SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the registrant [ ]
Filed by a party other than the registrant [X]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-1
COMMUNITY BANK SYSTEM, INC.
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(Name of Registrant as Specified in Its Charter)
Scott Printing
40 Broad Street
New York, New York 10004
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing on 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
COMMUNITY BANK SYSTEM, INC.
5790 Widewaters Parkway
DeWitt, New York 13214
-------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-------------------------------------------------------------------------------
March 30, 1995
To the Shareholders of Community Bank System, Inc.:
At the direction of the Board of Directors of Community Bank System, Inc.,
a Delaware corporation (the Company ), NOTICE IS HEREBY GIVEN that the Annual
Meeting of Shareholders of the Company (the Meeting) will be held at 1:00 p.m.
on Wednesday, May 3, 1995 at the Ramada Inn, Watertown, New York for the purpose
of considering and voting upon the following matters:
1. The election of four directors, each to hold office for a term
of three years and until their successors have been duly
elected.
2. The transaction of any other business which may properly
be brought before the Meeting or any adjournment thereof.
By Order of the Board of Directors
Loretta L. Marx
Secretary
YOUR VOTE IS IMPORTANT. YOU ARE THEREFORE REQUESTED TO SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, EVEN IF YOU EXPECT TO BE PRESENT AT
THE MEETING. YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO THE MEETING, OR IF
YOU DO ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AT THAT TIME AND VOTE IN
PERSON IF YOU WISH.
<PAGE>
COMMUNITY BANK SYSTEM, INC.
5790 Widewaters Parkway
DeWitt, New York 13214
---------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 3, 1995
This Proxy Statement is furnished as part of the solicitation of proxies by
the Board of Directors of Community Bank System, Inc. (the Company), the holding
company for Community Bank, N.A. (the Bank), for use at the Annual Meeting of
Shareholders of the Company (the Meeting ) to be held at 1:00 p.m. on Wednesday,
May 3, 1995, at the Ramada Inn, Watertown, New York. This Proxy Statement and
the form of Proxy are first being sent to Shareholders on approximately March
30, 1995.
At the Meeting, the Shareholders will be asked to vote for the election of
directors. Four of the total of thirteen directors who serve on the Company's
Board of Directors will stand for re-election to the Board at the Meeting. In
addition, voting will be conducted on any other matters which are properly
brought before the Meeting.
VOTING RIGHTS AND PROXIES
The Board of Directors of the Company has fixed the close of business on
March 10, 1995 as the record date for determining which Shareholders are
entitled to notice of and to vote at the Meeting. At the close of business on
the record date, 2,788,150 shares of common stock, par value $1.25 per share,
were outstanding and entitled to vote at the Meeting. This is the Company's only
class of voting stock outstanding. Each share of outstanding common stock is
entitled to one vote with respect to each item to come before the Meeting. There
will be no cumulative voting of shares for any matter voted upon at the Meeting.
The Bylaws of the Company provide that one-third of the outstanding shares of
the Company, represented in person or by proxy, shall constitute a quorum at a
shareholder meeting. The Company is not aware of any persons who beneficially
own more than 5% of the outstanding voting stock of the Company as of the record
date for the Meeting.
If the enclosed form of Proxy is properly executed and returned to the
Company prior to or at the Meeting, and if the Proxy is not revoked prior to its
exercise, all shares represented thereby will be voted at the Meeting and, where
instructions have been given by a Shareholder, will be voted in accordance with
such instructions.
Any Shareholder executing a Proxy which is solicited hereby has the power
to revoke it at any time prior to its exercise. A Proxy may be revoked by giving
written notice to the Secretary of the Company at the Company's address set
forth above, by attending the Meeting and voting the shares of stock in person,
or by executing and delivering to the Secretary a later-dated Proxy.
The solicitation of Proxies will be by mail, but Proxies may also be
solicited by telephone, telegram, or in person by directors, officers, and other
regular employees of the Company or of the Bank. The Company will bear all costs
of soliciting Proxies. Should the Company, in order to solicit Proxies, request
the assistance of other financial institutions, brokerage houses, or other
custodians, nominees, or fiduciaries, the Company will reimburse such persons
for their reasonable expenses in forwarding proxy materials to Shareholders and
obtaining their Proxies.
<PAGE>
The Annual Report of the Company for the fiscal year ended December 31,
1994 is being sent to Shareholders with this Proxy Statement. Copies of the
Annual Report on Form 10-K filed with the Securities and Exchange Commission
will be distributed without charge to any Shareholder upon written request of
such person addressed to Mr. David G. Wallace, Treasurer, Community Bank System,
Inc., 5790 Widewaters Parkway, DeWitt, New York 13214.
