Clover Leaf Financial Corp.
200 East Park Street
Edwardsville, Illinois 62025
April 30, 2004
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of Clover Leaf Financial Corp. (the "Company"). Our
Annual Meeting will be held at the branch office of Clover Leaf Bank, 2143 South
State Route 157, Edwardsville, Illinois, on May 25, 2004 at 1:00 p.m., local
time.
The enclosed Notice of Annual Meeting of Stockholders and proxy
statement describe the formal business to be transacted. During the Annual
Meeting we will also report on the operations of the Company. Directors and
officers of the Company will be present to respond to any questions that
stockholders may have. Also enclosed for your review is our Annual Report to
Stockholders, which contains detailed information concerning the activities and
operating performance of the Company.
The business to be conducted at the Annual Meeting consists of the
election of three directors and the ratification of the appointment of
independent auditors for the year ending December 31, 2004. For the reasons set
forth in the proxy statement, the Board of Directors of the Company unanimously
recommends a vote "FOR" each matter to be considered.
On behalf of the Board of Directors, we urge you to sign, date and
return the enclosed proxy card as soon as possible, whether or not you plan to
attend the Annual Meeting. This will not prevent you from voting in person, but
will assure that your vote is counted if you are unable to attend the Annual
Meeting. Your vote is important, regardless of the number of shares that you
own.
Sincerely,
/s/ Dennis M. Terry
Dennis M. Terry
President and Chief Executive Officer
Clover Leaf Financial Corp.
200 East Park Street
Edwardsville, Illinois 62025
(618) 656-6122
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 25, 2004
Notice is hereby given that the Annual Meeting of Stockholders (the
"Annual Meeting") of Clover Leaf Financial Corp. (the "Company") will be held at
the branch office of Clover Leaf Bank, 2143 South State Route 157, Edwardsville,
Illinois, on May 25, 2004 at 1:00 p.m., local time.
A proxy card and a proxy statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of three directors;
2. The ratification of the appointment of McGladrey & Pullen, LLP
as independent auditors for the Company for the year ending
December 31, 2004; and
such other matters as may properly come before the Annual Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on the foregoing proposals at the Annual
Meeting on the date specified above, including all adjournments of the Annual
Meeting. Stockholders of record at the close of business on April 15, 2004, are
the stockholders entitled to vote at the Annual Meeting, and any adjournments
thereof. A list of stockholders entitled to vote at the Annual Meeting will be
available at 200 East Park Street, Edwardsville, Illinois, for a period of ten
days prior to the Annual Meeting and will also be available for inspection at
the Annual Meeting itself.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING,
IS REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
By Order of the Board of Directors
/s/ Dennis M. Terry
April 30, 2004 Dennis M. Terry
Edwardsville, Illinois President and Chief Executive Officer
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
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PROXY STATEMENT
Clover Leaf Financial Corp.
200 East Park Street
Edwardsville, Illinois 62025
(618) 656-6122
ANNUAL MEETING OF STOCKHOLDERS
May 25, 2004
This proxy statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Clover Leaf Financial Corp.
(the "Company" or "Clover Leaf Financial") to be used at the Annual Meeting of
Stockholders of the Company, which will be held at the branch office of Clover
Leaf Bank, 2143 South State Route 157, Edwardsville, Illinois, on May 25, 2004,
at 1:00 p.m., local time, and all adjournments of the annual meeting. The
accompanying Notice of Annual Meeting of Stockholders and this proxy statement
are first being mailed to stockholders on or about April 30, 2004.
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REVOCATION OF PROXIES
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Stockholders who execute proxies in the form solicited hereby retain
the right to revoke them in the manner described below. Unless so revoked, the
shares represented by proxies will be voted at the annual meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Company will be voted in accordance with the directions given thereon. Where
no directions are indicated, validly executed proxies will be voted "FOR" the
proposals set forth in this proxy statement for consideration at the annual
meeting.
A proxy may be revoked at any time prior to its exercise by the filing
of a written notice of revocation with the Secretary of the Company, by
delivering to the Company a validly completed proxy bearing a later date, or by
attending the annual meeting and voting in person. Attendance at the annual
meeting will not constitute a revocation of a previously delivered proxy.
However, if you are a stockholder whose shares are not registered in your own
name, you will need appropriate documentation from your record holder to vote
personally at the annual meeting.
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VOTING SECURITIES
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Holders of record of the Company's common stock, par value $0.10 per
share, as of the close of business on April 15, 2004 (the "Record Date") are
entitled to one vote for each share then held, except as described below. As of
the Record Date, the Company had 622,417 shares of common stock issued and
outstanding. The presence, in person or by proxy, of at least a majority of the
total number of shares of common stock outstanding and entitled to vote is
necessary to constitute a quorum at this annual meeting. In the event there are
not sufficient votes for a quorum, or to approve or ratify any matter being
presented, at the time of this annual meeting, the annual meeting may be
adjourned in order to permit the further solicitation of proxies.
