SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Soliciting Material Pursuant to
[ ] Confidential, for Use of the ss. 240.14a-11(c) or ss. 240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
CNB FINANCIAL CORP.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(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 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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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>
CNB FINANCIAL CORP.
24 Church Street
Canajoharie, New York 13317
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-----------------------------------------------------------
April 4, 2000
To the Shareholders of CNB Financial Corp.
NOTICE IS HEREBY GIVEN that the ANNUAL MEETING OF SHAREHOLDERS OF CNB
FINANCIAL CORP., the parent company of Central National Bank, Canajoharie, will
be held at the FORT RENSSELAER CLUB, Moyer Street, Canajoharie, New York, on May
4, 2000 at 9:30 A.M. for the purpose of considering and voting on the following
matters:
1. The election of two directors for a term of three years or until
their successors have been elected.
2. The increase in the number of shares authorized for issuance under
the Incentive Stock Option Plan.
3. The transaction of any other business which may be properly brought
before the meeting or any adjournment thereof.
Only those shareholders of record at the close of business on March 15,
2000 shall be entitled to notice of the meeting and to vote at the meeting.
By Order of the Board of Directors,
Holly C. Craver
Secretary
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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.
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<PAGE>
CNB FINANCIAL CORP.
24 Church Street
Canajoharie, New York 13317
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 4, 2000
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of CNB Financial Corp. (the "Company"), the
holding company for Central National Bank, Canajoharie (the "Bank") and Central
Asset Management, Inc., for use at the Annual Meeting of Shareholders of the
Company (the "Meeting") to be held on May 4, 2000 and at any and all
adjournments thereof, for the purposes stated in the accompanying notice of
Meeting. This Proxy Statement, together with the enclosed proxy, is first being
mailed to shareholders on or about April 4, 2000.
At the Meeting, the shareholders will be asked to vote for the election
of directors. Two of the directors who currently serve on the Company's
classified Board of Directors will stand for re-election to the Board at the
Meeting. The shareholders will also be asked to vote on the increase in the
number of shares authorized for issuance under the Company's Incentive Stock
Option Plan. Voting will also be conducted on any other matters which are
properly brought before the Meeting.
VOTING RIGHTS AND PROXIES
Shareholders of record at the close of business on March 15, 2000 (the
"Record Date") will be entitled to notice of and to vote at the Meeting. On the
Record Date, there were 7,534,054 shares of Common Stock issued and outstanding,
and the Company had no other class of equity securities outstanding. Each share
of Common Stock is entitled to one vote, except that in the election of
directors, the Common Stock has cumulative voting rights permitting each
shareholder to vote the number of shares held multiplied by the number of
directors to be elected, distributing his or her votes among as many candidates
as he or she may wish. The vote of a plurality of the shares of Common Stock
present or represented at the meeting is required for the election of directors,
assuming a quorum is present or represented at the meeting. The vote of a
majority of the votes cast at the meeting is required to approve the amendment
to the Incentive Stock Option Plan. An abstention with respect to approving the
amendment to the Incentive Stock Option Plan will not constitute a vote cast and
therefore will not affect the outcome of the vote on the Incentive Stock Option
Plan. A majority of the outstanding shares of the Common Stock, represented in
person or by proxy, shall constitute a quorum at the Meeting. Broker non-votes
will be counted as being present or represented at the meeting for purposes of
establishing a quorum, but will not have an effect on the outcome of the vote
for the election of directors or the amendment to the Incentive Stock Option
Plan.
The proxy provided with this Proxy Statement grants the proxy agent
discretionary authority to exercise the voting rights of the shareholder if no
specific instructions are given by the shareholder. The proxy may be revoked by
a later dated proxy or by written notification delivered to Holly C. Craver,
Secretary of the Company, at the above address at any time prior to the Meeting.
If you attend the Meeting, you may withdraw your proxy and vote by ballot. If
not revoked, all properly executed proxies will be voted as directed.
The solicitation of proxies shall be made through mailings, but proxies
may also be solicited by telephone communications and in person by directors,
officers, and other regular employees of the Company or of the Bank. The cost of
solicitation of proxies will be borne by the Company. The Company will reimburse
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending the proxy materials to the beneficial
owners of the Common Stock.
