SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities 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 [s]240.14a-11(c) or [s]240.14a-12
CUMMUNITY BANK SYSTEM, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
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):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
[ ] 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:
-------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------
3) Filing Party:
-------------------------------------------------------
4) Date Filed:
-------------------------------------------------------
<PAGE>
COMMUNITY BANK SYSTEM, INC.
5790 Widewaters Parkway
DeWitt, New York 13214-1883
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------
April 1, 1997
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 14, 1997 at the Holiday Inn, Waterloo, 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
/s/ Loretta L. Marx
----------------------------------
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 13214-1883
---------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 14, 1997
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 14, 1997, at the Holiday Inn, Waterloo, New York. This Proxy
Statement and the form of Proxy are first being sent to Shareholders on
approximately April 1, 1997.
At the Meeting, the Shareholders will be asked to vote for the election of
directors. Four of the total of eleven 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 24, 1997 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, 7,518,262 shares of common stock, no par value, 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.
<PAGE>
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 per sons
for their reasonable expenses in forwarding proxy materials to Shareholders and
obtaining their Proxies.
The Annual Report of the Company for the fiscal year ended December 31,
1996 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 Ms. Loretta L. Marx, Corporate Secretary, Community
Bank System, Inc., 5790 Widewaters Parkway, DeWitt, New York 13214-1883.
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 1998 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 December 2, 1997. 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.
NOTE REGARDING STOCK SPLIT
On December 18, 1996, the Board of Directors authorized a two-for-one split
of the Company's common stock, effective on or about March 12, 1997. At a
special meeting held on February 19, 1997, the Company's Shareholders approved
the necessary amendments to the Company's Certificate of Incorporation to
effectuate the stock split. All share ownership data in this Proxy Statement
reflects post-split information, and information regarding grants and awards
made during 1996 has been adjusted to reflect post-split equivalent
capitalization.
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. The eleven members of the
Board (including the nominees for re-election at the 1997 Annual Meeting, if
elected) are expected to continue to serve on the Board until their respective
terms expire. The Bylaws of the Company state that the term of a director shall
terminate on December 31 of the year in which the director attains age 70. In
accordance with the Bylaws, Hugh G. Zimmer will retire from the Board on
December 31, 1997. Upon his retirement, the size of the Board will be decreased
from eleven to ten directors.
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)
AS OF MARCH 24, 1997 (d)
------------------------------
DIRECTOR OF BUSINESS
NAME AND THE COMPANY EXPERIENCE DURING
AGE (a) SINCE PAST FIVE YEARS (b) NUMBER(e) PERCENT
- ------------------------ --------------- ------------------------------------ -------------- --------------
NOMINEES (FOR TERMS TO EXPIRE AT ANNUAL MEETING IN 2000):
- ---------------
<S> <C> <C> <C> <C>
Sanford A. Belden 1992 President and Chief Executive 45,020 .60%
Age 54 Officer of the Company since
October 1, 1992. From 1990 to
1992, Manager, Eastern Region,
Rabobank Nederland, New York,
New York.
Nicholas A. DiCerbo 1984 Partner, law firm of DiCerbo and 60,780 .81%
Age 50 Palumbo, Olean, New York.
Lee T. Hirschey 1991 President and Chief Executive 35,920 .48%
Age 61 Officer, 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 14,986 .20%
Age 55 Patterson, Inc., manufacturer and
seller of livestock feed located in
Canton, New York.
DIRECTORS CONTINUING IN OFFICE
- ------------------------------
TERMS EXPIRING AT ANNUAL MEETING IN 1999:
Richard C. Cummings 1983 Partner, law firm of Cummings, 40,200 .53%
Age 67 McGuire, Dunckel & Campany,
Lowville, New York.
William M. Dempsey 1984 Vice President of Finance and 5,808 .08%
Age 58 Administration, Rochester Institute
of Technology, Rochester, New
York.
