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Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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CORTLAND FIRST FINANCIAL CORPORATION
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<PAGE>
[TO BE RELEASED ON OR AFTER NOVEMBER 6, 1998, IN LIEU OF CORTLAND
FIRST SHAREHOLDER LETTER FILED WITH THE COMMISSION ON 11/4/98,
DUE TO THE EVENTS DESCRIBED HEREIN]]
[CORTLAND FIRST FINANCIAL CORPORATION LETTERHEAD]
November 6, 1998
Dear Shareholder:
This letter is being provided to update you on recent developments in
connection with the proposed merger of Cortland First Financial Corporation
("Cortland First" or the "Company") with Oneida Valley Bancshares, Inc. ("Oneida
Valley") as we approach the upcoming Shareholders Meeting on November 16, 1998.
Since the public announcement of the merger on July 13, 1998, the management
team and employees of Cortland First have worked diligently to ensure that our
strategic merger of equals with Oneida Valley takes place with minimal
disruption to our customers and in accordance with our long term strategic plan
to grow and strengthen our independent community bank. More detailed information
concerning the Board of Directors unanimous approval and recommendation to vote
for the strategic merger of equals is contained in the Proxy Statement/
Prospectus dated September 24, 1998 which was previously provided to you.
As your Board of Directors, we want to advise you of recent events and of
your Board's careful consideration of these matters. On October 23, 1998, Oneida
Valley received an unsolicited letter dated October 22, 1998 from a
representative of CNY Financial Corporation ("CNY"), the recently converted
holding company for Cortland Savings Bank, expressing an interest in acquiring
control of Oneida Valley. The proposal was subject to several contingencies,
including Oneida Valley not consummating the proposed merger of equals with
Cortland First. After due deliberation, the Oneida Valley Board of Directors
determined that it is in Oneida Valley's shareholders' best interests to reject
the CNY proposal and to proceed with the proposed merger of equals with Cortland
First. Oneida Valley informed CNY of this decision on November 4, 1998.
Less than three hours after CNY received Oneida Valley's rejection letter,
CNY delivered to Cortland First a letter dated November 4, 1998, purporting to
express an interest in acquiring control of CORTLAND FIRST. Subject to the
contingencies referred to below, this new CNY proposal states that each share of
Cortland First would receive consideration of $37.00 per share, consisting of
$18.50 per share in cash and shares of common stock of CNY with an estimated
market value of $18.50. CNY's proposal is subject to and contingent upon the
negotiation of an acceptable definitive agreement, the completion of a due
diligence review (which could result in an increase or decrease in the
consideration) and, as may be applicable, the approval of Cortland First and CNY
shareholders and any required regulatory approvals. Furthermore, the proposal is
subject to Cortland First not consummating the proposed merger of equals with
Oneida Valley. CNY's letter asserts that CNY would be willing to consummate the
proposed acquisition of our Company, the previously proposed acquisition of
Oneida Valley, or both acquisitions.
Upon receipt of the CNY proposal, your Board of Directors met to carefully
review the proposal and to consider whether or not to sell our Company based
upon the likely fair value that our shareholders would receive from prospective
buyers in a change of control transaction like the one proposed by CNY.
<PAGE>
The Board has reviewed our strategic plans associated with the proposed merger
of equals with Oneida Valley to test our business judgment in arriving at the
Agreement and Plan of Reorganization, including the related Plan of Merger,
pursuant to which Cortland First will merge with Oneida Valley to form Alliance
Financial Corporation as a strategic merger of equals. The Board has considered
all of the alternatives to our strategic plan as developed by our management and
we have sought the assistance of expert financial and legal advisors. Based upon
the review by the Board of Directors of all of the pertinent and relevant
information and the advice of our financial and legal advisors, we have
unanimously reaffirmed that our Company is not for sale and have concluded that
it is in our shareholders' best interests to reject the CNY proposal and to
proceed with the proposed merger of equals with Oneida Valley.