The Annual Report of the Company for the fiscal year ended December 31,
1999 is being sent to shareholders with this Proxy Statement, but is not part of
the proxy soliciting materials. Copies of the Annual Report will be distributed
without charge to any shareholder upon written request of such person addressed
to Holly C. Craver, Secretary, CNB Financial Corp., 24 Church Street,
Canajoharie, New York 13317.
<PAGE>
ITEM 1: ELECTION OF DIRECTORS AND INFORMATION WITH RESPECT TO
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors is divided into three classes as nearly equal in
number as possible. The members of each class are elected for a term of three
years or until their successors are elected and qualified. One class of
directors is elected annually. In accordance with the Company's Bylaws, the size
of the Board is presently set at six. Immediately prior to the meeting, David J.
Nolan will retire from the Board, and the size of the Board will be reduced to
five.
At the meeting, directors Van Ness D. Robinson and John P. Woods, Jr.
will stand for re-election. Each nominee has indicated a willingness to continue
to serve as a director. In the event either nominee is unable to serve, it is
intended that the proxies will be voted for a successor nominee designated by
the Board of Directors.
The following information is furnished for each candidate nominated to
serve as a director and for each director of the Company whose term of office
continues after the Meeting. It is the intention of the individuals named as
proxies to vote for the election of the following nominees:
<TABLE>
NOMINEES FOR DIRECTOR
<CAPTION>
Nominees for Director (for terms expiring in 2003)
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Name and Age Occupation During Past Five Years Director Since
------------ --------------------------------- --------------
<S> <C> <C>
Van Ness D. Robinson Chairman of the Board, Secretary and CEO, New York Central Mutual Fire 1997
Age 64 Insurance Co.
John P. Woods, Jr. President, John P. Woods Co., Inc. (Reinsurance Intermediaries) 1991
Age 63
</TABLE>
<TABLE>
DIRECTORS CONTINUING IN OFFICE
<CAPTION>
Directors Continuing in Office (terms expiring in 2001)
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Name and Age Occupation During Past Five Years Director Since
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<S> <C> <C>
J. Carl Barbic Retired Dairy Farmer, Former Clerk of Schoharie County Board of 1989
Age 73 Supervisors.
Donald L. Brass President of the Company since January 1993, CEO of the Bank since 1990
Age 51 January 1992, President of the Bank since January 1991.
<CAPTION>
Directors Continuing in Office (terms expiring in 2002)
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Name and Age Occupation During Past Five Years Director Since
------------ --------------------------------- --------------
<S> <C> <C>
Joseph A. Santangelo Administrator, Arkell Hall Foundation. 1991
Age 47
</TABLE>
The Board of Directors recommends a vote "For" the election of the nominated
directors, and signed proxies that are returned will be so voted unless
otherwise instructed on the proxy card.
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<PAGE>
The Board of Directors and Its Committees
Each director of the Company also serves as a director of the Bank. The
Company and Bank Boards each meet regularly on a monthly basis. The Board of
Directors of the Company and the Board of Directors of the Bank each held 13
meetings during 1999. No incumbent director attended less than 75% of the
aggregate number of meetings of the Board of Directors and meetings held by all
committees of the Board on which such director served during 1999.
Among its standing committees, the Board of the Company has an
Executive Committee, an Examining/Audit Committee, and a Personnel Committee.
The President acts an ex-officio member of all committees except the
Examining/Audit Committee.
The full Board nominates individuals for election to the Board. The
Board will consider written recommendations from shareholders for nominees to be
elected to the Board of Directors that are sent to the Secretary of the Company
at the Company's address and that comply with the provisions of the Company's
Bylaws. Section 202 of the Company's Bylaws provides that nominations for
directors, except those made by the Board, must be submitted in writing to the
Secretary of the Company not less than fourteen (14) or more than fifty (50)
days prior to the annual meeting setting forth the name, address and principal
occupation of the proposed nominee and the number of shares which will be voted
for the proposed nominee, as well as the name and address and the number of
shares owned by the notifying shareholder. In the event that less than
twenty-one (21) days notice of the meeting is given to shareholders, such
nominations may be submitted to the Secretary of the Company not later than
seven (7) days following the date of the mailing of the notice of the meeting.
If any nomination is properly and timely made by a shareholder in accordance
with Section 202 of the Company's Bylaws, ballots will be provided for use by
shareholders at the annual meeting bearing the name of such nominee or nominees.