In accordance with the provisions of the Company's Certificate of
Incorporation, record holders of common stock who beneficially own in excess of
10% of the outstanding shares of common stock (the "Limit") are not entitled to
any vote with respect to the shares held in excess of the Limit. The Company's
Certificate of Incorporation authorizes the Board of Directors (i) to make all
determinations necessary to implement and apply the Limit, including determining
whether persons or entities are acting in concert, and (ii) to demand that any
person who is reasonably believed to beneficially own shares of common stock in
excess of the Limit supply information to the Company to enable the Board of
Directors to implement and apply the Limit.
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VOTING PROCEDURES AND METHOD OF COUNTING VOTES
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As to the election of Directors, the proxy card being provided by the
Board of Directors enables a stockholder to vote FOR the election of the three
nominees proposed by the Board of Directors, or to WITHHOLD authority to vote
for the nominees being proposed. Under Delaware law and the Company's
Certificate of Incorporation and Bylaws, Directors are elected by a plurality of
votes cast, without regard to either broker non-votes, or proxies as to which
authority to vote for the nominees being proposed is withheld.
As to the ratification of McGladrey & Pullen, LLP as independent
auditors of the Company, by checking the appropriate box, a stockholder may: (i)
vote FOR the item; (ii) vote AGAINST the item; or (iii) ABSTAIN from voting on
such item. Under the Company's Certificate of Incorporation and Bylaws, the
ratification of this matter shall be determined by a majority of the votes cast,
without regard to broker non-votes, or proxies marked "ABSTAIN."
Proxies solicited hereby will be returned to the Company, and will be
tabulated by an inspector of election designated by the Board of Directors. If
there are insufficient votes to approve any matter presented at the annual
meeting, the annual meeting may be adjourned from time to time in order to
permit further solicitation of proxies.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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Persons and groups who beneficially own in excess of 5% of the
Company's outstanding common stock are required to file certain reports with the
Securities and Exchange Commission (the "SEC") regarding such beneficial
ownership. The following table sets forth, as of April 15, 2004, the shares of
common stock beneficially owned by persons who beneficially own more than 5% of
the Company's outstanding shares of common stock.
Amount of Shares
Owned and Nature Percent of Shares
Name and Address of of Beneficial of Common Stock
Beneficial Owners Ownership Outstanding
----------------- --------- -----------
Joseph J. Gugger 61,460 9.8%
200 East Park Street
Edwardsville, Illinois 62025
Dennis E. Ulrich 31,186(1) 5.0%
200 East Park Street
Edwardsville, Illinois 62025
-----------------------
(1) Includes 30,186 shares owned by a limited liability company of which Mr.
Ulrich is a manager.
2
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PROPOSAL I - ELECTION OF DIRECTORS
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The Company's Board of Directors consists of six members. The Company's
Bylaws provide that one-third of the Directors are to be elected annually.
Directors of the Company are generally elected to serve for a three-year term
and until their respective successors are elected. Three Directors will be
elected at the annual meeting to serve for a three-year term and until their
respective successors are elected. The Board of Directors has nominated Dennis
M. Terry, Joseph J. Gugger and Kenneth P. Highlander to serve for three-year
terms. Each nominee is currently a member of the Board of Directors.
The following table sets forth certain information, as of April 15,
2004, regarding the Board of Directors, including the terms of office of members
of the Board of Directors. It is intended that the proxies solicited on behalf
of the Board of Directors (other than proxies in which the vote is withheld as
to the nominees) will be voted at the annual meeting for the election of the
nominees identified below. If the nominees are unable to serve, the shares
represented by all such proxies will be voted for the election of such
substitute as the Board of Directors may recommend. At this time, the Board of
Directors knows of no reason why the nominees might be unable to serve, if
elected. Except as indicated herein, there are no arrangements or understandings
between the nominees and any other person pursuant to which such nominees were
selected.
Shares
Position(s) With Director Expiration Beneficially Percent of
Name the Company Age Since(1) of Term Owned Class
--------------------- ------------------------------- ----------- -------------------------------------------------------
NOMINEES
Dennis M. Terry President, Chief 57 2000 2006 13,064 2.1%
Executive Officer and
Director
Joseph J. Gugger Director 53 2000 2006 61,460 9.8%
Kenneth P. Highlander Director 50 1996 2006 20,000(2) 3.2%
DIRECTORS CONTINUING IN OFFICE
Robert W. Schwartz Chairman of the Board 64 1972 2004 26,000 (5) 4.2%
Dennis E. Ulrich Director 49 2003 2004 31,186(4) 5.0%
Gary D. Niebur Director 48 1992 2005 5,100 *
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Lisa R. Fowler Senior Vice President 38 N/A N/A 200 *
Darlene F. McDonald Senior Vice President, 41 N/A N/A 200 *
Treasurer and Secretary
All Directors and
Executive Officers as a
Group (8 persons) 157,210 25.3%
----------------------------------
* Less than 1%.
