LAKELAND FINANCIAL CORPORATION
P.O. Box 1387 o Warsaw, Indiana 46581 o (574) 267-6144
March 7, 2003
Dear Shareholder:
On behalf of the board of directors and management of Lakeland
Financial Corporation, we cordially invite you to attend the annual meeting of
shareholders of Lakeland Financial Corporation to be held at 12:00 p.m. on
April 8, 2003, at Westminster Hall located at 200 Seminary Drive in Winona
Lake, Indiana. The accompanying notice of annual meeting of shareholders and
proxy statement discuss the business to be conducted at the meeting. We have
also enclosed a copy of our 2002 summary annual report to shareholders and a
copy of our annual report on Form 10-K for your review. At the meeting we will
report on operations and the outlook for the year ahead.
Your board of directors has nominated six persons to serve as
directors, each of whom are incumbent directors. Additionally, our audit
committee has selected and we recommend that you ratify the selection of
Crowe, Chizek and Company LLP to continue as our independent public
accountants for the year ending December 31, 2003. We recommend you vote your
shares for the director nominees and in favor of the proposal.
We encourage you to attend the meeting in person. Please return the
enclosed RSVP card if you plan to attend. Whether or not you plan to attend,
however, please complete, date, sign and return the enclosed proxy card in the
enclosed envelope. This will assure that your shares are represented at the
meeting.
We look forward with pleasure to seeing and visiting with you at the
meeting.
Very truly yours,
/s/Michael L. Kubacki
Michael L. Kubacki
President and Chief Executive Officer
LAKELAND FINANCIAL CORPORATION
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD APRIL 8, 2003
To the shareholders:
The annual meeting of the shareholders of Lakeland Financial
Corporation will be held on Tuesday, April 8, 2003, at 12:00 p.m. at
Westminster Hall located at 200 Seminary Drive in Winona Lake, Indiana, for
the following purposes:
1. to elect six members of the board of directors;
2. to ratify the appointment of Crowe, Chizek and Company LLP
as independent public accountants for the fiscal year ending
December 31, 2003; and
3. to transact such other business as may properly be brought
before the meeting and any adjournments or postponements of
the meeting.
Only shareholders of record on our books at the close of business on
February 19, 2003, the record date for the annual meeting, will be entitled to
vote at the annual meeting. In the event there are an insufficient number of
votes for a quorum or to approve or ratify any of the foregoing proposals at
the time of the annual meeting, the meeting may be adjourned or postponed in
order to permit us to further solicit proxies.
By order of the Board of Directors
/s/R. Douglas Grant
R. Douglas Grant
Chairman of the Board
Warsaw, Indiana
March 7, 2003
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED
ENVELOPE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING IN PERSON. WE HOPE THAT YOU WILL BE ABLE TO ATTEND THE MEETING, AND IF
YOU DO YOU MAY VOTE YOUR STOCK IN PERSON IF YOU WISH. YOU MAY REVOKE THE PROXY
CARD AT ANY TIME PRIOR TO ITS EXERCISE.
LAKELAND FINANCIAL CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 8, 2003
Lakeland Financial Corporation, an Indiana corporation, with its
principal executive offices located in Warsaw, Indiana, is the holding company
for Lake City Bank. We also own all of the common securities of Lakeland
Capital Trust, a Delaware business trust created for the issuance of trust
preferred securities to the public. Lake City Bank owns all of the common
stock of LCB Investments Limited, formed in 1999 to manage a portion of the
bank's securities portfolio.
This proxy statement is being furnished to shareholders in connection
with the solicitation by our board of directors of proxies to be used at the
annual meeting to be held at Westminster Hall, located at 200 Seminary Drive
in Winona Lake, Indiana on Tuesday, April 8, 2003 at 12:00 p.m., or at any
adjournments or postponements of the meeting. Our summary annual report to
shareholders, including the consolidated financial statements for the fiscal
year ended December 31, 2002 and a copy of our Form 10-K that we filed with
the Securities and Exchange Commission, accompanies this proxy statement,
which is first being mailed to shareholders on or about March 7, 2003.
The following is information regarding the meeting and the voting
process, presented in a question and answer format.
Why am I receiving this proxy statement and proxy card?
You are receiving a proxy statement and proxy card from us because on
February 19, 2003, the record date for the annual meeting, you owned shares of
Lakeland Financial's common stock. This proxy statement describes the matters
that will be presented for consideration by the shareholders at the annual
meeting. It also gives you information concerning the matters to assist you in
making an informed decision.
When you sign the enclosed proxy card, you appoint the proxy holder
as your representative at the meeting. The proxy holder will vote your shares
as you have instructed in the proxy card, thereby ensuring that your shares
will be voted whether or not you attend the meeting. Even if you plan to
attend the meeting, you should complete, sign and return your proxy card in
advance of the meeting just in case your plans change.
If you have signed and returned the proxy card and an issue comes up
for a vote at the meeting that is not identified on the card, the proxy holder
will vote your shares, pursuant to your proxy, in accordance with his or her
judgment.
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What matters will be voted on at the meeting?
You are being asked to vote on the election of six directors of
Lakeland Financial for a term expiring in 2006 and the ratification of Crowe,
Chizek and Company LLP as our independent auditors for the 2003 fiscal year.
These matters are more fully described in this proxy statement.
How do I vote?
You may vote either by mail or in person at the meeting. To vote by
mail, complete and sign the enclosed proxy card and mail it in the enclosed
pre-addressed envelope. No postage is required if mailed in the United States.
If you mark your proxy card to indicate how you want your shares voted, your
shares will be voted as you instruct.
If you sign and return your proxy card but do not mark the card to
provide voting instructions, the shares represented by your proxy card will be
voted "for" all six nominees named in this proxy statement and "for" the
ratification of our auditors.
If you want to vote in person, please come to the meeting. We will
distribute written ballots to anyone who wants to vote at the meeting. Please
note, however, that if your shares are held in the name of your broker (or in
what is usually referred to as "street name"), you will need to arrange to
obtain a proxy from your broker in order to vote in person at the meeting.
Even if you plan to attend the annual meeting, you should complete and return
your proxy card in advance of the annual meeting in case your plans change.
What does it mean if I receive more than one proxy card?
It means that you have multiple holdings reflected in our stock
transfer records and/or in accounts with stockbrokers. Please sign and return
ALL proxy cards to ensure that all your shares are voted.
If I hold shares in the name of a broker, who votes my shares?
If you received this proxy statement from your broker, your broker
should have given you instructions for directing how your broker should vote
your shares. It will then be your broker's responsibility to vote your shares
for you in the manner you direct.
Under the rules of various national and regional securities
exchanges, brokers may generally vote on routine matters, such as the election
of directors and the ratification of independent auditors, but cannot vote on
non-routine matters, such as an amendment to the certificate of incorporation
or the adoption of a stock option plan, unless they have received voting
instructions from the person for whom they are holding shares. If your broker
does not receive instructions from you on how to vote particular shares on a
matter on which your broker does not have discretionary authority to vote,
your broker will return the proxy card to us, indicating that he or she does
not have the authority to vote on these matters. This is generally referred to
as a "broker non-vote" and will affect the outcome of the voting as described
below, under "How many votes are needed for approval of each proposal?"