The Examining/Audit Committee, currently composed of Directors Joseph
A. Santangelo, J. Carl Barbic and Van Ness D. Robinson, reviews the Bank's
internal control and internal audit procedures and coordinates the audit of the
Company's consolidated financial statement conducted by KPMG LLP. Status reports
were reviewed by the Committee Chairman periodically at regular Board Meetings.
The Examining/Audit Committee met four (4) times in 1999.
The Personnel Committee, currently composed of Directors John P. Wood,
Jr., Van Ness D. Robinson and Joseph A. Santangelo, reviews and determines
compensation levels, adjustments and employee benefits. The Personnel Committee
met nine (9) times in 1999.
Directors, other than those employed by the Company in other
capacities, receive a fee of $400 per month, plus $400 per meeting of the Board
and $250 per committee meeting attended. Committee Chairs receive an additional
fee of $100 per each committee meeting chaired. Directors who are also officers
of the Company or Bank receive no compensation for attendance at Board or
committee meetings.
ITEM 2: AMENDMENT OF THE STOCK OPTION PLAN
Background
In 1994, the Company established the Incentive Stock Option Plan (the
"Plan"). The purpose of the Plan is to: (i) help the Company attract and retain
high-quality executive personnel by providing a compensation package more
typical of compensation packages offered by comparable publicly-traded
companies; (ii) encourage stock ownership by covered executives; and (iii) link
potential gain by a covered executive with the performance of the Company, thus
aligning management interests with shareholder interest.
The Board of Directors approved an amendment to the Plan (the
"Amendment") on February 18, 2000, subject to the shareholder approval solicited
by this proxy statement. The Company is asking the shareholders to approve the
Amendment, the terms of which are described below.
Proposed Amendment: Increase the Number of Shares For Which Options May
be Granted
The number of shares of stock of the Company that are authorized for
issuance under the Plan is 300,000. Of the 300,000 shares authorized, 226,500
are subject to outstanding awards or have already been issued pursuant to the
terms of prior awards. The Amendment increases the total number of shares for
which options may be granted to 600,000. The Company has the option of using
treasury shares or authorized and unissued shares for option exercises.
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<PAGE>
If any option granted under the Plan expires or terminates for any
reason without having been exercised in full, the unpurchased shares will again
be available for the purposes of the Plan.
Description of Plan
The following summary of the material terms of the Plan is qualified in
its entirety by reference to the full text of the Plan a copy of which is
available by contacting the Secretary of the Company, Holly C. Craver. Unless
otherwise specified, capitalized terms used herein have the meaning assigned to
them in the Plan.
Eligibility to Receive Grants. Under the Plan, grants of option rights
may be made to officers and other key employees of the Company or any of its
subsidiaries.
Administration and Terms and Conditions of Stock Option Grants. The
Plan contemplates that option rights may be granted by the Personnel Committee
in accordance with the provisions of the Plan, which provisions provide that:
(i) each grant must specify the number of shares of Common Stock to which it
pertains or a method for determining such number; (ii) each grant shall be at an
option price that is not less than the fair market value of the Common Stock on
the date the option is granted; (iii) successive grants may be made to the same
employee whether or not any Option Rights previously granted to such employee
remain unexercised, provided that no employee may be granted more than 60,000
option rights, subject to adjustment; and (iv) no option rights may be exercised
earlier than six months after the date of grant nor later than 10 years after
the date of grant.
Agreements evidencing option rights may contain such other terms and
provisions, consistent with the Plan, as the Personnel Committee may approve.
The option price is payable at the time of exercise either in cash, or by the
transfer to the Company of Common Stock owned by the optionee having a fair
market value equal to the option price or any combination of cash and stock.
Options are exercisable during the optionee's lifetime only by the
optionee. Shares covered by option rights which are terminated for any reason or
expire unexercised may be made the subject of new option rights.
Types of Awards Under Plan. Option rights granted under the Plan are
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code.
Transferability. No option right may be transferred by an optionee
other than by will or the laws of descent and distribution. The maximum number
of shares of Common Stock that may be issued under the Plan, the maximum number
of option rights that may be awarded any one optionee, and the option price per
share, are subject to adjustment to reflect stock splits, combinations of
shares, recapitalizations, mergers, consolidations, spin-offs, reorganizations,
liquidations, issuances of rights or warrants and similar events.