In making this decision, we reconfirmed the validity of the factors we
considered in reaching our decision to approve the Merger as outlined in the
paragraphs entitled "Background of the Merger" and "Reasons for the Merger and
Recommendation of the Boards of Directors" found at pages 24 through 27 of the
Proxy Statement/Prospectus, and we considered many additional factors regarding
our present situation, the prospects for the proposed merger of Cortland First
with Oneida Valley to form Alliance Financial Corporation and the risks of
abandoning our strategy to pursue a contingent change of control transaction
with a party such as CNY. Our stakeholders including our customers, our
depositors, our employees, our vendors, our communities and, most importantly,
our shareholders, have previously mandated that we continue to pursue a course
of independence, while providing quality banking services to our communities on
a profitable basis. By approving the merger of equals with Oneida Valley, we
allow our Company to continue on that strategic course, while at the same time
we attempt to deploy our combined resources into expanding our assets and our
earnings for the ultimate benefit of our shareholders.
We believe the proposal from CNY to acquire our Company would have a
significant negative effect on our long term strategy to enhance shareholder
value. First, we would lose control over the decisions affecting our
shareholders and over the management of our Company. Second, the proposal, if
completed, would likely render our Board and management helpless to stop
consolidation of headquarters and back office functions in Cortland and the
resultant loss of employment in our community. Third, we have considered the
ability of the management of CNY to implement and effectuate a long term
business plan with Cortland First given their history and experience in
operating a mutual savings bank and relative lack of experience in operating a
commercial bank and publicly held stock company.
In addition, the Board of Directors considered the speculative nature of
the CNY proposal, which contains several significant contingencies including, if
applicable, the approval of CNY shareholders. The Board noted that CNY's
proposal would, if consummated, appear to result in significant dilution to CNY
shareholders on a book value per share and earnings per share basis. In this
regard, the Board also noted that on November 5, 1998, Spence Limited, L.P., an
institutional investor purporting to own 100,000 shares (1.86%) of CNY's common
stock, announced that it had made a written demand for a list of CNY
shareholders. Spence Limited's press release announcing the demand stated that
the purpose of the demand is, among other things, to communicate with other CNY
shareholders in order to oppose CNY's offer to acquire Oneida Valley. On the
same day, according to the downgrade listing posted on the Yahoo Finance
website, CIBC Oppenheimer Corp., the managing underwriter for CNY's recently
completed conversion offering, downgraded a recommendation on CNY's common stock
from "buy" to "hold." Based upon these events, the Board considered the
possibility of similar CNY shareholder reaction to CNY's new proposal to acquire
our Company, and determined that it would not be prudent to abandon the merger
of equals with Oneida Valley to pursue a new transaction which could potentially
be scuttled by CNY shareholder dissent.
Our continued position that our Company is not for sale, and our decision
to reject the proposal
<PAGE>
from CNY and to continue to pursue the pending merger of equals with Oneida
Valley, have been arrived at after very careful consideration by all of us on
the Board of Directors. As noted above, we have consulted with expert financial
advisors and legal advisors in performing our duties as Directors and as
fiduciaries of our shareholders. We strongly believe that the merger of equals
with Oneida Valley is the best alternative available to our shareholders versus
any sale or change of control at likely valuations for our Company at this time.
We cannot predict what further actions CNY may take in pursuit of acquiring
our Company or to disrupt our pending merger of equals and pursuit of our long
term goals. However, it would not be uncommon for a company like CNY to approach
shareholders directly or in a public manner to attempt to convince you that
their takeover of our Company has greater merit than the merger with Cortland
First. They could also pursue a hostile takeover of our Company by increasing or
enhancing the consideration they purport to offer. Finally, they may persist to
the extent of commencing litigation to disrupt the long term strategic plan and
goals of our Company. Please be assured that, as your Board of Directors, we
will consider in a careful manner, with the assistance of our external advisors,
what is in the best long term interest of the shareholders of Cortland First.
We urge you to take the time to consider these new developments carefully.