Therefore, we encourage you to provide directions to your broker as to how you
want your shares voted on all matters to be brought before the meeting. You
should do this by carefully following the instructions your broker gives you
concerning its procedures. This ensures that your shares will be voted at the
meeting.
3
What if I change my mind after I return my proxy card?
If you hold your shares in your own name, you may revoke your proxy
and change your vote at any time before the polls close at the meeting. You
may do this by:
o signing another proxy card with a later date and returning that
proxy card to our transfer agent at:
American Stock Transfer and Trust Company
59 Maiden Lane
New York, New York 10038;
o sending notice to us that you are revoking your proxy; or
o voting in person at the meeting.
If you hold your shares in the name of your broker and desire to
revoke your proxy, you will need to contact your broker to revoke your proxy.
How many votes do we need to hold the annual meeting?
A majority of the shares that are outstanding and entitled to vote as
of the record date must be present in person or by proxy at the meeting in
order to hold the meeting and conduct business.
Shares are counted as present at the meeting if the shareholder
either:
o is present and votes in person at the meeting; or
o has properly submitted a signed proxy card or other form of
proxy.
On February 19, 2003, the record date, there were 5,770,565 shares of
common stock issued and outstanding. Therefore, at least 2,885,283 shares need
to be present at the annual meeting.
What happens if a nominee is unable to stand for re-election?
The board may, by resolution, provide for a lesser number of
directors or designate a substitute nominee. In the latter case, shares
represented by proxies may be voted for a substitute nominee. Proxies cannot
be voted for more than six nominees. The board has no reason to believe any
nominee will be unable to stand for re-election.
What options do I have in voting on each of the proposals?
You may vote "for" or "withhold authority to vote for" each nominee
for director. You may vote "for," "against" or "abstain" on any other proposal
that may properly be brought before the meeting.
How many votes may I cast?
Generally, you are entitled to cast one vote for each share of stock
you owned on the record date. The proxy card included with this proxy
statement indicates the number of shares owned by an account attributable to
you.
4
How many votes are needed for each proposal?
The six individuals receiving the highest number of votes cast "for"
their election will be elected as directors of Lakeland Financial.
The ratification of our auditors and all other matters must receive
the affirmative vote of a majority of the shares present in person or by proxy
at the meeting and entitled to vote. Broker non-votes will not be counted as
entitled to vote, but will count for purposes of determining whether or not a
quorum is present on the matter.
Where do I find the voting results of the meeting?
We will announce voting results at the meeting. The voting results
will also be disclosed in our Form 10-Q for the quarter ended June 30, 2003.
Who bears the cost of soliciting proxies?
We will bear the cost of soliciting proxies. In addition to
solicitations by mail, officers, directors or employees of Lakeland Financial
or its subsidiaries may solicit proxies in person or by telephone. These
persons will not receive any special or additional compensation for soliciting
proxies. We may reimburse brokerage houses and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy
and solicitation materials to shareholders.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
the beneficial ownership of our common stock at February 19, 2003, by each
person known by us to be the beneficial owner of more than 5% of the
outstanding common stock, by each director or nominee, by each executive
officer named in the summary compensation table which can be found later in
this proxy statement, and by all directors and executive officers of Lakeland
Financial as a group. Beneficial ownership has been determined for this
purpose in accordance with Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), under which a person is deemed to be
the beneficial owner of securities if he or she has or shares voting power or
investment power in respect of such securities or has the right to acquire
beneficial ownership of securities within 60 days of February 19, 2003.
Name of Individual or Amount and Nature of Percent
Number of Individuals in Group Beneficial Ownership(1,2) of Class
5% Shareholders
Lakeland Financial Corporation 401(k) Plan 636,633(3) 11.03%
Post Office Box 1387
Warsaw, Indiana 46581-1387
5
Directors and Nominees
Robert E. Bartels, Jr. 100 *
Eddie Creighton 145,100(4) 2.51%
Anna K. Duffin 3,000(5) *
L. Craig Fulmer 10,730(6) *
R. Douglas Grant 104,321(7) 1.81%
Jerry L. Helvey 82,800(8) 1.43%
Michael L. Kubacki 35,886(9) *
Allan J. Ludwig 31,916(10) *
Charles E. Niemier 10,311(11) *
D. Jean Northenor 36,900(12) *
Emily Pichon 100 *
Richard L. Pletcher 9,731(13) *
Steven D. Ross 1,612 *
Donald B. Steininger 5,000 *
Terry L. Tucker 9,989(14) *
M. Scott Welch 5,249(15) *
Other Named Executive Officers
David M. Findlay 1,019 *
Charles D. Smith 30,564(16) *
Robert C. Condon 2,211 *
Kevin L. Deardorff 2,613 *
All directors and executive officers as a group
(20 persons) 529,152(17) 9.17%
*Indicates that the individual or entity owns less than one percent of
Lakeland Financial's common stock.
(1) The total number of shares of common stock issued and outstanding on
February 19, 2003 was 5,770,565.
(2) The information contained in this column is based upon information
furnished to us by the persons named above and as shown on our
transfer records. The nature of beneficial ownership for shares shown
in this column, unless otherwise noted, represents sole voting and
investment power.
(3) This information has been supplied by Lake City Bank which serves as
trustee of the trust for the plan. Participant employees of Lakeland
Financial and Lake City Bank exercise investment power over the
shares held in their respective participant accounts. Lake City Bank
exercises sole investment power over those shares not allocated to
any participant account. On February 19, 2003, there were 363,367
unallocated shares held for the plan.
6
(4) Mr. Creighton intends to retire from the board of directors prior to
this year's annual meeting. Includes 112,172 shares held by CB Farms,
LLC, as to which Mr. Creighton shares voting and investment power and
3,960 shares owed individually by Mr. Creighton's wife, as to which
shares he disclaims any beneficial interest.
(5) All of which shares Mrs. Duffin owns jointly with her husband and
shares voting and investment power.
(6) Includes 5,211 shares credited to Mr. Fulmer's account as of January
28, 2003 under the terms of the Amended and Restated Lakeland
Financial Corporation Directors Fee Deferral Plan.
(7) Includes 3,339 shares credited to Mr. Grant's account as of January
28, 2003 under the terms of the Amended and Restated Lakeland
Financial Corporation Directors Fee Deferral Plan.
(8) Includes 56,255 shares held individually by Mr. Helvey's wife, as to
which shares he disclaims any beneficial interest and 12,317 shares
credited to Mr. Helvey's account as of January 28, 2003 under the
terms of the Amended and Restated Lakeland Financial Corporation
Directors Fee Deferral Plan.
(9) Includes 100 shares owned by each of Mr. Kubacki's minor son and
daughter, as to which shares he disclaims any beneficial interest.