Amendments. The Plan may be amended by the Board of Directors from time
to time, provided no such amendment shall (i) increase the maximum number of
shares that may be sold pursuant to the Plan or purchased by any one optionee,
or (ii) change the definition of employees eligible to receive grants of option
rights, without further approval by the shareholders.
Accounting Treatment
Under current accounting principles, neither the grant nor the exercise
of an Incentive Stock Option under the Plan with an exercise price not less than
the fair market value of Common Stock at the date of grant requires any charge
against earnings. The Company is required to disclose in a footnote to its
consolidated financial statements the pro forma effects of stock-based
compensation arrangements on net income and earnings per share, based on the
estimated grant date fair value of stock options that are expected to vest.
Federal Tax Consequences
The following discussion briefly summarizes certain federal income tax
aspects of stock under the Plan. State and local tax consequences may differ.
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<PAGE>
Incentive Stock Options. An optionee will not recognize income on the
grant or exercise of an incentive stock option. However, the difference between
the exercise price and the fair market value of the stock on the date of
exercise is an adjustment item for purposes of the alternative minimum tax. If
an optionee does not exercise an incentive stock option within certain specified
periods after termination of employment, the option will be treated as a
nonstatutory option and the optionee will recognize ordinary income on exercise
equal to the excess, if any, of the fair market value of the shares on the
exercise date over the exercise price.
Gain or Loss on Sale or Exchange of Shares. In general, gain or loss
from the sale or exchange of shares acquired pursuant to the exercise of options
granted under the Plan will be treated as capital gain or loss, provided that
the shares are held as capital assets at the time of the sale or exchange.
However, if certain holding period requirements are not satisfied at the time of
a sale or exchange of shares acquired upon exercise of an incentive stock option
(a "disqualifying disposition"), an optionee generally will be required to
recognize ordinary income upon such disposition. Gain recognized on the
disposition in excess of the ordinary income resulting therefrom will be capital
gain, and any loss recognized will be a capital loss.
Deductibility by Company. The Company generally is not allowed a
deduction in connection with the grant or exercise of an incentive stock option.
However, if an optionee is required to recognize income as a result of a
disqualifying disposition, the Company will be entitled to a deduction equal to
the amount of ordinary income so recognized. In addition, in the event an
incentive stock option is treated as a nonstatutory stock option, as described
above, the Company generally will be allowed a deduction in an amount equal to
the amount of ordinary income recognized by an optionee, provided that certain
income tax reporting requirements are satisfied.
Parachute Payments. Where payments to certain employees that are
contingent on a change in control exceed limits specified in the Internal
Revenue Code, the employee generally is liable for a 20 percent excise tax on,
and the corporation or other entity making the payment generally is not entitled
to any deduction for, a specified portion of such payments. The accelerated
vesting of stock options would be relevant in determining whether the excise tax
and deduction disallowance rules would be triggered with respect to certain
Company employees.
Performance-Based Compensation. Subject to certain exceptions, Section
162(m) of the Internal Revenue Code disallows federal income tax deductions for
compensation paid by a publicly-held corporation to certain executives to the
extent the amount paid to an executive exceeds $1 million for the taxable year.
The Plan would allow the grant of stock options that qualify under an exception
to the deduction limit of Section 162(m) for "performance-based compensation."
New Plan Benefits
Grants under the Plan are generally made at the discretion of the
Personnel Committee and are therefore not determinable with respect to dollar
value or amount. During 1999, the Personnel Committee granted 1,500 options to
each of Russell G. Melton, Vice President - Director of Investments and Trust,
and Robert E. Ward, Jr., Vice President - Director of Marketing.
Approval by Shareholders
Before the Amendment can be implemented it must be approved by the vote
a majority of the votes cast at the meeting.
The Board of Directors recommends a vote "FOR" approval of Item 2, and signed
proxies that are returned will be so voted unless otherwise instructed in the
proxy card.
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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL HOLDERS
The following table sets forth as of the Record Date the ownership of
Common Stock by (i) any person who is known to the Company to be the beneficial
owner of more than five percent of Common Stock, (ii) each director or director
nominee, (iii) each executive officer named under "Compensation of Executive
Officers" and (iv) all directors and executive officers of the Company as a
group.
