UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
(Amendment No. )
Filed by the Registrant þ
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¨ | Definitive Proxy Statement | |
¨ | Definitive Additional Materials | |
¨ | Soliciting Material Pursuant to §240.14a-12 |
CORTLAND BANCORP (Name of Registrant as Specified In Its Charter)
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Cortland Bancorp
194 West Main Street
Cortland, Ohio 44410
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT Annual Meeting: May 27, 2014 10:00 a.m., EDT Squaw Creek Country Club 761 Youngstown-Kingsville Road Vienna, Ohio 44473 Record Date and Voting: Agenda: 1. To elect 2. To 3. To consider and vote upon amendment of Section 4. To 5. To transact any other business that may properly come before the Proxies: Proxies Solicited By: Mailing You may revoke your proxy before it is voted at the Annual Meeting. • sending written • sending in another signed proxy • attending the Annual Meeting and IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 27, 2014: THE PROXY STATEMENT, INCLUDING NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS, AND FORM 10-K ARE AVAILABLE AT www.cortland-banks.com/invest. PROXY STATEMENTAnnualApril 12, 2005The Cortland Savings and Banking CompanyMeeting:7:00 p.m., EST194 West Main Street Cortland, Ohio 44410 Record Date:8:5:00 a.m.p.m., EST, March 1, 2005.EDT, April 14, 2014. If you were a shareholder of Cortland Bancorp (Cortland) at that time, you may vote at the 2014 Annual Meeting.Meeting of Shareholders (the Annual Meeting). Each common share entitles the holder to one vote on each matter to be voted on by shareholders at the Annual Meeting. Cumulative voting is not allowed in the election of directors. On the record date, Cortland Bancorp had 4,188,597[4,527,849] common shares outstanding. Agenda:threefour directors to serve on the Board for terms of three years each until the 2017 Annual Meeting in 2008of Shareholders and thereafter until their successors are elected and qualified.amendapprove, on an advisory basis, the executive compensation of Cortland’s named executive officers as described in this proxy statement.2.01. Authority and Qualifications2.02 of theCortland’s Code of Regulations.3.approveratify the form and useappointment of indemnification agreementsS.R. Snodgrass, P.C. as Cortland’s independent auditor for directors.4.the fiscal year ending December 31, 2014.meeting.Annual Meeting. Unless you specify on the proxy card to vote differently, the management proxies will vote all signed and returned proxies “FOR” election of the Board’s nominees for directorsdirector, “FOR” approval of executive compensation, “FOR” amendment of the Code of Regulations, and “FOR” proposals 2 and 3.ratification of Cortland’s independent auditor. The management proxies will use their discretion on any other matters that may arise. If a named nominee cannot or will not serve as a director, the management proxies will vote for a substitute person nominated by the Board to serve as a director. Solicited By:The Board of Directors of Cortland Bancorp. are being solicited by the Board. The cost of the solicitation is being borne by Cortland Bancorp.Cortland. Proxies will be solicited by mail and may be further solicited, for no additional compensation, by officers, directors, or employees of Cortland Bancorp and its subsidiaries by mail, telephone, or personal contact. Cortland Bancorp will also pay the standard charges and expenses of brokerage houses, voting trustees, banks, associations, and other custodians, nominees, and fiduciaries who are record holders of common shares not beneficially owned by them, for forwarding proxy materials to, and obtaining proxies from, the beneficial owners of such common shares.First Date: We anticipate mailing this proxy statement on or about March 17, 2005.April [18], 2014.Revoking Your Proxy: RevokingYour Proxy:There are several ways youYou may revoke your proxy. You may deliver a signed,proxy by:revocation letter, dated later thannotice revoking your proxy to Timothy Carney, Cortland’s Secretary, at 194 West Main Street, Cortland, Ohio 44410, which must be received prior to the proxy; you may deliver aAnnual Meeting;datedcard with a later thandate, which must be received by Cortland prior to the first proxy;Annual Meeting; or you may attendvoterevoking your proxy in person if your common shares are held in your name. If your common shares are held in the name of your broker, financial institution, or by proxy. other holder of record, you must bring an account statement or letter from the broker, financial institution, or other holder of record indicating that you were the beneficial owner of the common shares on the record date.Attendance at the Annual Meeting will not, in and of itself, constitute revocation of a proxy. Note on StockDividend:All shares, share pricesYourComments:Your comments about any and all aspects of our business are welcome. Although we may not respond on an individual basis, your comments help us measure shareholder satisfaction. Collectively, we may benefit from your suggestions and comments.
PLEASE VOTE – YOUR VOTE IS IMPORTANT
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PROXY STATEMENT
Cortland Bancorp, an Ohio corporation (Cortland), is registered as a financial holding company and a bank holding company with the Board of Governors of the Federal Reserve System and owns all of the issued and outstanding common shares of The Cortland Savings and Banking Company (the Bank). Cortland’s principal executive offices are located at 194 West Main Street, Cortland, Ohio 44410. Cortland’s common shares are traded on the Over the Counter Bulletin Board under the symbol CLDB. As used in this proxy statement, the terms “we,” “us,” and “our” refer to Cortland and/or its subsidiaries, depending on the context.
This proxy statement is furnished in connection with the solicitation by Cortland’s Board of Directors (the Board) of proxies to be voted at the 2014 Annual Meeting of Shareholders, including any adjustment or postponement of such meeting (the Annual Meeting). The Annual Meeting will be held on Tuesday, May 27, 2014, at 10:00 a.m., EDT, at Squaw Creek Country Club, 761 Youngstown-Kingsville Road, Vienna, Ohio 44473. The accompanying Notice of Meeting and this proxy statement are first being mailed to shareholders on or about April [18], 2014.
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table furnishes information regarding the beneficial ownership of common shares, as of April [11], 2014, for each of the current directors, each of the director nominees, each of the individuals named in the Summary Compensation Table, and all current directors and executive officers as a group. To the knowledge of Cortland, no person beneficially owns more than 5% of the outstanding common shares of Cortland. The mailing address of each of the current executive officers and directors of Cortland is 194 West Main Street, Cortland, Ohio 44410.