(10) Includes 17,492 shares held by Ludwig Investments, as to which shares
Mr. Ludwig exercises voting and investment power; 8,000 shares held
by Mr. Ludwig's individual retirement account, as to which shares he
exercises voting and investment power; 2,000 shares held by Mr.
Ludwig's wife's retirement account, as to which shares Mr. Ludwig
disclaims any beneficial interest; and 4,424 shares credited to Mr.
Ludwig's account as of January 28, 2003 under the terms of the
Amended and Restated Lakeland Financial Corporation Directors Fee
Deferral Plan.
(11) Includes 1,673 shares held by Mr. Niemier's individual retirement
account, as to which shares he shares voting and investment power;
1,279 shares held by Mr. Niemier's wife's individual retirement
account, as to which shares he shares voting and investment power;
1,848 shares held in Mr. Niemier's 401(k) plan, as to which shares he
shares voting and investment power; and 3,359 shares credited to Mr.
Niemier's account as of January 28, 2003 under the terms of the
Amended and Restated Lakeland Financial Corporation Directors Fee
Deferral Plan.
(12) Includes 415 shares held jointly with Ms. Northenor's husband, with
whom she shares voting and investment power.
(13) Includes 704 shares held by Mr. Pletcher's individual retirement
account. Also included are 704 shares held by Mr. Pletcher's wife's
individual retirement account, with respect to which shares Mr.
Pletcher disclaims any beneficial interest; and 7,657 shares credited
to Mr. Pletcher's account as of January 28, 2003 under the terms of
the Amended and Restated Lakeland Financial Corporation Directors Fee
Deferral Plan.
(14) Includes 4,709 shares credited to Mr. Tucker's account as of January
28, 2003 under the terms of the Amended and Restated Lakeland
Financial Corporation Directors Fee Deferral Plan.
(15) Includes 2,399 shares credited to Mr. Welch's account as of January
28, 2003 under the terms of the Amended and Restated Lakeland
Financial Corporation Directors Fee Deferral Plan.
(16) Includes 272 shares owned by Mr. Smith's wife, as to which shares he
disclaims any beneficial interest.
(17) This includes shares which have been allocated to executive officers
under the 401(k) plan through December 31, 2001 and all prior years.
ELECTION OF DIRECTORS
Shareholders will be entitled to elect six directors for a term
expiring in 2006 at the annual meeting. Our board is divided into three
classes of directors having staggered terms of three years. We have no
knowledge that any nominee will refuse or be unable to serve, but if any of
the nominees is unavailable for election, the holders of the proxies reserve
the right to substitute another person of their choice as a nominee when
voting at the meeting.
7
Set forth below is information concerning the nominees for election
and for each of Lakeland Financial's other directors, whose terms of office
will continue after the meeting, including the age, the year first elected as
a director and the other positions held by the person at Lakeland Financial
and Lake City Bank. The nominees, if elected at the annual meeting, will serve
as directors for a three-year term expiring in 2006, except as noted below. We
recommend that shareholders vote "FOR" each of the nominees for director.
Unless authority to vote for the nominees is withheld, the shares represented
by the enclosed proxy card, if executed and returned, will be voted "FOR" the
election of the nominees proposed by the Board of Directors.
NOMINEES
Name Director Positions with Lakeland
(Age) Since(1) Financial and Lake City Bank
Term Expires 2006
R. Douglas Grant(2) 1980 Chairman of the Board and Director of Lakeland
(Age 69) Financial and Lake City Bank
Jerry L. Helvey(2) 1974 Director of Lakeland Financial and Lake City Bank
(Age 69)
Allan J. Ludwig 1996 Director of Lakeland Financial and Lake City Bank
(Age 64)
D. Jean Northenor(2) 2001 Director of Lakeland Financial and Lake City Bank
(Age 70)
Emily Pichon 2002 Director of Lakeland Financial and Lake City Bank
(Age 39)
Richard L. Pletcher 1992 Director of Lakeland Financial and Lake City Bank
(Age 61)
CONTINUING DIRECTORS
Term Expires 2004
Anna K. Duffin 1994 Director of Lakeland Financial and Lake City Bank
(Age 69)
L. Craig Fulmer 1993 Director of Lakeland Financial and Lake City Bank
(Age 60)
Charles E. Niemier 1998 Director of Lakeland Financial and Lake City Bank
(Age 47)
Donald B. Steininger 2001 Director of Lakeland Financial and Lake City Bank
(Age 60)
Terry L. Tucker 1988 Director of Lakeland Financial and Lake City Bank
(Age 62)
8
Term Expires 2005
Robert E. Bartels, Jr. 2002 Director of Lakeland Financial and Lake City Bank
(Age 38)
Michael L. Kubacki 1998 President, Chief Executive Officer and Director
(Age 51) of Lakeland Financial and Lake City Bank
Steven D. Ross 2000 Director of Lakeland Financial and Lake City Bank
(Age 48)
M. Scott Welch 1998 Director of Lakeland Financial and Lake City Bank
(Age 42)
(1) Includes service as a director of Lake City Bank. Messrs. Grant and
Helvey have served as a director of Lakeland Financial since its
formation in 1984.
(2) Mr. Grant intends to retire from the board in June, 2003, Ms.
Northenor intends to retire in September, 2003, and Mr. Helvey
intends to retire in December, 2003. As these retirements occur, the
Board of Directors will determine if appropriate candidates are
available for nomination to fill these vacancies.
Except as noted above, all directors will hold office for the terms
indicated, or until their earlier death, resignation, removal or
disqualification, and until their respective successors are duly elected and
qualified. There are no arrangements or understandings between any of the
nominees, directors or executive officers and any other person pursuant to
which any of our nominees, directors or executive officers have been selected
for their respective positions. No nominee, member of the board of directors
or executive officer is related to any other nominee, member of the board of
directors or executive officer. No nominee or director is a director of
another "public corporation" (i.e. subject to the reporting requirements of
the Securities Exchange Act of 1934) or of any investment company, except for
Mr. Fulmer, who is a director of Starcraft Corporation, and Mr. Niemier, who
is a director of Biomet, Inc.
The business experience of each of the nominees and continuing
directors for the past five years is as follows:
Mr. Bartels, Jr. is president and chief operating officer of Martin's
Supermarkets, Inc., a regional supermarket chain headquartered in South Bend,
Indiana.
Mr. Creighton is a former partner and general manager of CB Farms,
LLC, which owns and operates Creighton Brothers, LLC and Crystal Lake, LLC,
which are involved in poultry and egg production and sales, as well as the
production and sale of other agricultural and food products.
Mrs. Duffin is active in civic affairs in the Goshen, Indiana area.
Mr. Fulmer is chairman of Heritage Financial Group, Inc., a real
estate investment and management company based in Elkhart, Indiana.
Mr. Grant presently serves as chairman of the board of directors of
Lakeland Financial and Lake City Bank, positions which he has held since 1993.