Amount and
Name and Nature of
Address of Beneficial Ownership Percent
Beneficial Owner as of 3/15/00 of Class
---------------- ------------- --------
J. Carl Barbic 8,852 *
Cobleskill, NY 12043
Donald L. Brass 81,400 (1) 1.07%
Fort Johnson, NY 12070
Van Ness D. Robinson 751,437 (2) 9.97%
Edmeston, NY 13335
Joseph A. Santangelo 6,141 (3) *
Johnstown, NY 12095
John P. Woods, Jr. 451,080 (4) 5.99%
Canajoharie, NY 13317
New York Central Mutual 751,437 (5) 9.97%
Fire Insurance Company
Edmeston, NY 13335
Peter J. Corso 69,960 (6) *
St. Johnsville, NY 13452
Michael D. Hewitt 600 (7) *
Johnstown, NY 12095
Number of shares of common stock 1,369,470 (8) 18.03%
beneficially owned by all
directors and executive officers
as a group (7 persons)
- --------------------
* Represents less than 1% of the Company's outstanding common stock.
(1) Includes 39,179 shares issuable upon exercise of options which are
exercisable within 60 days. These shares are included in the total number
of shares outstanding for the purpose of calculating Mr. Brass' percentage
ownership.
(2) The amount disclosed for Mr. Robinson includes 750,728 shares held by New
York Central Mutual Fire Insurance Company for which Mr. Robinson serves
as Chairman, Secretary and CEO.
(3) Mr. Santangelo holds 4,410 shares jointly with his wife and 288 shares
jointly with his children.
(4) Includes 151,912 shares held jointly with his wife, 20,656 shares held by
the Woods Corporation and 274,618 shares by John P. Woods Co., Inc. Mr.
Woods holds a controlling interest in both the Woods Corporation and
John P. Woods Co., Inc.
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<PAGE>
(5) Includes 709 shares held by Van Ness D. Robinson, a director of the
Company, who serves as Chairman of the Board, Secretary and CEO of New
York Central Mutual Fire Insurance Company.
(6) Includes 23,750 shares issuable upon exercise of options which are
exercisable within 60 days. These shares are included in the total number
of shares outstanding for the purpose of calculating Mr. Corso's
percentage ownership.
(7) Includes 500 shares issuable upon exercise of options which are
exercisable within 60 days. These shares are included in the total number
of shares outstanding for the purpose of calculating Mr. Hewitt's
percentage ownership.
(8) Includes 63,429 shares issuable upon exercise of options which are
exercisable within 60 days. These shares are included in the total number
of shares outstanding for the purpose of calculating the percentage of
ownership of the group as a whole but not for the purpose of calculating
the percentage ownership of the other beneficial owners listed in the
table.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation paid
by the Company to the chief executive officer and other most highly compensated
executive officers whose annual salary and bonus exceeded $100,000 during 1999.
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Long Term
Compensation(1) Compensation:
------------------------------- Securities All Other
Annual Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($)(2) Options (No.) ($)(3)
- --------------------------- ---- ---------- ------------ ------------- ------
<S> <C> <C> <C> <C> <C>
Donald L. Brass.................. 1999 225,000 93,607 0 33,156
President & CEO 1998 217,300 146,847 10,000 3,000
1997 217,300 89,462 0 15,478
Peter J. Corso................... 1999 140,000 59,280 0 11,000
Executive Vice President 1998 135,000 61,592 7,500 3,000
and CFO 1997 120,000 40,056 0 9,822
Michael D. Hewitt................ 1999 100,000 33,711 0 1,200
Senior Vice President
and Senior Commercial &
Retail Banking Executive
</TABLE>
- --------------------
(1) Includes compensation for which payment was deferred pursuant to
non-qualified deferred compensation plans until such time that the
executive retires or leaves the employ of the Company.
(2) The amounts in this column for 1999 and 1998 reflect awards made under the
Company's Incentive Compensation Plan, as well as a one-time $45,650
performance bonus to Mr. Brass in 1998 in lieu of a base salary increase.
(3) For 1999, consists of amounts contributed by the Company to a 401(k)
Profit Sharing Plan pursuant to a formula which applies uniformly to all
employees, along with a vehicle use allowance for Messrs. Brass and Corso.