(1) Reflects initial appointment to the Board of Directors of Clover Leaf
Financial or Clover Leaf Bank, SB.
(2) Includes 4,000 shares owned by Mr. Highlander's spouse, and 1,000 shares
as to which Mr. Highlander serves
as trustee.
(3) Includes 10,000 shares owned by Mr. Schwartz's spouse.
(4) Includes 30,186 shares owned by a limited liability company of which Mr.
Ulrich is a manager.
The business experience for the past five years of each of Clover Leaf
Financial's directors and executive officers is as follows:
Directors
Robert W. Schwartz has served as Chairman of the Board of Directors of
Clover Leaf Bank since 2003 and Chairman of the Board of Directors of Clover
Leaf Financial since 2003. Mr. Schwartz is the President of Schwartz Ventures,
Inc., a communications company founded by Mr. Schwartz.
3
Dennis M. Terry has served as President and Chief Executive Officer of
Clover Leaf Bank since 2000, and President and Chief Executive Officer of Clover
Leaf Financial since its incorporation in 2001. Prior to joining Clover Leaf
Bank, Mr. Terry served as President of Mercantile Bank of Edwardsville.
Mercantile Bank of Edwardsville had acquired Mr. Terry's previous employer, Mark
Twain Bank of Edwardsville, in 1998, where Mr. Terry had served as President
since 1988.
Joseph J. Gugger has served as a partner of Fastechnology LLC, an
engineering company, since 1999; a partner of CBC LLC, a real estate company,
since 1999; and as the owner of Gugger Group, Inc., a manufacturing and
investment company, since 1993.
Kenneth P. Highlander is the President of Ready-Mix Service, Inc., a
concrete manufacturer with plants in Hamel, Alton and Collinsville, Illinois.
Mr. Highlander has been employed by Ready-Mix Services since 1971.
Gary D. Niebur has served as the Mayor of Edwardsville, Illinois since
1993, and has served as the Executive Director of the Edwardsville YMCA since
1982.
Dennis E. Ulrich is the managing principal of Scheffel and Company,
P.C., a C.P.A. firm with offices in Edwardsville, Alton, Highland, Jerseyville
and Carrollton, Illinois. Mr. Ulrich has been employed by Scheffel and Company
since 1977.
Executive Officers Who Are Not Directors
Lisa R. Fowler has served as Senior Vice President of Clover Leaf Bank
since June 2000 and Senior Vice President of Clover Leaf Financial since its
incorporation in 2001. Ms. Fowler was previously the Vice President of
Commercial Lending at Mercantile Bank, where she had been employed since 1991.
Darlene F. McDonald joined Clover Leaf Bank in October 2000, and serves
as Senior Vice President, Treasurer and Secretary. Ms. McDonald serves in the
same positions with Clover Leaf Financial. Previously, Ms. McDonald served as a
Controller of the Real Estate Division of Bank of America, which had acquired
her previous employer, NationsBank, in 1999. NationsBank had acquired her
previous employer, Boatmens Bank, in 1997, where Ms. McDonald had been employed
since 1987.
Meetings of the Board of Directors and Committees of the Board of Directors
The Board of Directors of Clover Leaf Financial meets quarterly, or
more often as necessary. The Board of Directors has an Audit Committee and a
Nominating Committee. The Board of Directors of Clover Leaf Financial met 12
times during the year ended December 31, 2003. No Director attended fewer than
75% in the aggregate of the total number of Board meetings held and the total
number of committee meetings on which he served during 2003, including Board and
committee meetings of Clover Leaf Bank.
Audit Committee. The Audit Committee reviews audit reports and related
matters to ensure compliance with regulations and internal policies and
procedures. This committee also acts on the recommendation by management of an
accounting firm to perform Clover Leaf Financial's annual audit and acts as a
liaison between the auditors and the Board. The current members of this
committee are Directors Ulrich, Schwartz and Niebur. Mr. Ulrich has been
designated as the financial expert on the Audit Committee. The Audit Committee
of Clover Leaf Financial met four times during the year ended December 31, 2003.
Nominating Committee. The Nominating Committee meets annually in order
to nominate candidates for membership on the Board of Directors. This committee
is comprised of the Board members who are not standing for election. The
nominating committee met once during the year ended December 31, 2003. During
the year ended December 31, 2003, the Nominating Committee consisted of
directors who were "independent" of the Company as defined by Nasdaq listing
standards.
The Company's Board of Directors has adopted a written charter for the
Nominating Committee, which is attached hereto as Appendix A.
4
The functions of the Nominating Committee include the following:
o to lead the search for individuals qualified to become members
of the Board and to select director nominees to be presented
for stockholder approval; and
o to develop and recommend to the Board criteria for the
selection of individuals to be considered for election or
re-election to the Board.
The Nominating Committee identifies nominees by first evaluating the
current members of the Board of Directors willing to continue in service.
