password-hashing scheme

Hi, I'm have trouble trying to get a ldap client be authenicated by the the ldap server. I think the problem is that I might have the hash scheme configured wrongly or something like that. I'm on solaris 9 with Openldap 2.3.35. I have the password set as "clear" in the ldap.conf and password-hash as {MD5} in slapd.conf. Am I safe to assume that with these settings, it means that the client will be sent the passwords over the server as clear text and the server will hash it to MD5 before checking against its stored password list? If it is not the case, then how should I configure the client and server to be the case?

Thanks, Vinh