Prior to January 1999, he also served as president and chief executive officer
of Lakeland Financial and Lake City Bank.
Mr. Helvey serves as chairman of the board of directors of Helvey &
Associates, Inc., a group of collection agencies.
9
Mr. Kubacki presently serves as president and chief executive officer
of Lakeland Financial and Lake City Bank. He first joined Lakeland Financial
and Lake City Bank during 1998 as president and became chief executive officer
of both in January 1999. Prior to 1998, Mr. Kubacki served as executive vice
president of the Northern Trust Bank of California, NA.
Mr. Ludwig is an entrepreneur and industrial developer.
Mr. Niemier is senior vice president - international operations of
Biomet, Inc., which is a manufacturer of medical and orthopedic devices. He
also serves as a trustee of Valparaiso University.
Ms. Northenor retired in February, 2001 as an executive vice
president of Lakeland Financial and Lake City Bank, positions she had held
since 1998. She first joined Lake City Bank as the marketing officer in 1983.
Ms. Pichon is the director of the Cole Foundation.
Mr. Pletcher is president of Pletcher Enterprises, Inc., a holding
company, and chief executive officer of its principal subsidiary, Amish Acres,
LLC, a heritage resort.
Mr. Ross is president of Bertsch Services, which is a regional food
service and vending company based in Warsaw, Indiana.
Mr. Steininger is president of Steininger Development, a real estate
development company based in Ft. Wayne, Indiana.
Mr. Tucker is president of Maple Leaf Farms, Inc., which is primarily
engaged in duck production, processing and sales, as well as the production
and sale of other food products.
Mr. Welch is the chief executive officer of Welch Packaging Group,
Inc., which is primarily engaged in producing industrial and point of purchase
packaging.
In addition, the following individuals serve as executive officers of
Lakeland Financial and are named in the compensation tables included in this
proxy statement:
David M. Findlay, age 41, became an executive vice president and
chief financial officer of Lakeland Financial in September, 2000. Prior to his
arrival, Mr. Findlay served as the chief financial officer of Quality Dining,
Inc., a publicly traded company with its headquarters in South Bend, Indiana.
Prior to that, he served in various capacities with The Northern Trust Company
in Chicago.
Charles D. Smith, age 58, presently serves as an executive vice
president of Lakeland Financial and Lake City Bank, positions he has held
since 2000. He has served as an officer of Lake City Bank since 1983.
Robert C. Condon, age 61, presently serves as an executive vice
president of Lakeland Financial and Lake City Bank, positions he has held
since 1999. Prior to that he was managing director of the northern California
region of The Northern Trust Company for eight years. Before that he was vice
president and division head for Trust Division A for The Northern Trust
Company in Chicago.
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Kevin L. Deardorff, age 41, presently serves as an executive vice
president of Lakeland Financial and Lake City Bank, positions he has held
since 2001. He has served as an officer of Lake City Bank since 1993.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that
our executive officers, directors and persons who own more than 10% of our
common stock file reports of ownership and changes in ownership with the
Securities and Exchange Commission. They are also required to furnish us with
copies of all Section 16(a) forms they file. Based solely on our review of the
copies of such forms, and, if appropriate, representations made to us by any
reporting person concerning whether a Form 5 was required to be filed for
2002, we are not aware that any of our directors, executive officers or 10%
shareholders failed to comply with the filing requirements of Section 16(a)
during 2002 except Mr. Deardorff, who failed to timely file a Form 4 reporting
the sale of 513 shares; Mr. Niemier, who failed to timely file a Form 4
reporting the purchase of 1,680 shares; Ms. Northenor, who failed to timely
report gifts in an aggregate of 10 shares on last year's Form 5; Mr. Nowak,
who failed to timely file a Form 4 reporting the sale of 570 shares and Mr.
Steininger, who failed to timely file a Form 4 reporting the purchase of 2,700
shares.
Board of Directors and Committees of the Board
Our board of directors held 12 meetings during 2002. The board of
directors has, in addition to other committees, an audit committee and a
compensation committee. All members of our board of directors also serve as
members of the board of directors of Lake City Bank. The board has determined
that a majority of the directors are "independent," as that term is defined by
the Nasdaq Stock Market, Inc. The board of directors will consider nominees
recommended by shareholders if such recommendations comply with our bylaws.
Currently, the entire board makes up the nominating committee. During 2002,
none of the directors attended less than 75% of the total number of meetings
they were eligible to attend except for Messrs. Creighton, Ludwig, Niemier and
White.
In 2002, the audit committee was comprised of Anna K. Duffin, Emily
E. Pichon, Richard L. Pletcher, Steven D. Ross, Terry L. Tucker and M. Scott
Welch. Donald B. Steininger also served on the committee until September,
2002, as did George L. White, who retired as a director in December, 2002. The
committee held 4 meetings during 2002. Each of the members was considered
"independent" according to the Nasdaq listing requirements. In 2003 Charles E.
Niemier and Robert E. Bartels, Jr. became audit committee members. The board
of directors has determined that Mr. Niemer qualifies as an "audit committee
financial expert" under the rules of the Securities and Exchange Commission.
The board based this decision on Mr. Niemier's education, professional
experience in working for an audit firm and his experience as chief financial
officer and board member of Biomet, Inc., a company with its common stock
quoted on the Nasdaq National Market System.
The functions performed by the audit committee include:
o the selection of our independent auditors;
o reviewing the independence of the independent auditors;
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o reviewing actions by management on recommendations of the independent
auditors and internal auditors;
o meeting with management, the internal auditors and the independent
auditors to review the effectiveness of our system of internal
control and internal audit procedures; and
o reviewing reports of bank regulatory agencies and monitoring
management's compliance with recommendations contained in those
reports.
To promote independence of the audit function, the committee consults
separately and jointly with the independent auditors, the internal auditors
and management. The audit committee has adopted a written charter, which sets
forth the committee's duties and responsibilities. We have attached a copy of
the current charter to this proxy statement as Appendix A.
The compensation committee, comprised of L. Craig Fulmer, R. Douglas
Grant, Jerry L. Helvey, Michael L. Kubacki and George L. White, until his
retirement in December, held 2 meetings during 2002. The functions performed
by the compensation committee include making recommendations to the full board
of directors with respect to officers' salaries and setting awards in
accordance with our benefit plans. Beginning in 2003, Mr. Kubacki no longer
serves on the committee and it is comprised solely of "independent" directors,
as that term is defined by Nasdaq.