Current members of the Board with skills and experience that are relevant to the
Company's business and who are willing to continue in service are first
considered for re-nomination, balancing the value of continuity of service by
existing members of the Board with that of obtaining a new perspective. If any
member of the Board does not wish to continue in service, or if the Nominating
Committee or the Board decides not to re-nominate a member for re-election, or
if the size of the Board is increased, the Nominating Committee would solicit
suggestions for director candidates from all Board members. In addition, the
Nominating Committee is authorized by its charter to engage a third party to
assist in the identification of director nominees. The Nominating Committee
would seek to identify a candidate who at a minimum satisfies the following
criteria:
o has the highest personal and professional ethics and integrity
and whose values are compatible with the Company's;
o has had experiences and achievements that have given them the
ability to exercise and develop good business judgment;
o is willing to devote the necessary time to the work of the
Board and its committees, which includes being available for
Board and committee meetings;
o is familiar with the communities in which the Company operates
and/or is actively engaged in community activities;
o is involved in other activities or interests that do not
create a conflict with their responsibilities to the Company
and its stockholders; and
o has the capacity and desire to represent the balanced, best
interests of the stockholders of the Company as a group, and
not primarily a special interest group or constituency.
The Nominating Committee will also take into account whether, if a
nominee is sought for service on the Audit Committee, the financial and
accounting expertise of the candidate, including whether an individual qualifies
as an audit committee financial expert.
Procedures for the Consideration of Board Candidates Submitted by
Stockholders. The Nominating Committee has adopted procedures for the submission
of director nominees by stockholders for consideration by the Nominating
Committee. If a determination is made that an additional candidate is needed for
the Board, the Nominating Committee will consider candidates submitted by the
Company's stockholders. Stockholders can submit the names of candidates for
Director by writing to the Company's Corporate Secretary, Clover Leaf Financial
Corp., 200 East Park Street, Edwardsville, Illinois 62025. A submission must be
received not less than ninety (90) days prior to the date of the Company's proxy
materials for the preceding year's annual meeting. If the date of the annual
meeting is advanced more than thirty (30) days prior to or delayed by more than
thirty (30) days after the anniversary of the preceding year's annual meeting,
the stockholder's recommendation must be so delivered not later than the close
of business on the tenth day following the day on which public announcement of
the date of such annual meeting is first made.
5
The submission must include the following information:
o A statement that the writer is a stockholder and is proposing
a candidate for consideration by the committee;
o The name and address of the stockholder as they appear on the
Company's books, and number of shares of the Company's common
stock that are owned beneficially by such stockholder (if the
stockholder is not a holder of record, appropriate evidence of
the stockholder's ownership will be required);
o The name, address and contact information for the candidate,
and the number of shares of common stock of the Company that
are owned by the candidate (if the candidate is not a holder
of record, appropriate evidence of the candidate's ownership
should be provided);
o A statement of the candidate's business and educational
experience;
o Such other information regarding the candidate as would be
required to be included in the proxy statement pursuant to SEC
Regulation 14A;
o A statement detailing any relationship between the candidate
and the Company;
o A statement detailing any relationship between the candidate
and any customer, supplier or competitor of the Company;
o Detailed information about any relationship or understanding
between the proposing stockholder and the candidate; and
o A statement that the candidate is willing to be considered and
willing to serve as a Director if nominated and elected.
A nomination submitted by a stockholder for presentation by the
stockholder at an annual meeting of stockholders must comply with the procedural
and informational requirements described in "Advance Notice Of Business To Be
Conducted at an Annual Meeting."
Stockholder Communications with the Board. A stockholder of the Company
who wants to communicate with the Board or with any individual Director may do
so by writing to:
Clover Leaf Financial Corp.
Attention: Corporate Secretary
200 East Park Street
Edwardsville, Illinois 62025
The letter should indicate that the author is a stockholder and if
shares are not held of record, should include appropriate evidence of stock
ownership. Depending on the subject matter, the Corporate Secretary will:
o forward the communication to the Director(s) to whom it is
addressed;
o attempt to handle the inquiry directly, for example where it
is a request for information about the Company or it is a
stock-related matter; or
o not forward the communication if it is primarily commercial in
nature, relates to an improper or irrelevant topic, or is
unduly hostile, threatening, illegal or otherwise
inappropriate.
6
Attendance at Annual Meetings of Stockholders
The Company does not have a policy regarding director attendance at
annual meetings of stockholders. All of the Company's directors attended the
prior year's annual meeting of stockholders.
Code of Ethics
The Company has adopted a code of ethics that is applicable to senior
financial officers of the Company, including the Company's principal executive
officer, principal financial officer, principal accounting officer and all
officers performing similar functions as defined in the Code of Ethics. The Code
of Ethics has previously been filed with the SEC. Amendments to and waivers from
the Code of Ethics with respect to the principal executive officer, principal
financial officer, principal accounting officer and all officers performing
similar functions will also be disclosed on the Company's website.