SHAREHOLDER PROPOSALS
If shareholder proposals are to be considered by the Company for inclusion
in a proxy statement for a future meeting of the Company's Shareholders, such
proposals must be submitted on a timely basis and must meet the requirements
established by the Securities and Exchange Commission for shareholder proposals.
Shareholder proposals for the Company's 1996 Annual Meeting of Shareholders will
not be deemed to be timely submitted unless they are received by the Company at
its principal executive offices by November 30, 1995. Such shareholder
proposals, together with any supporting statements, should be directed to the
Secretary of the Company. Shareholders submitting proposals are urged to submit
their proposals by certified mail, return receipt requested.
ITEM 1: ELECTION OF DIRECTORS AND INFORMATION WITH
RESPECT TO DIRECTORS AND EXECUTIVE OFFICERS
The first Item to be acted upon at the Meeting is the election of four
directors, each to hold office for three years and until his successor shall
have been duly elected and qualified. The nominees receiving a plurality of the
votes represented in person or by proxy at the Meeting will be elected
directors.
All Proxies in proper form which are received by the Board prior to the
election of directors at the Meeting will be voted FOR the four nominees listed
below, unless authority is withheld in the space provided on the enclosed Proxy.
Each nominee is presently a director of the Company, and each director of the
Company is also a director of the Bank. In the event any nominee declines or is
unable to serve, it is intended that the Proxies will be voted for a successor
nominee designated by the Board. All nominees have indicated a willingness to
serve, and the Board knows of no reason to believe that any nominee will decline
or be unable to serve if elected. Edwin J. Lyons resigned from the Board
effective October 10, 1994. Upon his resignation, the number of Boardmembers
decreased from 14 to 13 members. The other 13 members of the Board, who are
listed below (including the nominees for re-election at the 1995 Annual Meeting,
if elected), presently are expected to continue to serve on the Board until
their respective terms expire.
The information on the following pages is furnished for each nominee for
director to be elected at the Meeting and each director of the Company whose
term of office continues after the Meeting.
-2-
<PAGE>
NOMINEES FOR DIRECTOR AND DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
Shares of Company Common
Stock Beneficially Owned (c)
Business as of March 10, 1995 (d)
Name and Director of the Experience During --------------------------
Age (a) Company Since Past Five Years (b) Number Percent
------- ------------- ------------------- ------ -------
<S> <C> <C> <C> <C>
Nominees (for terms to expire at Annual Meeting in 1998)
--------------------------------------------------------
John M. Burgess 1991 Retired. Prior to 1991, President of 3,210 .12%
Age 58 Kinney Drugs, Inc., a drug and retail
chain with stores located throughout
northern New York.
James A. Gabriel 1984 Partner, law firm of Franklin & Gabriel, 8,675 .31%
Age 47 Ovid, New York.
Earl W. MacArthur 1983 Vice President, WM Academic Search 1,420 .05%
Age 66 Specialists since 1993. From 1972-
1992, President, State University of
New York at Canton, New York.
Hugh G. Zimmer 1989 Retired. Prior to 1989, President, The 20,347 .73%
Age 68 Nichols National Bank, Nichols, New
York, which was consolidated into
Community Bank, N.A. as of January 1,
1992.
Directors Continuing in Office
------------------------------
Terms expiring at Annual Meeting in 1996:
Richard C. Cummings 1983 Partner, law firm of Cummings, 5,676 .20%
Age 65 McGuire, Dunckel & Company,
Lowville, New York.
William M. Dempsey 1984 Vice President of Finance and 800 .03%
Age 56 Administration, Rochester Institute of
Technology, Rochester, New York.
William N. Sloan 1991 Associate Professor of Mathematics, 234 .01%
Age 60 Potsdam College of the State University
of New York, Potsdam, New York.
William D. Stalder 1983 Retired. Prior to 1990, partner, firm of 13,237 .47%
Age 69 Witherbee and Whalen, retail cemetery
monument and burial vault business,
Canton, New York.
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
Shares of Company Common
Stock Beneficially Owned (c)
Business as of March 10, 1995 (d)
Name and Director of the Experience During --------------------------
Age (a) Company Since Past Five Years (b) Number Percent
------- ------------- ------------------- ------ -------
<S> <C> <C> <C> <C>
Terms expiring at Annual Meeting in 1997:
Sanford A. Belden 1992 President and Chief Executive Officer 2,000 .07%
Age 52 of the Company since October 1, 1992.
From 1990 to 1992, Manager, Eastern
Region, Rabobank Nederland, New
York, New York. From 1985 to 1990,
First Bank System, Minneapolis, Minnesota
as President, Community Banking (1990),
Regional Community Banking (1989),
Managing Director, Minnesota Region (1988),
Senior Vice President, Credit and Operations,
(1985-1988).