Name of Beneficial Owner | Sole Voting or Sole Investment Power | Shared Voting or Shared Investment Power | Total Shares | Percent of Common Shares Outstanding (1) | ||||||||||||
Timothy Carney(3) | 19,966 | (4) | 5 | (5) | 19,971 | (2 | ) | |||||||||
David C. Cole | 2,730 | 2,192 | (6) | 4,922 | (2 | ) | ||||||||||
James M. Gasior (3) | 13,135 | (7) | — | 13,135 | (2 | ) | ||||||||||
George E. Gessner | 29,221 | — | 29,221 | (2 | ) | |||||||||||
James E. Hoffman, III | 6,152 | — | 6,152 | (2 | ) | |||||||||||
Neil J. Kaback | 3,691 | — | 3,691 | (2 | ) | |||||||||||
Joseph E. Koch | 9,957 | — | 9,957 | (2 | ) | |||||||||||
Joseph P. Langhenry | 8,300 | — | 8,300 | (2 | ) | |||||||||||
David J. Lucido (3) | 10,474 | (8) | — | 10,474 | (2 | ) | ||||||||||
Richard B. Thompson | — | 139,589 | (9) | 139,589 | 3.08 | % | ||||||||||
Anthony R. Vross | 2,989 | — | 2,989 | (2 | ) | |||||||||||
Timothy K. Woofter | 4,349 | 128,733 | (10) | 133,082 | 2.94 | % | ||||||||||
All directors and executive officers as a group (13 persons) | 382,483 | 8.45 | % |
(1) | The “Percent of Class” computation is based upon the sum of [4,527,849] common shares of Cortland outstanding as of April [11], 2014. |
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(3) | Individual named in the Summary Compensation Table under Executive Compensation. |
(4) | Includes 19,956 common shares held in Mr. Carney’s 401(k) plan account. |
(5) | These common shares are owned by Mr. Carney’s spouse. |
(6) | Includes (a) 579 common shares owned by Mr. Cole’s spouse and |
(7) | Includes 12,863 common shares held in Mr. Gasior’s 401(k) plan account. |
(8) | Includes 7,974 common shares held in Mr. Lucido’s 401(k) plan account. |
(9) | These common shares are held in a trust of | ||||
trustee. |
(10) | Includes (a) 4,007 common shares owned by Mr. Woofter’s spouse, (b) 58,894 common shares held in a trust of which Mr. Woofter is the trustee (c) 48,936 common shares held in a trust of which Mr. Woofter is the successor trustee and (d) 16,896 common shares held in a private foundation established by Mr. Woofter. |
Stock Ownership Guidelines. At its May 22, 2012 meeting, the Board adopted stock ownership guidelines for directors, affirming the value that the Board places on directors having a significant personal financial stake in our success and the value that the Board places on the alignment of the interests of directors with the interests of stockholders generally. A director who does not comply with the guidelines will not be nominated for election. If the value of the director’s holdings declines to an amount under the minimum, the director’s annual retainer will be applied toward the purchase of shares, rather than being paid to the director in cash. The minimum value of a nonemployee director’s holdings of our stock is twice the annual retainer paid to directors, which currently is $18,000. For employee directors, the minimum value is four times the annual retainer. Directors are expected to achieve compliance with the stock ownership guidelines within three years after becoming a director or within three years after the May 2012 adoption of the guidelines.
If you were a shareholder of Cortland at the close of business on April 14, 2014, you are entitled to vote at the Annual Meeting. As of April 14, 2014, there were [4,527,849] common shares of Cortland issued and outstanding. When present in person or by proxy at the Annual Meeting, the holders of a majority of the common shares of Cortland issued and outstanding and entitled to vote will constitute a quorum for the conduct of business at the Annual Meeting.
Shareholders are entitled to one vote for each share held. Shareholders are not entitled to cumulate their votes in the election or removal of directors or otherwise. The director nominees receiving the greatest numbers of votes will be elected. We will consider the non-binding proposal regarding executive compensation to be approved if the proposal receives the affirmative vote of a majority of votes cast. The proposal to amend the Code of Regulations will be considered adopted if it receives the affirmative vote of the holders of shares entitled to exercise a majority of the voting power of the outstanding shares of our common stock.
ABSTENTIONS AND BROKER NON-VOTES
Abstention may be specified on all proposals except the election of directors. Broker non-votes generally occur when shares held by a broker nominee for a beneficial owner are not voted on a proposal because the nominee has not received voting instructions from the beneficial owner and lacks discretionary authority to vote the shares. Brokers generally have the right to vote on a proposal such as the ratification of the selection of independent auditors, but brokers generally do not have the discretion to vote on matters such as amendments to charter documents, executive compensation proposals, and the election of directors. Abstentions and broker non-votes will be counted for purposes of establishing that a quorum is present. Abstentions and broker non-votes will have no effect on the election of directors or on the non-binding proposal to approve executive compensation. Because the proposal to amend the Code of Regulations will not be approved unless it receives the affirmative vote of holders of shares entitled to exercise a majority of the voting power of all outstanding shares, abstentions and broker non-votes will have the same effect as votes against the proposal to amend the Code of Regulations.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), requires Cortland’s executive officers and directors to file reports with the Securities and Exchange Commission (SEC) disclosing their initial beneficial ownership of common shares and any subsequent changes in their beneficial ownership. Specific due dates have been established by the SEC, and Cortland is required to disclose in this proxy statement any late reports. To Cortland’s knowledge, based solely on a review of reports furnished to Cortland and written representations that no other reports were required, Cortland’s executive officers and directors complied with all Section 16(a) filing requirements during the 2013 fiscal year, except that in June of 2013 Mr. Neil Kaback filed a Form 4 one week late, reporting the purchase of 1,000 shares of Cortland stock. In January of 2014, Mr. Lance Morrison filed a Form 4 two weeks late, reporting the purchase of 49 shares of Cortland stock. Until the shares were included in a Form 4 filing made by Mr. Timothy Woofter on January 29, 2014, since May of 2000 48,936 shares beneficially owned through his interest in a family trust have not been included in Mr. Woofter’s total beneficial share ownership.
ELECTION OF DIRECTORSBoardStructure:Cortland Bancorp’s Board of Directors currently has ten members. Section 2.02(c) of Cortland Bancorp’s Code of Regulations provides that the directors may fix or change the number of directors and may fill any director’s office that is created by an increase in the number of directors so long as the directors do not increase the size of the Board to more than 11 members or reduce the size of the Board to fewer than nine members. On August 24, 2004, the Board of Directors increased the size of the Board from nine members to ten and added Jerry A. Carleton to the Board.The following information includes the principal occupation or employment of each director during the past five years. The directors are divided into three classes. Mr. Carleton was added to the class of directors whose terms will expire at the 2007 annual meeting of the shareholders. At each annual meeting of shareholders, the term of one class expires. Directors serve for three-year terms.
BOARD NOMINEES(Proposal One)
The Board currently has eleven members. Directors are divided into three classes, and directors of each class serve for three-year terms. Four directors serve in the class whose terms will expire at the Annual Meeting, four directors serve in the class whose term expires in 2015 and three directors serve in the class whose term expires in 2016. Proxies may not be voted for more than the four nominees.
Directors are individuals with knowledge and experience who serve and represent Cortland’s geographic footprint throughout the counties and communities served and those counties contiguous to its market. Current Board representation by outside directors demonstrates a background in automotive, law, manufacturing, and the accounting industries, with the expertise of these individuals covering a broad array of skills including corporate management, human resource management, strategic planning, business acquisitions, and small business operations.
The Board proposes that the threefour nominees identified below be elected for a new term of three years to expireyears. Each nominee was recommended by the Board’s Corporate Governance Committee. Each individual elected as a director at the 2008 annual meeting of shareholders. Common shares represented by properly executedAnnual Meeting will hold office until his term expires and returned proxy cardsthereafter until his successor is duly elected and qualified, or until his earlier resignation, removal from office, or death. While it is contemplated that all nominees will be votedFORthe election of the following nominees unless the authority to votestand for one or more nominees is withheld. Ifre-election, if a nominee who would otherwise receive the required number of votes becomes unableunavailable or unavailableunable to serve as a candidate for re-election as a director, the individuals designated as proxies on the proxy holders reservecard will have full discretion to vote the common shares represented by the proxies they hold for the election of the remaining nominees and for the election of any substitute nominee or nominees designated by the Board of Directors.following recommendation by the Corporate Governance Committee. The Board knows of Directors has no reason to believe thatany of the nominees named below will notbe unavailable or unable to serve if elected.elected to the Board.