William N. Sloan 1991 Vice President for Administration 5,722 .08%
Age 62 Emeritus, Potsdam College of the
State University of New York,
Potsdam, New York; prior to 1997,
Associate Professor of
Mathematics.
- 3 -
</TABLE>
<PAGE>
NOMINEES FOR DIRECTOR AND DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
SHARES OF COMPANY
COMMON
STOCK BENEFICIALLY OWNED (c)
AS OF MARCH 24, 1997 (d)
------------------------------
DIRECTOR OF BUSINESS
NAME AND THE COMPANY EXPERIENCE DURING
AGE (a) SINCE PAST FIVE YEARS (b) NUMBER(e) PERCENT
- ------------------------ --------------- ------------------------------------ -------------- --------------
TERMS EXPIRING AT ANNUAL MEETING IN 1998:
<S> <C> <C> <C> <C>
John M. Burgess 1991 Retired. Prior to 1991, President of 14,628 .19%
Age 60 Kinney Drugs, Inc., a drug and
retail chain with stores located
throughout northern New York.
James A. Gabriel 1984 Owner, Franklin & Gabriel, Ovid, 30,358 .40%
Age 49 New York.
Earl W. MacArthur 1983 Vice President, WM Academic 8,262 .11%
Age 68 Search 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, 50,062 .67%
Age 70 The Nichols National Bank,
Nichols, New York, which was
consolidated into Community Bank,
N.A. as of January 1, 1992.
</TABLE>
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:
SHARES OF COMPANY
COMMON STOCK
BENEFICIALLY OWNED (c)
AS OF MARCH 24, 1997 (d)
------------------------
NUMBER PERCENT
----------- -----------
James A. Wears Regional President 45,974 .61%
Northern Region
Michael A. Patton Regional President 47,794 .63%
Southern Region
David G. Wallace Senior Vice President 38,844 .52%
and Chief Financial Officer
Barry S. Kublin Executive Vice President, 21,875 .29%
Benefit Plans Administrative
Services, Inc.(f)
Number of shares of Company stock beneficially owned
by all Directors and Executive Officers of the
Company as a group (15 persons) 466,233 6.10%
- 4 -
<PAGE>
(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 24, 1997, 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 and named
executive officers are beneficial owners but not the sole beneficial owners
as follows: Mr. Burgess' wife holds 600 shares; Mr. Cummings' wife holds
304 shares and Mr. Cummings holds 22,616 shares as Trustee of the James P.
Lewis Irrevocable Trust; Mr. DiCerbo holds 27,929 shares jointly with his
wife, 27,454 shares are held in the name of the law partnership of DiCerbo
and Palumbo, 400 shares are held by his wife, 340 shares are held by his
daughter, and 848 shares are held by his son; Mr. Hirschey's wife holds
1,000 shares and Mr. Hirschey holds 14,000 shares as Trustee for the
Retirement Plan of Employees of Climax Manufacturing Company; Mr. Kublin is
the beneficial owner of 4,970 shares held by the Company's 401(k) plan; Dr.
MacArthur's wife holds 1,300 shares; Mr. Patterson holds 2,380 shares
jointly with his wife and 1,200 shares as Trustee for the Wight and
Patterson Retirement Plan; Mr. Patton is the beneficial owner of 3,650
shares held by the Company's 401(k) plan, his wife holds 1,400 shares, and
his daughters hold 1,244 shares; Mr. Sloan holds 146 shares jointly with
his wife; Mr. Wallace is the beneficial owner of 9,566 shares held by the
Company's 401(k) plan; Mr. Wears is the beneficial owner of 13,360 shares
held by the Company's 401(k) plan, he holds 5,442 shares jointly with his
wife, and his wife holds 700 shares in her own name; and Mr. Zimmer holds
35,474 shares jointly with his wife.
(e) Includes shares that the following individuals have the right to acquire
within 60 days of March 24, 1997 through exercise of stock options issued
by the Company: Mr. Belden, 24,020 shares; Mr. Burgess, 4,208 shares; Mr.