Nicholas A. DiCerbo 1985 Partner, law firm of DiCerbo and 19,791 .71%
Age 48 Palumbo, Olean, New York.
Benjamin Franklin 1984 Retired, formerly, of counsel, law firm 35,088 1.26%
Age 69 of Franklin & Gabriel, Ovid, New York.
Lee T. Hirschey 1991 President and Chief Executive Officer, 8,356 .30%
Age 59 Climax Manufacturing Company, converter
and manufacturer of paper products with
facilities in Castorland, Lowville, and
West Carthage, New York.
David C. Patterson 1991 President and owner of Wight and 3,046 .11%
Age 53 Patterson, Inc., manufacturer and seller
of livestock feed located in Canton, NY
</TABLE>
-4-
<PAGE>
In addition to the information provided above, the following summarizes the
security ownership of the highest paid executive officers who are not
also directors of the Company:
<TABLE>
<CAPTION>
Shares of Company Common
Stock Beneficially Owned (c)
as of March 10, 1995 (d)
---------------------------
Number Percent
------ -------
<S> <C> <C>
James A. Wears .................. 10,386 .37%
Regional President
Northern Region
Michael A. Patton ............... 9,074 .33%
Regional President
Southern Region
David G. Wallace ................ 7,468 .27%
Senior Vice President
and Chief Financial Officer
Number of shares of Company stock
beneficially owned by all
Directors and Executive Officers
of the Company as a group
(16 persons) .................. 148,808 5.3%
</TABLE>
(a) No family relationships exist between any two or more of the nominees
for director or executive officers of the Company.
(b) No nominee for director or continuing director of the Company holds a
directorship with any company (other than the Company) which is
registered pursuant to Section 12 or subject to the requirements of
Section 15(d) of the Securities Exchange Act of 1934, or with any
company which is a registered investment company under the Investment
Company Act of 1940.
(c) Represents all shares as to which named individual possessed sole or
shared voting or investment power as of March 10, 1995, including
shares held by, in the name of, or in trust for, spouse and dependent
children of named individual and other relatives living in the same
household, even if beneficial ownership has been disclaimed as to any
of these shares by the nominee or director.
(d) The listed amounts include shares as to which certain directors are
beneficial owners but not the sole beneficial owners as follows: Mr.
Burgess' wife holds 300 shares in her own name; Dr. MacArthur's wife
holds 150 shares; Mr. Zimmer holds 20,076 shares jointly with his
wife; Mr. Cummings' wife holds 140 shares in her own name; Mr. Sloan
holds 234 shares jointly with his wife; Mr. DiCerbo holds 5,933 shares
jointly with his wife, 12,158 shares are held in the name of the law
partnership of DiCerbo and Palumbo, 140 shares are held by his wife,
160 shares are held by his daughter, 400 shares are held by his son,
and 1,000 shares are held in trust for his children; Mr. Franklin's
wife holds 2,352 shares in her own name; Mr. Hirschey's wife holds
1,000 shares in her own name and Mr. Hirschey holds 1,000 shares as
Trustee for the Retirement Plan of Climax Manufacturing Company; Mr.
Stalder's wife holds 126 shares in her name; and Mr. Patterson holds
1,190 shares jointly with his wife. Mr. Zimmer owns presently
exercisable stock options to purchase l,000 shares of common stock.
Board Committees and Meetings
-----------------------------
The Board of Directors of the Company held twelve regularly scheduled
meetings during the fiscal year ended December 31, 1994. During this period,
each director of the Company attended at least 75% of the aggregate of the total
number of meetings of the Board and the total number of meetings held by
committees of the Board on which he served. Edwin J. Lyons resigned effective
October 10, 1994.
-5-
<PAGE>
Among its standing committees, the Board of the Bank has an
Audit/Compliance/Risk Management Committee which also serves as the Company's
Audit Committee. The Audit/Compliance/Risk Management Committee reviews internal
and external audits of the Company and the Bank and the adequacy of the
Company's and the Bank's accounting, financial, and compliance controls, and
investigates and makes recommendations to the Company's Board and the Bank's
Board regarding the appointment of independent auditors. During 1994, this
Committee held four meetings and its present members are directors Richard C.
Cummings (Chair), James A. Gabriel, Lee T. Hirschey, and William D. Stalder.
The Bank's Board also has a Personnel Committee which reviews and makes
recommendations to the Bank's Board regarding compensation adjustments and
employee benefits to be instituted and which also serves as the Company's
Personnel Committee. The Personnel Committee reviews the Compensation of
nonofficer employees in the aggregate, and the salaries and performance of
executive officers are reviewed individually. The Personnel Committee held eight
meetings in 1994, and its present members are directors Nicholas A. DiCerbo
(Chair), John M. Burgess, and William N. Sloan.
