SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
UNIONBANCORP, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: NA
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(2) Aggregate number of securities to which transaction applies: NA
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): NA
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: NA
(2) Form, Schedule or Registration Statement No.: NA
(3) Filing Party: NA
(4) Date Filed: NA
Notes:
[COMPANY LOGO OMITTED]
UNIONBANCORP, INC.
March 24, 2004
Dear Fellow Stockholder:
You are cordially invited to attend UnionBancorp, Inc.'s annual meeting
of stockholders at the Starved Rock Lodge and Conference Center located in
Utica, Illinois, on Tuesday, April 27, 2004, at 10:00 a.m. At the meeting, we
will report to you on the progress of UnionBancorp and respond to your comments
or questions. Moreover, several members of our management team will be available
to speak with you individually about our record of achievement and plans for the
future.
Your board of directors has nominated three persons to serve as Class
III directors on the board of directors. Their names appear in the enclosed
proxy materials. All three of the nominees are incumbent directors. We recommend
that you vote your shares for the nominees.
We encourage you to attend the meeting in person. Because it is
important that your shares be represented at the meeting, please sign and return
the enclosed proxy, whether or not you plan to attend the meeting.
We look forward with pleasure to seeing and visiting with you at the
meeting.
With best personal wishes,
/s/ DEWEY R. YAEGER
-----------------------
Dewey R. Yaeger
President and
Chief Executive Officer
321 West Main Street o Ottawa Illinois o 815-431-2720
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UNIONBANCORP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 27, 2004
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TO HOLDERS OF COMMON STOCK:
The annual meeting of stockholders of UnionBancorp, Inc., a Delaware
corporation, will be held at the Starved Rock Lodge and Conference Center
located in Utica, Illinois, on Tuesday, April 27, 2004, at 10:00 a.m., local
time, for the purpose of considering and voting upon the following matters:
1. to elect three Class III directors.
2. to transact such other business as may properly come before
the meeting or any adjournments or postponements of the
meeting.
We are not aware of any other business to come before the meeting. Only
those stockholders of record as of the close of business on March 1, 2004, shall
be entitled to notice of the meeting and to vote at the meeting and any
adjournments or postponements of the meeting. In the event there are not
sufficient votes for a quorum or to approve or ratify any of the foregoing
proposals at the time of the meeting, the meeting may be adjourned or postponed
in order to permit our further solicitation of proxies.
By Order of the Board of Directors
/s/ DEWEY R. YAEGER
-----------------------
Dewey R. Yaeger
President and
Chief Executive Officer
Ottawa, Illinois
March 24, 2004
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE
AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON. IT IS HOPED THAT YOU WILL BE ABLE TO ATTEND THE MEETING, AND IF YOU DO
YOU MAY VOTE YOUR STOCK IN PERSON IF YOU WISH. THE PROXY MAY BE REVOKED AT ANY
TIME PRIOR TO ITS EXERCISE.
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UNIONBANCORP, INC.
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by the
board of directors of UnionBancorp, Inc. of proxies to be voted at the annual
meeting of stockholders to be held at the Starved Rock Lodge and Conference
Center located in Utica, Illinois, on Tuesday, April 27, 2004, at 10:00 a.m.,
local time, or at any adjournments or postponements of the meeting.
UnionBancorp, a Delaware corporation, is a regional financial services company
based in Ottawa, Illinois which has three bank subsidiaries and one non-bank
subsidiary. Our banks serve communities throughout Central, Northern and Western
Illinois through twenty-five locations. UnionFinancial Services & Trust Company,
our non-bank subsidiary, is an insurance/brokerage agency and trust company.
The proxy statement and the accompanying notice of meeting and proxy are first
being mailed to holders of shares of our common stock, par value $1.00 per
share, on or about March 24, 2004. Our 2003 annual report, including financial
statements, is enclosed.
Voting Rights and Proxy Information
The board of directors has fixed the close of business on March 1, 2004, as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the annual meeting. Our transfer books will not be closed between the
record date and the date of the annual meeting. The board of directors hopes
that all stockholders can be represented at the annual meeting. Whether or not
you expect to be present, please sign and return your proxy in the enclosed
self-addressed, stamped envelope. Stockholders giving proxies retain the right
to revoke them at any time before they are voted by written notice of revocation
to the Secretary of UnionBancorp, and stockholders present at the meeting may
revoke their proxy and vote in person.
On March 1, 2004, we had 4,034,500 issued and outstanding shares of common
stock. For the election of directors, and for all other matters to be voted upon
at the annual meeting, each share of common stock is entitled to one vote. A
majority of the outstanding shares of the common stock must be present in person
or represented by proxy to constitute a quorum for purposes of the annual
meeting. Abstentions and broker non-votes will be counted for purposes of
determining a quorum. Directors will be elected by a plurality of the votes
present in person or represented by proxy at the meeting and entitled to vote.
In all other matters, the affirmative vote of the majority of shares of common
stock present in person or represented by proxy at the annual meeting and
entitled to vote on the subject matter shall be required to constitute
stockholder approval. Abstentions will be treated as votes against a proposal
and broker non-votes will have no effect on the vote.
1.
I. ELECTION OF DIRECTORS
We have a staggered board of directors, divided into three classes. One class is
elected annually to serve for three years. At the annual meeting, our
stockholders will be entitled to elect three Class III directors for terms of
three years or until their successors are elected and qualified. Each of the
nominees for election as Class III directors are incumbent directors. Our board
of directors has determined that each of Messrs. Breipohl, Doty, McDonnell,
Reinhardt, Shinkle, Sullivan and Trainor are independent as independence is
defined in the National Association of Securities Dealers' listing standards, as
those standards have been modified or supplemented.
The proxy provides instructions for voting for all director nominees or for
withholding authority to vote for one or more director nominees. Unless
instructed to the contrary, the persons acting under the proxy which we are
soliciting will vote for the nominees listed below. In the event, however, that
any nominee shall be unable to serve, which is not now contemplated, the proxy
holders reserve the right to vote at the annual meeting for a substitute
nominee.
Information About Directors and Nominees
Set forth below is information, current as of March 1, 2004, concerning the
nominees for election and for the other directors whose terms of office will
continue after the meeting, including the age, year first elected a director and
business experience of each during the previous five years. Unless otherwise
indicated, each person has held the positions shown for at least five years. The
three nominees, if elected at the annual meeting, will serve as Class III
directors for three-year terms, expiring in 2007. We recommend that you vote
your shares FOR all three nominees.
NOMINEES
Name Position with UnionBancorp
(Age) Director Since and Principal Occupation
----- -------------- ------------------------
Class III
(term expires 2007)
Dennis J. McDonnell 2000 Chairman of the Board (since 2002)
(Age 61) and Director of UnionBancorp;
Chairman of McDonnell Investment
Management, LLC (2001-present);
Director of Global Decisions Group;
President and Chief Operating
Officer of Van Kampen Investment
Advisory Corporation (1983-2000)
John A. Shinkle 1997 Director of UnionBancorp; Executive
(Age 52) Vice President and Director,
Synovus Securities, Inc.
(1986-present)
Scott C. Sullivan 1996 Director of UnionBancorp; Attorney,
(Age 49) Williams & McCarthy
2.
CONTINUING DIRECTORS
Name Position with UnionBancorp
(Age) Director Since and Principal Occupation
----- -------------- ------------------------
Class I
(term expires 2005)
Richard J. Berry 1985 Director of UnionBancorp; Attorney,
(Age 51) Myers, Berry, O'Conor & Kuzma, Ltd.
Walter E. Breipohl 1993 Director of UnionBancorp; Owner,
(Age 50) Kaszynski/Breipohl Realtors/
Developers
John A. Trainor 1985 Director of UnionBancorp; Chairman
(Age 73) of UnionBancorp (2000-2002); Owner,
Trainor Grain & Supply Company,
Inc.
Class II
(term expires 2006)
Robert J. Doty 1996 Director of UnionBancorp; Chairman
(Age 76) of Prairie Bancorp, Inc.