Nominee | Age | Biography | Director of | Nominee for | ||||
David C. Cole | 55 | Mr. Cole is a Partner and President of Cole Valley Motor Company, an automobile dealership. He is President of JDT, Inc., Cole Valley Chevrolet, CJB Properties, and David Tom LTD, automobile sales, since 2001. As President of a family-owned automobile dealership located in Warren, Ohio, Mr. Cole is responsible for the management and day-to-day operations of the business. He has a Bachelor of Science degree in business administration. Mr. Cole serves on the board of Forum Health. The Corporate Governance Committee and the Board believe that Mr. Cole’s experiences, qualifications, attributes and skills allow him to provide an extensive understanding of small business and retail needs. | 1989 | 2017 | ||||
Timothy Carney | 48 | Mr. Carney is Executive Vice President and Chief Operating Officer of the Company and the Bank as well as Secretary of the Company and the Bank since November 2, 2009. He was previously Senior Vice President and Chief Operations Officer of the Company and the Bank. Prior to joining the bank, Mr. Carney was employed by a major accounting firm and had experience in all financial activities and financial reporting, audit preparation, budgeting, and knowledge of government regulatory requirements. The Corporate Governance Committee and the Board believe that the experiences, qualifications, attributes and skills that Mr. Carney has developed allow him to provide valuable accounting, strategic planning and corporate governance expertise to the Board. | 2009 | 2017 |
Nominee Age Biography Director of Nominee for
Cortland
Since
Term
Expiring InNeil J. Kaback 53 Mr. Kaback is Vice President of Cohen & Company, Inc., a firm that provides marketing for Cohen & Company LTD (an accounting firm where Mr. Kaback is also a Vice President). Mr. Kaback is a partner in Cohen & Company Investment Partnership, a financial planning firm and Vice President of Cohen Fund Audit Services, a mutual fund auditing firm. He is a member of the American Institute of CPAs and the Ohio Society of CPAs. Mr. Kaback has varied responsibilities. He focuses on high level business succession, tax, estate, and family business planning, as well as the supervision and planning of financial statement and tax return engagements. He heads the firm’s Automotive Dealers Group and provides managerial, operational, financing, and tax consulting advice. Mr. Kaback serves as Finance Chairman for the Trumbull Memorial Hospital Foundation and was the Campaign Chairman of Operation: Save our Airbase Reservists. He is also a director of GOJO, Inc. He was a member of the Leadership Youngstown Class of 92-93, and is actively involved with the Mahoning County United Way, Trumbull 100 and Youngstown Area Jewish Federation. The Corporate Governance Committee and the Board believes that the experiences, qualifications, attributes and skills that Mr. Kaback has developed allow him to provide continued accounting and financial expertise to the Board. 2004 2017 Anthony R. Vross 52 Mr. Vross is an owner of Simon Roofing and has 29 years of experience in executive administration, manufacturing, operations, distribution and sales and marketing. He has a Bachelors of Science in Business Administration degree from Youngstown State University. He is the inventor of the Fume Recovery System and is involved in many other concepts and technology in the roofing industry. Mr. Vross sponsors his company’s membership in the National Roofing Contractors Association and Restaurant Facilities Management Association and was a speaker for Professional Retail Store Management. He is a Trustee and president of Glacier Sports, Inc. He is a member of St. Maron’s parish where he has been a parish council member, CCD teacher and volunteer for the Maronite Youth organization. The Corporate Governance Committee and the Board believes that the experiences, qualifications, attributes and skills that Mr. Vross has developed through his business and industry experiences allow him to provide local business expertise and innovation insight to the Board. 2013 2017
Recommendation and Vote
Under Ohio law and Cortland’s Code of Regulations, the nominees receiving the greatest number of votes“FOR” election will be elected to the Board. Shareholders are not entitled to cumulate votes in the election of directors. Common shares represented by properly executed and returned proxy cards will be voted“FOR”the election of the Board’s nominees named above unless authority to vote for one or more nominees is withheld. Common shares as to which the authority to vote is withheld and broker non-votes will be counted for quorum purposes, but will not be counted in the election of directors.
The Board recommends a voteFOR the election of the nominees.
Nominee | Age | Biography | Director of | Term | ||||
George E. Gessner | 69 | An attorney, Mr. Gessner is Partner, Director, and Corporate Secretary in the law firm of Gessner & Platt Co., L.P.A. Mr. Gessner has been a general practitioner of law for over 40 years and is a partner in the local law firm. He received his undergraduate (B.A.) degree at Hiram College and his Juris Doctorate (J.D.) degree from the University of Akron Law School. He became a member of the Ohio Bar in 1969. The Corporate Governance Committee and the Board believe that Mr. Gessner’s background as a lawyer and his experiences, qualifications, attributes and skills allow him to provide valuable insights to the Board. | 1987 | 2015 | ||||
James E. Hoffman, III | 62 | An attorney, Mr. Hoffman is President of Hoffman & Walker Co., L.P.A. Mr. Hoffman has been a general practitioner of law for over 37 years and is a partner in a local law firm. He received his undergraduate (B.A.) degree at The Ohio State University in 1973 and his Juris Doctorate (J.D.) degree from the University of Akron Law School in 1976. The Corporate Governance Committee and the Board believe that Mr. Hoffman’s background as a lawyer and his experiences, qualifications, attributes and skills allow him to provide valuable insights to the Board. | 1984 | 2015 | ||||
Joseph E. Koch | 56 | Mr. Koch is President of Joe Koch Construction, Inc., a homebuilding, developing and remodeling company since 1988. He is also President of Joe Koch Realty, Inc., a real estate brokerage firm, and owner of Better Living of the Mahoning Valley, a dealer for sunrooms and installations. Mr. Koch is a member of Eagle Ridge Properties, LLC since 2002. He is the President of Koch Family Charitable Foundation, a 501(c)3 organization. The Corporate Governance Committee and the Board believe that Mr. Koch’s experiences, qualifications, attributes and skills allow him to provide local business expertise to the Board. | 2010 | 2015 | ||||
Timothy K. Woofter | 63 | Mr. Woofter is President, CEO, and Director of Stanwade Metal Products, a manufacturer of tanks and distributor of oil equipment, and Lucky Oil Equipment, a distributor of oil equipment. He is Partner in the Woofter Family Limited Partnership; Owner, Jester Investments, a residential and commercial property rental company; Part owner and Vice President of Northern Ventures, a real estate rental company; Manager of Hartford Land LLC, a Real Estate Holding Company; and Director of the Trade Association, Steel Tank Institute. Mr. Woofter has managed and owned a business that manufactures steel storage tanks and distributes oil-handling equipment for 40 years. He has owned and managed real estate, both residential and commercial, for over 30 years and is familiar with properties of these types and their values. The Corporate Governance Committee and the Board believe that the experiences, qualifications, attributes and skills that Mr. Woofter has developed through his business and leadership experiences allow him to provide business and leadership insight to the Board. | 1985 | 2015 | ||||
James M. Gasior | 54 | Mr. Gasior is the President, Chief Executive Officer and Director of the Company and the Bank. He previously served as Senior Vice President, Chief Financial Officer and Secretary of the Company and the Bank. Mr. Gasior is a Certified Public Accountant, a member of the American Institute of CPAs and a member of the Ohio Society of CPAs. His professional affiliation includes a background in all financial activities and financial reporting, audit preparation, budgeting, compensation reviews, and knowledge of government regulatory requirements. The Corporate Governance Committee and the Board believe that the experiences, qualifications, attributes and skills that Mr. Gasior has developed allow him to provide valuable accounting, strategic planning and corporate governance expertise to the Board. | 2005 | 2016 |
Nominee Age Biography Director of Term
Cortland
Since
Expires InRichard B. Thompson 65 Mr. Thompson is the owner and executive of Therm-O-Link, Inc., Vulkor, Inc., and Therm-O-Link of Texas, Inc., all manufacturers of electrical wire and cable; Owner and executive of Geneva Partners, a condominium development company which is no longer active; Executive of Kinsman IGA, a grocery store; Partner in Dana Partners, a real estate holding company, and Dana Gas, a gas well operation; Owner of the Heritage Hill Grain Company and Heritage Hill Enterprises, agricultural businesses, since 2003; Partner in Stratton Creek Woodworks, a maker of wood products, and Smearcase, a real estate holding company, each since 2005; Partner in Goodview, a Brazilian agricultural business; and Partner in Kinsman Hardware LLC, a home improvement store. Mr. Thompson is a private investor with an extensive background in manufacturing. The Corporate Governance Committee and the Board believe that Mr. Thompson’s experiences, qualifications, attributes and skills allow him to provide assistance in understanding and evaluating manufacturing business relationships. He has owned and managed numerous small businesses in several industries in the Bank’s current market area, as well as outside the immediate area. 2001 2016 Joseph P. Langhenry 55 Mr. Langhenry is the President and CEO of Watteredge, Inc., since 2000. A division of Coleman Cable, Inc., Watteredge, Inc. is a Cleveland-area manufacturer of power connectors and other products for the power generation, automotive and other industries. Mr. Langhenry started with Watteredge as a Sales Manager and previously worked as a bond trader for Prescott Ball and Turben. He serves on the Board of the Lakewood Country Club. The Corporate Governance Committee and the Board believe that Mr. Langhenry’s experiences, qualifications, attributes and skills allow him to provide valuable business leadership expertise to the Board. 2013 2016
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Independence of Directors
The following information, as of March 1, 2005, concerningBoard has reviewed, considered, and discussed each director’s relationships, both direct or indirect, with Cortland and its subsidiaries and the age, principal occupation or employment,compensation and other affiliations and business experience ofpayments, if any, each nominee for re-election as a director has, been furnishedboth directly or indirectly, received from or made to Cortland Bancorp byand its subsidiaries in order to determine whether the director is independent. The Board has determined that it has a majority of independent directors and that each director. Unless otherwise indicated, each individual has had his principal occupation for more than five years.