The Company has a Nominating Committee which makes recommendations to the
Board for nominees to serve as directors. The Nominating Committee will consider
written recommendations from shareholders for nominees to serve on the Board
that are sent to the Secretary of the Company at the Company's main office. The
Nominating Committee held one meeting in 1994, and its present members are
William D. Stalder (Chair), William M. Dempsey, and William N. Sloan.
The President and Chief Executive Officer of the Company serves as an ex
officio member of all Board committees and receives no compensation for serving
in this capacity. Dr. MacArthur, as Chair of the Board, also serves as a member
of all Board Committees.
Compensation of Directors
-------------------------
As directors of both the Company and the Bank, Board members receive an
annual retainer of $8,000, $500 for each Board meeting they attend, $500 for
each Executive Committee meeting they attend, and $350 for each committee
meeting they attend. Mr. Belden does not receive an annual retainer or
compensation for attending Board and committee meetings. The Chair of the Board
receives an all inclusive $46,000 retainer for serving in that capacity. The
Chair of the Loan Committee and the Personnel Committee each receives an annual
retainer of $2,500; and the Chair of the Investment Committee, the Trust
Committee, and the Audit/Compliance/Risk Management Committee each receives an
annual retainer of $750. The Company pays the travel expenses incurred by each
director in attending meetings of the Board.
Directors may elect to defer all or a portion of their director fees
pursuant to a Deferred Compensation Plan for Directors. Directors who elect to
participate in the Plan designate the percentage of their director fees which
they wish to defer (the deferred fees ) and the date to which they wish to defer
payment of benefits under the plan (the distribution date). The plan
administrator establishes an account for each participating director and credits
to such account (i) on the date a participating director would have otherwise
received payment of his deferred fees, the number of shares of Company Common
Stock which could have been purchased with the deferred fees, and (ii) from time
to time such additional number of shares of Common Stock which could have been
purchased with any dividends which would have been received had shares equal to
the number of shares credited to the account actually been issued and
outstanding. On the distribution date, the participating director shall be
entitled to receive either (i) shares of Company Common Stock equal to the
number of shares credited to the director's account, or (ii) at the Company's
election, cash equal to the fair market value of the number of shares credited
to the account as of the distribution date. The effect of the plan is to permit
directors to invest deferred director fees in stock of the Company, having the
benefit of any stock price appreciation and dividends as well as the risk of any
decrease in the stock price. To the extent that directors participate in the
plan, the interests of participating directors will be more closely associated
with the interests of shareholders in achieving growth in the Company's stock
price.
-6-
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation paid by
the Bank to those persons who were, at December 31, 1994, (i) the chief
executive officer and (ii) the other most highly compensated executive officers
whose annual salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------------------------------- ----------------------------
Name and Other Annual All Other
Principal Compensation Stock Compensation
Position($)(3) Year Salary ($) Bonus ($) (l) ($)(2) Options(#) ($)(3)
--------------------- ---- ---------- ------------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sanford A. Belden 1994 205,000 74,107 2,180 5,300 11,986
President and Chief 1993 185,000 66,600 3,498 0 12,422
Executive Officer (4) 1992 44,115 0 324 48,000 92,375(5)
James A. Wears 1994 119,669 31,293 4,193 2,050 9,075
Regional President 1993 113,971 29,633 3,706 0 9,498
Northern Region 1992 107,520 16,128 4,227 5,000 5,357
Michael A. Patton 1994 118,539 30,998 2,156 2,050 8,988
Regional President 1993 112,896 29,353 3,085 0 9,704
Southern Region 1992 107,520 16,128 1,535 2,000 5,624
David G. Wallace 1994 111,750 29,222 0 1,950 8,858
Senior Vice President 1993 106,937 27,804 2,939 0 9,419
and Chief Financial 1992 100,883 15,132 1,733 3,000 5,498
Officer
</TABLE>
(1) The amounts shown in this column reflect payments under the Company's
Management Incentive Plan, an annual cash award plan based on performance and
designed to provide incentives for employees.
(2) The amounts disclosed in this column include: (a) the reportable value
of the personal use of Company-owned vehicles for Messrs. Belden, Wears, and
Patton, which amounted to $2,180, $4,193, and $2,156, respectively; and (b)
wages received by Mr. Wallace as tax reimbursement for restricted stock which
vested in 1993 and 1992 amounting to $2,939 and $1,733.
