securities stock exchange, market or other quotation system on or through which the Company Stock is listed or traded, such amendment may not be made without the requisite approval. No termination, amendment or suspension of the 2006 Plan by the Board of Directors may adversely affect in any material way any outstanding Awards without the consent of the affected participant. Further, the Committee may amend or modify any outstanding Options, SARs, Restricted Stock Awards, or Performance Unit Awards in any manner to the extent that the 2006 Plan has provided the initial authority to the Committee to grant such Awards as so modified or amended. Subject to the above conditions, the Board of Directors can amend the 2006 Plan and any award agreements without any additional consideration to affected participants to the extent necessary to comply with, or avoid penalties under, Section 409A of the Internal Revenue Code, even if those amendments reduce, restrict or eliminate rights granted prior to such amendments. U.S. Federal Income Tax Consequences - ------------------------------------ The following is a brief summary of the general U.S. federal income and employment tax consequences relating to the 2006 Plan. This summary is based on U.S. federal tax laws and regulations in effect on the date of this proxy statement and does not purport to be a complete description of the U.S. federal income or employment tax laws. SECTION 409A OF THE INTERNAL REVENUE CODE In 2004, the Internal Revenue Code was amended to add Section 409A, which creates new rules for amounts deferred under "nonqualified deferred compensation plans." Section 409A includes a broad definition of nonqualified deferred compensation plans which may apply to various types of Awards granted under the 2006 Plan. The proceeds of any grant that is subject to Section 409A are subject to a 20% excise tax if those proceeds are distributed before the recipient separates from service or before the occurrence of other specified events, such as death, disability or a change of control, all as defined in Section 409A. The Internal Revenue Service (the "IRS") has not finalized regulations describing the effect of Section 409A on the types of Awards issuable pursuant to the 2006 Plan. The Committee intends to administer the 2006 Plan to avoid or minimize the effect of Section 409A and, if necessary, will amend the 2006 Plan to comply with Section 409A before December 31, 2006 (or a later date specified by the IRS). INCENTIVE STOCK OPTIONS Incentive Stock Options are intended to qualify for special treatment available under Section 422 of the Internal Revenue Code. A participant will not recognize any income when an Incentive Stock Option is granted or exercised and Peoples will not receive a deduction at either of those times. Also, Incentive Stock Options are not subject to employment taxes. If a participant acquires Company Stock by exercising an Incentive Stock Option and continues to hold that Company Stock for one year or, if longer, until the second anniversary of the grant date (each of these periods is called an "ISO Holding Period"), the amount the participant receives when he or she disposes of the Company Stock minus the exercise price will be taxable at long-term capital gain or loss rates (this is referred to as a "qualifying disposition"), depending on whether the amount the participant receives when he or she disposes of the Company Stock is larger or smaller than the exercise price he or she paid. Upon a qualifying disposition, Peoples is not entitled to a deduction. If a participant disposes of the Company Stock before the end of either ISO Holding Period (this is referred to as a "disqualifying disposition"), the participant will recognize compensation income equal to the excess, if any, of (1) the fair market value of the Company Stock on the date the Incentive Stock Option was exercised, or, if less, the amount received on the disposition, over (2) the exercise price. Peoples will be entitled to a deduction equal to the income that the participant recognizes. The participant's additional gain will be taxable at long-term or short-term capital gain rates (depending on whether he or she held the Company Stock for more than one year). If a participant uses Company Stock acquired by exercising an Incentive Stock Option ("Delivered Shares") to pay the exercise price of another Incentive Stock Option, the participant's payment will be treated as a disqualifying disposition of the Delivered Shares if the Delivered Shares are used to exercise an Incentive Stock Options before the end of the ISO Holding Periods of the Delivered Shares. This type of disposition generally will cause the participant to recognize ordinary income on the Delivered Shares equal to the difference between the exercise price of the Delivered Shares and the fair market value of the Delivered Shares at exercise. Peoples will be entitled to a deduction equal to the ordinary income that the participant recognizes. If a participant exercises his or her Incentive Stock Option using (1) Company Stock that was not purchased pursuant to an Incentive Stock Option or (2) Delivered