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CONTINUING DIRECTORS
The following information, as of March 1, 2005, concerning the age, principal occupation or employment, other affiliations and business experience of each continuing director has been furnished to Cortland Bancorp by each director. Unless otherwise indicated, each individual has had his principal occupation for more than five years. Mr. Hoffman, who is in the class of directors whose terms will expire at the 2006 annual meeting of shareholders, is a first cousin to Craig M. Phythyon, a member of the Bank’s Executive Management Team.
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BOARD INFORMATION
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BOARD COMPENSATION
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AUDIT COMMITTEE REPORT
The Audit Committee has submitted the following report for inclusion in this proxy statement:
The Audit Committee has reviewed the audited financial statements for the year ended December 31, 2004 and has discussed the audited financial statements with management. The Audit Committee has also discussed with Packer Thomas, Cortland Bancorp’sdirectors qualifies as independent accountants, the matters required to be discussed by Statement on Auditing Standards No. 61 (having to do with accounting methods used in the financial statements). The Audit Committee has received the written disclosures and the letter from Packer Thomas required by Independence Standards Board Standard No. 1 (having to do with matters that could affect the auditor’s independence), and has discussed with Packer Thomas the independent accountants’ independence. Based on this, the Audit Committee recommended to the Board that the audited financial statements be included in Cortland Bancorp’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee Neil J. Kaback, K. Ray Mahan, Richard B. Thompson and Timothy K. Woofter
EXECUTIVE COMPENSATION COMMITTEE REPORT
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Submitted by the Executive Compensation Committee Jerry A. Carleton, David C. Cole, George E. Gessner, James E. Hoffman, III, Neil J. Kaback, Joseph E. Koch, Joseph P. Langhenry, Richard B. Thompson, Anthony R. Vross, and Timothy K. Woofter.
James M. Gasior and Timothy Carney do not qualify as independent directors because they currently serve as executive officers of Cortland and its subsidiaries.
Meetings of the Board and Attendance at the Annual Meeting of Shareholders
In 2013, the Board held a total of 18 meetings. Each incumbent director attended at least 75% of the aggregate of the total number of meetings held by the Board and the total number of meetings held by the board committees on which he served, in each case during the period of his service.
Cortland encourages all incumbent directors and director nominees to attend each annual meeting of shareholders. All of the incumbent directors and director nominees attended Cortland’s last Annual Meeting of Shareholders, held on May 28, 2013.
Communications with the Board
Although Cortland does not currently have formal procedures by which shareholders may communicate directly with directors, Cortland believes that its current process has adequately served the needs of the Board and its shareholders. Communications sent to the Board, either generally or in care of the Chief Executive Officer, Secretary, the Investor Relations Officer, or another corporate officer, are forwarded to all directors. There is no screening process, and all communications that are received by officers for the Board’s attention are forwarded to the Board.
Until other procedures are developed and posted on Cortland’s website at www.cortland-banks.com, any communication to the Board may be mailed to the Board, in care of the Investor Relations Officer, at Cortland’s headquarters in Cortland, Ohio. The mailing envelope must contain a clear notation indicating that the enclosed letter is a “Shareholder-Board Communication” or a “Shareholder-Director Communication.” In addition, communication via Cortland’s website may be used. Correspondence through the investor relations page of the website should also be directed to the Investor Relations Officer and indicate that the communication is a “Shareholder-Board Communication” or a “Shareholder-Director Communication.” All such communications, whether via mail or website, must identify the author as a shareholder and clearly state whether the intended recipients are all directors on the Board or just certain specified individual directors or committee members. The Investor Relations Officer will make copies of all such communications and circulate them to the appropriate director or directors.
Board Committees
Audit Committee
The Board has an Audit Committee comprised of Messrs. Cole, Kaback (Chair), Thompson and Vross. The Board has determined that each member of the Audit Committee qualifies as independent under the Nasdaq Marketplace Rules, as well as under Rule 10A-3 promulgated under the Exchange Act. The Board has determined that Mr. Kaback qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K. Mr. Kaback has acquired these attributes through education and experience as a certified public accountant.
The Audit Committee conducts its business pursuant to a written charter adopted by the Board. A current copy of the charter of the Audit Committee is posted on Cortland’s website at www.cortland-banks.com on the investor relations page under Governance Documents, “Audit Committee Charter.” At least annually, the Audit Committee reviews and reassesses the adequacy of its charter and recommends any proposed changes to the full Board for approval as necessary.
The Audit Committee is responsible for appointing, compensating, and overseeing the independent registered public accounting firm employed by Cortland for the purpose of preparing and issuing an audit report or other audit, review, or attestation services. The Audit Committee evaluates the independence of the independent registered public accounting firm on an ongoing basis. The Audit Committee also approves audit reports and plans, accounting policies, and audit outsource arrangements, including audit scope, internal audit reports, audit fees, and certain other expenses. The Audit Committee is responsible for developing procedures for the receipt, retention, and treatment of complaints regarding accounting, internal auditing controls, or auditing matters, including procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
The Audit Committee held six meetings in 2013. The Audit Committee’s report relating to the 2013 fiscal year appears elsewhere in this proxy statement.
Corporate Governance Committee
The Corporate Governance Committee is comprised of Messrs. Carney, Cole, Gasior, Gessner, Thompson, and Woofter (Chair). The Board has determined that each non-employee member of the Corporate Governance Committee qualifies as independent under Nasdaq Marketplace Rules. In addition, each non-employee member of the Corporate Governance Committee qualifies as an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the IRC), and as a “non-employee director” for purposes of Section 16b-3 under the Exchange Act. The Corporate Governance Committee met twice in 2013.