(3) The amounts in this column include: (a) the value of group term life
insurance benefits in excess of $50,000 under a plan available to all full-time
employees for which Messrs. Belden, Wears, Patton, and Wallace received $1,440,
$661, $654, and $1,002, respectively; and (b) Company contributions to the
Employee Savings and Retirement Plan, a defined contribution plan, amounting to
$10,546 for Mr. Belden, $8,414 for Mr. Wears, $8,334 for Mr. Patton, and $7,857
for Mr. Wallace. The Company does not maintain any "split-dollar" arrangements
for any of the named executives.
(4) Mr. Belden was appointed President and Chief Executive officer
effective October 1, 1992.
(5) This amount includes $55,000 as a relocation allowance, $35,000 as a
sign-on bonus, and $2,375 pursuant to a stock purchase reimbursement
arrangement.
-7-
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides further information on grants of stock options
pursuant to the Company's Long-Term Incentive Compensation Program in fiscal
year 1994 to the named executives as reflected in the Summary Compensation Table
on page 7.
<TABLE>
<CAPTION>
% of Total Potential Realizable Value at
Options Assumed Annual Rates of Stock Price
Granted to Exercise or Market Appreciation for Option Term
Options Employees in Base Price Expiration Value on -----------------------------------
Name Granted (#) Fiscal Year ($/Sh) Date Grant Date 0% 5% 10%
-------------- ----------- ----------- ------ ------------ ---------- --- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sanford A. Belden 5,300 37% $28.50 1/02/04 $28.50 None $94,995 $240,735
James A. Wears 2,050 14% $28.50 1/02/04 $28.50 None 36,743 93,114
Michael A. Patton 2,050 14% $28.50 1/02/04 $28.50 None 36,743 93,114
David G. Wallace 1,950 14% $28.50 1/02/04 $28.50 None 34,951 88,572
</TABLE>
On January 2, 1994, the Board of Directors issued incentive stock options
to Messrs. Belden, Wears, Patton, and Wallace at the then current market price
of $28.50 per share. These options become exercisable over the course of five
years, with one-fifth of the options becoming exercisable on January 2, 1995,
1996, 1997, 1998, and 1999.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
The following table provides information for the named executive officers,
with respect to (i) stock options exercised in fiscal year 1994, (ii) the number
of stock options held at the end of fiscal year 1994, and (iii) the value of
in-the-money stock options at the end of fiscal year 1994.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised Options ln-the-Money Options
Shares at 12/31/94 (#) at 12/31/94($)(l)
Acquired on Value ------------------------------- -------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
-------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sanford A. Belden 0 0 19,200 34,100 $ 24,000 $36,000
James A. Wears 600 $10,059 5,400 4,050 58,550 22,500
Michael A. Patton 3,000 59,295 7,500 3,250 85,046 13,500
David G. Wallace 0 0 3,200 3,750 36,500 20,250
<FN>
----------
(1) Based on the average price of the Company's Common Stock on
December 31, 1994 of $26.25 per share.
</FN>
</TABLE>
-8-
<PAGE>
PENSION PLAN TABLE
YEARS OF SERVICE
<TABLE>
<CAPTION>
Highest Five
Year Average
Compensation (1) 15 20 25 30 35
---------------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
20,000 2,700 3,600 4,500 5,400 6,300
50,000 9,227 12,302 15,378 18,453 21,529
100,000 20,852 27,802 34,753 41,703 48,654
125,000 26,664 35,552 44,440 53,328 62,216
150,000 32,477 43,302 54,128 64,953 75,779
<FN>
---------
(1) For 1994, the Internal Revenue Code limits the total compensation that may
be taken into account in calculating benefits to $150,000.
</FN>
</TABLE>
The table above sets forth the estimated annual benefits under the formula
adopted for post-1988 years of service, payable upon retirement at age 65 in the
form of a single life annuity. Benefits are computed based on the average annual
compensation for the highest consecutive five years in the 10 years preceding
retirement. The amounts are not subject to any deduction for Social Security.
For purposes of calculating the benefit, an employee may not be credited with
more than 35 years of service. The base salary and cash award amounts in the
Summary Compensation Table on page 7 reflect the covered compensation under the
plan for Messrs. Belden, Wears, Patton, and Wallace. Messrs. Belden, Wears,
Patton, and Wallace have been credited with 2, 24, 24, and 6 years of service,
respectively, under the plan.
The pension plan maintained by the Company is a noncontributory defined
benefit plan which is funded by the Company and administered by the Trust
Department of Community Bank, N.A. The plan covers all employees of the Company
who have completed one full year of continuous service. The Company first
entered into a nonqualified supplemental retirement plan agreement with Mr.
Belden in January 1995. The Company does not currently maintain any nonqualifed
retirement plans for any of the other named executives.