(1989-1996); Consultant, Farm
Management
I. J. Reinhardt, Jr. 1991 Director of UnionBancorp; Director
(Age 66) and General Manager, St. Louis
Beverage Company
Dewey R. Yaeger 2003 Director of UnionBancorp; President
(Age 63) and Chief Executive Officer of
UnionBancorp (since November 2003);
Senior Vice President and Chief
Credit Officer of UnionBancorp
(April-November 2003)
All of our directors will hold office for the terms indicated, or until their
respective successors are duly elected and qualified. There are no arrangements
or understandings between UnionBancorp and any person pursuant to which any
director has been selected. No member of the board of directors is related to
any other member of the board of directors.
Board Committees and Meetings
Our board of directors generally meets on a quarterly basis. The board of
directors met seven times during 2003. During 2003, all directors attended at
least 75 percent of the meetings of the board and the committees on which they
served. Our board of directors has standing executive, audit and compensation
committees.
The executive committee is comprised of Messrs. McDonnell (Chair), Sullivan,
Trainor and Yaeger. The executive committee meets on an as needed basis and
exercises the power of the board of directors between board meetings. This
committee met two times in 2003.
3.
The audit committee recommends independent auditors to the board, reviews the
results of the auditors' services, reviews with management and the internal
auditor the systems of internal control and internal audit reports and seeks to
assure that our books and records are kept in accordance with applicable
accounting principles and standards. The audit committee charter, which sets
forth the duties and responsibilities of the committee, is attached as an
appendix to this proxy statement. The members of the audit committee are Messrs.
Reinhardt (Chair), Breipohl and Doty. During 2003, the audit committee met three
times.
The compensation committee establishes compensation and benefits for the chief
executive officer and reviews and recommends compensation and benefits for the
other executive officers and employees of UnionBancorp and our subsidiaries. The
committee also administers and oversees our stock-based incentive compensation
plans. The members of the compensation committee are Messrs. Shinkle (Chair),
McDonnell, Sullivan and Dewey R. Yaeger (ex officio). The compensation committee
met four times in 2003.
Nominating Committee
Our board of directors has a nominating committee which consists of three
directors. Messrs. McDonnell (Chair), Shinkle and Sullivan are the current
members of this committee. The nominating committee identifies individuals to
become board members and selects, or recommends for the board's selection,
director nominees to be presented for shareholder approval at the annual meeting
of shareholders or to fill any vacancies. During 2003, the nominating committee,
as currently comprised, held no meetings because it was not formed until March
18, 2004. Prior to the formation of the formal nominating committee, the
executive committee or entire board served the functions of the nominating
committee. The board met on December 18, 2003, and nominated the current
nominees for re-election at this year's annual meeting.
Our board of directors has adopted a written charter for the nominating
committee, a copy of which is attached as an appendix to this proxy statement.
Each of the members of our nominating committee is independent as independence
is defined in the National Association of Securities Dealers' listing standards,
as those standards have been modified or supplemented.
The nominating committee's policy is to consider director candidates recommended
by shareholders. Such recommendations must be made pursuant to timely notice in
writing to:
UnionBancorp, Inc.
321 West Main Street
Ottawa, Illinois 61350
Attention: Nominating Committee
The nominating committee has not established specific, minimum qualifications
for recommended nominees or specific qualities or skills for one or more of our
directors to possess. The nominating committee uses a subjective process for
identifying and evaluating nominees for director, based on the information
available to, and the subjective judgments of, the members of the nominating
committee and our then current needs, although the committee does not believe
there would be any difference in the manner in which it evaluates nominees based
on whether the nominee is recommended by a shareholder. Historically, nominees
have been existing directors or business associates of our directors or
officers.
4.
Code of Ethics
The Company has adopted a Code of Ethics that applies to all of our employees,
officers and directors, including our principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions. Our Code of Ethics contains written standards that
we believe are reasonably designed to deter wrongdoing and to promote:
o Honest and ethical conduct, including the ethical handling of
actual or apparent conflicts of interest between personal and
professional relationships;
o Full, fair, accurate, timely, and understandable disclosure in
reports and documents that we file with, or submit to, the
Securities and Exchange Commissions and in other public
communications we make;
o Compliance with applicable governmental laws, rules and
regulations;
o The prompt internal reporting of violations of the code to an
appropriate person or persons named in the code; and
o Accountability for adherence to the code.
This Code of Ethics is attached to our Annual Report on Form 10-K for the fiscal
year ended December 31, 2003 as Exhibit 14. We will provide to any person
without charge, upon request, a copy of our Code of Ethics. Requests for a copy
of our Code of Ethics should be made to our secretary at 321 West Main Street,
Ottawa, Illinois 61350.
Shareholder Communications with the Board
Our board of directors has a process for shareholders to send communications to
the board of directors, its nominating committee or its audit committee,
including complaints regarding accounting, internal accounting controls, or
auditing matters. Communications can be sent to the board of directors, its
nominating committee or its audit committee or specific directors either by
regular mail to the attention of the board of directors, its nominating
committee, its audit committee or specific directors, at our principal executive
offices at 321 West Main Street, Ottawa, Illinois 61350. All of these
communications will be reviewed by our secretary (1) to filter out
communications that our secretary deems are not appropriate for our directors,
such as spam and communications offering to buy or sell products or services,
and (2) to sort and relay the remainder to the appropriate directors. We
encourage all of our directors to attend the annual meeting of shareholders, if
possible. All of our directors attended the 2003 annual meeting of shareholders.
Compensation of Directors
Each of our directors was paid a fee of $1,000 for each board meeting attended
and $250 for each committee meeting attended. In addition, each director was
paid an annual retainer of $2,500. Each of our directors may also receive an
annual grant of options to purchase shares of common stock under the
UnionBancorp, Inc. 2003 Stock Option Plan. The UnionBancorp, Inc. 2003 Stock
Option Plan provides for annual formula grants to each of our directors of
options to purchase shares of common stock with an exercise price of not less
than 100% of the then current market price of the common stock on the date of
the grant. Such options become exercisable over five years. During 2003, each
non-employee director was granted options to purchase 2,500 shares of common
stock at a price of $23.29 per share.
5.
Existing Equity Compensation Plans
The Company currently maintains the UnionBancorp, Inc. 2003 Stock Option Plan
(the "2003 Stock Option Plan"), which the Company's Board of Directors adopted
on December 19, 2002 and the stockholders of the Company approved on April 22,
2003 and the UnionBancorp, Inc. 1993 Stock Option Plan (the "1993 Stock Option
Plan"), which the Company's Board of Directors adopted on February 18, 1993 and
the stockholders of the Company approved on April 12, 1993. The following table
provides information regarding the number of shares of common stock subject to
each of these plans as well as information regarding outstanding options to
purchase the Company's common stock under the plans as of December 31, 2003.
Equity Compensation Plan Information
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Plan category Number of securities to Weighted-average Number of securities remaining
be issued upon exercise exercise price of available for future issuance under
of outstanding options, outstanding options, equity compensation plans
warrants and rights warrants and rights (excluding securities in column
(a) (b) (c)
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Equity compensation
plans approved by 284,198 $ 13.2227 180,000
stockholders (1)
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Equity compensation
plan not approved by 20,450 $ 16.0625 28,050
stockholders (2)
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Total 304,648 $ 13.4134 208,050
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(1) Includes shares issuable under the UnionBancorp, Inc. 2003 Stock Option Plan
and the UnionBancorp, Inc. 1993 Stock Option Plan. The UnionBancorp, Inc. 1993
Stock Option Plan terminated April 12, 2003.
(2) In 1999, the Company adopted the UnionBancorp, Inc. Non-qualified Stock
Option Plan ("the 1999 Option Plan"), a broadly based compensation plan. Under
the 1999 Option Plan, non-qualified options may be granted to employees and
eligible directors of the Company and its subsidiaries to purchase the Company's
common stock at 100% of the fair market value on the date the option is granted.
The Company has authorized 50,000 shares for issuance under the 1999 Option
Plan. During 1999, 40,750 of these shares were granted and are exercisable in
three years. The options have an exercise period of ten years from the date of
grant.
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 March 1, 2004, 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 of our directors and executive officers as a group.
6.