The Corporate Governance Committee oversees director and executive officer compensation as well as compensation under the Profit Sharing Program and the Employee Benefit Plan 401(k). The Corporate Governance Committee reviews and recommends officer compensation levels and benefit plans. In evaluating executive officer performance, the committee takes into account –
quality and accuracy of work performed and priority setting;
customer relations;
subordinate feedback and ability to provide instruction to staff; and
the relationship of these factors to Cortland and the Bank’s achievement of strategic objectives and profitability.
The Corporate Governance Committee occasionally requests the Chief Executive Officer (CEO) to be present at Corporate Governance Committee meetings to discuss executive compensation and evaluate individual performance. The Corporate Governance Committee discusses the CEO’s compensation with him, but final deliberations and all votes regarding his compensation are made in executive session, without the CEO present. The Corporate Governance Committee also approves the compensation for other executive officers based on the CEO’s recommendations with input from outside advisors and counsel and then makes its recommendation to the Board.
The Corporate Governance Committee reviews publicly available peer data to assist with evaluating the overall compensation for the Board. From time to time the Corporate Governance Committee recommends changes in compensation to further the goals of the director compensation program, which strives to provide appropriate compensation to directors for their time, efforts and contributions.
The Corporate Governance Committee uses compensation data from similar-sized financial institutions for comparative purposes from time to time, both for director compensation and for executive compensation issues, but the committee did not engage a consultant in setting 2013 compensation. The Corporate Governance Committee does not have a formal charter.
The Corporate Governance Committee also has the following responsibilities:
identify qualified candidates for election, nomination, or appointment to the Board and recommend to the full Board a slate of director nominees for each annual meeting or as vacancies occur;
make recommendations to the full Board and the Chairman of the Board regarding assignment and rotation of members and chairs of committees of the Board;
recommend the number of directors to serve on the Board; and
undertake such other responsibilities as may be referred to the Nominating Committee by the full Board or the Chairman of the Board.
Nominating Procedures
The Corporate Governance Committee has the responsibility to identify and recommend individuals qualified to become directors. Each candidate must satisfy the eligibility requirements set forth in Cortland’s Code of Regulations, Article Two, Section 2.01 “Authority and Qualifications.” No person who has attained the age of 70 is eligible for election as a director, and each director must hold shares of stock of Cortland with an aggregate par value or stated value of $500, an aggregate shareholder equity of at least $500, or an aggregate fair market value of at least $500. The stock ownership guidelines adopted by the board in 2012 provide that the minimum stock ownership level for nonemployee directors is shares having a value equal to two times the annual retainer, and the minimum stock ownership level for employee directors is shares having a value equal to four times the annual retainer.
When considering potential candidates for the Board, the Corporate Governance Committee strives to assure that the composition of the Board, as well as its practices and operation, contributes to an effective representation and advocacy of shareholders’ interest. The Corporate Governance Committee may consider those factors it deems appropriate in evaluating director candidates, including judgment, skill, strength of character, experience with business and organizations comparable in size and scope to Cortland, experience and skills relative to other Board members, and specialized knowledge or experience. Depending upon the current needs of the Board, certain factors may be weighed more heavily than others by the Corporate Governance Committee. The Corporate Governance Committee does not have a policy for the consideration of diversity in the nomination process, but takes into account in its deliberations all facets of a potential nominee’s background, including the potential nominee’s educational background, gender, business and professional experience, and his or her particular skills and other qualities. The Corporate Governance Committee’s goal is to identify individuals who will enhance and add valuable perspective to the Board’s deliberations and who will assist Cortland in its effort to capitalize on business opportunities in a challenging and highly competitive market.
In considering candidates for the Board, the Corporate Governance Committee evaluates the entirety of each candidate’s credentials and, other than the eligibility requirements set forth in Cortland’s Code of Regulations and other than the stock ownership guidelines, there are no specific minimum qualifications that must be met by a Corporate Governance Committee-recommended nominee. However, the Corporate Governance Committee does believe that each director on the Board should be of the highest character and integrity; possess a reputation for working constructively with others; have sufficient time to devote to Board matters; and be without any conflict of interest that would impede the individual’s performance as a director.
The Corporate Governance Committee will consider candidates for the Board from any reasonable source, including shareholder recommendations. The Corporate Governance Committee will not evaluate candidates differently based on who has made the recommendation. The Corporate Governance Committee has the authority to hire and pay a fee to consultants or search firms for the purpose of identifying and evaluating candidates. No such consultants or search firms have been used to date and, accordingly, no fees have been paid to consultants, search firms, or any other individuals.
According to Section 2.03(B) of Cortland’s Code of Regulations, any shareholder who desires to nominate an individual to the Board must provide timely written notice. To be timely, the notice must be mailed to the President of Cortland at least 14 days but no more than 50 days before the meeting at which directors will be elected, or 7 days after notice of the meeting is mailed to shareholders if the meeting is held within 21 days of Cortland mailing notice of the meeting.
The shareholder’s notice of nomination must give:
the name and address of the nominee;
the principal occupation of the nominee;
the approximate number of shares the shareholder making the nomination reasonably anticipates will be voted in favor of the proposed nominee;
the name and address of the shareholder making the nomination; and
the number of shares beneficially owned by the shareholder making the nomination.
The Corporate Governance Committee will disregard a shareholder’s nomination if it is not made in compliance with these rules and standards.
Board Leadership Structure and Role in Risk Oversight
The office of Chairman of the Board and the office of Chief Executive Officer have been separate at Cortland since 2005. Since November 2, 2009, James M. Gasior has held the office of Chief Executive Officer and effective April 27, 2010, Timothy K. Woofter became Chairman of the Board. Cortland believes that separation of these two offices is consistent with the Board’s responsibility for oversight of management and of Cortland’s affairs generally. The Board and its committees have a significant role in oversight of the risks to which Cortland is subject. Like other community banking organizations, we exercise oversight of common banking risks through a loan committee that considers loan applications and credit risk, an asset and liability committee whose routine responsibilities require consideration of interest rate and liquidity risk, an audit committee that takes into account audit and regulatory compliance risks and a loan review committee that monitors non-performing assets and their ultimate outcome. The full Board, of course, takes these and other risks into account in its deliberations as well.
Code of Ethics
Cortland has adopted a Code of Ethics (the Code) as part of its corporate governance program. The Code applies to all of Cortland’s officers and employees, including its Chief Executive Officer and Chief Financial Officer. The Code is posted on the Investor Relations page of Cortland’s website at www.cortland-banks.com under Governance Documents, “Code of Business Conduct and Ethics.” Any amendments to, or waivers from, this Code will be posted on this same website. In addition, a copy of the Code is available to shareholders upon request. Shareholders desiring a copy of the Code should address written requests to Mr. Timothy Carney, Executive Vice President, Chief Operating Officer and Secretary of Cortland Bancorp, 194 West Main Street, Cortland, Ohio 44410, and are asked to mark “Code of Business Conduct and Ethics” on the outside of the envelope containing the request.