Cummings, 4,208 shares; Mr. Dempsey, 4,208 shares; Mr. DiCerbo, 4,208
shares; Mr. Gabriel, 4,208 shares; Mr. Hirschey, 4,208 shares; Dr.
MacArthur, 4,208 shares; Mr. Patterson, 4,208 shares; Mr. Sloan, 4,208
shares; Mr. Zimmer, 6,208 shares; Mr. Kublin, 4,920 shares; Mr. Patton,
14,340 shares; Mr. Wallace, 16,220 shares; and Mr. Wears, 18,160 shares.
These shares are included in the total number of shares outstanding for the
purpose of calculating the percentage ownership of the foregoing
individuals and of the group as a whole, but not for the purpose of
calculating the percentage ownership of other individuals listed in the
foregoing table.
(f) Benefit Plans Administrative Services, Inc. is a wholly-owned subsidiary of
the Company. Mr. Kublin also serves as Senior Employee Benefit Trust
Officer of the Bank.
BOARD COMMITTEES AND MEETINGS
The Board of Directors of the Company held 12 regularly scheduled meetings
during the fiscal year ended December 31, 1996. 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.
- 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 1996, this
Committee held four meetings and its present members are Directors James A.
Gabriel (Chair), John M. Burgess, William M. Dempsey, and William N. Sloan.
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
non-officer employees in the aggregate, and the salaries and performance of
executive officers are reviewed individually. The Personnel Committee held seven
meetings in 1996, and its present members are directors Nicholas A. DiCerbo
(Chair), William M. Dempsey, 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 1996, and its present members are Hugh
G. Zimmer (Chair), Richard C. Cummings, and William M. Dempsey.
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>
In 1995, the directors re-evaluated their total compensation arrangement,
in light of the increased responsibility associated with the changing nature of
the Company and the "Blue Ribbon Report" issued by the National Association of
Corporate Directors. Among other things, the Blue Ribbon Report suggests that
director compensation be structured so that it is specifically aligned with the
long-term interests of shareholders. In keeping with the spirit of the Blue
Ribbon Report, effective January 1, 1996, the Board adopted a "Stock Balance
Plan" for non-employee directors of the Company who have completed at least six
months of service as director. The plan establishes an account for each eligible
director. Amounts credited to those accounts reflect the value of 100 shares of
the Company's Common Stock for each year of service between 1981 and 1995 at the
December 31, 1995 market value, plus an annual amount equal to 100 additional
shares of Common Stock beginning in 1996, plus an annual earnings credit equal
to the three-year average total return on the Company's Common Stock. The
crediting of additional units beginning in 1996 is subject to an adjustment
factor which reflects the Company's asset quality, return on equity and CAMEL
rating (a measurement of capital, assets, management, earnings and liquidity
utilized by the Office of the Comptroller of the Currency, the Bank's primary
regulator). The account balance is payable to each director in the form of an
annuity following the later of age 55 or disassociation from the Board, is
subject to a six-year vesting schedule, and is forfeitable in the event of
termination from the Board for cause.
In addition, effective January 1, 1996, the Company's 1994 Long Term
Incentive Compensation Program (the "Incentive Plan") was amended, in part to
allow for the issuance of Non-Qualified Stock Options to non-employee directors.
The Board believes that providing for the grant of Non-Statutory Stock Options
to non-employee directors is in the best interests of the Company. In the spirit
of the Blue Ribbon Report, such a provision more closely aligns the interests of
individual directors with the long-term interests of the Company's Shareholders,
and enables the Company to continue to attract qualified individuals to serve on
the Board.