Shares that were purchased by exercising an Incentive Stock Option that satisfied the ISO Holding Periods, the participant generally will not recognize income, gain or loss in connection with the exercise. If a participant exercises his or her Incentive Stock Option using only Delivered Shares to pay the exercise price, the participant's basis in the same number of new shares of Company Stock will be the same as his or her basis in the Delivered Shares plus the taxable income, if any, that the participant recognized on the delivery of the Delivered Shares. Any additional new shares of Company Stock will have a zero basis. The rules that generally apply to Incentive Stock Options do not apply when calculating any alternative minimum tax liability. When an Incentive Stock Option is exercised, a participant must treat the excess, if any, of the fair market value of the Company Stock on the date of exercise over the exercise price as an item of adjustment for purposes of the alternative minimum tax. The rules affecting the application of the alternative minimum tax are complex and their effect depends on individual circumstances, including whether a participant has items of adjustment other than those derived from Incentive Stock Options. NONQUALIFIED STOCK OPTIONS Nonqualified Stock Options do not receive the special tax treatment afforded to Incentive Stock Options under the Internal Revenue Code, although a participant will not recognize any income when a Nonqualified Stock Option is granted and Peoples will not receive a deduction at that time. However, unlike an Incentive Stock Option, when a Nonqualified Stock Option is exercised, a participant will recognize ordinary income equal to the excess, if any, of the fair market value of the Company Stock that the participant purchased on the date of exercise over the exercise price. Also, unlike an Incentive Stock Option, this same amount will be subject to employment taxes, including social security and Medicare taxes. If a participant uses Company Stock or a combination of Company Stock and cash to pay the exercise price of a Nonqualified Stock Option, he or she will have ordinary income equal to the value of the excess of the number of shares of Company Stock that the participant purchases over the number he or she surrenders, less any cash the participant uses to pay the exercise price. This same amount will be subject to employment taxes, including social security and Medicare taxes. When a Nonqualified Stock Option is exercised, Peoples will be entitled to a deduction equal to the ordinary income that the participant recognizes. If the amount a participant receives when he or she disposes of the Company Stock that he or she acquired by exercising a Nonqualified Stock Option is larger than the exercise price the participant paid, the excess will be treated as a long-term or short-term capital gain, depending on whether the participant held the Company Stock for more than one year after he or she acquired the Company Stock by exercising the Nonqualified Stock Option. But, if the amount a participant receives when he or she disposes of the Company Stock that the participant acquired by exercising a Nonqualified Stock Option is less than the exercise price he or she paid, the difference will be treated as a long-term or short-term capital loss, depending on whether the participant held the Company Stock for more than one year after he or she acquired the Company Stock by exercising the Nonqualified Stock Option. SARs A participant will not recognize any income when a SAR is granted and Peoples will not receive a deduction at that time. When a SAR is exercised, a participant will recognize ordinary income equal to the cash and/or fair market value of the Company Stock the participant received upon exercise. Peoples will be entitled to a deduction equal to the ordinary income that the participant recognizes. Also, the same amount will be subject to employment taxes, including social security and Medicare taxes. If the amount a participant receives when he or she disposes of any Company Stock acquired upon the exercise of a SAR is larger than the value of the shares of Company Stock when the SAR was exercised, the excess will be treated as a long-term or short-term capital gain, depending on whether the participant held the Company Stock for more than one year after the SAR was exercised. But, if the amount the participant receives when he or she disposes of the Company Stock is less than the value of the Company Stock when the SAR was exercised, the difference will be treated as a long-term or short-term capital loss, depending on whether the participant held the Company Stock for more than one year after the SAR was exercised. RESTRICTED STOCK Unless a participant makes an election under Section 83(b) of the Internal Revenue Code, the participant will not recognize taxable income when Restricted Stock is granted and Peoples will not receive a deduction at that time. Instead, a participant will recognize ordinary income when the shares of Restricted Stock vest (i.e., when the participant can no longer lose them) equal to the fair market value of