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EXECUTIVE COMPENSATION
The following table shows the compensation earned for the last three
fiscal years by the chief executive officer and our four other most highly
paid executive officers:
--------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------------------------------------------
Long Term
Compensation
Annual Compensation Awards
----------------------------------- ------------------
(a) (b) (c) (d) (g) (i)
Securities
Underlying All Other
Name and Options/SARs Compensation
Principal Position Year Salary($) Bonus($) (#) ($)(3)
------------------------------- ---------- -------------------- -------------- ------------------ ------------------
Michael L. Kubacki 2002 $ 290,000 $ 56,000 - $ 11,791
President and Chief Executive 2001 280,000 52,000 10,000 10,936
Officer 2000 260,000 47,500 20,000 16,657
David M. Findlay(1) 2002 $ 182,500 $ 26,250 - $ 12,307
Chief Financial Officer 2001 177,296 7,615 15,000 3,680
Charles D. Smith 2002 $ 152,500 $ 21,750 - $ 11,184
Executive Vice President 2001 145,423 18,377 7,000 8,719
2000 128,462 11,003 10,000 9,862
Robert C. Condon 2002 $ 125,000 $ 18,000 - $ 8,098
Executive Vice President 2001 120,000 16,500 6,000 7,772
2000 110,000 11,250 8,000 934
Kevin L. Deardorff(2) 2002 $ 125,000 $ 18,000 - $ 9,178
Executive Vice President 2001 120,000 10,645 5,000 7,772
(1) Mr. Findlay joined the organization in September, 2000. Accordingly, no
information is given with respect to his compensation for 2000.
(2) We were not required to disclose Mr. Deardorff's salary information for
2000, and therefore, it is not included in this table.
(3) The amounts set forth in column (i) for Messrs. Kubacki, Findlay, Smith,
Condon and Deardorff include life insurance premiums paid by us as well
as the following 401(k) plan matching contributions, including
supplemental 401(k) matching contributions, paid by Lakeland Financial as
follows:
13
Mr. Kubacki Mr. Findlay Mr. Smith Mr. Condon Mr. Deardorff
2002 $ 10,500 $ 11,000 $ 10,455 $ 7,500 $ 8,580
2001 $ 10,096 $ 2,845 $ 8,029 $ 7,200 $ 7,200
2000 $ 11,874 $ --- $ 8,408 $ --- $ ---
There were no options granted to the individuals named above in the
summary compensation table during the 2002 fiscal year.
The following table sets forth information concerning the exercisable
and nonexercisable stock options at December 31, 2002 held by the individuals
named in the summary compensation table:
--------------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTIONS VALUES
--------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Shares Number of Securities Value of Unexercised In-the-
Acquired on Underlying Unexercised Money Options at
Name Exercise Value Options at FY-End FY-End ($)
Realized (#)
(#) ($) Exercisable Unexercisable Exercisable Unexercisable
--------------------------- --------------- -------------- --------------- ---------------- ------------- ----------------
Michael L. Kubacki --- --- --- 60,000 $ --- $ 1,076,950
David M. Findlay --- --- --- 30,000 $ --- $ 414,750
Charles D. Smith --- --- --- 25,000 $ --- $ 418,710
Robert C. Condon --- --- --- 19,000 $ --- $ 291,500
Kevin L. Deardorff --- --- --- 22,000 $ --- $ 372,000
Pension Plan Table
Our defined benefit retirement plan covers certain employees over 21
years of age with more than one year of service. Effective April 1, 2000, we
amended the plan to freeze the accrual of benefits to participants under the
plan. As a result of this amendment, employees who were not participants in
the plan as of March 31, 2000 are no longer able to become participants under
the plan. In addition, all benefits previously accrued under the plan by
participants were frozen in place, and continuing employment with us will not
increase the employee's benefits upon retirement. Normal retirement age is 65.
Participants received credit for 2-1/2% of their average salary for each year
up to 20 years of service or through March 31, 2000, whichever occurred first.
The principal benefit under this plan is a lifetime annuity for the
joint lives of participants and their spouses. This amount is offset by social
security benefits. On December 31, 1985, the then existing plan was terminated
and the latest plan (which is now frozen) was adopted effective January 1,
1986. Participants in the terminated plan were paid cash or received annuities
for their earned benefits as of December 31, 1985. The amounts paid for
annuities purchased, as a part of the plan termination will reduce the
benefits to be paid out of the latest plan.
14
Years of Credited Service Through March 31, 2000
Remuneration 15 20 25 30 35
------------ ---------- ---------- ---------- ---------- ----------
100,000 37,500 50,000 50,000 50,000 50,000
150,000 56,250 75,000 75,000 75,000 75,000
200,000 75,000 100,000 100,000 100,000 100,000
250,000 93,750 125,000 125,000 125,000 125,000
300,000 112,500 150,000 150,000 150,000 150,000
350,000 131,250 175,000 175,000 175,000 175,000
400,000 150,000 200,000 200,000 200,000 200,000
450,000 168,750 225,000 225,000 225,000 225,000
500,000 187,500 250,000 250,000 250,000 250,000
The amounts shown above include benefits payable under a supplemental
employee retirement plan, which is a non-qualified plan payable as a general
creditor of Lakeland Financial. This plan was created in 1989 when changes to
the Internal Revenue Code that apply to defined pension plans could have
resulted in a reduced pension benefit for certain highly compensated
employees. This supplemental plan did not create any new benefits, but was
adopted to offset any such reduction in pension benefits. Benefits under this
plan were frozen as of December 31, 1999, by a resolution of our board, and
continuing employment will not increase the employee's benefits under the
plan. At the time the defined benefit plan was frozen, Mr. Kubacki was
credited with 2 years of service, Mr. Smith was credited with 14 years of
service, and Mr. Deardorff was credited with 8 years of service. Mr. Findlay
joined Lakeland Financial in 2000 and never participated in the plan. Mr.
Condon joined Lakeland Financial in 1999 and never participated in the plan.
Compensation Committee Interlocks and Insider Participation
During 2002, the compensation committee consisted of Messrs. Fulmer,
Grant, Helvey and Kubacki. Mr. White also served on the committee until his
retirement in December, 2002. Mr. Kubacki, president and chief executive
officer, left the meeting during the time the committee deliberated on his
compensation, but he did participate in evaluating and establishing the
salaries of other executive officers. Mr. Kubacki no longer serves on the
committee.
Employment Agreements
The Company has entered into change of control agreements with
several of its executive officers, including Messrs. Kubacki, Findlay, Smith,
Condon and Deardorff. The agreements provide that upon the termination of the
executive's employment within one year prior to, or following, a change of
control of Lakeland Financial, Mr. Kubacki has the right to receive a payment
equal to approximately two times 120% of his base salary and all other
executives have the right to receive a payment equal to approximately two
times 115% of the executives base salary. Also, the executive shall continue
to receive certain benefits, including medical insurance coverage. Pursuant to
the agreements, a "change of control" shall be any of the following events: a
merger or attempted hostile takeover; a person acquiring 30% of our voting
securities followed by their election of a director to the board of directors;
a person acquiring more than 50% of our voting securities; and any other event
that has the effect of placing control of Lakeland Financial in someone other
than its current shareholders.
15
In addition, the agreements provide that the executive shall not
compete with us, or our successor, for two years following a change of
control. If the executive elects, he may forego the severance benefit and not
be subject to the restrictive covenant. The restrictive covenant extends to a
60 mile radius of Warsaw, Indiana.