Now, more than ever, your vote is critical in determining the future of Cortland
First. We believe our strategy of a merger of equals is the best way to maintain
our independence and at the same time enhance long term shareholder value.
We unanimously recommend that you vote your shares for the merger of equals
with Oneida Valley if you have not already done so. You can, of course, revoke
your proxy by written notice, or change your vote at any time by requesting a
new proxy card or by voting your shares in person at the Shareholder Meeting, as
provided in the Proxy Statement/Prospectus.
If you have any questions about these new developments or future events,
please call David Alvord at (607) 758-1201 or any of your other Directors listed
below.
CORTLAND FIRST FINANCIAL
CORPORATION BOARD OF DIRECTORS
David R. Alvord
Donald S. Ames
Mary Alice Bellardini
John H. Buck
Robert M. Lovell
Harry D. Newcomb
Garrison A. Marstead
Charles E. Shafer
Richard J. Shay
Charles H. Spaulding
David J. Taylor
Stuart E. Young
<PAGE>
[To be Released on November 6, 1998]
DATE: November 6, 1998
CONTACT:
David R. Alvord
President and CEO
Cortland First Financial Corporation
(607) 758-1201
CORTLAND FIRST FINANCIAL CORPORATION REJECTS UNSOLICITED PROPOSAL
FROM CORTLAND SAVINGS BANK PARENT
CORTLAND, NEW YORK. Cortland First Financial Corporation announced today
its rejection of an unsolicited expression of interest from CNY Financial
Corporation, the recently converted holding company for Cortland Savings Bank,
to acquire control of Cortland First. This rejection by Cortland First follows
the rejection by Oneida Valley Bancshares, Inc. of a similar unsolicited
expression of interest by CNY to acquire control of Oneida Valley. Cortland
First and Oneida Valley have a pending merger of equals transaction, which was
announced on July 13, 1998, is the subject of a binding Merger Agreement, has
been approved by the banking regulators, and is awaiting only shareholder
approval before it can be consummated.
David Alvord, President and CEO of Cortland First, stated that the Board of
Directors of Cortland First had carefully considered the proposal from CNY, with
the advice of financial and legal advisors, prior to rejecting the overture from
CNY. Mr. Alvord stated, "Based on the careful consideration of the Board, and
the advice of financial and legal advisors, the Board has reaffirmed its
long-term strategic plan and concluded that it is in our shareholders' best
interest to reject the CNY proposal and proceed with our strategic merger of
equals with Oneida Valley." Mr. Alvord indicated that the Board's decision also
reaffirmed that Cortland First was not interested in pursuing a sale of its bank
as proposed by CNY.
The unsolicited letter from CNY expressed an interest in acquiring control
of Cortland First. Subject to contingencies noted below, the CNY proposal
indicated that each share of Cortland First stock would receive consideration of
$37.00 per share, consisting of $18.50 per share in cash plus shares of common
stock of CNY with an estimated market value of $18.50. CNY's proposal was
subject to, and contingent upon, the negotiation of an definitive agreement
acceptable to CNY, completion of a due diligence review (which could result in
an increase or decrease in the consideration), any applicable approvals of
Cortland First and CNY shareholders and required regulatory approvals.
Furthermore, the proposal was subject to Cortland First not completing its
proposed merger of equals with Oneida Valley.
<PAGE>
Mr. Alvord stated that the Cortland First Board of Directors also
considered other significant contingencies related to the CNY proposal in
deciding not to abandon its pending strategic merger of equals with Oneida
Valley. In particular, the Board considered that on November 5, 1998, Spence
Limited, L.P., an institutional investor purporting to own 100,000 shares (1.86
percent) of CNY's common stock, announced that it had made a written demand for
a list of CNY shareholders. Spence Limited's press release announcing the demand
stated that the purpose of the demand is, among other things, to communicate
with other CNY shareholders in order to oppose CNY's offer to acquire Oneida
Valley. Further, although the proposal from CNY is not definitive enough to
determine the number of shares which would be offered, it appears that the
transaction would, if consummated, result in significant dilution to CNY
shareholders on a book value per share and earnings per share basis. Based upon
these events and other contingencies and factors, the Board of Cortland First
determined it would not be prudent to abandon the pending merger of equals with
Oneida Valley to pursue a new transaction which might not be consummated due to
CNY shareholder dissent or other circumstances beyond its control.