Name of Individual or Amount and Nature of Percent
Number of Individuals in Group Beneficial Ownership(1)(2) of Class
------------------------------ -------------------------- --------
5% Stockholders
UnionBank, as Trustee for the 488,130(3) 12.1%
UnionBancorp, Inc. Employee Stock Ownership
Plan ("ESOP")
201 East Main Street
Streator, Illinois 61364
Wayne W. Whalen 803,263(4) 19.5%
333 W. Wacker Drive, Suite 2100
Chicago, Illinois 60606
Jeffrey L. Gendell 395,000(5) 9.8%
37 Park Avenue, 9th Floor
New York, New York 10017
Directors and Nominees
Richard J. Berry 40,279(6) 1.0%
Walter E. Breipohl 28,579 *
Robert J. Doty 11,234 *
Dennis J. McDonnell 602,920(7) 14.6%
I.J. Reinhardt, Jr. 23,547(8) *
John A. Shinkle 13,790(9) *
Scott C. Sullivan 19,590(10) *
John A. Trainor 36,764(11) *
Dewey R. Yaeger 2,620 *
Other Named Executive Officers
Rick R. Clary 17,166(12) *
Jimmie D. Lansford 36,295(13) *
Kurt R. Stevenson 10,329(14) *
All directors and executive officers as a group 843,113 20.5%
(12 persons)
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* Indicates less than one percent.
(1) The information contained in this column is based upon information
furnished to us by the persons named above and the members of the
designated group. Amounts reported include shares held directly as well
as shares which are held in retirement accounts and shares held by
members of the named individuals' families or held by trusts of which
the named individual is a trustee or substantial beneficiary, with
respect to which shares the respective individual may be deemed to have
sole or shared voting and/or investment power. The nature of beneficial
ownership for shares shown in this column is sole voting and investment
power, except as set forth in the footnotes below. Inclusion of shares
shall not constitute an admission of beneficial ownership or voting and
investment power over included shares.
(2) Amounts shown include shares presently obtainable through the exercise
of options to purchase shares of common stock granted under
UnionBancorp's stock option plans as follows: Mr. Berry - 13,300
shares; Mr. Breipohl - 15,400 shares; Mr. Doty - 8,250 shares; Mr.
McDonnell - 4,250 shares; Mr. Reinhardt - 13,400 shares; Mr. Shinkle -
8,250 shares; Mr. Sullivan - 8,250 shares; Mr. Trainor - 14,900 shares;
Mr. Clary - 7,517 shares; Mr. Lansford - 21,715 and Mr. Stevenson -
4,713 shares. Option holders have the sole power to exercise their
respective options and would also be entitled to exercise sole voting
and investment power over the shares issued upon the exercise of such
options.
(3) All of the shares held by the employee stock ownership plan are
allocated to particular participants' accounts and over which shares
the employee stock ownership plan trustee has shared voting and no
investment power over such shares.
7.
(4) As reported to the Securities and Exchange Commission on Schedule Form
4 dated August 8, 2003. In addition, Mr. Whalen's wife, Paula Wolff,
Mr. Whalen's children, and WPW Associates, L.P., a family limited
partnership, were also named as parties sharing voting and investment
power over such shares. The amount above also includes approximately
86,181.5 shares which are issuable upon the conversion of 1,381 shares
of UnionBancorp, Inc. convertible preferred stock held by Mr. Whalen.
(5) As reported to the Securities and Exchange Commission on a Schedule 13G
dated February 10, 2004. Includes 364,700 shares allocated to Tontine
Financial Partners, L.P. and 30,300 shares allocated to Tontine
Overseas Associates, L.L.C., over which Mr. Gendell has shared voting
and investment power over such shares.
(6) Includes 11,100 shares held in trusts for which Mr. Berry is a
co-trustee, over which shares Mr. Berry has shared voting and
investment power.
(7) Includes shares held jointly by Mr. McDonnell and his wife over which
voting and dispositive power is shared. Also includes shares held in
trust for which Mr. McDonnell is trustee. The amount above also
includes approximately 86,181.5 shares which are issuable upon the
conversion of 1,381 shares of UnionBancorp, Inc. convertible preferred
stock held by Mr. McDonnell. Mr. McDonnell's address is 815 Jackson
Avenue, River Forest, Illinois 60305.
(8) Includes 6,000 shares held by Mr. Reinhardt jointly with his spouse,
over which shares Mr. Reinhardt has shared voting and investment power.
(9) Includes 400 shares held by members of Mr. Shinkle's family. Mr.
Shinkle has no voting or investment power over 100 of such shares and
has shared voting and investment power over the remaining 300 shares.
Also includes 2,561 shares held in trust for which Mr. Shinkle serves
as trustee. Mr. Shinkle also has voting and investment power over 1,500
shares held in an investment club.
(10) Includes 1,660 shares held by Mr. Sullivan jointly with his spouse and
1,000 shares held by members of Mr. Sullivan's family. Mr. Sullivan has
shared voting and investment power over the 2,660 shares.
(11) Includes 8,515 shares held solely by Mr. Trainor's spouse, over which
shares Mr. Trainor has no voting or investment power.
(12) Includes 913 shares held by Mr. Clary jointly with his spouse, over
which shares Mr. Clary has shared voting and investment power. Also
includes 6,021 shares held by Mr. Clary in his 401(k) plan and 2,415
shares allocated to Mr. Clary under the employee stock ownership plan.
(13) Includes 2,200 shares held by Mr. Lansford jointly with his spouse,
over which shares Mr. Lansford has shared voting and investment power.
Also includes 2,501 shares allocated to Mr. Lansford under the employee
stock ownership plan.
(14) Includes 425 shares held by Mr. Stevenson jointly with his spouse, over
which shares Mr. Stevenson has shared voting and investment power. Also
includes 430 shares held by Mr. Stevenson in his 401(k) plan and 4,761
shares allocated to Mr. Stevenson under the employee stock ownership
plan.
Section 16(a) Beneficial Ownership 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 2003, we are not aware
that any of our directors, executive officers or 10% stockholders failed to
comply with the filing requirements of Section 16(a) during 2003, except each of
the directors failed to file a Form 4 in connection with options granted to them
by the Company on December 18, 2003. In addition, two directors (Shinkle and
Sullivan) each failed to file three Form 4's reporting one transaction per
report in connection with the purchase of Company common stock through a
broker-maintained dividend reinvestment plan. Mr. Shinkle also failed to file
one Form 4 in connection with a single purchase transaction in 1998.
8.
EXECUTIVE COMPENSATION
Cash Compensation
The following table shows the compensation earned for the last three fiscal
years by the chief executive officer and our executive officers whose 2003
salary and bonus exceeded $100,000:
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SUMMARY COMPENSATION TABLE
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Annual Compensation Long Term Compensation
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Awards Payouts
-----------------------------------
Name and Year Salary Bonus Other Restricted Securities LTIP All Other
Principal ($) ($) Annual Stock Underlying Payouts Compensation
Position Compensation Award(s) Options/ ($) ($)
($) ($) SARs
(#) (1)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
-----------------------------------------------------------------------------------------------------------------------------------
Rick R. Clary (2) 2003 $ 131,875 $ 20,250 -- -- -- -- $ 10,976 (2)
Vice President and
Chief Operating Officer
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Jimmie D. Lansford (3) 2003 $ 113,375 $ 12,375 -- -- -- -- $ 9,060 (3)
Executive Vice President 2002 110,000 7,700 5,979 16,891 (3)
2001 110,000 -- 3,587 22,310 (3)
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Kurt R. Stevenson (4) 2003 $ 110,000 $ 16,500 -- -- -- -- $ 6,040 (4)
Senior Vice President and 2002 110,000 7,700 -- -- 5,327 -- 7,803 (4)
Chief Financial Officer
-----------------------------------------------------------------------------------------------------------------------------------
Dewey R. Yaeger (5) 2003 $ 121,821 $ 25,000 -- -- -- -- $ 7,256 (5)
President and
Chief Executive Officer
-----------------------------------------------------------------------------------------------------------------------------------
Charles J. Grako (6) 2003 $ 276,316 $ -- -- -- -- -- $ 17,347 (6)
Former President and 2002 205,000 17,938 -- -- 10,164 -- 22,647 (6)
Chief Executive Officer 2001 175,000 -- -- -- 5,707 -- 25,511 (6)
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(1) All options vest at a rate of 20% per year on or about each anniversary
of the date of grant.