Audit Committee Report
In accordance with rules recently established by the SEC, the Audit
Committee has prepared the following report for inclusion in the proxy
statement. Each member of the Audit Committee satisfies the definition of
independent director as established by the National Association of Securities
Dealers. The Board of Directors has not adopted a written charter for the Audit
Committee.
Management is responsible for the Company's internal controls and
financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America and to issue a report thereon. The Audit Committee's
responsibility is to monitor and oversee these processes.
As part of its ongoing activities, the Audit Committee has:
o Reviewed and discussed with management the Company's audited
consolidated financial statements for the fiscal year ended
December 31, 2003;
o Discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61,
Communications with Audit Committees, as amended; and
o Received the written disclosures and the letter from the
independent auditors required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit
Committees, and has discussed with the independent auditors
their independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited consolidated
financial statements be included in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 2003 and be filed with the SEC. In addition, the
Audit Committee recommended that the Board of Directors appoint McGladrey &
Pullen, LLP as the Company's independent auditors for the year ending December
31, 2004, subject to the ratification of this appointment by Company's
stockholders.
7
This report shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
The Audit Committee
Dennis E. Ulrich
Robert W. Schwartz
Gary D. Niebur
Compensation of Directors of Clover Leaf Financial
Fees. Directors do not receive compensation for their service on the
Board of Directors of Clover Leaf Financial. Directors of Clover Leaf Bank were
paid a monthly fee of $1,000 for the year ended December 31, 2003. Members of
the loan committee receive $200 per meeting attended; members of the audit
committee receive $200 per meeting attended; and members of the executive
committee receive $100 per meeting attended.
Amended and Restated Directors' Emeritus Plan. Clover Leaf Bank
maintains a directors' emeritus plan to compensate former members of the Board
of Directors who have attained age 75, have a minimum of 20 years of service as
directors, and perform emeritus services for Clover Leaf Bank. A director
emeritus is entitled to receive an annual fee equal to his annual director's fee
as of the date of retirement for a maximum of five years, provided he continues
to perform emeritus services for Clover Leaf Bank. A director emeritus must
retire at age 80, at which time no further fees will be paid by Clover Leaf
Bank. The Board of Directors may, in its discretion, appoint a retired director
emeritus as a consultant for a maximum of one year after termination as a
director emeritus.
Director's Deferred Compensation Agreements. Clover Leaf Bank has
entered into non-qualified deferred compensation agreements with certain of its
non-employee directors under which a non-employee director can elect to defer
all or a portion of his fees earned in his capacity as a director. The amounts
deferred will earn interest at a rate equal to that paid on Clover Leaf Bank's
one-year certificate of deposit. In the event of a director's termination of
service, the director's account will be paid to him in a lump sum or equal
installments over a period not exceeding five years, in the sole discretion of
Clover Leaf Bank. In the event of a director's death, amounts under the
agreement will be paid to his beneficiary or his estate.
The deferred compensation agreements, in the aggregate, constitute an
unfunded plan for tax purposes and for purposes of the Employee Retirement
Income Security Act ("ERISA"). All obligations arising under the non-qualified
plan are payable from the general assets of Clover Leaf Bank. As of December 31,
2003, Directors Schwartz and Gugger had account balances of $256,379 and
$44,561, respectively, under their deferred compensation agreements.
8
Executive Compensation
The following table sets forth information concerning the compensation
paid or granted to Clover Leaf Bank's Chief Executive Officer. No other
executive officer of Clover Leaf Bank had aggregate annual compensation in
excess of $100,000 for the year ended December 31, 2003.
Annual Compensation Long-Term Compensation
------------------------------------------------------ ----------------------------------------------------------
Awards Payouts
-------------------------- -------------------------------
Year Other Restricted
Name and Ended Annual Stock Options/ LTIP All Other
Principal Position 12/31(1) Salary Bonus Compensation(2) Awards SARS(#) Payouts Compensation
----------------------- -------- ---------- ------- --------------- ------ -------- ------- ------------
Dennis M. Terry, 2003 $ 140,000 $24,243 $ 12,000 -- -- -- --
President and 2002 134,000 10,000 9,800 -- -- -- --
Chief Executive Officer 2001 127,200 10,000 9,600 -- -- -- --
----------------------
(1) Consists of director's fees. Does not include the aggregate amount of other
personal benefits, which did not exceed 10% of the total salary and bonus
reported.
Benefits
General Benefits. Clover Leaf Bank currently provides health care
benefits, including medical, disability and group life insurance, subject to
certain deductibles and co-payments, for its full time employees.
Defined Benefit Pension Plan. Clover Leaf Bank maintains the Financial
Institutions Retirement Fund, which is a qualified, tax-exempt defined benefit
plan ("Retirement Plan"). All employees age 21 or older who have worked at
Clover Leaf Bank for a period of one year in which they have 1,000 or more hours
of service are eligible for membership in the Retirement Plan. Once eligible, an
employee must have been credited with 1,000 or more hours of service with Clover
Leaf Bank during the year in order to accrue benefits under the Retirement Plan.