Report of the Compensation Committee on Executive Compensation
The report of the compensation committee below 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 or under
the Securities Exchange Act of 1934, except to the extent Lakeland Financial
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
General
We annually review executive officer compensation in December with
the new compensation to become effective on the following January 1. In
establishing executive compensation, we have historically divided compensation
into the two separate components of salary and bonus. When fixing an
individual executive officer's compensation, these two components are intended
to work together to compensate the executive officer fairly for his or her
services and reward the executive officer based upon our performance during
the year. We further encourage the executive officers and all employees to
acquire a personal interest in the long-term success of Lakeland Financial by
participating in stock ownership under our 401(k) plan. During 1998, we
established the Lakeland Financial Corporation 1997 Share Incentive Plan to
enhance the opportunity of the executive officers, as well as other covered
employees, to acquire stock in Lakeland Financial. The board of directors
retains final approval over executive compensation.
Salary
The compensation committee reviews each executive's base salary on an
annual basis. The committee believes that the base salaries should offer
security to each executive and allow us to attract qualified executives and
maintain a stable management team and environment. The committee targets base
salaries at market levels, although it may be adjusted, either up or down, to
reflect our financial performance, including, but not limited to, our earnings
per share, net income and return on average assets, although no specific
weight is given to these factors. Additionally, base salaries are determined
examining, among other things, an executive's level of responsibility, prior
experience, education, breadth of knowledge, internal performance objectives
and the current market level. When establishing the salary of executive
officers other than his own, Mr. Kubacki participated and made recommendations
to the committee. Mr. Kubacki is no longer on the committee.
The salary paid to Mr. Kubacki, as president and chief executive
officer, during 2002 was based in part upon the committee's satisfaction with
the following factors; profitability, revenue growth, expense control and
credit quality. The committee determined that Mr. Kubacki's leadership had a
significant impact on our attaining this level of performance while
maintaining our excellent safety and soundness ratings. Additionally, the
committee considered Mr. Kubacki's personal performance as president and chief
executive officer, as well as his employment contract, his previous years'
salaries and the salary levels of other similarly situated financial
institutions in setting his base salary at $290,000 for 2002.
16
Bonus
Executive officer bonuses that were paid in 2002, including Mr.
Kubacki's, were determined by an established executive incentive compensation
program, which is periodically reviewed by the committee. This program applied
to all of our executive officers, as well as designated officers of Lake City
Bank. As established, the committee retains the right to modify the program
and/or withhold payment at any time. Historically, payments have not been
withheld since its adoption. The bonus program for 2002 was designed to
encourage the executive officers to achieve a strong return on shareholders'
equity. During the December 2001 review of bonuses to be paid in February
2002, the committee chose not to modify the bonus program or withhold payment
for fiscal year 2001. We have adopted provisions of Statement of Financial
Accounting Standard ("SFAS") 115 which requires recognition of unrealized
gains or losses on certain debt and equity securities held in Lake City Bank's
investment securities portfolio at year end. For purposes of calculating bonus
payments made in 2002, unrealized gains and losses in the investment
securities portfolio of Lake City Bank are excluded from equity capital.
Bonuses paid in 2002 were computed on our return on beginning
shareholders' equity. It was based upon net profit (after taxes) and includes
all realized securities gains and losses (including tax effect), before
payment of incentive compensation bonuses and contributions to the 401(k)
plan. For payments made in 2002, the year end return on shareholders' equity
as of January 1 of each year must equal or exceed 12% in order for a bonus to
be paid that year. Thereafter, based upon an established schedule, a
percentage of each eligible officer's salary was paid as a bonus.
For bonus payments made in 2002, the bonus program provided that our
president and chief executive officer would receive up to 20% of his salary
and that the executive vice presidents would receive up to 15% of their
salary. Bonuses for officers receiving promotions during the year were
prorated.
The committee made changes to the executive incentive compensation
plan in 2002 for bonus payments to be made in 2003. The group of eligible
participants was expanded to include selected Lake City Bank officers and
banking center managers. Eligible participants in the plan may earn a
performance-based bonus based on the Company's return on beginning
shareholders' equity and the employee's performance versus personal goals. For
purposes of determining the return on shareholders equity, net income after
the 401(k) match and incentive compensation costs and excluding non-recurring
gain/loss on sale of fixed assets is used. In addition, the calculation
utilizes beginning equity as of January 1, which includes common stock,
surplus and undivided profits (including treasury stock) and the adjustment
from unrealized gain/losses on securities. The return on beginning
shareholders' equity as of January 1 of each year must equal or exceed 13% in
order for a bonus to be paid that year. Thereafter, based upon an established
schedule, the award eligibility increases with improved return on
shareholders' equity. Bonuses under the plan provide for bonus payments of 5%
to 40% of eligible salary.
Stock Ownership
At the annual meeting held in April 1998, the shareholders approved
the Lakeland Financial Corporation 1997 Share Incentive Plan. The purpose of
this incentive plan is to enhance our long term financial performance by:
17
o attracting and retaining executive and other key employees of
Lakeland Financial and Lake City Bank through incentive compensation
opportunity;
o motivating such employees to further the long term goals of Lakeland
Financial and the Lake City Bank; and
o furthering the identity of interests of participating employees with
our shareholders through opportunities for increased employee
ownership of Lakeland Financial.
We have granted options to our executive officers in past years,
although in 2002 we did not grant any options to our executive officers as a
result of the introduction of the expanded incentive compensation program.
We have a 401(k) plan, effective January 1, 1984, which allows the
participants to choose between several different investment options, including
shares of our common stock. Under the plan, employees are eligible to redirect
up to 12% of their regular basic compensation into a tax-deferred trust. We
make matching contributions of up to 6% of each participant's regular basic
compensation. All participants are always 100% vested in their salary
redirections and become 100% vested in our contribution upon retirement,
disability or in accordance with the vesting provisions of the plan.
Participant accounts are distributed to the individual participants upon
termination of employment and may include our stock.
Approved by the Lakeland Financial compensation committee as of
December 31, 2002.
L. Craig Fulmer Jerry L. Helvey, Chairman Terry L. Tucker R. Douglas
Grant Michael L. Kubacki
Stock Price Performance Graph
The stock price performance graph below 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 or under
the Securities Exchange Act of 1934, except to the extent Lakeland Financial
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
The graph below compares cumulative total return* of Lakeland
Financial, the Nasdaq Market Index and a peer group index.
18
The following table was presented as a graph in the proxy material
mailed to shareholders.
INDEX 1997 1998 1999 2000 2001 2002
------------------------ ------- ------- ------- ------- ------- -------
LAKELAND FINANCIAL CORP. $100.00 $ 77.81 $ 64.32 $ 55.98 $ 82.03 $112.42
PEER GROUP INDEX 100.00 140.99 261.48 157.42 124.89 86.33
NASDAQ MARKET INDEX 100.00 96.10 83.70 84.81 111.41 133.54
* Assumes $100 invested on December 31, 1997 and dividends were reinvested.