the Company Stock he or she receives when the restrictions lapse, less any consideration paid for the Restricted Stock, and Peoples generally will be entitled to a deduction equal to the income that the participant recognizes. Also, the same amount will be subject to employment taxes, including social security and Medicare taxes. If the amount a participant receives when he or she disposes of these shares is larger than the value of the shares when the Restricted Stock vested, the excess will be treated as a long-term or short-term capital gain, depending on whether the participant held the shares for more than one year after the Restricted Stock vested. But, if the amount the participant receives when he or she disposes of these shares is less than the value of the shares when the Restricted Stock vested, the difference will be treated as a long-term or short-term capital loss, depending on whether the participant held the shares for more than one year after the Restricted Stock vested. If a participant makes a Section 83(b) election, the participant will recognize ordinary income on the grant date equal to the fair market value of the shares of Restricted Stock on the grant date, and Peoples will be entitled to a deduction equal to the income that the participant recognizes at that time. Also, the same amount will be subject to employment taxes, including social security and Medicare taxes. However, the participant will not recognize income when (and if) the restrictions lapse. If a participant earns the shares, any appreciation between the grant date and the date the participant disposes of the shares will be treated as a long-term or short-term capital gain, depending on whether he or she held the shares for more than one year after the grant date. But, if the amount the participant receives when he or she disposes of these shares is less than the value of the shares on the grant date, the difference will be treated as a long-term or short-term capital loss, depending on whether he or she held the shares for more than one year after the grant date. Also, if a participant forfeits his or her Restricted Stock, the participant cannot take a tax deduction in connection with that forfeiture. RESTRICTED PERFORMANCE STOCK AND PERFORMANCE UNITS A participant will not recognize taxable income when Peoples grants the participant Restricted Performance Stock and/or Performance Units and the Peoples will not receive a deduction at that time. However, if the participant satisfies the conditions imposed on the Award, he or she will recognize ordinary income equal to the cash or the fair market value of the Company Stock he or she receives at the time of delivery. Also, the same amount will be subject to employment taxes, including social security and Medicare taxes. Peoples generally will be entitled to a deduction equal to the income that the participant recognizes. If the amount a participant receives when he or she disposes of the Company Stock acquired upon the settlement of a Restricted Performance Stock or Performance Unit Award is larger than the value of the Company Stock when the participant received them, the excess will be treated as a long-term or short-term capital gain, depending on whether the participant held the shares for more than one year after they were issued. But, if the amount the participant receives when he or she disposes of these shares is less than the value of the shares when they were issued, the difference will be treated as a long-term or short-term capital loss, depending on whether the participant held the shares for more than one year after they were issued. UNRESTRICTED COMPANY STOCK Upon an issuance of unrestricted Company Stock, a participant will recognize taxable income equal to the fair market value of the shares issued and Peoples will receive a deduction in the same amount at that time. ANY U.S. FEDERAL TAX ADVICE CONTAINED IN THE FOREGOING IS NOT INTENDED OR WRITTEN BY THE PREPARER OF SUCH ADVICE TO BE USED, AND IT CANNOT BE USED BY THE RECIPIENT, FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THE RECIPIENT. THIS DISCLOSURE IS INTENDED TO SATISFY U.S. TREASURY DEPARTMENT REGULATIONS. Other Matters - ------------- The 2006 Plan is intended to comply with Section 162(m) of the Internal Revenue Code with respect to 2006 Plan Awards granted to Employees who are or who may become a "covered employee" as defined in Section 162(m). Peoples is seeking shareholder approval of the 2006 Plan in order to satisfy the shareholder approval requirements of applicable NASDAQ Rules as well as those under Section 162(m) of the Internal Revenue Code. If shareholder approval of the 2006 Plan is not obtained, the 2006 Plan will be null and void. Recommendation and Vote - ----------------------- The affirmative vote of the holders of a majority of shares of Company Stock that are voted on the proposal to approve the 2006 Plan is necessary to approve the 2006 Plan. Broker non-votes will not be treated as votes cast. Abstentions will be treated as votes cast and will have the effect of a vote "AGAINST" the proposal. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE 2006 PLAN. PROPOSAL NUMBER 3: ADOPTION OF AMENDMENTS TO SECTIONS 2.06, 2.07, 3.01 AND 3.04 OF THE CODE OF REGULATIONS Proposal - -------- Under Sections 2.06 and 2.07 of Peoples' Code of Regulations as presently in effect, the Leadership Director is not granted authority to call or provide notice of meetings of the Board of Directors. Under Section 3.01 of Peoples' Code of Regulations as presently in effect, the directors are to elect a Leadership Director if the Chairman of the Board is the Chief Executive Officer or the President of Peoples. Section 3.04 of Peoples' Code of Regulations outlines the duties of the Leadership Director. The Board of Directors believes that it is important to clarify the role of the Leadership Director in providing a bridge between Peoples' independent directors and management when the Chairman of the Board does not qualify as an independent director, whatever the reason. The proposed amendments to Sections 2.06 and 2.07 of the Code of Regulations would permit the Leadership Director to call meetings of Peoples' directors and provide notice of director meetings. The proposed amendment to Section 3.01 of the Code of Regulations would provide that if the Chairman of the Board is the Chief Executive Officer or the President of Peoples or otherwise does not qualify as an independent director, the directors shall elect a Leadership Director. The proposed amendment to Section 3.04 of the Code of Regulations would clarify that the role of the Leadership Director, if any, would be to: o preside at all executive sessions of the independent directors of Peoples and, in the absence of the Chairman of the Board, preside as chairman of a meeting of the Board of Directors; o serve as Chairman of the Governance and Nominating Committee of the Board of Directors; and o perform such other duties as may be assigned, from time to time, by the Board of Directors or by the independent directors to the Leadership Director. Peoples' Board of Directors has unanimously approved, and recommends that shareholders adopt, the proposed amendments to Sections 2.06, 2.07, 3.01 and 3.04 of the Code of Regulations to clarify the role of the Leadership Director. The text of Section 2.06, as amended, would read as follows: Section 2.06. Meetings. A meeting of the directors shall be held immediately following the adjournment of each annual meeting of shareholders at which directors are elected, and notice of such meeting need not be given. The directors shall hold such other meetings as may from time to time be called, and such other meetings of directors may be called only by the Chairman of the Board, the Leadership Director, the President, or any two directors. All meetings of directors shall be held at the principal office of the corporation in Marietta or at such other place within or without the State of Ohio as the directors may from time to time determine by a resolution. Meetings of the directors may be held through any communications equipment if all persons participating can hear each other and participation in a meeting pursuant to this provision shall constitute presence at such meeting. The text of Section 2.07, as amended, would read as follows: Section 2.07. Notice of Meetings. Notice of the place, if any, and time of each meeting of directors for which such notice is required by law, the Articles, the Regulations or the By-Laws shall be given to each of the directors by at least one of the following methods: (A) In a writing mailed or sent by overnight delivery service, not less than two days before such meeting and addressed to the residence or usual place of business of a director, as such address appears on the records of the corporation; or (B) By personal delivery or by telegram, cablegram, telephone or any other means of communication authorized by the director, not later than the day before the date on which such meeting is to be held. Notice given to a director by any one of the methods specified in the Regulations shall be sufficient, and the method of giving notice to all directors need not be uniform. Notice of any meeting of directors may be given only by the Chairman of the Board, the Leadership Director, the President or the Secretary of the corporation. Any such notice need not specify the purpose or purposes of the meeting. Notice of adjournment of a meeting of directors need not be given if the time and place to which it is adjourned are fixed and announced at such meeting. The text of Section 3.01, as amended, would read as follows: Section 3.01. Officers. The officers of the corporation to be elected by the directors shall be a Chairman of the Board, a Chief Executive Officer, a President, one or more Executive Vice Presidents, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers and assistant officers as the directors may from time to time elect. If the Chairman of the Board is the Chief Executive Officer or the President of the corporation or otherwise does not qualify as an independent director, the directors shall elect a Leadership Director. Any person holding the office of Chairman of the Board, Leadership Director, Chief Executive Officer or President must be a director