The 1996 amendment to the Incentive Plan (which was approved by the
Company's Shareholders at their 1996 Annual Meeting) provides that each eligible
non-employee director is to receive an option to purchase 805 shares of common
stock on or about January 1, 1996, and 1,000 shares on or about each January 1st
thereafter. Each option granted to a non-employee director is granted at an
option price per share equal to the market value per share of the Company's
common stock on the date of grant, and is fully exercisable upon its date of
grant, provided that shares of common stock acquired pursuant to the exercise of
such options may not be sold or otherwise transferred by a director within six
months of the grant. Each option is exercisable until the earlier of (i) ten
years from the date of grant, or (ii) termination of the optionee's service on
the Board for cause (as defined in the Incentive Plan). Notwithstanding the
foregoing, to the extent that the Committee appointed by the Board to administer
the Incentive Plan determines that grants may be exempt from Section 16(b) of
the Securities Exchange Act of 1934, as amended, the Non-Statutory Stock Options
granted to eligible non-employee directors shall relate to a number of shares of
common stock to be determined based upon the financial performance of the
Company. Such financial performance shall be determined based upon factors
including (but not limited to) the Company's asset quality, return on equity,
and CAMEL rating.
Pursuant to the 1996 amendment to the Incentive Plan, each eligible
non-employee director received an option to purchase 805 shares effective
January 2, 1996, and an option to purchase 1,299 shares effective December 18,
1996. The December 18, 1996 options would ordinarily have been effective in
early January 1997. At its December 18, 1996 meeting, however, the Board
authorized a two-for-one split of the Company's common stock, which was
subsequently approved by the Shareholders at a special meeting of the Company's
Shareholders on February 19, 1997. In order to avoid subjecting optionees to any
artificial impact of an announcement of the pending stock split on the price of
the Company's common stock (and, therefore, on the exercise price for the 1997
options), the stock options became effective December 18, 1996, with the
exercise price fixed at the closing bid price on that date.
- 7 -
<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, 1996, (i) the chief
executive officer and (ii) the other most highly compensated executive officers
whose annual salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------------------- ------------------------------
Name and Other Annual Restricted
Principal Compensation Stock Stock All Other
Position Year Salary ($) Bonus ($)(1) ($) (2) Options (#)(3) Awards ($) Compensation ($)(4)
- --------------------- ----- ---------- ------------ ----------- -------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sanford A. Belden 1996 275,000 104,500 3,318 40,000 0 82,844
President and Chief 1995 240,000 86,400 4,082 14,650 0 67,273
Executive Officer 1994 205,000 74,107 2,180 10,600 0 11,986
James A. Wears 1996 135,000 37,800 4,705 16,200 0 10,407
Regional President 1995 129,000 33,550 3,249 5,150 0 9,201
Northern Region 1994 119,669 31,293 4,193 4,100 0 9,075
Michael A. Patton 1996 135,000 37,800 2,906 16,200 0 10,908
Regional President 1995 129,000 33,550 3,956 3,010 0 9,675
Southern Region 1994 118,539 30,998 2,156 5,100 0 8,988
David G. Wallace 1996 125,000 35,000 0 23,800 0 10,411
Senior Vice President 1995 119,000 30,950 0 4,800 0 8,861
and Chief Financial 1994 111,750 29,222 0 3,900 0 8,858
Officer
Barry S. Kublin, 1996 90,766 10,700 849 2,995 47,250 6,149
Executive Vice President, 1995 82,405 10,068 994 950 3,175 5,995
Benefit Plans 1994 77,925 10,300 950 650 0 5,252
Administrative Services,
Inc.
</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,
Patton, and Kublin, which amounted to $3,318, $4,705, $2,906, and $849,
respectively, in 1996.
(3) Under the terms of the options referenced in this column, each option may
be adjusted to account for any stock split, stock dividend, combination of
shares, recapitalization, or other change in the capital structure of the
Company. Accordingly, the amounts set forth in this column have been
adjusted to reflect the two-for-one split of the Company's common stock
referenced on page 2. At the time the options were granted, the options
related to a number of (pre-split) shares equal to one-half of the number
set forth in this column.
(4) 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, Wallace, and
Kublin received $1,480, $764, $1,265, $1,149, and $163 in 1996,
respectively; (b) Company contributions to the Employee Savings and
Retirement Plan, a defined contribution plan, amounting to $10,215 for Mr.
Belden; $9,643 for Mr. Wears; $9,643 for Mr. Patton; $9,262 for Mr.