The peer group index is comprised of all financial institution
holding companies in the United States with total assets between one billion
dollars and three billion dollars whose equity securities were traded on an
exchange or national quotation service.
DIRECTORS' COMPENSATION
During 2002, directors who were not full time employees of Lakeland
Financial or Lake City Bank, were paid an annual fee of $8,500 and an
additional $400 for each board meeting attended and $400 for each committee
meeting attended. They are not eligible to participate in the 401(k) plan or
the defined benefit plan. Inside directors (those who are full time employees
of Lakeland Financial or Lake City Bank) are not paid a director's fee.
Directors are permitted to defer receipt of their directors' fees and earn a
rate of return based upon Lake City Bank's six-month certificate of deposit
rates. Effective January 1, 1997, this plan was broadened to add an option to
permit the directors to earn a return based upon the performance of our stock
rather than the certificate of deposit rate. We may, but are not required to,
fund the deferred fees into a trust which may hold our stock. The plan is
unqualified and the directors have no interest in the trust. The deferred fees
and any earnings thereon are unsecured obligations of Lakeland Financial. Any
19
shares held in the trust are treated as treasury shares and may not be voted.
During 2002, Ms. Pichon was granted an option to acquire 1,000 shares at the
price of $27.00. The options are not exercisable for 5 years, except in the
case of retirement or disability.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2002, Lake City Bank had extended, and expects to continue to
extend, loans to its directors and officers and to their related interests.
Such loans were, and will continue to be, made only upon the same terms,
conditions, interest rates, and collateral requirements as those prevailing at
the same time for comparable loans extended from time to time to other,
unrelated borrowers. Loans to directors and officers do not and will not
involve greater risks of collectibility, or present other unfavorable
features, than loans to other borrowers.
AUDIT COMMITTEE REPORT
The report of the audit committee below 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 or under
the Securities Exchange Act of 1934, except to the extent Lakeland Financial
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
The audit committee assists the board in carrying out its oversight
responsibilities for our financial reporting process, audit process and
internal controls. The audit committee also reviews the audited financial
statements and recommends to the board that they be included in our annual
report on Form 10-K. As of December 31, 2002, the committee was comprised
solely of independent directors.
The audit committee has reviewed and discussed our audited financial
statements for the fiscal year ended December 31, 2002 with our management and
Crowe, Chizek and Company LLP, our independent auditors. The committee has
also discussed with Crowe Chizek the matters required to be discussed by SAS
61 (Codification for Statements on Auditing Standards) as well as having
received and discussed the written disclosures and the letter from Crowe
Chizek required by Independence Standards Board Statement No. 1 (Independence
Discussions with Audit Committees). Based on the review and discussions with
management and Crowe Chizek, the committee has recommended to the board that
the audited financial statements be included in our annual report on Form 10-K
for the fiscal year ending December 31, 2002 for filing with the Securities
and Exchange Commission.
Approved by the Lakeland Financial audit committee as of December 31,
2002.
Anna K. Duffin Emily E. Pichon Richard L. Pletcher
Steven D. Ross Terry L. Tucker M. Scott Welch
INDEPENDENT PUBLIC ACCOUNTANTS
Shareholders will be asked to ratify the appointment of Crowe, Chizek
and Company LLP as our independent public accountants for the year ending
December 31, 2003. A proposal will be presented at the annual meeting to
ratify the appointment of Crowe Chizek. If the appointment of Crowe Chizek is
not ratified, the matter of the appointment of independent public accountants
will be considered by the audit committee and board of directors. A
representative of Crowe Chizek is not expected to be present at the annual
meeting.
20
Accountant Fees
Audit Fees
The aggregate fees and expenses billed by Crowe Chizek in connection
with the audit of our annual financial statements as of and for the year ended
December 31, 2002 and for the required review of our financial information
included in our Form 10-Q filings for the year 2002 was $98,650.
Financial Information Systems Design and Implementation Fees
There were no fees incurred for these services for the year 2002.
All Other Fees
The aggregate fees and expenses billed by Crowe Chizek for all other
services rendered to us for the year ended December 31, 2002 was $43,990.
The audit committee, after consideration of the matter, does not
believe that the rendering of these services by Crowe Chizek to be
incompatible with maintaining Crowe Chizek's independence as our principal
accountant.
PROPOSALS OF SHAREHOLDERS
Any proposal which any shareholder may intend to present at the
annual meeting to be held in 2004 must be received by us on or before November
7, 2003, if such proposal is to be included in the proxy statement and form of
proxy pertaining to the 2004 annual meeting.
Michael L. Kubacki
President and Chief Executive Officer
March 7, 2003
Warsaw, Indiana
ALL SHAREHOLDERS ARE URGED TO SIGN
AND MAIL THEIR PROXIES PROMPTLY
21
APPENDIX A
LAKELAND FINANCIAL CORPORATION
AUDIT COMMITTEE CHARTER
Purpose
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company, (2)
the independent auditor's qualifications and independence, (3) the performance
of the Company's internal audit function and independent auditors, and (4) the
compliance by the Company with legal and regulatory requirements.
Committee Membership
The Audit Committee shall consist of no fewer than three members. The members
of the Audit Committee shall meet the independence and experience requirements
of the NASDAQ, Section 10A(m)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act) and the rules and regulations of the Commission. At least one
member of the Audit Committee shall be a financial expert as defined by the
Commission. Audit Committee members shall not simultaneously serve on the
audit committees of more than two other public companies.
The members of the Audit Committee shall be appointed by the Board on the
recommendation of the Nominating Committee. Audit Committee members may be
replaced by the Board.
Meetings
The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly. The Audit Committee shall meet periodically with
management, the internal auditors and the independent auditor in separate
executive sessions. The Audit Committee may request any officer or employee of
the Company or the Company's outside counsel or independent auditor to attend
a meeting of the Committee or to meet with any members of, or consultants to,
the Committee.
Committee Authority and Responsibilities
The Audit Committee shall have the sole authority to appoint or replace the
independent auditor (subject, if applicable, to shareholder ratification). The
Audit Committee shall be directly responsible for the compensation and
oversight of the work of the independent auditor (including resolution of
disagreements between management and the independent auditor regarding
financial reporting) for the purpose of preparing or issuing an audit report
or related work. The independent auditor shall report directly to the Audit
Committee.
22
The Audit Committee shall preapprove all auditing services and permitted
non-audit services to be performed for the Company by its independent auditor,
subject to the de minimus exceptions for non-audit services described in
Section 10A(i)(1)(B) of the Exchange Act, which are approved by the Audit
Committee prior to the completion of the audit.
The Audit Committee may form and delegate authority to subcommittees
consisting of one or more members when appropriate, including the authority to
grant preapprovals of audit and permitted non-audit services, provided that
decisions of such subcommittee to grant preapprovals shall be presented to the
full Audit Committee at its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it deems necessary
or appropriate, to retain independent legal, accounting or other advisors. The
Company shall provide for appropriate funding, as determined by the Audit
Committee, for payment of compensation to the independent auditor for the
purpose of rendering or issuing an audit report and to any advisors employed
by the Audit Committee.