Mr. Alvord noted that CNY was potentially misleading the shareholders of
Cortland First in comparing the financial terms of the announced merger with
Oneida Valley to the proposal by CNY. While not definitive, the CNY proposal
contemplates the acquisition of control of Cortland First. An acquisition of
control is a completely different transaction than the pending merger of equals
between Cortland First and Oneida Valley. In the pending merger of equals,
Cortland First will share management direction, preserve its independence and
strong ties to its community, and continue jointly on a strategic plan to grow
and strengthen the combined bank. The unsolicited acquisition proposal by CNY
would appear to contemplate the sale of Cortland First, relinquishment of
management control, and the loss of employment and focus on Cortland First
customers as part of a consolidation to achieve cost savings. The proposed
merger of equals with Oneida Valley does not involve a financial premium for
selling control of Cortland First, but instead envisions reaping the benefits of
a long-term strategic plan of merging Cortland First and Oneida Valley. Mr.
Alvord noted that "We believe our pending merger of equals is the best
alternative for our shareholders to maintain our independence and at the same
time enhance long-term shareholder value."
Mr. Alvord noted that since the public announcement of its pending merger
with Oneida Valley on July 13, 1998, "the management team and employees of
Cortland First have worked diligently to insure that our strategic merger of
equals with Oneida Valley takes place with minimal disruption to our customers
and in accordance with our long-term plan to grow and strengthen our independent
community bank." Mr. Alvord noted that "the unusual and aggressive actions by
CNY in attempting to upset the pending merger, while disruptive, have served to
reaffirm our commitment to merge with Oneida Valley in pursuit of our long term
strategic plan.
<PAGE>
Mr. Alvord further noted that, "We cannot anticipate what further actions
CNY may take in pursuing the acquisition of our bank or what further actions
they may take to disrupt our pending merger with Oneida Valley. However, the
Board of Directors of Cortland First will take appropriate actions to insure
that the best long-term interests of our shareholders are considered. We will
not permit a competitor in our marketplace to disrupt our long-term strategic
plan for success and pending merger with Oneida Valley."
Cortland First Financial Corporation is the parent company for First
National Bank of Cortland, an independent commercial bank serving the Cortland,
Southern Onondaga, and Northern Broome County region. From its eight branches
First National Bank of Cortland offers individual, business and municipal
customers a full range of loan and deposit products and trust and investment
services. The common stock of Cortland First Financial Corporation is publicly
traded under the stock symbol "CTLN".
<PAGE>
[To be Released on November 6, 1998]
DATE: November 6, 1998
CONTACT:
John C. Mott
President
Oneida Valley Bancshares, Inc.
(315) 363-4500
ONEIDA VALLEY BANCSHARES, INC. REJECTS UNSOLICITED PROPOSAL FROM
CORTLAND SAVINGS BANK PARENT
ONEIDA, NEW YORK. Oneida Valley Bancshares, Inc. announced its rejection of
an unsolicited expression of interest from CNY Financial Corporation, the
recently converted holding company for Cortland Savings Bank, to acquire control
of Oneida Valley. This rejection by Oneida Valley of CNY preceded the rejection
by Cortland First Financial Corporation of a similar unsolicited expression of
interest by CNY to acquire Cortland First. Cortland First and Oneida Valley have
a pending merger of equals transaction, which was announced on July 13, 1998.
The pending merger is the subject of a binding Merger Agreement, has been
approved by the banking regulators, and is awaiting only shareholder approval
before it can be consummated.
John Mott, President of Oneida Valley, stated that the Board of Directors
of Oneida Valley has carefully considered the proposal from CNY, with the advice
of financial and legal advisors, prior to rejecting the overture from CNY. Mr.