(2) We were not required to disclose Mr. Clary's salary information with
respect to his compensation prior to 2003. Represents the dollar value
of allocations under our employee stock ownership plan in the amount of
$2,820 for 2003, premiums for split dollar life insurance of $227 for
2003, director fees for serving on the board of a subsidiary of $1,200
for 2003 and $4,230 of 401(k) employer contributions for 2003.
(3) Represents the dollar value of allocations under our employee stock
ownership plan in the amount of $2,422 for 2003, $4,400 for 2002 and
$4,308 for 2001, premiums for split dollar life insurance of $1,006 for
2003, $891 for 2002 and $802 for 2001, fees for services provided to
our board of directors and director fees for serving on the boards of
various subsidiaries of $2,000 for 2003, $8,300 for 2002 and $15,000
for 2001, and $3,632 of 401(k) employer contributions for 2003, $3,300
for 2002 and $2,200 for 2001.
(4) We were not required to disclose Mr. Stevenson's salary information
with respect to his compensation prior to 2002. Represents the dollar
value of allocations under our employee stock ownership plan in the
amount of $2,354 for 2003 and $4,351 for 2002, premiums for split
dollar life insurance of $155 for 2003 and $152 for 2002 and $3,531 of
401(k) employer contributions for 2003 and $3,300 for 2002.
(5) We were not required to disclose Mr. Yaeger's salary information with
respect to his compensation prior to 2003. Represents fees for services
provided to our board of directors and director fees for serving on the
boards of various subsidiaries of $6,200 for 2003 and premiums for
split dollar life insurance of $1,056 for 2003.
9.
(6) Mr. Grako resigned as president and chief executive officer, effective
September 2, 2003. The total for 2003 includes $100,711 per the
severance package approved by the board, which provides for monthly
payments of $5,000 for a period of 18 consecutive months commencing
October 31, 2003 and ending March 31, 2005 and the continuance of the
bank owned life insurance policy (BOLI) on Mr. Grako. This policy had a
present value of approximately $86,000. All other compensation
represents the dollar value of allocations under our employee stock
ownership plan in the amounts of $0 for 2003, $7,911 for 2002 and
$6,657 for 2001, premiums for split dollar life insurance of $528 for
2003, $486 for 2002 and $404 for 2001. All other compensation also
includes fees for services provided to our board of directors and
director fees for serving on the boards of various subsidiaries of
$10,700 for 2003, $8,100 for 2002 and $15,050 for 2001. In addition, it
includes $4,894 of 401(k) employer contributions in 2003, $6,150 for
2002 and $3,400 in 2001.
Stock Option Information
No stock options were granted in 2003 to any of the individuals named above in
the summary compensation table. The following table sets forth certain
information concerning the exercisable and nonexercisable stock options at
December 31, 2003 held by the individuals named in the summary compensation
table, with the exception of Mr. Grako who exercised his options after his
resignation.
-------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTIONS VALUES
-------------------------------------------------------------------------------------------------------------------
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired on Options at FY-End In-the-Money Options at
Name Exercise Value Realized (#)(d) FY-End ($)(e)
(#)(a) (#)(b) ($)(c) Exercisable Unexercisable Exercisable Unexercisable
-------------------------------------------------------------------------------------------------------------------
Rick R. Clary -- -- 5,702 7,909 $ 39,855 $ 62,180
-------------------------------------------------------------------------------------------------------------------
Jimmie D. Lansford 1,500 $ 18,915 19,781 7,535 $ 191,854 $ 60,517
-------------------------------------------------------------------------------------------------------------------
Kurt R. Stevenson -- -- 3,539 6,123 $ 27,166 $ 49,191
-------------------------------------------------------------------------------------------------------------------
Employment Agreements and Other Arrangements
We are not a party to any employment agreements with our executive officers,
except for the following:
An employment agreement was entered into on August 22, 2001 with Paul R.
Tingley, president and chief executive officer of UnionFinancial Services &
Trust Company. The employment agreement with Mr. Tingley provides that beginning
January 2002, UnionBancorp, Inc. will pay Mr. Tingley a minimum of $10,000
monthly. Mr. Tingley's total compensation, including bonuses, is valued at
$150,000 annually. Mr. Tingley is entitled to other customary employee benefits
provided by UnionBancorp. Mr. Tingley's employment agreement was to terminate on
August 22, 2004. Effective February 27, 2004, Mr. Tingley resigned from
UnionFinancial Services & Trust Company. Mr. Tingley entered into an amended
agreement with UnionBancorp, whereby Mr. Tingley would continue to receive
$10,000 monthly through the termination of his contract but would not be
eligible for bonuses during this period. Mr. Tingley will continue to receive
customary employee benefits through the expiration of the agreement on August
22, 2004.
10.
Effective September 3, 2003, Mr. Grako resigned as president and chief executive
officer of UnionBancorp. In recognition of his service, the board approved a
severance package for Mr. Grako which included monthly payments of $5,000 for a
period of 18 consecutive months commencing October 31, 2003 and ending March 31,
2005. In addition, the Company shall continue in effect the bank owned life
insurance policy (BOLI) on Mr. Grako which provides a death benefit of $600,000
to Mr. Grako's beneficiary. This policy had a present value of approximately
$86,000.
On November 3, 2003, the Company entered into change of control agreements with
three of its executives, Rick R. Clary, Everett J. Solon and Kurt R. Stevenson.
The agreements provide that if, within two years after a change in control
occurs, the executive's employment is terminated without "good cause," then the
executive shall receive a cash payment equal to two times the executive's
salary.
Compensation Committee Interlocks and Insider Participation
During 2003, the members of the compensation committee were Messrs. Shinkle
(Chair), McDonnell, Sullivan and Yaeger (ex officio). None of these individuals
was an officer or employee of UnionBancorp or any of our subsidiaries during
2003, and none of these individuals is a former officer or employee of
UnionBancorp or any of our subsidiaries, except for Mr. Yaeger who is president
and chief executive officer. Mr. Yaeger did not participate in any decisions
pertaining to his compensation.
Board Compensation Committee Report on Executive Compensation
The incorporation by reference of this proxy statement into any document filed
with the Securities and Exchange Commission by UnionBancorp shall not be deemed
to include the following report unless the report is specifically stated to be
incorporated by reference into such document.
The compensation committee of our board of directors is comprised of three
independent directors and is responsible for providing oversight to ensure that
the company's compensation incentives are competitive and that they are aligned
to allow company goals to be successfully achieved. In determining compensation,
the following factors are generally taken into consideration:
o the performance of the executive officers in achieving our
short and long-term goals;
o payment of compensation commensurate with the ability and
expertise of the executive officers; and
o payment of compensation that is competitive with similar
companies.
The committee considers the foregoing factors, as well as others, in determining
compensation. There is no assigned weight given to any of these factors.
Additionally, the compensation committee considers various benefits, such as our
employee stock ownership plan, 401(k) plan and the stock option plan, together
with perquisites in determining compensation. The committee believes that the
benefits provided through the stock-based plans more closely tie the
compensation of the officers to the interests of the stockholders and provide
significant additional performance incentives for the officers which directly
benefit the stockholders through an increase in the stock value.
11.
Annually, the compensation committee evaluates four primary areas of performance
in determining the chief executive officer's level of compensation. These areas
are:
o long-range strategic planning and implementation;
o our financial performance;
o our compliance with regulatory requirements and relations with
regulatory agencies; and
o the individual's effectiveness of managing relationships with
stockholders and the board of directors.
When evaluating our financial performance, the committee considers
profitability, asset growth, asset quality and risk management. The primary
evaluation criteria are considered to be essential to our long-term viability
and are given equal weight in the evaluation. Finally, the committee reviewed
compensation packages of peer institutions, as well as compensation surveys
provided by independent third parties, to ensure that the chief executive
officer's compensation is competitive and commensurate with his level of
performance.
Compensation Committee:
John A. Shinkle (Chair)
Dennis J. McDonnell
Scott C. Sullivan
Dewey R. Yaeger (ex officio)
12.
Stockholder Return Performance Presentation
The incorporation by reference of this proxy statement into any document filed
with the Securities and Exchange Commission by UnionBancorp shall not be deemed
to include the following performance graph and related information unless such
graph and related information are specifically stated to be incorporated by
reference into such document.