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS VALUES
The following table provides information for the named executive
officers, with respect to (i) stock options exercised in fiscal year 1999, (ii)
the number of stock options held at the end of fiscal year 1999, and (iii) the
value of in-the-money-stock options at the end of fiscal year 1999.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at 12/31/99 (#) at 12/31/99 ($)(2)
Shares Acquired Value ------------------------------ ------------------------------
Name on Exercise (#) Realized ($)(1) Exercisable Unexcercisable Exercisable Unexercisable
- ---- --------------- --------------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald L. Brass....... 1,077 12,760 39,179 9,000 299,942 0
Peter J. Corso........ 1,000 10,325 23,750 6,750 183,762 0
Michael D. Hewitt..... 0 0 500 4,500 0 0
</TABLE>
- --------------------
(1) The Value Realized represents the amount equal to the excess of the fair
market value of the shares at the time of exercise over the exercise
price of the option.
(2) Calculated by multiplying the number of unexercised options outstanding
at December 31, 1999 by the difference between the fair market value of
the Company's shares at December 31, 1999 and the option exercise price.
Board Compensation Committee Report on Executive Compensation
The Personnel Committee determines the compensation level for the
Company's executive officers. The compensation structure of the Company's
executive officers, including its President and Chief Executive Officer,
includes a combination of base salaries, cash bonuses under its Incentive
Compensation Plan and stock options.
In determining base salaries, the Personnel Committee considers salary
surveys covering banks similar to the Company in asset size and geographic area.
While the Personnel Committee uses the surveys to establish a salary range for
the Company's executive officers, salary and compensation policies and practices
are general and subjective and not subject to specific criteria. In addition to
the surveys, factors considered in determining salaries include experience,
internal salary structure, performance, and ability to improve the
profitability, growth, and value of the Company.
The surveys reviewed in setting salary ranges for 1999 were the KPMG
National Banking Industry Compensation Survey and the SNL Executive Compensation
Survey (Commercial Banks). The banks covered by the salary surveys are not
necessarily included within the peer group index reflected in the Performance
Graph in this proxy. The Personnel Committee targets salaries at or below the
average of that provided by the Company's competition and uses variable
incentives to bring overall compensation to a level at or above the average
provided by its competition.
The Company has adopted the CNB Financial Corp. Incentive Compensation
Plan (the "Incentive Plan") in which all employees are eligible to participate
and pursuant to which the Company makes cash awards. The Incentive Plan is
designed to promote a superior level of performance relative to the Company's
competition in its market area by providing participating employees with rewards
for meeting and exceeding performance goals, as well as by providing recognition
of departmental and individual achievements. Each year, the Personnel Committee
establishes threshold, target and superior performance goals for the Company,
departments and individuals. Awards under the Incentive Plan depend on the
attainment of those performance goals. Before any awards are made to an
executive, the Incentive Plan requires a threshold level of Company financial
performance as well as departmental and individual performance, which is
subjectively evaluated; except that, the award to Mr. Brass depends solely on
the Company meeting at least a threshold level of financial performance. Once
the threshold performance goals are met, the award will depend on whether
targeted Company, departmental and individual performance goals have been met or
exceeded. The Company performance goals relate to net income, asset growth,
return on equity and the efficiency ratio. Payments of incentive awards are
included in the "Bonus" column of the Summary Compensation Table. In 1999, the
Personnel Committee adjusted downward the threshold Company performance goals
with respect
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<PAGE>
to net income, return on equity and the efficiency ratio, and adjusted upward
the threshold Company performance goals with respect to asset growth. The
Personnel Committee made such downward and upward adjustments to account for the
acquisition of five branches from Astoria Federal Savings and Loan Association.
In 1999, the Company met these adjusted threshold performance goals. In
addition, Mr. Corso met his threshold personal and departmental performance
goals. Thus, Mr. Brass and Mr. Corso received awards based on the threshold
award levels.
The Company also maintains an Incentive Stock Option Plan pursuant to
which the Personnel Committee may grant incentive stock options. The Incentive
Stock Option Plan aligns management interests with shareholder interest by
providing long-term incentive opportunities to its executive officers through
grants of stock options. Under the Incentive Stock Option Plan, a covered
executive may be granted the right to purchase a specified number of shares of
the Common Stock of the Company at a price per share at least equal to the fair
market value of the stock on the date the option is granted. The option price
remains fixed, and the executive may purchase the underlying stock during the
option exercise period. The option to purchase stock at a predetermined, fixed
price provides the executive with motivation to manage the Company's affairs in
a manner that will enhance the performance of the Company and the value of its
stock, and to then purchase the stock at its predetermined price. Shareholders,
of course, also benefit from enhanced performance of the Company and increases
in the value of Company stock. During 1999, the Personnel Committee granted
1,500 options to each of Russell G. Melton, Vice President - Director of
Investments and Trust, and Robert E. Ward, Jr., Vice President - Director of
Marketing.