Wallace; and $5,986 for Mr. Kublin during 1996; and (c) the expense
associated with Mr. Belden's supplemental retirement plan, which amounted
to $71,189 in 1996. The Company does not maintain any "split-dollar"
arrangements for any of the named executives.
- 8 -
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides further information on grants of stock options
pursuant to the Company's Long-Term Incentive Compensation Program in fiscal
year 1996 to the named executives as reflected in the Summary Compensation Table
on page 8.
<TABLE>
<CAPTION>
% of Total Potential Realizable Value at
Options Market Assumed Annual Rates of Stock Price
Granted to Exercise or Value on Appreciation for Option Term
Options Employees Base Price Expiration Grant Date -----------------------------------
Name Granted (#) Fiscal Year ($/Sh) Date ($/Sh) 0% 5% 10%
- -------------------- --------- ----------- ---------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sanford A. Belden 18,000 12% 16.00 1/2/06 16.00 None 181,122 458,998
2,000 1% 12.125 1/16/06 16.125 8,000 28,282 59,398
20,000 14% 19.125 12/18/06 19.125 None 240,552 609,606
James A. Wears 6,200 4% 16.00 1/2/06 16.00 None 62,386 158,099
2,000 1% 12.125 1/16/06 16.125 8,000 28,282 59,398
8,000 6% 19.125 12/18/06 19.125 None 96,221 243,843
Michael A. Patton 6,200 4% 16.00 1/2/06 16.00 None 62,386 158,099
2,000 1% 12.125 1/16/06 16.125 8,000 28,282 59,398
8,000 6% 19.125 12/18/06 19.125 None 96,221 243,843
David G. Wallace 5,800 4% 16.00 1/2/06 16.00 None 58,361 147,899
10,000 7% 12.125 1/16/06 16.125 40,000 141,409 296,991
8,000 6% 19.125 12/18/06 19.125 None 96,221 243,843
Barry S. Kublin 1,900 1% 16.00 1/2/06 16.00 None 19,618 48,450
4,010 3% 19.125 12/18/06 19.125 None 48,231 122,226
</TABLE>
NOTES REGARDING GRANTS DURING 1996
Options granted under the Company's Long-Term Incentive Compensation
Program may be adjusted to account for any stock split, stock dividend,
combination of shares, recapitalization or other change in the capital structure
of the Company. Accordingly, the information in the above table regarding the
number of shares underlying options, exercise price per share, and market value
per share, has been adjusted to reflect the two-for-one stock split referenced
on page 2. As described more fully below, at the time the options were granted,
the options related to a number of (pre-split) shares equal to one-half of the
number set forth in the table, and the exercise price and per (pre-split) share
market value on the date of grant were twice the amounts stated in the table.
On January 2, 1996, the Board of Directors issued incentive stock options
to Messrs. Belden, Wears, Patton, Wallace and Kublin at the then current market
price of $32.00 per share. These options become exercisable over the course of
five years, with one-fifth of the options becoming exercisable on each of
January 2, 1997, 1998, 1999, 2000 and 2001.
In June 1995, the Company successfully raised $27.5 million in equity in
connection with its July 14, 1995 acquisition of 15 branches from The Chase
Manhattan Bank, N.A. In August 1995, the Board approved the issuance of
restricted stock to 42 nonexecutive officer employees who supported those
efforts; however, it elected to delay special remuneration for Messrs. Belden,
Wears, Patton and Wallace, pending evaluation of the post-acquisition results.
Having determined that the Company successfully integrated the new branches and
completed its planned divestiture of three of the acquired branches, on January
16, 1996 the Board approved the granting of discounted Non-Statutory Stock
Options to Messrs. Belden, Wears, Patton, and Wallace in the amounts of 1,000,
1,000, 1,000, and 5,000 shares, respectively. The exercise price for these
options was set at the June 24 public offering price of $24.25, and the options
vest at the rate of 20% per year, commencing on January 2, 1997.