The following graph shows a comparison of cumulative total returns for
UnionBancorp, the Nasdaq Stock Market (US Companies), the Nasdaq Bank Index and
an index of SNL Midwest Bank Stocks for the five-year period beginning January
1, 1999 and ending on December 31, 2003. The graph was prepared at our request
by SNL Securities, Charlottesville, Virginia.
COMPARISON OF CUMULATIVE TOTAL RETURN
(ASSUMES $100 INVESTED ON JANUARY 1, 1999)
[GRAPHIC CHART OMITTED]
----------------------------------------------------------------------------------------------------
Period Ending
----------------------------------------------------------------------------------------------------
Index 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
----------------------------------------------------------------------------------------------------
UnionBancorp, Inc. 100.00 86.06 62.33 87.35 97.47 142.77
----------------------------------------------------------------------------------------------------
NASDAQ - Total US 100.00 185.95 113.19 89.65 61.67 92.90
----------------------------------------------------------------------------------------------------
NASDAQ Bank Index* 100.00 96.15 109.84 118.92 121.74 156.62
----------------------------------------------------------------------------------------------------
SNL Midwest Bank Index 100.00 78.57 95.15 97.24 93.80 120.07
----------------------------------------------------------------------------------------------------
*Source: CRSP, Center for Research in Security Prices, Graduate School of
Business, The University of Chicago 2004. Used with permission. All rights
reserved. crsp.com.
13.
TRANSACTIONS WITH MANAGEMENT
Several of our directors and executive officers (including their affiliates,
families and companies in which they are principal owners, officers or
directors) were loan customers of, and had other transactions with, us and our
subsidiaries in the ordinary course of business. These loans and lines of credit
were made in the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
transactions with other persons and did not involve more than the normal risk of
collectibility or present other unfavorable features. During 2003, we paid
approximately $135,907 to the law firm of Myers, Berry, O'Conor & Kuzma, Ltd.
for legal services. Richard J. Berry, a director of UnionBancorp, is a principal
of that firm.
ACCOUNTANT FEES
Audit Fees
Audit fees and expenses billed to the Company by Crowe, Chizek and Company LLC
for the audit of the Company's financial statements for the fiscal years ended
December 31, 2003 and December 31, 2002, and for the review of the Company's
financial statements included in the Company's quarterly reports on Form 10-Q,
are as follows:
2003 2002
-------- --------
$123,800 $ 99,000
Audit Related Fees
Audit related fees and expenses billed to the Company by Crowe, Chizek and
Company LLC for fiscal years 2003 and 2002 for services related to the
performance of the audit or review of the Company's financial statements that
were not included under the heading "Audit Fees", are as follows:
2003 2002
-------- --------
$ -- $ --
Tax Fees
Tax fees and expenses billed to the Company for fiscal years 2003 and 2002 for
services related to tax compliance, tax advice and tax planning, consisting
primarily of preparing the Company's federal and state income tax returns for
the previous fiscal periods and inclusive of expenses are as follows:
2003 2002
-------- --------
$ 37,250 $ 31,550
All Other Fees
Fees and expenses billed to the Company by Crowe, Chizek and Company LLC for all
other services provided during fiscal years 2003 and 2002 are as follows:
2003 2002
-------- --------
$ 41,538 $209,430
14.
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 its independence as our principal accountant. In accordance with
Section 10A(i) of the Exchange Act, before Crowe, Chizek and Company LLC is
engaged by us to render audit or non-audit services, the engagement is approved
by our audit committee. None of the audit-related, tax and other services
described in the table above were approved by the audit committee pursuant to
Rule 2-01(c)(7)(i)(C) of Regulation S-X.
AUDIT COMMITTEE REPORT
The incorporation by reference of this proxy statement into any document filed
with the Securities and Exchange Commission by UnionBancorp shall not be deemed
to include the following report unless the report is specifically stated to be
incorporated by reference into such document.
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.
The committee is comprised solely of independent directors.
The audit committee has reviewed and discussed our audited financial statements
for the fiscal year ended December 31, 2003 with our management and Crowe,
Chizek and Company LLC, 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, 2003 for filing with the Securities and Exchange Commission.
Audit Committee:
I.J. Reinhardt, Jr. (Chair)
Walter E. Breipohl
Robert J. Doty
Audit Committee Financial Expert
While the board of directors endorses the effectiveness of our audit committee,
its membership does not include a director who qualifies for designation as an
"audit committee financial expert" - a new concept under federal regulation that
contemplates such designation only when an audit committee member satisfies all
five qualification requirements, such as experience (or "experience actively
supervising" others engaged in), preparing, auditing, analyzing or evaluating
financial statements presenting a level of accounting complexity comparable to
what is encountered in connection with our Company's financial statements.
15.
STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
For inclusion in our proxy statement and form of proxy relating to the 2005
annual meeting of stockholders, stockholder proposals must be received by us on
or before November 24, 2004. In order to be presented at such meeting, notice of
the proposal must be received by UnionBancorp on or before March 28, 2005, and
must otherwise comply with our bylaws.
"HOUSEHOLDING" OF PROXY MATERIALS
In December of 2000, the Securities and Exchange Commission adopted new rules
that permit companies and intermediaries (e.g., brokers) to satisfy the delivery
requirements for proxy statements, prospectuses and annual reports with respect
to two or more security holders sharing the same address by delivering a single
copy of proxy statements, prospectuses and annual reports, as the case may be,
addressed to those security holders. This process, which is commonly referred to
as "householding," potentially means extra convenience for security holders and
cost savings for companies.
This year, a number of brokers with accountholders who are UnionBancorp
stockholders will be "householding" our proxy materials. As indicated in the
notice previously provided by these brokers to UnionBancorp stockholders, a
single proxy statement and annual report will be delivered to multiple
stockholders sharing an address unless contrary instructions have been received
from an affected stockholder. Once you have received notice from your broker or
the Company that they will be "householding" communications to your address,
"householding" will continue until you are notified otherwise or until you
revoke your consent. If, at any time, you no longer wish to participate in
"householding" and would prefer to receive a separate proxy statement and annual
report, please notify your broker, direct your written request to UnionBancorp,
Inc., Investor Relations, 321 West Main Street, Ottawa, IL 61350 or contact
Investor Relations at (815) 431-2720.
Stockholders who currently receive multiple copies of the proxy statement and
annual report at their address and would like to request "householding" of their
communications should contact their broker or, if a stockholder is a direct
holder of UnionBancorp shares, they should submit a written request to
Computershare Investor Services, the Company's transfer agent, at 2 North
LaSalle Street, Chicago, IL 60602.
OTHER MATTERS
We do not intend to present any other business at the meeting and know of no
other matters which will be presented. However, if any other matters come before
the meeting, it is the intention of the persons named in the accompanying proxy
to vote in accordance with their best judgment on those matters. A
representative of our independent auditors, Crowe, Chizek and Company, LLC, is
expected to attend the annual meeting and will be available to respond to
appropriate questions and to make a statement if he or she so desires.
Your proxy is solicited by the board of directors, and we will pay the cost of
solicitation. In addition to soliciting proxies by use of the mail, officers,
directors and regular employees of UnionBancorp or our subsidiaries, acting on
our behalf, may solicit proxies by telephone, telegraph or personal interview.
We will, at our expense, upon the receipt of a request from brokers and other
custodians, nominees and fiduciaries, forward proxy soliciting material to the
beneficial owners of shares held of record by such persons.
16.
FAILURE TO INDICATE CHOICE
If any stockholder fails to indicate a choice with respect to any of the
proposals on the proxy for the annual meeting, the shares of such stockholder
shall be voted FOR the nominees listed under proposal 1.
By Order of the Board of Directors
/s/ DEWEY R. YAEGER
-----------------------
Dewey R. Yaeger
President and
Chief Executive Officer
Ottawa, Illinois
March 24, 2004
ALL STOCKHOLDERS ARE URGED TO SIGN
AND MAIL THEIR PROXIES PROMPTLY
17.
EXHIBIT A
CHARTER OF THE CORPORATE GOVERNANCE
AND NOMINATING COMMITTEE
OF THE BOARD OF DIRECTORS
OF UNIONBANCORP, INC.