DIRECTOR COMPENSATION The following table shows the compensation of Cortland directors for their service in 2013, other than Directors Gasior and Carney. Information about compensation paid to and earned by Directors Gasior and Carney is included in the Summary Compensation Table. Compensation shown in the table is aggregate compensation paid in 2013 for directors’ service both to Cortland and all of its subsidiaries. Name Jerry A. Carleton (retired May 28, 2013) David C. Cole George E. Gessner James E. Hoffman, III Neil J. Kaback Joseph E. Koch Joseph P. Langhenry (elected May 28, 2013) Richard B. Thompson Anthony R. Vross Timothy K. WoofterCOMMITTEE INTERLOCKSAND INSIDER PARTICIPATIONIN 2013 Fees Earned or
Paid in Cash
($) All Other
Compensation (1)
($) Total
($) 13,800 544 14,344 30,600 6,096 36,696 30,400 3,243 33,643 29,550 7,929 37,479 32,200 3,340 35,540 33,050 3,810 36,860 17,500 — 17,500 31,100 6,728 37,828 31,700 — 31,700 34,275 6,577 40,852 (1) Gessner &Platt, Co., LPAPerquisites and other personal benefits provided to each of the directors described in the table were less than $10,000 in 2013. The Corporationfigures in the “all other compensation” column consist of the imputed monetary value of life insurance policies for the directors and the Bank also retained the legal services of Gessner & Platt, Co., LPA. Mr. George E. Gessner is a member of Cortland Bancorp’s Board of Directors and Executive Compensation Committee. Mr. Gessner is also a member of Gessner & Platt Co., LPA. Messrs. Robert M. Platt Sr. and Jr. of Gessner & Platt, Co., LPA are the brother and nephew, respectively, of Cortland Bancorp’s President and Chairman of the Board and the Bank’s President, Chairman, and CEO, Rodger W. Platt. The amount of fees paid to Gessner & Platt Co., LPA by the Corporation and the Bank during 2004 was less than 5% of the law firm’s gross revenues during 2004.CertainTransactions:Cortland Bancorp and the Bank retained the legal services of Hoffman & Walker Co., LPA during 2004. James E. Hoffman, III is a member of Cortland Bancorp’s Board of Directors. Mr. Hoffman is also a 60% shareholder of Hoffman & Walker Co., LPA. The amount of fees paid to Hoffman & Walker Co., LPA by the Corporation and the Bank during 2004 was $14,213, which was approximately 7.5% of the firm’s gross revenues during 2004.ManagementIndebtedness:Certain directors and officers, including members of the Compensation Committee, and one or more of their associates have engagedaddition in banking transactions with the Bank. All of these transactions were in the ordinary course of the Bank’s business during 2004 and up2013 to the present time. All loansliability accrual balance established by Cortland to account for Cortland’s obligation to pay retirement benefits under director retirement agreements entered into with all non-employee directors. The imputed value of life insurance policies for income tax purposes in 2013 was $544 for Director Carleton, $144 for Director Cole, $501 for Director Gessner, $292 for Director Hoffman, $86 for Director Kaback, $99 for Director Koch, $0 for Director Langhenry, $372 for Director Thompson, $0 for Director Vross and undisbursed commitments$319 for Director Woofter. The addition to loan includedthe liability accrual balance to account for the director retirement agreements in such transactions were made in the ordinary course of business on substantially the same terms, including interest rates2013 was $0 for Director Carleton, $5,952 for Director Cole, $2,742 for Director Gessner, $7,637 for Director Hoffman, $3,254 for Director Kaback, $3,711 for Director Koch, $0 for Director Langhenry, $6,356 for Director Thompson, $0 for Director Vross and collateral, as those prevailing at the time$6,258 for comparable transactions with other persons and, in the opinion of the management of Cortland Bancorp, do not involveDirector Woofter.
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Retirement Agreements and Insurance for Non-Employee Directors. Directors Carleton, Cole, Gessner, Hoffman, Kaback, Thompson, and Woofter are parties to director retirement agreements with Cortland. The director retirement agreements promise a post-retirement benefit of $10,000 payable annually for 10 years if the director retires after reaching his normal retirement age, which is a function of years of service on the Board and attained age. Normal retirement ages for these directors are age 61 (Mr. Cole), age 62 (Mr. Hoffman), age 63 (Mr. Woofter), age 66 (Mr. Gessner), age 67 (Mr. Kaback), and age 70 (Mr. Thompson). A reduced annual retirement benefit is payable if the director terminates service or becomes disabled before reaching the normal retirement age, but the benefit is not paid until the director reaches the normal retirement age. Having attained normal retirement age under his agreement, Mr. Carleton retired in 2013. If termination of the director’s service occurs within one year after a change in control of Cortland, the director will receive cash in a single lump sum equal to the retirement benefit expense accrued by Cortland. The director retirement agreement benefits to which a director is entitled are payable to his beneficiary after the director’s death, but if the director dies in active service to Cortland before reaching his normal retirement age, his beneficiary will be entitled to cash in a single lump sum equal to the retirement benefit expense accrued by Cortland.
Cortland purchased insurance on the lives of directors who are parties to the director retirement agreements and entered into split dollar agreements with them, promising to share a portion of the life insurance death benefits with the directors’ designated beneficiaries. Each director’s portion of the policy’s death benefit is $100,000, payable to the director’s beneficiary whether the director’s death occurs while in active service to Cortland or after retirement. Cortland will receive any death benefits remaining after payment to the director’s beneficiary.
Director Indemnification. At the 2005 Annual Meeting, the shareholders of Cortland approved the form and use of indemnification agreements with directors. Cortland has entered into indemnification agreements with each of its directors. The indemnification agreements allow a director to select the most favorable indemnification rights provided under:
Cortland’s Articles of Incorporation or Code of Regulations in effect on the date of the indemnification agreement or on the date expenses are incurred;
state law in effect on the date of the indemnification agreement or on the date expenses are incurred;
any liability insurance policy in effect when a claim is made against the director or on the date expenses are incurred; and
any other indemnification arrangement otherwise available.
The indemnification agreements cover all fees, expenses, judgments, fines, penalties, and settlement amounts paid in any matter relating to the director’s role as director, officer, employee, agent, or when serving as Cortland’s representative with another entity. Each indemnification agreement provides for the prompt advancement of all expenses incurred in a proceeding, subject to the director’s obligation to repay those advances if it is determined later that the director is not entitled to indemnification.
Director Emeritus Compensation. For up to ten years after retirement as a director, an emeritus director of the Bank is paid $600 for each meeting attended, for an annual compensation of $7,200, provided the director emeritus attends at least 75% of Board meetings. Emeritus directors are also entitled to continue participation in the Bank’s health care plan, although the former director is responsible for paying 100% of the Bank’s cost to maintain health care coverage. After the emeritus director’s death, his or her spouse may similarly maintain health care coverage, at the spouse’s cost. Emeritus directors participate in Board meetings, but are not entitled to vote on any matters coming before the Board. In October 2012, the Board elected to discontinue the director emeritus compensation program. There will be no new emeritus director participants in the program, although the former directors currently participating will continue to do so until the end of the ten-year term.
EXECUTIVE COMPENSATION
Cortland Bancorp does not provide any monetary compensation directly to its executive officers.