Clover Leaf Bank annually contributes an amount to the Retirement Plan necessary
to satisfy the actuarially determined minimum funding requirements in accordance
with ERISA.
The regular type of all retirement benefits (i.e., normal, early or
disability) provides a retirement allowance plus a retirement death benefit. The
regular retirement allowance is payable in monthly installments for life. For a
married participant, the normal retirement allowance would be paid as a joint
and survivor annuity where, upon the participant's death, the participant's
spouse is entitled to receive a benefit equal to 50% of that paid during the
participant's lifetime. Other optional types of retirement allowance may be
selected instead of the normal form. These optional types include various
annuity forms.
The regular retirement allowance payable at or after age 65, is an
amount equal to 2% multiplied by an employee's years of benefit service times
average compensation paid in the three consecutive years providing the highest
average. A reduced benefit is payable upon retirement at age 55 at or after
completion of five years of service. A member is fully vested in his account
upon completion of five or more years of employment or upon attaining normal
retirement age.
If a participant dies while in active service, his beneficiary would
receive a lump sum death benefit equal to the participant's last 12 months'
salary, plus 10% of such salary for each year of benefit service, up to 300% of
salary for 20 or more years, plus refund of his contributions, if any, with
interest. Death benefits may be paid in installments over a period of up to 10
years or a lifetime annuity. In the event the participant dies after he retires,
his beneficiary would receive a lump sum retirement death benefit equal to 12
times the annual retirement allowance, less the sum of such allowance payments
made before death.
9
The following table indicates the annual retirement allowance that would be
payable under the Retirement Plan upon retirement at age 65 in calendar year
2003, expressed in the form of a single life annuity for the average salary and
benefit service classifications specified below.
Highest Three-Year
Average Years of Service and Benefit Payable at Retirement
---------------------------------------------------
Compensation 15 20 25 30
------------ ----------- ----------- ----------- -----------
$ 50,000 $ 15,000 $ 20,000 $ 25,000 $ 30,000
$ 75,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000
$ 100,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000
$ 125,000 $ 37,500 $ 50,000 $ 62,500 $ 75,000
$ 150,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000
$ 170,000 $ 51,000 $ 68,000 $ 85,000 $ 102,000
Employee Stock Ownership Plan and Trust. Clover Leaf Bank implemented
an employee stock ownership plan in connection with its conversion to stock
form. Employees with at least one year of employment with Clover Leaf Bank and
who have attained age 18 are eligible to participate. The employee stock
ownership plan is borrowing funds from Clover Leaf Financial to purchase a
number of shares equal to up to 8% of the common stock issued in the conversion.
The loan is being repaid principally from Clover Leaf Bank's discretionary
contributions to the employee stock ownership plan over a period of up to 10
years, although the loan documents permit repayment over a shorter period,
without penalty for prepayments. The interest rate for the loan is a floating
rate equal to the prime rate. Shares purchased by the employee stock ownership
plan are being held in a suspense account for allocation among participants as
the loan is repaid.
Contributions to the employee stock ownership plan and shares released
from the suspense account in an amount proportional to the repayment of the
employee stock ownership plan loan are allocated among employee stock ownership
plan participants on the basis of compensation in the year of allocation. A
participant who terminates employment for reasons other than death, retirement,
or disability prior to seven years of credited service under the employee stock
ownership plan vests at 20% per year, starting upon completion of three years of
service, with full vesting upon the completion of seven years of service.
Nonvested benefits will become fully vested upon a participant's death or
disability or termination of the plan. Vested benefits are payable in the form
of common stock and/or cash. Clover Leaf Bank's contributions to the employee
stock ownership plan are discretionary, subject to the loan terms and tax law
limits; therefore, benefits payable under the employee stock ownership plan
cannot be estimated. Pursuant to SOP 93-6, Clover Leaf Bank is required to
record compensation expense in an amount equal to the fair market value of the
shares released from the suspense account. In the event of a change in control
(as defined in the plan), the employee stock ownership plan will terminate.
Clover Leaf Bank has established a committee of nonemployee directors
to administer the employee stock ownership plan. The employee stock ownership
plan trustee, subject to its fiduciary duty, must vote all allocated shares held
in the employee stock ownership plan in accordance with the instructions of
participating employees. Under the employee stock ownership plan, nondirected
shares and shares held in the suspense account are voted in a manner calculated
to most accurately reflect the instructions it has received from participants
regarding the allocated stock, so long as the vote is in accordance with the
provisions of ERISA.