-9-
<PAGE>
Employment Agreements
---------------------
The Company has an employment agreement with Mr. Belden dated January 1,
1995 providing for his employment as the Company's President and Chief Executive
Officer until December 31, 1997. The agreement may be terminated by the Board
for good cause at any time. The agreement requires that Mr. Belden devote his
full business time and attention to the performance of his duties for a base
salary of $240,000 for 1995, $275,000 for 1996, and $300,000 for 1997. In the
event the Company's average assets during any monthly reporting period reach
$1.75 billion, Mr. Belden's base salary will by reviewed by the Board. The
agreement also provides Mr. Belden with a supplemental retirement benefit which
amounts to 4% of his final five year average salary, times years of service (15
year maximum), payable at age 65 in the form of an actuarially reduced joint and
50% survivor benefit. Benefits payable prior to age 65, or in another form, are
subject to the same actuarial adjustments as benefits payable under the
Company's pension plan. The supplemental retirement payments are reduced by the
benefit payable under the Company's pension plan, plus his Social Security
benefit, plus the benefits payable from two other pension plans that Mr. Belden
participated in prior to his joining the Company in 1992. If upon expiration of
the agreement the Company elects not to renew, Mr. Belden will be entitled to
severance pay equal to one year of his then current base salary, provided that
such severance payments shall cease if Mr. Belden subsequently obtains
employment or becomes self-employed during the severance period. If Mr. Belden's
employment is terminated for reasons other than cause within two years following
a change of control, the Company will retain him as a consultant for two years
at an annual consulting fee equal to his base salary, reimburse him for any loss
incurred on the sale of his home, and all of his stock options shall become
fully exercisable. Additionally, in the event of a change of control, Mr.
Belden's years of service for supplemental retirement benefit purposes shall
include his consultation period plus an additional three years.
The Company also maintains one year employment agreements with Messrs.
Wears, Patton, and Wallace. These agreements provide for severance pay equal to
the employee's base salary for the balance of the term of the agreement plus
benefits under the Company's regular severance policy, and change of control
benefits which include a two year consulting engagement, accelerated vesting on
all outstanding stock options, and in the case of Mr. Wallace, crediting for
retirement funding purposes in the greater amount of actual years of service or
20 years.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Personnel Committee of the Bank's Board of Directors
during the last fiscal year were Nicholas A. DiCerbo (Chair), John M. Burgess,
Edwin J. Lyons, Earl W. MacArthur, and William N. Sloan. Mr. Lyons is a former
officer of the Company and Bank having served as President and Chief Executive
Officer until September 30, 1992, but did not serve as a member of the Personnel
Committee while serving as an officer of the Company. Following his resignation
from the Board of Directors effective October 10, 1994, the Personnel Committee
was comprised of Directors DiCerbo, Burgess, Sloan, and MacArthur. The Personnel
Committee reviews and makes recommendations regarding compensation levels and
employee benefits.
REPORT OF THE PERSONNEL COMMITTEE
ON EXECUTIVE COMPENSATION
The Company has adopted a multi-faceted approach towards compensating all
of its employees, including senior management. The underlying philosophy and
description of major components of the total compensation program are described
below.
-10-
<PAGE>
Philosophy
----------
The total compensation program is intended to align compensation with
business objectives and enable the Company to attract and retain individuals who
are contributing to the long-term success of the Company. Towards this end:
The Company pays competitively. The Company regularly compares its cash,
equity and benefits based compensation practices with those of other companies
of similar size, operating in similar geographic market areas, many of which are
represented in the stock performance graph included on page 13, and establishes
compensation parameters based on that review.
The Company encourages teamwork. The Company recognizes that its long-term
success results from the coordinated efforts of employees working towards
common, well established objectives. While individual accomplishments are
encouraged and rewarded, the performance of the Company is a determining factor
in total compensation opportunities.
The Company strives for fairness in the administration of pay. The Company
strives to ensure that compensation levels accurately reflect the level of
accountability that each individual has within the Company; employees are
informed of the total compensation program; decisions made regarding individual
performance which affect compensation matters are based upon an objective
assessment of performance; and all employees have equal access to positions
within the Company which provide for increased levels of total compensation.
The process of assessing performance involves the following:
1. Prior to the beginning of each fiscal year, the Chief Executive
Officer establishes and distributes written goals, which must be approved
by the full Board. Those goals include specific financial targets relative
to earnings and asset quality. The Company strives to achieve financial
results which are in the upper third of the results published by its peer
group.
2. Individuals at each successive level of management establish
written goals, which must be approved by their respective managers.