Instead, the executive officers of Cortland Bancorp are paid by the Bank for services rendered in their capacity as executive officers of Cortland Bancorp and the Bank. For the President and Chief Executive Officer and for the Bank’s four other most highly compensated executive officers, who were serving as executive officers at the end of 2004 and whose total compensation (including salary and bonus, if any) exceeded $100,000, the following table shows all forms of compensation paid or payable to the named executive officers for services in all capacities for the years indicated:
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Name and Principal Position | Year | Salary(1) ($) | All Other Compensation(2) ($) | Total ($) | ||||||||||||
James M. Gasior | 2013 | 224,910 | 89,493 | 314,403 | ||||||||||||
President and Chief Executive Officer of Cortland and the Bank | 2012 | 226,710 | 80,684 | 307,394 | ||||||||||||
Timothy Carney | 2013 | 212,370 | 71,057 | 283,427 | ||||||||||||
Executive Vice President, Chief Operating Officer and Corporate Secretary of Cortland and the Bank | 2012 | 214,170 | 62,847 | 277,017 | ||||||||||||
David J. Lucido | 2013 | 139,725 | 87,900 | 227,625 | ||||||||||||
Senior Vice President and Chief Financial Officer of Cortland and the Bank | 2012 | 139,725 | 78,858 | 218,583 |
SUMMARY COMPENSATION TABLE
Long-Term Compensation | ||||||||||||||||||||||||||||||||
Annual Compensation | Awards | Payouts | ||||||||||||||||||||||||||||||
Long Term | ||||||||||||||||||||||||||||||||
(#) | Incentive | |||||||||||||||||||||||||||||||
($) | ($) | Securities | Plan($) | |||||||||||||||||||||||||||||
Name and | ($) | ($) | Other Annual | Restricted | Underlying | (LTIP) | ($) | |||||||||||||||||||||||||
Principal Position | Year | Salary(1) | Bonus (2) | Compensation | Stock Awards | Options | Payouts | All Other Compensation(4) | ||||||||||||||||||||||||
Rodger W. Platt | ||||||||||||||||||||||||||||||||
President and Chairman of the Board of | 2004 | $ | 249,413.00 | $ | 0.00 | (3 | ) | — | — | — | $ | 15,763.00 | ||||||||||||||||||||
Cortland Bancorp and President, | 2003 | $ | 239,524.00 | $ | 0.00 | (3 | ) | — | — | — | $ | 17,000.00 | ||||||||||||||||||||
Chairman, and CEO of the Bank | 2002 | $ | 238,000.00 | $ | 21,148.00 | (3 | ) | — | — | — | $ | 15,781.00 | ||||||||||||||||||||
Lawrence A. Fantauzzi, Senior Vice President, Chief Financial Officer, | 2004 | $ | 155,730.00 | $ | 0.00 | (3 | ) | — | — | — | $ | 11,681.00 | ||||||||||||||||||||
Controller and Secretary-Treasurer of | 2003 | $ | 150,013.00 | $ | 0.00 | (3 | ) | — | — | — | $ | 8,904.00 | ||||||||||||||||||||
Cortland Bancorp and the Bank | 2002 | $ | 146,563.00 | $ | 10,263.00 | (3 | ) | — | — | — | $ | 8,372.00 | ||||||||||||||||||||
James M. Gasior, Senior Vice President and Chief of Credit Administration and | 2004 | $ | 130,491.00 | $ | 0.00 | (3 | ) | — | — | — | $ | 7,762.00 | ||||||||||||||||||||
Lending of Cortland Bancorp and the | 2003 | $ | 125,274.00 | $ | 0.00 | (3 | ) | — | — | — | $ | 6,817.00 | ||||||||||||||||||||
Bank | 2002 | $ | 122,415.00 | $ | 9,439.00 | (3 | ) | — | — | — | $ | 6,694.00 | ||||||||||||||||||||
Timothy Carney, Senior Vice President and Chief Operations Officer of the Bank | 2004 | $ | 107,985.00 | $ | 0.00 | (3 | ) | — | — | — | $ | 6,106.00 | ||||||||||||||||||||
2003 | $ | 102,795.00 | $ | 0.00 | (3 | ) | — | — | — | $ | 5,518.00 | |||||||||||||||||||||
2002 | $ | 100,280.00 | $ | 8,641.00 | (3 | ) | — | — | — | $ | 5,788.00 | |||||||||||||||||||||
Stephen A. Telego, Sr., Senior Vice President and Director of Human | 2004 | $ | 106,680.00 | $ | 0.00 | (3 | ) | — | — | — | $ | 6,541.00 | ||||||||||||||||||||
Resources and Corporate Administration | 2003 | $ | 106,680.00 | $ | 0.00 | (3 | ) | — | — | — | $ | 6,359.00 | ||||||||||||||||||||
of the Bank | 2002 | $ | 105,000.00 | $ | 8,657.00 | (3 | ) | — | — | — | $ | 6,304.00 |
(1) |
(2) | ||||
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Salary Continuation Agreements and Life Insurance..Cortland Bancorp and the Bank do not have a defined benefit pension plan promising benefits based on final compensation and years of service. However, effective March 1, 2001, the Bank entered into defined benefit salary continuation agreements with eight officers, including the five executive officers identified in the Summary Compensation Table. The agreements are intended to provide the officers with an annual benefit for 15 years of approximately 60% of their estimated final compensation at the normal retirement age of 65, taking into account anticipated benefits payable to the retired officer under the Bank’s 401(k) plan and Social Security benefits. The salary continuation agreements provide for reduced benefits in the case of early termination on or after reaching the early retirement age (age 62 for officers other than Mr. Platt, age 65 for Mr. Platt), or in the case of termination due to disability occurring at any age, but in either case benefits do not become payable until the officer finally reaches the normal retirement age. Benefits are fixed under the salary continuation agreements regardless of whether actual final compensation equals the final compensation estimate established when the Bank entered into the agreements. Payment of benefits is accelerated if the officer’s service with the Bank terminates within one year after a change in control, whether termination is voluntary or involuntary. However, no benefits are payable if the officer’s employment is terminated for cause, if he is removed from office by an order issued under the Federal Deposit Insurance Act, if a receiver is appointed under the Federal Deposit Insurance Act, or if theFDIC enters into an agreement to provide assistance under the Federal Deposit Insurance Act to the Bank.
The salary continuation agreements of five of the eight officers were amended in 2003, including the agreements of Messrs. Carney, Fantauzzi, Gasior, and Telego (but not Mr. Platt), by adoption of Second Amended Salary Continuation Agreements. The purpose of the amendment was to increase the fixed benefit promised by the salary continuation agreements, targeting the fixed benefit at 60% of projected final compensation at normal retirement age (less benefits attributable to the Bank’s contributions to the officer’s 401(k) plan account and the Bank’s portion of the officer’s Social Security benefits).
With a single premium payment of $2.3 million, on December 29, 2000, the Bank purchased insurance policies on the lives of the eight officers who are parties to salary continuation agreements. The Bank expects to recover in full the premium paid by it from the Bank’s portion of the policies’ death benefits. If the officer dies before age 65 in active service to the Bank, instead of salary continuation agreement benefits, the officer’s beneficiaries will receive a life insurance death benefit in a fixed amount. The life insurance benefit will be paid under the terms of a split dollar agreement entered into by the officer and the Bank at the same time as the salary continuation agreements. The Bank will receive the remainder of the life insurance death benefits. If the officer dies after termination of employment, the beneficiaries will receive any payments to which the officer would have been entitled under the salary continuation agreement, but none of the proceeds of the life insurance. With an additional single premium payment of $2.5 million in July 2003, the Bank purchased additional insurance policies to support the enhanced benefits payable under the Second Amended Salary Continuation Agreements and the benefit payable under the new salary continuation agreement for a ninth officer.
The Bank purchased the split dollar life insurance policies as informal financing for the salary continuation agreement payment obligation arising out of an officer’s death before retirement. Although the Bank expects the split dollar life insurance policy benefits to support the payment obligations under the salary continuation agreements, the officers’ contractual entitlements under the agreements are not funded and remain contractual liabilities of the Bank.