By the Personnel Committee:
John P. Woods, Jr.
Van Ness D. Robinson
Joseph A. Santangelo
Personnel Committee Interlocks and Insider Participation
During 1999, the Bank had, and expects in the future to have, various
transactions including loans with members of the Personnel Committee and other
directors and officers of the Company, the Bank and their associates in the
ordinary course of business. All such transactions were made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the same time for comparable transactions with other persons and do not involve
more than normal risk of collectability or present other unfavorable features.
Pension Plan
The Bank has in effect a Pension Plan which conforms to the
requirements of the Employee Retirement Income Security Act of 1974 (as
amended), provides for full vesting upon five years of participation, and
contains provisions which permit early retirement within ten years prior to
normal retirement date for participants with at least ten years of credited
service. The Plan requires no contribution from participants, covers all
eligible employees, provides for normal retirement at age 65, and is qualified
under Section 401(a) of the Internal Revenue Code. There were 258 participants
in the Plan in 1999. Normal retirement benefits are based on the greater of (i)
40% of average earnings for the highest 36 consecutive months, reduced
proportionately for less than 20 years of service, or (ii) a minimum of $50 per
month after 10 years of service. The following table sets forth the estimated
annual benefits payable on retirement at age 65 by a participating employee
assuming earnings as shown. Benefits set forth in the table are subject to
federal income tax deductions. For 1999, the Internal Revenue Code limits the
total compensation that may be taken into account in calculating benefits to
$160,000. The estimated retirement benefits in the table below are based on the
assumption that the persons in the Plan will continue in employment until age 65
at 1999 salaries. Messrs. Brass, Corso, and Hewitt have credited years of
service of 10, 13 and 1, respectively, under the plan.
- 10 -
<PAGE>
<TABLE>
PENSION PLAN TABLE
<CAPTION>
Years of Service
----------------
Remuneration 15 Years 20 or More Years
------------ -------- ----------------
<S> <C> <C>
$ 20,000 $ 6,000 $ 8,000
$ 30,000 $ 9,000 $12,000
$ 40,000 $12,000 $16,000
$ 50,000 $15,000 $20,000
$ 60,000 $18,000 $24,000
$ 80,000 $24,000 $32,000
$100,000 $30,000 $40,000
$125,000 $37,500 $50,000
$150,000 $45,000 $60,000
$160,000 $48,000 $64,000
</TABLE>
Executive Agreements
In 1999, Messrs. Brass and Corso had Senior Executive Severance
Agreements with the Bank and Company which provided that in the event of a
termination of the executive's employment within 24 months after a Change of
Control, the Company shall be obligated to pay the executive 2.99 times his
annual base salary (exclusive of bonus payments) in effect immediately prior to
the date of termination, as compensation for services rendered to the Company
and as consideration for the covenant not to compete contained in the Agreement.
The Senior Executive Severance Agreements expired on December 31, 1999. The
Company and the Bank currently are negotiating new severance agreements with
Messrs. Brass and Corso and hope to finalize such agreements in the second
quarter of 2000. It is anticipated that the terms of such agreements will be
substantially similar to the terms contained in the expired agreements. Under
such anticipated terms, payments to executives are payable in eight equal
quarterly installments without interest. Furthermore, under such terms, a Change
of Control shall be deemed to have occurred if (i) any person or group becomes
the beneficial owner of 50% or more of the Company's outstanding securities,
(ii) as a result of a tender offer, merger, business combination or contested
election, the persons who were directors of the Company cease to constitute a
majority of the Board, (iii) the Company or Bank is merged with another entity
in a transaction in which less than 50% of the voting securities of the
resulting entity are held by the former shareholders of the Company, (vi) a
tender offer or exchange offer is made for more than 50% of the Company's
outstanding securities, or (v) the Company transfers substantially all of its
assets to another corporation. Under the anticipated terms, a termination of an
executive's employment is deemed to have occurred if (i) the executive is
terminated by the Company for reasons other than cause, death or disability, or
(ii) the executive resigns following a reasonable determination that there has
been a significant change in the nature of executive's authority, a reduction in
executive's total compensation and benefits, a change in location where
executive is required to perform services, or that there is a change in
circumstances significantly affecting his position such that he is unable to
exercise the authority, powers, functions or duties of his position. Under the
anticipated terms, any such determination shall be made by affirmative vote of
at least 50% of the individuals who are members of the Board of Directors of
both the Company and any successor entity by which the executive is employed
immediately prior to the executive's resignation, or, if there is no such
individual, by the executive in his or her discretion.