3. All goals are reviewed on an ongoing basis to ensure that the
Company is responding to changes in the marketplace and economic climate,
and that accomplishment of retained goals is ensured.
4. At the end of the fiscal year, performance is evaluated against
goals and other key position responsibilities. Such evaluations affect
decisions on salary, cash award, and stock option matters.
Compensation Programs
---------------------
The Company defines itself as a super-community bank which provides
products of a more comprehensive and advanced nature than those offered by
smaller institutions, while simultaneously providing a level of service which
exceeds the service quality delivered by larger regional and money center
organizations. The delivery of those products and services, in ways that enhance
shareholder value, requires that the Company attract key people, promote
teamwork, and reward results. In furtherance of those requirements, the Company
maintains the following compensation programs.
-11-
<PAGE>
Cash-Based Compensation
-----------------------
Salary. The Company sets base salaries for employees by reviewing the total
cash compensation opportunities for competitive positions in the market. Where
practical, the Company maintains its base salary levels slightly below market
and provides for total compensation opportunities that may exceed those in
comparable companies which do not generate comparable financial results.
Management Incentive Plan. The Company maintains an annual incentive plan
in which 37% of its employees participate. The Company's performance to targeted
return on equity and budget, which targets are approved by the Board, triggers
the payment of cash awards for all employees in this group. Award levels, which
amount to a percentage of salary, have been established for different
organizational levels within the Company. For Mr. Belden, 100% of his award is
determined by the Company's performance relative to its Return on Equity and Net
Income targets. For Messrs. Wears, Patton, and Wallace, 80% of their respective
award opportunities reflect the Company's performance relative to its financial
targets, and 20% of their respective award opportunities reflect performance to
other quantitative and qualitative goals specific to their areas of
responsibility.
Equity-Based Compensation
-------------------------
Stock Option Program. The purpose of this program is to provide additional
incentives to employees to work to maximize shareholder value. The option
program serves as an effective tool in recruiting key individuals and utilizes
vesting periods to encourage these individuals to continue in the employ of the
Company. The Board frequently awards options in years during which the Company
has achieved its financial targets. The number of stock options issued generally
reflects a percentage of salary; and various percentages have been established
for different organizational levels within the Company.
Restricted Stock. The Company has, on occasion, issued limited amounts of
restricted stock to individuals to support a variety of business objectives.
Examples include: performance unit shares have been issued in start-up and
turnaround assignments, with vesting schedules tied to specific performance
criteria; and restricted shares have been issued to newly promoted and hired
individuals who received initial stock option awards with no in-the-money
exercisable value.
CEO Compensation
----------------
In December 1994, the full Board formally reviewed Mr. Belden's performance
for fiscal year 1994, his second full year as the Company's President and CEO.
Having determined that the Company's level of performance relative to its
previously approved annual and long-term financial targets had been surpassed,
the Board, operating under the terms of the Management Incentive Plan disclosed
in this Report, authorized the payment of Mr. Belden's cash award for 1994,
which amounted to $74,107. Mr. Belden's $205,000 base salary level for 1994 is
well supported by competitive wage survey data, and the increase over his 1993
base salary level is well supported by the Company's financial performance
during the 1993 evaluation period.
The foregoing report has been provided by Nicholas A. DiCerbo (Chair), John
M. Burgess, Earl W. MacArthur, and William N. Sloan, members of the Personnel
Committee.
-12-
<PAGE>
Stock Performance Graph
The following graph compares cumulative total shareholder returns on the
Company's stock over the last seven fiscal years to the NASDAQ Index and the
NASDAQ Bank Stocks Index. Total return values were calculated assuming $100
investment on January l, 1989 and reinvestment of dividends.
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Community Bank 100 55.42 106.87 190.63 233.13 223.23
System, Inc.
NASDAQ Stock 100 84.92 136.28 158.58 180.93 176.92
Market Index
NASDAQ Bank Stocks 100 73.23 120.17 174.87 199.33 198.69
Index
</TABLE>
-13-
<PAGE>
TRANSACTIONS WITH MANAGEMENT
Some of the directors and executive officers of the Company and the Bank
(and the members of their immediate families and corporations, organizations,
trusts, and estates with which these individuals are associated) are indebted to
the Bank. However, all such loans were made in the ordinary course of business,
do not involve more than the normal risk of collectibility or present other
unfavorable features, and were made on substantially the same terms, including
interest rate and collateral requirements, as those prevailing at the same time
for comparable loan transactions with unaffiliated persons. No such loan is
nonperforming at present. The Company expects that the Bank will continue to
have banking transactions in the ordinary course of business with the Company's
executive officers and directors and their associates on substantially the same
terms, including interest rates and collateral, as those then prevailing for
comparable transactions with others.