Mott stated, "Based on the careful consideration of the Board, and the advice of
financial and legal advisors, the Board has reaffirmed its long-term strategic
plan and concluded that it is in our shareholders' best interest to reject the
CNY proposal and proceed with our strategic merger of equals with Cortland
First." Mr. Mott indicated that the Board's decision also reaffirmed that Oneida
Valley was not interested in pursuing a sale of its bank as proposed by CNY.
The unsolicited letter from CNY expressed an interest in acquiring control
of Oneida Valley. Subject to contingencies noted below, the CNY proposal
indicated that each share of Oneida Valley stock would receive consideration of
$67.00 per share, consisting of $33.50 per share in cash plus shares of common
stock of CNY with an estimated market value of $33.50. CNY's proposal was
subject to, and contingent upon, the negotiation of an definitive agreement
acceptable to CNY, completion of a due diligence review (which could result in
an increase or decrease in the consideration), any applicable approvals of
Oneida Valley and CNY shareholders and required regulatory approvals.
Furthermore, the proposal was subject to Oneida Valley not completing its
proposed merger of equals with Cortland First.
Mr. Mott noted that, although the proposal from CNY is not definitive
enough to determine the number of shares which would be offered, it appears that
the transaction
<PAGE>
would, if consummated, result in significant dilution to CNY shareholders on a
book value per share and earnings per share basis. Based upon this fact and
other contingencies and factors, the Board of Oneida Valley determined it would
not be prudent to abandon the pending merger of equals with Cortland First to
pursue a new transaction which might not be consummated due to CNY shareholder
dissent or other circumstances beyond Oneida Valley's control.
Mr. Mott noted that CNY was potentially misleading the shareholders of
Oneida Valley in comparing the financial terms of the announced merger with
Cortland First to the proposal by CNY. While not definitive, the CNY proposal
contemplates the acquisition of control of Oneida Valley. An acquisition of
control is a completely different transaction than the pending merger of equals
between Cortland First and Oneida Valley. In the pending merger of equals,
Oneida Valley will share management direction, preserve its independence and
strong ties to its community, and continue jointly on a strategic plan to grow
and strengthen the combined bank. The unsolicited acquisition proposal by CNY
would appear to contemplate the sale of Oneida Valley, relinquishment of
management control, and the consolidation of headquarters and back office
facilities away from Oneida and resulting loss of employment in our community.
The proposed merger of equals with Cortland First does not involve a financial
premium for selling control of Oneida Valley, but instead envisions reaping the
benefits of a long-term strategic plan of merging Cortland First and Oneida
Valley. Mr. Mott stated that "We believe our pending merger of equals is the
best alternative for our shareholders to maintain our independence and at the
same time enhance long-term shareholder value."
Mr. Mott pointed out that since the public announcement of its pending
merger with Cortland First on July 13, 1998, "the management team and employees
of Oneida Valley have worked diligently to insure that our strategic merger of
equals with Cortland First takes place with minimal disruption to our customers
and is in accordance with our long-term plan to grow and strengthen our
independent community bank." Mr. Mott noted that "the unusual and aggressive
actions by CNY in attempting to upset the pending merger, while disruptive, have
served to reaffirm our commitment to merge with Cortland First in pursuit of our
long term strategic plan."
Mr. Mott further noted that, "We cannot anticipate what further actions CNY
may take in pursuing the acquisition of our Company or what further actions they
may take to disrupt our pending merger with Cortland First. However, the Board
of Directors of Oneida Valley will take appropriate actions to insure that the
best long-term interests of our shareholders are considered."
Oneida Valley Bancshares, Inc. is the parent company for Oneida Valley
National Bank, an independent commercial bank serving the Madison, Eastern
Onondaga, and Western Oneida County region. From its eight branches Oneida
Valley National Bank offers individual, business and municipal customers a full
range of loan and deposit products and trust and investment services. The common
stock of Oneida Valley Bancshares, Inc. is traded under the stock symbol "ONVB".