- 9 -
<PAGE>
On December 18, 1996 the Board of Directors approved 1997 incentive stock
option awards for senior management. Under normal circumstances, these option
awards would have been effective on or about January 2, 1997, with the exercise
price based upon the price of the Company's common stock on the effective date.
As noted on page 2, however, at the December 18, 1996 meeting the Board also
authorized a two-for-one split of the Company's common stock, which was
subsequently approved by the Shareholders at a special meeting of the Company's
Shareholders on February 19, 1997. In order to avoid subjecting optionees to any
artificial impact of an announcement of the pending stock split on the price of
the Company's common stock (and, therefore, on the exercise price for the 1997
options), the Board authorized the stock options to be awarded effective
December 18, 1996, with the exercise price fixed at the closing bid price on
that date. Thus, on December 18, 1996, the Board of Directors issued incentive
stock options to Messrs. Belden, Wears, Patton, Wallace and Kublin, exercisable
at the then current market price of $38.25, in the amounts of 10,000, 4,000,
4,000, 4,000, and 2,005 shares, respectively. These options become exercisable
over the course of five years, with one-fifth of the options becoming
exercisable on each of December 18, 1997, 1998, 1999, 2000 and 2001.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information for the named executive officers,
with respect to (i) stock options exercised in fiscal year 1996, (ii) the number
of stock options held at the end of fiscal year 1996, and (iii) the value of
in-the-money stock options at the end of fiscal year 1996. The amounts set forth
in the table have been adjusted to reflect the two-for-one split of the
Company's common stock referenced on page 2. At the time the options were
granted or exercised (as applicable), the options related to a number of
(pre-split) shares equal to one-half of the number set forth in the table.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised Options In-the-Money Options
Shares 12/31/96 (#) at 12/31/96 ($) (1)
Acquired on Value ------------------------------ -----------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ------------- ------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Sanford A. Belden 26,000 169,000 57,970 77,280 405,035 337,415
James A. Wears 0 0 14,670 24,780 159,010 105,728
Michael A. Patton 0 0 10,860 23,540 112,370 90,917
David G. Wallace 0 0 11,320 31,180 121,825 152,112
Barry S. Kublin 0 0 3,900 8,210 40,140 22,965
</TABLE>
(1) Based on the average price of the Company's common stock on December 31,
1996 of $39.25 per share (post-split equivalent of $19.625 per share).
- 10 -
<PAGE>
PENSION PLAN TABLE
YEARS OF SERVICE
Highest Five
Year Average
Compensation (1) 15 20 25 30 35
- ----------------- ------ ------ ------ ------ ------
20,000 2,700 3,600 4,500 5,400 6,300
50,000 8,936 11,915 14,894 17,873 20,851
100,000 20,561 27,415 34,269 41,123 47,976
125,000 26,374 35,165 43,956 52,748 61,539
150,000 32,186 42,915 53,644 64,373 75,101
(1) For 1996, the Internal Revenue Code limits the total compensation that
may be taken into account in calculating benefits to $150,000.
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 8 reflect the covered compensation under the
plan for Messrs. Belden, Wears, Patton, Wallace, and Kublin. Messrs. Belden,
Wears, Patton, Wallace, and Kublin have been credited with 4, 26, 26, 8, and 12
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 a retirement
committee which consists of persons appointed by the Board of Directors. 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, and with Mr. Wallace
in March 1997. The Company does not currently maintain any nonqualified
retirement plans for any of the other named executives.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Mr. Belden dated January 1,
1997 providing for his employment as the Company's President and Chief Executive
Officer until December 31, 2002. The agreement requires that Mr. Belden devote
his full business time and attention to the performance of his duties for a base
salary of $300,000 for 1997, $350,000 for 1998, $400,000 for 1999, and $450,000
for 2000; Mr. Belden's base salary for 2001 and 2002 is to be negotiated during
the year 2000. In the event that the Company fails to meet certain defined
performance targets during a given fiscal year, the Company may renegotiate the
scheduled increase in Mr. Belden's base salary for the next succeeding fiscal
year. The agreement may be terminated by the Board for good cause at any time.