Outside of these normal customer relationships, none of the directors or
executive officers of the Company or the Bank and no 5% shareholders of the
Company (or members of the immediate families of any of the above or any
corporations, organizations, or trusts with which such persons are associated)
maintains any significant business or personal relationship with the Company or
the Bank, other than as arises by virtue of his ownership interest in the
Company or his position with the Company or the Bank. The law firms of (i)
Cummings, McGuire, Dunckel & Campany, of which director Cummings is a partner,
provided legal services to the Bank's operations in Lowville, New York, (ii)
Franklin & Gabriel, of which director Gabriel is a partner and director Franklin
is associated, provided legal services to the Bank's operations in Ovid, New
York, and (iii) DiCerbo & Palumbo, of which director DiCerbo is partner,
provided legal services to the Bank's operations in Olean, New York. For
services rendered during 1994 and for related out-of-pocket disbursements,
DiCerbo & Palumbo received $115,219 from the Bank. The amount received by
Cummings, McGuire, Dunckel & Campany and by Franklin & Gabriel from the Company
or Bank was less than 5% of the gross revenues of each of these law firms' last
fiscal year.
The Company has a consulting agreement with Mr. Edwin J. Lyons entered into
in 1991 in contemplation of Mr. Lyons' retirement. The purpose of the agreement
was to assure Mr. Lyons' continued service following his retirement as President
and Chief Executive Officer in 1992. Pursuant to the agreement, Mr. Lyons must
be available at least 90 days per year at the Company offices or other
designated locations to provide consulting services as requested by the Company.
Mr. Lyons was paid $100,000 in 1993; $50,000 in 1994; and will be paid $50,000
in 1995 and 1996 under the agreement.
INDEPENDENT AUDITORS
Coopers & Lybrand, L.L.P., Independent Certified Public Accountants, were
retained by the Company at the direction of the Board of Directors. The
independent auditors have audited the financial statements of the Company for
the fiscal year ended December 31, 1994 and performed such other nonaudit
services as the Board requested.
A representative of Coopers & Lybrand, L.L.P. will be present at the
Meeting. This representative will have the opportunity to make a statement, if
he so desires, and will be available to respond to appropriate questions from
Shareholders.
-14-
<PAGE>
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters
that may come before the Meeting. However, the Proxies may be voted with
discretionary authority with respect to any other matters that may properly come
before the Meeting.
Date: March 30, 1995 By Order of the Board of Directors
Loretta L. Marx
Secretary
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<PAGE>
PROXY
COMMUNITY BANK SYSTEM, INC.
5790 Widewaters Parkway
DeWitt, New York 13214
Annual Meeting of Shareholders May 3, 1995
THIS PROXY IS SOLICITED
BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned shareholder(s) of Community Bank System, Inc. a Delaware
corporation (the "Company"), hereby appoints Charles M. Ertel and Loretta L.
Marx, and each of them, attorneys-in-fact and proxies of the undersigned, with
full power of substitution to represent and to vote all shares of common stock
of the Company which the undersigned is entitled to vote at the annual meeting
of shareholders to be held on Wednesday, May 3, 1995, and at any adjournment
thereof as follows:
(continued on reverse side)
<TABLE>
<CAPTION>
Please mark
[x] your vote
this way
<S> <C> <C> <C> <C> <C>
---------- --------------------
COMMON DIVIDEND REINVESTMENT
Election of Directors: John M. Burgess, James A. Gabriel, Earl W. MacArthur, and Please check box to
Hugh G. Zimmer indicate whether you
plan to attend Annual
Meeting.
FOR all nominees WITHHOLD INSTRUCTION: To withhold authority to vote for any
listed (except as AUTHORITY individual nominee, write that nominee's name in the space will attend will not
marked to the to vote for all provided below. attend
contrary at right) nominees listed to
the right _________________________________________________________ [ ] [ ]
In their discretion, such attorneys-in-fact This Proxy, when properly executed will be
[ ] [ ] and proxies are authorized to vote upon such voted as directed herein by the undersigned.
other business as may properly come before IF NO DIRECTION IS GIVEN, THIS PROXY WILL
this meeting. BE VOTED "FOR" PROPOSAL 1.
Date______________________________, 1995
______________________________________
Signature
______________________________________
Signature
YOU ARE REQUESTED TO COMPLETE, DATE, SIGN
AND RETURN THIS PROXY PROMPTLY. ALL
JOINT OWNERS MUST SIGN. PERSONS SIGNING
AS EXECUTORS, ADMINISTRATORS, TRUSTEES,
CORPORATE OFFICER, OR IN OTHER
REPRESENTATIVE CAPACITIES SHOULD SO
INDICATE.
</TABLE>