I. AUTHORITY AND MEMBERSHIP
The members of the Committee shall be appointed annually by the Board
of Directors of UnionBancorp, Inc. (the "Corporation") on the recommendation of
the Committee. The members of the Committee shall serve until their successors
are duly elected and qualified by the Board. The Committee shall be comprised of
three or more members, all of whom must qualify as independent directors
("Independent Directors") under the standards for Nasdaq National Market issuers
or such other exchange or system upon which the Corporation's securities are
listed, quoted or traded ("Nasdaq") and any standards of independence as may be
prescribed for purposes of any federal securities, tax, banking or other laws
relating to the Committee's duties and responsibilities. No member of the
Committee shall be removed except by majority vote of the Independent Directors
then in office. The Committee shall meet at least four times annually.
The Board will appoint one of the members of the Committee to serve as
committee Chair on the recommendation of the Committee. The Committee may also
appoint a Secretary, who need not be a Director.
The Committee has the authority, to the extent it deems necessary or
appropriate, to retain independent legal, accounting or other advisors. The
Committee shall also have the authority, to the extent it deems necessary or
appropriate, to ask the Corporation to provide the Committee with the support of
one or more Corporation employees to assist it in carrying out its duties. The
Corporation shall provide for appropriate funding, as determined by the
Committee, for payment of compensation to any advisors employed by the
Committee. The Committee may request any officer or employee of the Corporation
or the Corporation's outside counsel or other advisors to attend a meeting of
the Committee or to meet with any members of, or consultant to, the Committee.
II. PURPOSE OF THE COMMITTEE
The Committee's primary purpose is to:
o Develop and recommend to the Board corporate governance policies
and guidelines for the Corporation and for identifying and
nominating director and committee member candidates.
o Nominate directors for election to the Board and appointment to
committee membership.
o Evaluate Board, committee and senior officer performance.
18.
EXHIBIT A
III. RESPONSIBILITIES OF THE COMMITTEE
A. Charter Review
--------------
o Review and reassess the adequacy of this charter annually and
recommend to the Board any proposed changes to this charter; and
o Publicly disclose the charter and any such amendments at the times
and in the manner required by the SEC and/or any other regulatory
body or stock exchange having authority over the Corporation.
B. Corporate Governance Policies
-----------------------------
o Recommend to the Board policies to enhance the Board's
effectiveness, including the size and composition of the Board, the
frequency and structure of Board meetings and meetings of
committees of the Board, the frequency, structure and guidelines
for calling executive sessions of Independent Directors, procedures
for Board Meetings including distribution of meeting materials, and
the formation of new Board committees and recommend membership on
Board committees.
o Create and review at least annually, the corporate governance
policies of the Corporation, including corporate governance
principles, director and officer conflicts of interest and ethics
policies, and document retention and destruction policies, to
ensure that they are appropriate for the Corporation and comply
with applicable laws, regulations and listing standards, and to
recommend any desirable changes to the Board.
o Establish and review at least annually an enforcement mechanism for
the Corporation's conflict of interest and ethics policies;
o Consider any other corporate governance issues that arise from time
to time, including requests for waivers from conflicts of interest
and ethics policies and corporate governance principles, and
develop appropriate recommendations for the Board.
o Review at least annually the Corporation's succession plans for its
CEO and other executive officers and make recommendations to the
Board regarding the same.
o Review and advise the Board from time to time with respect to the
functions of the Corporation's executive officers and the
governance structure of the Corporation.
C. Board Membership
----------------
o Investigate and assess the backgrounds and skills required of Board
members and those of potential candidates for Board membership.
o Nominate candidates to be presented to the stockholders for
election or to the Board for appointment to fill vacancies,
considering the independence and other qualifications of each
candidate and seeking an appropriately diversified Board.
o Establish training and orientation programs for all new Board
members.
19.
EXHIBIT A
o Maintain an active file of suitable candidates for consideration as
nominees to the Board.
o Recommend to the Board standards for determining director
independence and other qualifications consistent with the
requirements applicable to Nasdaq and other legal or regulatory
requirements and review and assess these standards on a periodic
ongoing basis.
o Establish policies for director succession and retirement.
D. Committee Membership
--------------------
o Make recommendations to the Board for membership on the various
Board committees (considering the qualifications for membership on
each committee and the extent to which there should be a policy of
periodic rotation of directors among the committees).
o Recommend to the Board such changes to the Board's committee
structure and committee functions as it deems advisable.
o Recommend committee members for chairs of such Board committees.
o Establish training and orientation programs for all new committee
members.
E. Board Compensation
------------------
o Recommend to the full Board of Directors director and committee
member and chair compensation for those directors who are not also
salaried officers of the Corporation.
F. Evaluation of the Board, Committee and Executive Officers
---------------------------------------------------------
o Review on at least an annual basis and prepare an assessment of the
Board's performance as a whole, each committee's performance as a
whole and each individual director's performance.
o Establish continuing education programs for all Board and committee
members.
o Review on at least an annual basis the performance of the
Corporation's CEO and other executive officers.
G. General
-------
o Form and delegate authority to subcommittees when appropriate.
o Report to the Board on the Committee's activities at each Board
meeting.
o Annually review the performance of the Committee.
In performing their responsibilities, Committee members are entitled to
rely in good faith on information, opinions, reports or statements prepared or
presented by:
20.
EXHIBIT A
o One or more officers or employees of the Corporation whom the
Committee member reasonably believes to be reliable and competent
in the matters presented.
o Counsel, independent auditors, or other persons as to matters which
the Committee member reasonably believes to be within the
professional or expert competence of such person.
o Another committee of the Board as to matters within its designated
authority which committee the Committee member reasonably believes
to merit confidence.
21.
EXHIBIT B
UNIONBANCORP, INC.
AUDIT COMMITTEE CHARTER
I. PURPOSE
The purpose of the Audit Committee is to assist the Board of Directors:
o In its oversight of the Company's accounting and financial
reporting principles and policies and internal accounting and
disclosure controls and procedures;
o In its oversight and supervision of the Company's internal
audit function;
o In its oversight of the certification of the Company's
quarterly and annual financial statements and assessment of
internal disclosure controls by the Company's Chief Executive
Officer (CEO) and Chief Financial Officer (CFO);
o In its oversight of the Company's consolidated financial
statements and the independent external audit thereof,
including the appointing, compensating, overseeing (including
resolving any disagreements between management and the
independent external auditor regarding financial reporting),
evaluating and, where deemed appropriate, replacing the
registered independent external auditors (or appointing the
registered independent external auditors to be proposed for
shareholder ratifications in any proxy statement); and
o In evaluating the independence of the external auditors.
The function of the Audit Committee is oversight. The management of the
Company is responsible for the preparation, presentation and integrity of
the Company's consolidated financial statements. Management is responsible
for maintaining appropriate accounting and financial reporting principles
and policies and internal accounting and disclosure controls and procedures
designed to assure compliance with accounting standards and applicable laws
and regulations.
In fulfilling their responsibilities hereunder, it is recognized that
members of the Audit Committee are not full-time employees of the Company
and are not, and do not represent themselves to be, accountants or auditors
by profession or experts in the fields of accounting or auditing. As such,
it is not the duty or responsibility of the Audit Committee or its members
to conduct "field work" or other types of auditing or accounting reviews or
procedures or to set auditor independence standards. Each member of the
Audit Committee shall be entitled to rely on:
A. The integrity of those persons and organizations within and
outside the Company from which it receives information,
B. The accuracy of the financial and other information provided
to the Audit Committee by such persons or organizations absent
actual knowledge to the contrary (which shall be promptly
reported to the Board of Directors), and representations made
by management as to any information technology, internal audit
and other non-audit services provided by the independent
external auditors to the Company.
The independent external auditors are responsible for planning and carrying
out a proper audit of the Company's annual consolidated financial
statements and reviews of the Company's quarterly consolidated financial
statements prior to the filing of each quarterly report on Form 10-Q, and
other procedures.
22.
EXHIBIT B
The independent external auditors for the Company are accountable to the
Audit Committee. The Audit Committee has the authority and responsibility
to select and evaluate the independent external auditors. The Audit
Committee shall pre-approve all audit and non-audit services proposed to be
provided by the Company's external auditors in compliance with section 202
of the "Public Company Accounting Reform and Investor Protection Act of
2002". The independent external auditors shall submit to the Company
annually a formal written statement delineating all relationships between
the independent external auditors and the Company ("Statement as to
Independence"), addressing each non-audit service provided to the Company.