Ownership Reports by Officers and Directors
The common stock of the Company is registered with the SEC pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The officers and directors of the Company and beneficial owners of
greater than 10% of the Company's common stock are required to file reports on
Forms 3, 4 and 5 with the SEC disclosing beneficial ownership and changes in
beneficial ownership of the Company's common stock. SEC rules require disclosure
in the Company's Proxy Statement or Annual Report on Form 10-KSB of the failure
of an officer, director or 10% beneficial owner of the Company's common stock to
file a Form 3, 4, or 5 on a timely basis. President, Chief Executive Officer and
Director Terry filed a Form 4 on September 2, 2003 to report a
10
purchase of 100 shares of common stock that should have been reported on
September 1, 2003. Other than this report, and based on the Company's review of
such ownership reports, no other officer, director or 10% beneficial owner of
the Company failed to file ownership reports on a timely basis for the year
ended December 31, 2003.
Transactions With Certain Related Persons
In the ordinary course of business, Clover Leaf Bank makes loans
available to its directors, officers and employees. These loans are made in the
ordinary course of business on the same terms, including interest rates and
collateral, as comparable loans to other borrowers. It is the belief of
management that these loans neither involve more than the normal risk of
collectibility nor present other unfavorable features.
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PROPOSAL II - RATIFICATION OF THE APPOINTMENT OF AUDITORS
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The Company's independent auditors for the year ended December 31, 2003
were McGladrey & Pullen, LLP. The Audit Committee of the Board of Directors of
Clover Leaf Financial has approved the engagement of McGladrey & Pullen, LLP to
be Clover Leaf Financial's independent auditors for the year ending December 31,
2004, subject to the ratification of the engagement by Clover Leaf Financial's
stockholders at this annual meeting.
Set forth below is certain information concerning aggregate fees billed
for professional services rendered by McGladrey & Pullen, LLP during 2003 and
2002:
Audit Fees. The aggregate fees billed to the Company by McGladrey &
Pullen, LLP for professional services rendered by McGladrey & Pullen, LLP for
the audit of the Company's annual financial statements, review of the financial
statements included in the Company's Quarterly Reports on Form 10-QSB and
services that are normally provided by McGladrey & Pullen, LLP in connection
with statutory and regulatory filings and engagements was $59,840 and $43,646
during the years ended December 31, 2003 and 2002, respectively.
Audit Related Fees. The aggregate fees billed to the Company by
McGladrey & Pullen, LLP for assurance and related services rendered by McGladrey
& Pullen, LLP that are reasonably related to the performance of the audit of and
review of the financial statements and that are not already reported in "Audit
Fees," above, was $1,395 and $2,500 during the years ended December 31, 2003 and
2002, respectively.
Tax Fees. The aggregate fees billed to the Company by McGladrey &
Pullen, LLP for professional services rendered by McGladrey & Pullen, LLP for
tax compliance, tax advice and tax planning was $0 and $0 during the years ended
December 31, 2003 and 2002, respectively. These services primarily included the
review of tax returns and quarterly tax provisions.
All Other Fees. The aggregate fees billed to the Company by McGladrey &
Pullen, LLP that are not described above was $0 and $0 during the years ended
December 31, 2003 and 2002.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of
Independent Auditors
The Audit Committee's policy is to pre-approve all audit and non-audit
services provided by the independent auditors. These services may include audit
services, audit-related services, tax services and other services. Pre-approval
is generally provided for up to one year and any pre-approval is detailed as to
particular service or category of services and is generally subject to a
specific budget. The Audit Committee has delegated pre-approval authority to its
Chairman when expedition of services is necessary. The independent auditors and
management are required to periodically report to the full Audit Committee
regarding the extent of services provided by the independent auditors in
accordance with this pre-approval, and the fees for the services performed to
date. For the years ended December 31, 2003 and 2002, 100% and 100%,
respectively, of audit related fees, tax fees and all other fees were approved
by the Audit Committee prior to engagement.
The Audit Committee has considered whether the provision of non-audit
services, which relate primarily to regulatory reporting and compliance services
provided, is compatible with maintaining McGladrey & Pullen, LLP's independence.
The Audit Committee concluded that performing such services does not affect
McGladrey & Pullen, LLP's independence in performing its function as auditor of
Clover Leaf Financial.
11
A representative of McGladrey & Pullen, LLP is expected to attend the
annual meeting to respond to appropriate questions and to make a statement if he
or she so desires.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
MCGLADREY & PULLEN, LLP AS INDEPENDENT AUDITORS FOR CLOVER LEAF FINANCIAL
FOR THE YEAR ENDING DECEMBER 31, 2004.
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STOCKHOLDER PROPOSALS
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In order to be eligible for inclusion in the proxy materials for next
year's annual meeting of stockholders, any stockholder proposal to take action
at such meeting must be received at Clover Leaf Financial's executive office,
200 East Park Street, Edwardsville, Illinois 62025, no later than December 31,
2004. Any such proposals shall be subject to the requirements of the proxy rules
adopted under the Exchange Act.