If Mr. Belden's employment is terminated by the Company prior to December 31,
2002 for reasons other than cause, Mr. Belden will be entitled to severance pay
equal to the greater of (i) the sum of Mr. Belden's annual base salary at the
time of the termination and the most recent payment to Mr. Belden under the
Company's Management Incentive Plan, or (ii) amounts payable to Mr. Belden
through the unexpired term of his employment. 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 three years at an
annual consulting fee equal to his base salary plus the award to Mr. Belden
under the Management Incentive Plan for the year immediately preceding the
change in control, will reimburse him for any loss incurred on the sale of his
home, and all of his stock options will become fully exercisable. In addition,
Mr. Belden may voluntarily terminate his employment not sooner than three months
nor later than nine months following a change in control, in which event Mr.
Belden shall be entitled to receive the payments described in the preceding
sentence, with the consulting fees to be reduced by any non-Company wages or
self-employment income derived by Mr. Belden during the three-year consulting
period.
The Company also maintains four year employment agreements with Messrs.
Wears, Patton, Wallace and Kublin, providing for their continued employment
until December 31, 2000. These agreements provide for severance pay, in the
event of a termination for reasons other than cause, equal to the greater of (i)
the sum of the employee's annual base salary at the time of termination and the
most recent payment to the employee under the Company's Management Incentive
Plan,
- 11 -
<PAGE>
or (ii) amounts payable to the employee through the unexpired term of his
employment. In addition, if the Company elects not to renew the agreement upon
expiration, the employee is entitled to severance pay equal to one year of the
employee's then current annual base salary, provided that such severance pay
shall be reduced to the extent that the employee receives wages or
self-employment income during the one year period following expiration of the
agreement. The agreements also provide change of control benefits which include
a three year consulting engagement and accelerated vesting on all outstanding
stock options. Finally, the employee may voluntarily terminate his employment
not sooner than three months nor later than nine months following a change in
control, in which event the employee shall be entitled to full change in control
benefits, with his consulting fees to be reduced by any non-Company wages or
self-employment income derived by the employee during the three-year consulting
period.
SUPPLEMENTAL RETIREMENT PLAN AGREEMENTS
The Company has Supplemental Retirement Plan Agreements with Mr. Belden and
Mr. Wallace. Under Mr. Belden's Supplemental Retirement Plan Agreement, the
Company must provide Mr. Belden with an annual supplemental retirement benefit
which amounts to the sum of (i) 5% of his final five year average salary, for
each of his first ten years of service, plus (ii) 2% of his final five year
average salary, for each year of service in excess of ten years. The
supplemental retirement benefits are reduced by the benefit payable under the
Company's pension plan, Mr. Belden's Social Security benefit, the benefits
payable from two other pension plans in which Mr. Belden participated prior to
joining the Company in 1992, and certain additional amounts. The supplemental
retirement benefit is payable at age 65 in the form of an actuarially reduced
joint and 50% survivor benefit, provided that benefits payable prior to age 65,
or in another form, are subject to the same actuarial adjustments as benefits
under the Company's pension plan.
Under Mr. Wallace's Supplemental Retirement Plan Agreement, the Company
must contribute to the Company's deferred compensation plan, on behalf of Mr.
Wallace, certain additional amounts as of the last day of each calendar year for
which Mr. Wallace is credited with a "Year of Service" under the Company's
pension plan. In addition, in the event that Mr. Wallace's employment is
terminated within two years following a change in control, Mr. Wallace's
Supplemental Retirement Plan Agreement provides for crediting for retirement
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), William M.
Dempsey, Earl W. MacArthur, and William N. Sloan. The Personnel Committee
reviews and makes recommendations regarding compensation levels and employee
benefits. As noted below on page 16, the law firm of DiCerbo and Palumbo, of
which director DiCerbo is a partner, provided legal services to the Bank's
operations in its Southern Region Markets during 1996.