The Audit Committee shall be responsible for considering whether any
services provided by the external auditor would cause the external auditor
to not be independent of the Company.
II. COMPOSITION
The Audit Committee shall be comprised of at least three independent members of
the Board of Directors, each of whom shall have no relationship to the Company,
or to the executive officers of the Company or its subsidiaries or affiliates.
Each member shall not be compensated for any consulting, advisory or other
services performed for the Company other than compensation received for Board of
Directors and committee fees, and shall not be an affiliate of the Company or
any of its subsidiaries, as defined by the Securities and Exchange Commission
("SEC") or NASDAQ, and shall otherwise satisfy the applicable membership
requirements under the rules of the SEC or NASDAQ. Individuals previously not
meeting all independence requirements to serve on the Audit Committee, must meet
all independence requirements for at least three (3) years prior to being
eligible to serve on the Audit Committee.
Each member of the Audit Committee must able to read and understand fundamental
financial statements, including the Company's consolidated balance sheet, income
statement, and cash flow statement. Additionally, the Company will strive to
have, at least one member of the Audit Committee that has past employment
experience in finance or accounting, requisite professional certification in
accounting, or any other comparable experience or background which results in
the individual's financial sophistication, including being or having been a
chief executive officer, chief financial officer or other senior officer with
financial oversight responsibilities.
While not an absolute requirement, the Company will seek to have at least one
member of the Audit Committee who is considered to be a "financial expert" by
virtue of their education and experience as a public accountant or auditor or
principal financial officer of an SEC registrant and has:
A. An understanding of generally accepted accounting principles
and financial statements;
B. Experience in:
1. The preparation or auditing of financial statements of
generally comparable SEC registrants as the Company; and
2. The application of such principles in connection with the
accounting estimates, accruals and reserves;
C. Experience with internal accounting controls; and
D. An understanding of Audit Committee functions.
Members of the Audit Committee shall be appointed annually by majority vote of
the Board of Directors and shall serve until the next annual meeting of the
Board of Directors or until their successors shall be duly qualified and
appointed.
23.
EXHIBIT B
III. MEETINGS
The Audit Committee shall meet four times annually, or more frequently if
circumstances dictate. At least annually, the Audit Committee should meet
separately with the internal auditor and the independent external auditor,
without any members of management being present, to discuss any matters that the
Audit Committee or any of these persons or firms believes should be discussed
privately.
The Audit Committee may request any officer or employee of the Company, or the
Company's independent counsel, or independent external auditors to attend a
meeting of the Audit Committee or to meet with any members of or consultants to,
the Audit Committee.
IV. RESPONSIBILITIES AND DUTIES OF THE AUDIT COMMITTEE
A. Overseeing Financial Reporting and Disclosures:
1. Reading of Financial Statements and Disclosures. The Audit
Committee shall read all financial statements and related
disclosures included in the Company's periodic and annual
filings with the SEC, and consider whether the financial
statements and related disclosures accurately and
appropriately reflect their knowledge of the financial
condition of the Company and its results of operations.
2. Accuracy of Financial Reports. The Audit Committee shall
require management to make all material correcting
adjustments to the Company's quarterly and annual
consolidated financial statements to be filed with the
SEC, that are identified by the independent external
auditor as being required by generally accepted accounting
principles ("GAAP") or the rules of the SEC.
3. Disclosure of Off-Balance-Sheet Transactions. On a
quarterly basis, the Audit Committee shall inquire of
management as to whether they have complied with the SEC's
disclosure requirements regarding the Company's
requirement to disclose, in quarterly and annual SEC
filings, all material off-balance-sheet transactions,
arrangements, obligations (including contingent
obligations) and other relationships of the Company with
unconsolidated entities or other persons, that have a
material current or future effect on financial condition,
changes in financial condition, results of operations,
liquidity, capital resources, or significant components of
revenues or expenses.
4. Disclosure of Pro Forma Financial Information. On at least
a quarterly basis, the Audit Committee shall inquire of
management as to whether they have complied with the SEC's
pro forma information disclosure requirements regarding
the Company's requirement to only disclose in SEC filings,
or in any public disclosures or press or other release,
pro forma financial information that does not contain an
untrue statement of a material fact or omit to state a
material fact necessary in order to make the pro forma
financial information, in light of the circumstances under
which it is presented, not misleading; and to reconcile
the pro forma financial information with the financial
condition and results of operations of the Company under
GAAP.
5. Disclosure of Transactions Involving Management and
Principal Stockholders. The Audit Committee shall
determine that management has put in place procedures to
24.
EXHIBIT B
report to the SEC, within two (2) business days, changes
in Company stockholdings by directors, officers, and more
than 10% stockholders of the Company, including stock
purchases and sales and stock issued due to exercises of
stock options. Also, the Audit Committee shall determine
that management has put in place procedures to report to
the SEC, within ten (10) business days, for any new
directors, officers or 10% stockholders of the Company,
their stockholdings in the Company.
6. Management Certification of Financial Statements and
Disclosures, and Assessment of Internal Controls. The
Audit Committee shall ensure that the Company has
established adequate procedures to ensure that quarterly
and annual financial statements and disclosures, required
to be reported to the SEC, are accurate and complete. This
will include reviewing and approving the process to be
followed by management to comply with quarterly and annual
CEO and CFO certifications required by the SEC. The Audit
Committee shall be responsible for discussing the results
of the quarterly and annual CEO and CFO certification
process with management to consider whether the Company
has appropriately fulfilled its quarterly and annual SEC
reporting requirements. In reviewing and considering the
quarterly and annual certifications of the CEO and CFO,
the Audit Committee shall also obtain, review and consider
any applicable reports issued by the internal auditor or
the independent external auditor.
7. Disclosure of Code of Business Conduct and Ethics. The
Audit Committee shall determine that the Company has
complied with applicable requirements of the SEC to
disclose, in periodic reports on Form 10-Q and Form 10-K,
whether or not, and if not, the reason therefore, the
Company has established a Code of Ethics for senior
officers (CEO, CFO, Controllers, Investment Officers).
Also, the Audit Committee shall inquire of management to
determine that changes in or waivers of the Code of Ethics
are approved by the Audit Committee, and reported promptly
to the SEC by the Company on a Form 8-K.
8. Disclosure of "Audit Committee Financial Expert." The
Audit Committee shall determine that the Company has
complied with applicable requirements of the SEC to
disclose, in periodic reports on Form 10-Q and Form 10-K,
whether or not, and if not, the reason therefore, the
Company has at least one member on the Audit Committee who
is an "audit committee financial expert" as defined by the
SEC.
9. Disclosure of Audit Committee Approval of Non-Audit
Services. The Audit Committee shall determine that the
Company has complied with applicable requirements of the
SEC to disclose, in periodic reports on Form 10-Q and Form
10-K, the approval by the Audit Committee of all non-audit
services to be performed by the Company's independent
external auditor.
10. Real Time Issuer Disclosures. The Audit Committee shall
determine that the Company has implemented procedures to
comply with applicable requirements of the SEC to report
to the SEC real time (prompt) disclosures of any material
changes in the Company's financial condition or results of
operations.
25.
EXHIBIT B
B. Independent External Auditor:
The Audit Committee is responsible for the appointment and/or
discharge of the Company's independent external auditor and
the Company's independent external auditor shall report
directly to the Audit Committee. The Audit Committee should
also pre-approve the compensation of the external auditor, and
evaluate the external auditor's independence. The Audit
Committee shall also pre-approve all permissible non-audit
services and fees to be provided by the Company's independent
external auditor. The pre-approval of audit and non-audit
services and fees of the independent external auditor may be
documented by a member of the Audit Committee signing annual
or periodic engagement letters that define in general terms
the type of services to be provided and the range of fees that
are considered acceptable for such services, or as otherwise
documented in the minutes of the Audit Committee meetings. The
actual compensation paid to the independent external auditor,
for all such pre-approved services and fees, are to be
reported to the Audit Committee by management on at least a
quarterly basis.
C. Internal and External Audit Plans:
The Audit Committee should review the annual audit plans of
the internal auditor and the independent external auditor,
including the degree of coordination of the respective plans.