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ADVANCE NOTICE OF BUSINESS TO BE CONDUCTED
AT AN ANNUAL MEETING
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The Bylaws of Clover Leaf Financial provide an advance notice procedure
for certain business, or nominations to the Board of Directors, to be brought
before an annual meeting. In order for a stockholder to properly bring business
before an annual meeting, or to propose a nominee to the Board of Directors, the
stockholder must give written notice to the Secretary of Clover Leaf Financial
not less than ninety (90) days before the date fixed for such meeting; provided,
however, that in the event that less than one hundred (100) days notice or prior
public disclosure of the date of the meeting is given or made, notice by the
stockholder to be timely must be received not later than the close of business
on the tenth day following the day on which such notice of the date of the
annual meeting was mailed or such public disclosure was made. The notice must
include the stockholder's name, record address, and number of shares owned by
the stockholder, describe briefly the proposed business, the reasons for
bringing the business before the annual meeting, and any material interest of
the stockholder in the proposed business. In the case of nominations to the
Board, certain information regarding the nominee must be provided. Nothing in
this paragraph shall be deemed to require Clover Leaf Financial to include in
its proxy statement and proxy relating to an annual meeting any stockholder
proposal that does not meet all of the requirements for inclusion established by
the SEC in effect at the time such proposal is received.
The date on which next year's annual meeting of stockholders is
expected to be held is May 24, 2005. Accordingly, advance written notice for
certain business, or nominations to the Board of Directors, to be brought before
the next annual meeting must be given to Clover Leaf Financial by February 24,
2005. If notice is received after February 24, 2005, it will be considered
untimely, and Clover Leaf Financial will not be required to present the matter
at the annual meeting.
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OTHER MATTERS
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The Board of Directors is not aware of any business to come before the
annual meeting other than the matters described above in the proxy statement.
However, if any matters should properly come before the annual meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.
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MISCELLANEOUS
--------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by Clover Leaf
Financial. Clover Leaf Financial will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
sending proxy materials to the beneficial owners of common stock. In addition to
solicitations by mail, directors, officers and regular employees of Clover Leaf
Financial may solicit proxies personally or by telephone without additional
compensation.
A COPY OF CLOVER LEAF FINANCIAL'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR
ENDED DECEMBER 31, 2003, WILL BE FURNISHED WITHOUT CHARGE TO
12
STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN REQUEST TO DARLENE F. MCDONALD,
SENIOR VICE PRESIDENT, TREASURER AND SECRETARY, 200 EAST PARK STREET,
EDWARDSVILLE, ILLINOIS 62025 OR BY CALLING (618) 656-6122.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Dennis M. Terry
Dennis M. Terry
President and Chief Executive Officer
Edwardsville, Illinois
April 30, 2004
REVOCABLE PROXY
CLOVER LEAF FINANCIAL CORP.
ANNUAL MEETING OF STOCKHOLDERS
May 25, 2004
The undersigned hereby appoints the official proxy committee,
consisting of the Directors of Clover Leaf Financial Corp. (the "Company") who
are not named as nominees below, with full powers of substitution, to act as
attorneys and proxies for the undersigned to vote all shares of common stock of
the Company that the undersigned is entitled to vote at the 2004 Annual Meeting
of Stockholders of the Company ("Annual Meeting") to be held at 2143 South State
Route 157, Edwardsville, Illinois on May 25, 2004, at 1:00 p.m., local time. The
official proxy committee is authorized to cast all votes to which the
undersigned is entitled as follows:
FOR WITHHELD
--- --------
1. The election of Dennis |_| |_|
M. Terry, Joseph J.
Gugger and Kenneth P.
Highlander as
directors for a
three-year term
(except as marked to
the contrary below)
INSTRUCTION: To
withhold your vote for
one or more nominees,
write the name of the
nominee(s) on the
line(s) below.
----------------------
----------------------
----------------------
FOR AGAINST AGSTAIN
--- ------- -------
2. The ratification of |_| |_| |_|
the appointment of
McGladrey & Pullen,
LLP as independent
auditors for the
Company for the fiscal
year ending December
31, 2004.
The Board of Directors recommends a vote "FOR" each of the listed proposals.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS STATED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THE
MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual
Meeting or at any adjournment thereof and after notification to the Secretary of
the Company at the Annual Meeting of the stockholder's decision to terminate
this proxy, then the power of said attorneys and proxies shall be deemed
terminated and of no further force and effect. This proxy may also be revoked by
sending written notice to the Secretary of the Company at the address set forth
on the Notice of Annual Meeting of Stockholders, or by the filing of a
later-dated proxy statement prior to a vote being taken on a particular proposal
at the Annual Meeting.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a notice of the annual meeting, audited financial
statements and a proxy statement, dated April 30, 2004.
Dated: _________________, 2004 |_| Check Box if You Plan to Attend
the Annual Meeting
------------------------------- -------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
------------------------------- -------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this card. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder should sign.
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Please complete and date this proxy and return it promptly
in the enclosed postage-prepaid envelope.
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