The Audit Committee shall make regular reports to the Board. The Audit
Committee shall review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval. The Audit Committee
shall annually review the Audit Committee's own performance.
The Audit Committee, to the extent it deems necessary or appropriate, shall:
Financial Statement and Disclosure Matters
1. Review and discuss with management and the independent auditor the annual
audited financial statements, including disclosures made in management
discussion and analysis, and recommend to the Board whether the audited
financial statements should be included in the Company's Form 10-K.
2. Review and discuss with management and the independent auditor the
Company's quarterly financial statements prior to the filing of its Form
10-Q, including the results of the independent auditor's reviews of the
quarterly financial statements.
3. Discuss with management and the independent auditor significant financial
reporting issues and judgments made in connection with the preparation of
the Company's financial statements, including any significant changes in
the Company's selection or application of accounting principles, any
major issues as to the adequacy of the Company's internal controls and
any special steps adopted in light of material control deficiencies.
4. Review and discuss quarterly reports from the independent auditors on: a)
All critical accounting policies and practices to be used.
b) All alternative treatments of financial information within generally
accepted accounting principles that have been discussed with management,
ramifications of the use of such alternative disclosures and treatments,
and the treatment preferred by the independent auditor.
c) Other material written communications between the independent auditor and
management, such as any management letter or schedule of unadjusted
differences.
5. Discuss with management the Company's earnings press releases, including
the use of "pro forma" or "adjusted" non-GAAP information, as well as
financial information and earnings guidance provided to analysts and
rating agencies. Such discussion may be done generally (consisting of
discussing the types of information to be disclosed and the types of
presentations to be made).
6. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements.
23
7. Discuss with management the Company's major financial risk exposures and
the steps management has taken to monitor and control such exposures,
including the Company's risk assessment and risk management policies.
Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of the
audit.
8. Including any difficulties encountered in eh course of the audit work,
any restrictions on the scope of activities or access to requested
information, and any significant disagreements with management.
9. Review disclosures made to the Audit Committee by the Company's CEO and
CFO during their certification process for the Form 10-K and Form 10-Q
about any significant deficiencies in the design or operation of internal
controls or material weaknesses therein and any fraud involving
management or other employees who have a significant role in the
Company's internal controls.
Oversight of the Company's Relationship with the Independent Auditor
10. Review and evaluate the lead partner of the independent auditor team.
11. Obtain and review a report from the independent auditor at least annually
regarding (a) the independent auditor's internal quality-control
procedures (b) any material issues raised by the most recent internal
quality -control review, or peer review, of the firm, or by any inquiry
or investigation by governmental or professional authorities within the
preceding five years respecting one or more independent audits carried
out by the firm, (c) any steps taken to deal with any such issues, and
(d) all relationship between the independent auditor and the Company.
Evaluate the qualifications, performance and independence of the
independent auditor, including considering whether the auditor's quality
controls are adequate and the provision of permitted non-audit services
is compatible with maintaining the auditor's independence, and taking
into account the opinions of management and internal auditors. The Audit
Committee shall present its conclusions with respect to the independent
auditor to the Board.
12. Ensure the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner responsible
for reviewing the audit as required by law. Consider whether, in order to
assure continuing auditor independence, it is appropriate to adopt a
policy of rotating the independent auditing firm on a regular basis.
13. Recommend to the Board policies for the Company's hiring of employees or
former employees of the independent auditor who participated in any
capacity in the audit of the Company.
14. Discuss with the national office of the independent auditor issues on
which they were consulted by the Company's audit team and matters of
audit quality and consistency.
15. Meet with the independent auditor prior to the audit to discuss the
planning and staffing of the audit.
24
Oversight of the Company's Internal Audit Function
16. Review the appointment and replacement of the senior internal auditing
executive.
17. Review the significant reports to management prepared by the internal
auditing department and management's responses.
18. Discuss with the independent auditor and management the internal audit
department responsibilities, budget and staffing and any recommended
changes in the planned scope of internal audit.
Compliance Oversight Responsibilities
19. Obtain from the independent auditor assurance that Section 10A(b) of the
Exchange Act has not been implicated.
20. Obtain reports from management, the Company's senior internal auditing
executive and the independent auditor that the Company and its
subsidiary/foreign affiliated entities are in conformity with applicable
legal requirements and the Company's Code of Business Conduct and Ethics.
Review reports and disclosures of insider and affiliated party
transactions. Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and regulations and
with the Company's Code of Business Conduct and Ethics.
21. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential, anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters.
22. Discuss with management and the independent auditor any correspondence
with regulators or governmental agencies and any published reports, which
raise material issues regarding the Company's financial statements or
accounting policies.
23. Discuss with the Company's General Counsel legal matters that may have a
material impact on the financial statements or the Company's compliance
policies.
Limitation of Audit Committee's Role
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditor.
Revised: February 4, 2003
25
PROXY FOR COMMON SHARES SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
LAKELAND FINANCIAL CORPORATION TO BE HELD ON APRIL 8, 2003
The undersigned hereby appoints R. Douglas Grant and Michael L.
Kubacki, or either one of them acting in the absence of the other, with power
of substitution, attorneys and proxies, for and in the name and place of the
undersigned, to vote the number of common shares that the undersigned would be
entitled to vote if then personally present at the annual meeting of
shareholders, to be held at Westminster Hall located at 200 Seminary Drive in
Winona Lake, Indiana, on the 8th day of April, 2003, at 12:00 p.m., or any
adjournments or postponements of the meeting, upon the matters set forth in
the notice of annual meeting and proxy statement, receipt of which is hereby
acknowledged, as follows:
1. ELECTION OF DIRECTORS:
FOR all nominees listed below WITHHOLD AUTHORITY
--- ------------------
(except as marked to the contrary to vote for all nominees listed below
below)
[ ] [ ]
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Term Expires 2006: R. Douglas Grant, Jerry L. Helvey, Allan J. Ludwig,
D. Jean Northenor, Emily Pichon and Richard L. Pletcher
2. RATIFY THE APPOINTMENT OF Crowe, Chizek & Company LLP as the Company's
independent public auditors for the year ending December 31, 2003:
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For Against Abstain
3. In accordance with their discretion, upon all other matters that may
properly come before said meeting and any adjournments or postponements of
the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE NOMINEES LISTED UNDER PROPOSAL 1 AND FOR PROPOSAL 2.
Dated: , 2003
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Signature(s)
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NOTE: PLEASE DATE PROXY AND SIGN IT EXACTLY AS NAME OR NAMES APPEAR ABOVE.
ALL JOINT OWNERS OF SHARES SHOULD SIGN. STATE FULL TITLE WHEN SIGNING AS
EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC. PLEASE RETURN SIGNED PROXY
IN THE ENCLOSED ENVELOPE.