The Audit Committee should inquire of the internal auditor and
independent external auditor as to the extent to which the
planned audit scope can be relied upon to detect material
misstatements in the consolidated financial statements and
other public disclosures, weaknesses in internal accounting
and disclosure controls, and fraud. Additionally, the Audit
Committee should inquire regarding the audit plans of the
internal auditor and independent external auditor regarding
electronic data processing and controls to ensure that such
plans address the related impact on financial risk and
internal controls.
D. External Audit Results:
The Audit Committee should review with management the results
of the independent external auditor's quarterly financial
statement reviews, and review with management and the
independent external auditor the results of the annual
financial statement audit. The Audit Committee should also
review with management and the independent external auditor
their assessment of the quality of the Company's accounting
principles, the adequacy of internal accounting and disclosure
controls and the resolution of identified significant
deficiencies or material weaknesses and reportable conditions
in internal accounting and disclosure controls. The Audit
Committee should also review compliance with laws and
regulations and other audit reports deemed significant by the
Committee. Based on this review, the Audit Committee shall
make its recommendation to the Board of Directors as to the
inclusion of the audited consolidated financial statements in
the Company's annual report on Form 10-K.
E. Annual Proxy Statement Disclosure:
The Audit Committee should report audit activities to the
Board of Directors and issue an annual report to be included
in the Company's proxy statement (including appropriate
26.
EXHIBIT B
oversight conclusions) for submission to the shareholders. In
addition, the Audit Committee should re-approve the Audit
Committee Charter, annually, with a copy of the charter filed
with the SEC every three (3) years, and after any amendments.
F. Independent External Auditor Communication With the Audit
Committee:
It is the independent external auditor's responsibility, as
required by generally accepted auditing standards, to make
certain communications to the Audit Committee on at least an
annual basis. Such matters include the independent external
auditor's responsibility under generally accepted auditing
standards, matters pertaining to the external auditor's
independence, selection of or changes in significant
accounting principles, management's judgments and significant
accounting estimates, significant audit adjustments posted or
uncorrected, the external auditors responsibility and
consideration of other information that accompanies the
audited consolidated financial statements, any disagreements
with management, any difficulties encountered during the
audit, any consequential illegal acts or irregularities, any
major issues discussed with management prior to retention of
the external auditors as auditors of the Company for the
current fiscal year, or instances of management consultation
with other accountants regarding significant accounting or
auditing matters, and any management advisory services and
fees provided by the independent external auditor.
G. Communication of Concerns of the Audit Committee With the
Independent External Auditor:
The Audit Committee shall be responsible for informing the
independent external auditor of any serious concerns regarding
to the accuracy and integrity of the Company's financial
reporting, any serious concerns regarding the honesty and
integrity of the Company's management, and any serious
concerns regarding the adequacy of the Company's internal
accounting and disclosure controls. In fulfilling these
responsibilities the Audit Committee is aware that it is
illegal for an officer or director of the Company to mislead
or lie to the independent external auditor.
H. Internal Audit Supervision:
The Audit Committee should review the appointment and
replacement of the outsourced internal audit service provider.
The outsourced internal audit service provider shall report
directly to the chairman of the audit committee, with
administrative oversight provided by the Risk Assessment
Officer of the Company. At least annually, the Audit Committee
should evaluate the effectiveness of the internal audit
function and consider the need to make changes to ensure that
the internal audit objectives are be met.
The Audit Committee should review and approve the annual
internal audit plans, monitor the completion of these plans,
and approve any changes to the annual plans. The Audit
Committee should review the periodic reports of internal audit
division activities, including the opinion of the outsourced
internal audit service provider regarding the adequacy of the
Company's internal accounting and disclosure control
structure. The Audit Committee should meet with the outsourced
internal audit service provider to discuss the status of
completion of the annual internal audit plans and the periodic
internal audit reports and to consider the need for further
audit follow-up and investigation.
27.
EXHIBIT B
I. Fraud Reporting and Handling of Complaints:
The Audit Committee shall have the responsibility for
establishing procedures for:
1. The receipt, retention, and treatment of complaints
received by the Company regarding accounting, internal
accounting controls, or auditing matters; and
2. The confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or
auditing matters. The Audit Committee shall also establish
procedures to ensure that no retaliation will be allowed
to occur against anyone who reports potential fraud or a
complaint in good faith.
J. Compliance Supervision:
The Audit Committee should review and approve the annual
internal compliance plans, monitor the completion of these
plans, and approve any changes to the annual plans. The Audit
Committee should review the periodic reports of compliance
activities, including the opinion of the Risk Assessment
Officer regarding the adequacy of the Company's compliance
structure. The Audit Committee should meet with the Risk
Assessment Officer to discuss the status of completion of the
annual internal compliance plans and the periodic compliance
reports and to consider the need for further follow-up and
investigation.
K. New Accounting Pronouncements:
Changes in accounting standards that have a material effect on
the consolidated financial statements and new or changing
regulations which will affect compliance issues or the
approach taken towards evaluating the internal control
structure, should be explained to the Audit Committee by
financial management, the internal auditor or the independent
external auditor.
L. Continuing Education for the Audit Committee:
The Audit Committee shall establish a program of regular
continuing education for all Audit Committee members to ensure
that they are properly equipped to fulfill their
responsibilities.
M. Legal Counsel:
The Audit Committee should meet regularly with the Company's
general in-house legal counsel and outside legal counsel, when
appropriate, to discuss legal matters that have a significant
impact on the Company's consolidated financial statements. An
assessment of the Company's legal liability should be reviewed
for any pending or threatened litigation, including
establishment of any appropriate reserves or financial
disclosures until the matter is adjudicated. The Audit
Committee may retain legal counsel at its discretion without
prior permission of the Board of Directors or its management
at the expense of the Company.
28.
EXHIBIT B
N. Code of Ethics:
The Audit Committee shall adopt, and from time to time review
and update, a Company Code of Ethics for directors, officers,
employees, and financial officers and ensure that adequate
systems and procedures are established to monitor compliance
therewith.
O. Areas Requiring Special Attention:
The Audit Committee may request detailed reports from
management, the independent external auditor, or the internal
auditor related to significant matters affecting the financial
reporting process, internal controls, or other areas of
special interest or concern.
V. RESOURCES AND AUTHORITY OF THE AUDIT COMMITTEE
The Audit Committee shall have the authority to engage independent legal
counsel, auditors, or other advisors for special audits, reviews and other
procedures as it determines necessary to carry out its duties.
VI. FUNDING
The Company shall provide the Audit Committee with appropriate funding, as
determined by the Audit Committee, in its capacity as a committee of the Board
of Directors, for payment of compensation:
A. To the registered independent external auditor and independent
internal auditor employed by the Company for the purpose of
rendering or issuing an audit report; and
B. To any advisors employed by the Audit Committee.
29.
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[ ] Mark this box with an X if you have
made changes to your name or
address details above.
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Annual Meeting Proxy Card
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[A] Election of Directors
1. The Board of Directors recommends a vote FOR the listed nominees.
For Withhold
01 - Dennis J. McDonnell [ ] [ ]
02 - John A. Shinkle [ ] [ ]
03 - Scott C. Sullivan [ ] [ ]
Mark this box with an X if you plan [ ]
to attend the meeting.
[B] Authorized Signatures - Sign Here - This section must be completed for
your instructions to be executed.
NOTE: Please sign exactly as your name(s) appears. For joint accounts, each
owner should sign. When signing as executor, administrator, attorney, trustee or
guardian, etc., please give your full title.
Signature 1 - Please keep signature within the box
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Signature 2 - Please keep signature within the box
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Date (mm/dd/yyyy)
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1 U P X H H H P P P P 003199 +
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Proxy - UnionBancorp, Inc.
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PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS - APRIL 27, 2004
The undersigned hereby appoints Robert J. Doty and I. J. Reinhardt, Jr., or
either 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 shares of common stock that the undersigned would be entitled to
vote if then personally present at the annual meeting of the stockholders of
UnionBancorp, Inc., to be held at the Starved Rock Lodge and Conference Center
located in Utica, Illinois, on Tuesday, April 27, 2004, 10:00 a.m., local time,
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 designated on the reverse side, and in their discretion, the
proxies are authorized to vote upon such other business as may come before the
meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE ON THE
REVERSE. IF NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES.
(Continued and to be signed on reverse side).