- 12 -
<PAGE>
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.
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 19, 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.
- 13 -
<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. In
order to more closely align employee compensation to the Company's performance,
the Company uses a combination of competitive base salaries and performance
incentive opportunities to provide for total compensation 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 36% of its employees participate. The Company's performance to targeted
asset quality, return on equity, and CAMEL rating, 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 the financial
targets described above. For Messrs. Wears, Patton, and Wallace, 80% of their
respective award opportunities reflect the Company's performance relative to the
financial targets, and 20% of their respective award opportunities reflect
performance to other quantitative and qualitative goals specific to their areas
of responsibility. 60% of Mr. Kublin's award opportunity reflects the Company's
performance relative to the financial targets, and 40% of his award opportunity
reflects performance to other quantitative and qualitative goals specific to his
area 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 1996, the full Board formally reviewed Mr. Belden's performance
for fiscal year 1996, his fourth 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 1996,
which amounted to $104,500. Mr. Belden's $275,000 base salary level for 1996 is
well supported by competitive wage survey data, and the increase over his 1995
base salary level is well supported by the Company's strategic accomplishments
and financial performance during the 1995 evaluation period.
The foregoing report has been provided by Nicholas A. DiCerbo (Chair),
William M. Dempsey, Earl W. MacArthur, and William N. Sloan, members of the
Personnel Committee.
- 14 -
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares cumulative total shareholder returns on the
Company's stock over the last five fiscal years to the NASDAQ Index and the
NASDAQ Bank Stocks Index. Total return values were calculated assuming $100
investment on January 1, 1991 and reinvestment of dividends.
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Community Bank System, Inc. 100.00 178.46 218.19 208.93 265.40 339.17
NASDAQ Stock Market Index 100.00 116.38 133.59 130.59 184.67 227.16
NASDAQ Bank Stocks Index 100.00 145.55 165.99 165.38 246.32 325.60
</TABLE>
- 15 -
<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 its Northern Region Markets,
(ii) Franklin & Gabriel, owned by Director Gabriel, provided legal services to
the Bank's operations in its Finger Lakes Market, and (iii) DiCerbo & Palumbo,
of which Director DiCerbo is a partner, provided legal services to the Bank's
operations in its Southern Region Markets. For services rendered during 1996 and
for related out-of-pocket disbursements, DiCerbo & Palumbo received $111,888
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.
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, 1996 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.
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: April 1, 1997 By Order of the Board of Directors
/s/ Loretta L. Marx
----------------------------------
Loretta L. Marx
Secretary
- 16 -
<PAGE>
[FORM OF PROXY CARD]
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
COMMUNITY BANK SYSTEM, INC.
5790 WIDEWATERS PARKWAY
DEWITT, NEW YORK 13214-1883
The undersigned hereby appoints Charles M. Ertel and Loretta L. Marx
proxies, with power to act without the other and with power of substitution, and
hereby authorizes them to represent and vote, as designated on the other side,
all the shares of stock of Community Bank System, Inc. standing in the name of
the undersigned with all powers which the undersigned would possess if present
at the Annual Meeting of Shareholders of the Company to be held May 14, 1997 or
any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
- --------------------------------------------------------------------------------
Please mark your votes as indiated in this example X
The Board of Directors recommends a vote FOR Item 1.
ITEM 1: ELECTION OF DIRECTORS
Nominees: Sanford A. Belden, Nicholas A. DiCerbo, Lee T.
Hirschey, David C. Patterson
FOR WITHHELD FOR ALL
[ ] [ ]
WITHHELD FOR: (Write that nominee's name in the space
provided below.)
_______________________________________________________
In their discretion, such attorneys-in-fact and proxies are authorized to vote
upon such other business as may properly come before the meeting.
This Proxy, when properly executed will be voted as directed herein by the
undersigned.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1.
Please check below to indicate whether you plan to attend Annual Meeting.
will attend will not attend
[ ] [ ]
Signature_____________________Signature________________________Date____________
Note: Please sign as names appear hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