- 11 -
<PAGE>
Messrs. Brass and Corso have Executive Salary Continuation Agreements
with the Bank which provide for a supplemental retirement benefit designed to
provide the executive with total retirement income benefits which will equal at
least 65% of the executive's projected total annual compensation at the time of
the executive's retirement. Messrs. Brass and Corso are converting their
existing Salary Continuation Agreements into new agreements with an annuity
format. The present values of their existing agreements will be used to
determine the size of the annuity required to provide the supplemental
retirement benefits described in this paragraph. The supplemental retirement
benefit shall be paid to the executive or his beneficiary in monthly
installments for a period of fifteen years commencing at age 65, unless deferred
by Mr. Brass or Mr. Corso until a later year under the terms of the annuity. In
the event the executive dies prior to age 65, the executive's beneficiary shall
receive a death benefit equal to the supplemental retirement benefit payable
over fifteen years beginning at the time of death. Life insurance policies
covering the executives, which are owned by the Bank and which name the Bank as
the sole beneficiary, cover the Bank's costs for the annuities. If all the
assumptions concerning mortality, dividends and salary are met, the proceeds of
the policies will completely cover such costs.
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 a
peer group of banks in upstate New York. Total return values were calculated
assuming $100 investment on January 1994 and reinvestment of dividends. In prior
years, FNB Rochester Corp. and Evergreen Bancorp, Inc. comprised part of the
peer group of banks. These banks were acquired in 1999 and no longer exist.
Consequently, the Company has added Community Bank System, Inc. and Tompkins
County Trustco, Inc. to the peer group of banks examined as part of the Stock
Performance Graph.
[GRAPHIC OMITTED]
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
NASDAQ............... 100.0 141.3 173.9 213.1 300.2 545.7
Peer Group*.......... 100.0 111.2 141.2 216.7 233.3 191.8
CNB Financial Corp... 100.0 152.2 224.9 236.9 329.7 264.0
*Companies in the Self-Determined Peer Group:
- NBT Bancorp Inc. - Community Bank System, Inc.
- Arrow Financial Corp. - Tompkins County Trustco, Inc.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's principal accounting firm during 1999 was KPMG LLP. The
accounting firm is selected upon recommendation of the Examining/Audit Committee
and approval of the Board of Directors. The Company expects to continue its
engagement of KPMG LLP and expects representatives of the accounting firm will
be present at the Meeting. KPMG LLP will have the opportunity to make a
statement and to be available to respond to appropriate questions.
- 12 -
<PAGE>
SHAREHOLDER PROPOSALS
The annual meeting of shareholders for the fiscal year ending December
31, 2000 is expected to be held in May 2001 (the "Next Annual Meeting"). All
proposals intended to be presented at the Next Annual Meeting must be received
by the Secretary of the Company at 24 Church Street, Canajoharie, New York 13317
no later than December 5, 2000, to receive consideration for inclusion in the
Proxy Statement and form of proxy relating to that meeting.
Pursuant to the proxy rules under the Securities and Exchange Age of
1934, the Company's shareholders are notified that the deadline for providing
the Company with timely notice of any shareholder proposal to be submitted
outside the Rule 14a-8 process for consideration at the Next Annual Meeting will
be March 10, 2001. As to such matters which the Company does not have notice on
or prior to that date, discretionary authority to vote on such proposal shall be
granted to the persons designated in the Company's proxy related to the Next
Annual Meeting.
A copy of the Company's Annual Report to Shareholders for the year
ended December 31, 1999 accompanies this Proxy Statement. The Annual Report
includes a general description of the business of the Company, management's
discussion and analysis of financial condition and results of operations, and
the Company's consolidated financial statements, with the accountant's report
thereon.
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.
Dated: April 4, 2000
Holly C. Craver
Secretary