of the corporation. The other officers of the corporation may or may not be directors of the corporation. Officers need not be shareholders of the corporation unless they are also directors of the corporation, and may be paid such compensation as the board of directors (or a committee thereof) may determine. Any two or more offices may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law, the Articles, the Regulations or the By-Laws to be executed, acknowledged or verified by two or more officers. The text of Section 3.04, as amended, would read as follows: Section 3.04. Duties of Leadership Director. If the Chairman of the Board is the Chief Executive Officer or the President of the corporation or otherwise does not qualify as an independent director, the directors shall elect a Leadership Director. The Leadership Director, if any shall be elected, shall preside at all executive sessions of the independent directors of the corporation and, in the absence of the Chairman of the Board, shall preside as chairman of meetings of the directors of the corporation. The Leadership Director, if any shall be elected, shall serve as Chairman of the Governance and Nominating Committee of the board of directors of the corporation (or of the committee of the board of directors performing similar functions). The Leadership Director, if any shall be elected, shall perform such other duties and exercise such other powers as may be assigned, from time to time, by the board of directors or the independent directors to the Leadership Director. Recommendation and Vote - ----------------------- The affirmative vote of the holders of common shares entitling them to exercise not less than a majority of the voting power of Peoples is required to adopt the proposed amendments to Sections 2.06, 2.07, 3.01 and 3.04 of Peoples' Code of Regulations. The effect of an abstention or a broker non-vote is the same as a vote "AGAINST" the proposal. If adopted by the shareholders, the proposed amendments to Sections 2.06, 2.07, 3.01 and 3.04 of the Code of Regulations will become effective immediately without any additional action. THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" ADOPTION OF THE PROPOSED AMENDMENTS TO SECTIONS 2.06, 2.07, 3.01 AND 3.04 OF PEOPLES' CODE OF REGULATIONS. Common shares represented by properly executed and returned proxy cards will be voted as specified or, if no instructions are given, except in the case of broker non-votes, "FOR" the adoption of the proposed amendments to Sections 2.06, 2.07, 3.01 and 3.04 of the Code of Regulations. SHAREHOLDER PROPOSALS FOR 2007 ANNUAL MEETING

Proposals by shareholders intended to be presented at the 20072009 Annual Meeting of Shareholders (the “2009 Annual Meeting”) must behave been received by the Corporate Secretary of Peoples no later than November __, 200614, 2008, to be eligible for inclusion in Peoples'Peoples’ proxy, notice of meeting, and proxy statement and Notice of Internet Availability of Proxy Materials relating to that meeting. Upon receiptthe 2009 Annual Meeting.  Peoples will not be required to include in its proxy, notice of meeting, proxy statement or Notice of Internet Availability of Proxy Materials, a shareholder proposal Peoples will determine whetherthat is received after that date or notthat otherwise fails to includemeet the proposal inrequirements for shareholder proposals established by 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 20072009 Annual Meeting without inclusion of Shareholders,that proposal in Peoples’ proxy materials and doeswritten notice of the proposal is not notifyreceived by the Corporate Secretary of Peoples by January 28, 2009, or if Peoples meets other requirements of the proposal by February __, 2007,applicable SEC rules, the proxies solicited by the Board of Directors for use at the 20072009 Annual Meeting may be votedwill confer discretionary authority to vote on the proposal without discussion ofshould it then be raised at the proposal in Peoples' proxy statement for the 20072009 Annual Meeting.

In each case, written notice must be given to Peoples'Peoples’ Corporate Secretary, at the following address: whose name and address are:

As of the date of this proxy statement,Proxy Statement, the Board of Directors knows of no matter that will be presented for action by the shareholders at the AnnualSpecial Meeting other than those matters discussed in this proxy statement.Proxy Statement.  However, if any other matter requiring a vote of the shareholders isshould properly presented atcome before the AnnualSpecial Meeting, or at any adjournment,including matters relating to the conduct of the Special Meeting, the individuals acting under the proxies solicited by the Board of Directors will vote and act according to their best judgments in light of the conditions then prevailing. prevailing, to the extent permitted under applicable law.

It is important that your proxy card be completed, signed and returned promptly.  If you do not expect to attend the AnnualSpecial Meeting in person, please fill in,complete, sign and return the enclosed proxy card in the self-addressed envelope furnished herewith.