The table to follow shows benefits payable under the salary continuation agreements, as well as the life insurance death benefits payable under the associated split dollar agreements, for the executive officers named in the Summary Compensation Table. The Bank has also agreed to pay legal fees incurred by the officers associated with the interpretation, enforcement or defense of their rights under the salary continuation agreements, up to a maximum of $500,000 individually.
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Benefits Payable under the Salary Continuation Agreements (1) | ||||||||||||||||||||||||
Annual benefits payable for 15 years for | ||||||||||||||||||||||||
Lump sum | ||||||||||||||||||||||||
Early termination | Early | payable for | Life | |||||||||||||||||||||
occurring | termination | termination | insurance | |||||||||||||||||||||
in 2005 - | occurring at | within one | death benefit | |||||||||||||||||||||
benefit payable | age 62 | Disability | Termination | year after a | if the | |||||||||||||||||||
at normal | – benefit payable | occurring in 2005 | on or after | change in | executive | |||||||||||||||||||
retirement | at normal | benefit payable | normal | control | dies in active | |||||||||||||||||||
Named executive | age | retirement | at normal | retirement | occurring in | service to the | ||||||||||||||||||
officer | (2)) | age (3) | retirement age | age (4) | 2005 (5) | Bank (6) | ||||||||||||||||||
Rodger W. Platt | $ | 60,000 | $ | n/a | $ | 60,000 | $ | 60,000 | $ | 900,000 | $ | 523,203 | ||||||||||||
Lawrence A. Fantauzzi | $ | 0 | $ | 69,405 | $ | 29,726 | $ | 85,700 | $ | 481,707 | $ | 807,051 | ||||||||||||
James M. Gasior | $ | 0 | $ | 68,045 | $ | 15,231 | $ | 72,100 | $ | 180,694 | $ | 678,977 | ||||||||||||
Stephen A. Telego, Sr | $ | 0 | $ | 65,819 | $ | 20,266 | $ | 74,500 | $ | 292,449 | $ | 701,578 | ||||||||||||
Timothy Carney | $ | 0 | $ | 65,223 | $ | 13,126 | $ | 67,200 | $ | 115,655 | $ | 632,833 |
$6,658 for Mr. Lucido. The | ||||
Group Term Carve-Out PlanAdministration of Cortland’s Compensation Programs.. On December 29, 2000, Cortland’s compensation programs for its executive officers are generally administered by or under the Bank purchased insurance policies on the livesdirection and supervision of 22 officers,Cortland’s Corporate Governance Committee, which is responsible for which the Bank made a single premium payment of approximately $2.8 million. Currently, a corporation can provide its employees with a group term life insurance policy death benefit of up to $50,000 on a tax-free basis. The cost of providing a death benefit exceeding $50,000 is currently taxedreviewing and recommending to the employee as ordinary income. The Group Term Carve-Out Plan replaces the taxable portionindependent members of the group term life insurance plan with tax-free permanent life insurance. Board of Directors for approval the salary, bonus and all other compensation and benefits to be provided to Cortland’s Chief Executive Officer and other executive officers.
The 22 officers coveredCompany’s Chief Executive Officer and human resources manager annually review the compensation and performance of each executive officer of Cortland (other than the Chief Executive Officer, whose compensation and performance is reviewed by the group term carve-out split dollar insurance include Mr. Fantauzzi, Mr. Gasior, Mr. Telego and Mr. Carney.
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Corporate Governance Committee). The Bank andresults of these reviews are communicated to the officers share rightsCorporate Governance Committee, along with recommendations regarding compensation adjustments for the ensuing year. The Corporate Governance Committee either approves the recommended compensation adjustments or makes modifications in its discretion. The Corporate Governance Committee then makes its final recommendations to death benefits payable under the policies. An officer’s beneficiaries are entitled to an aggregate amount equal to –
The Bank receives the remainderindependent members of the death benefits,Board of Directors for approval.
In setting salaries for Cortland’s executive officers, the Corporate Governance Committee and human resources manager use pay ranges that are established based on publicly available market data regarding compensation paid to similarly situated executive officers at other companies. Pay ranges are established and adjusted periodically with reference to market data from publicly available compensation surveys. For each employee position or category within Cortland, the pay range that is established includes a minimum, a mid-point and a maximum salary. Although the Corporate Governance Committee generally does not target a specific point within the pay range for executive officer salaries, the Corporate Governance Committee strives to ensure that its executive officer compensation remains competitive with the compensation provided by other financial institutions with which the Bank expects to be sufficient to recover in full the premium paid by the Bank. No benefits are payable under the plan to any officer whose employment terminates before the age of 62, unless termination is due to disability or unless termination followed within one year after a change in control (as defined in the Group Term Carve-Out Plan). Benefits payable to the officers’ beneficiaries are payable in a lump sum. The officers also have life insurance benefits under the Bank’s group term life insurance programCortland competes for all employees, paying benefits up to $50,000 to the employee’s beneficiaries if the employee dies while employed by the Bank. The Bank’s costs for the insurance purchased on officers’ lives are not reflected in the Summary Compensation Table included elsewhere in this proxy statement.executive talent.
Severance Agreements. To assure itself of the continuity of management and to ensure that management is not unduly distracted by potential changes in control that could affect their financial security, Cortland Bancorp and the BankWe entered into severance agreements with Messrs. Fantauzzi, Gasior, Telego,Carney and Lucido in September 2012, superseding their previous agreements. Messrs. Gasior and Carney and with four other officers in January 2001. The initial term of eachare entitled by their severance agreement is three years, renewing each year forto an additional one-year term unless the Board of Directors gives advance written notice that the contract will not automatically renew. The severance agreement terminates when the officer attains age 65.
The severance agreement provides that the executive is entitled to severance compensationimmediate lump-sum cash payment if a change in control occurs during the termoccurs. The amount of the agreement, payable in a single lump sum. The severance compensation equalspayment is 2.99 times the officer’ssum of their base salary and the most recent annual salary whenbonus. If the executive’s employment terminates involuntarily but without cause or voluntarily because of an adverse change in control occurs, plus the amount of any bonus earned for the last whole calendar year. Under the severance agreements,employment circumstances to which he did not consent in advance, in either case with termination occurring within 24 months after a change in control, means anyhe would also be entitled to continued medical, dental, accident, disability, and life insurance coverage for up to three years. Mr. Lucido’s severance agreement is similar to that of Messrs. Gasior and Carney, except that (x) the change-in-control benefit of Mr. Lucido is 2.00 times compensation and (y) the change-in-control benefit is payable if and only if Mr. Lucido’s employment is terminated within 24 months after a change in control, whether because of involuntary termination by Cortland without cause or voluntary termination by Mr. Lucido because of a material adverse change in employment circumstances to which he did not consent in advance.
The severance agreements of the following events occur –
(a)Merger:executives have numerous common provisions, including a prohibition against competition with Cortland Bancorp merges intoin Trumbull, Portage, or consolidates with another corporation,Mahoning Counties in Ohio for one year after employment termination. The executives are entitled to a payment equal to 1.0 times compensation after employment termination in exchange for the agreement not to compete, unless (x) they also receive or merges another corporation into Cortland Bancorp, withare entitled to receive change-in-control benefits under the result in either case that less than 50%severance agreement or (y) their employment termination occurs after age 65 or on account of retirement. Other common provisions of the total voting powerseverance agreements include these:
four miscellaneous, noncash benefits for employment termination occurring within two years after a change in control, specifically (1) continued club membership for three years, (2) tax and financial planning services for three years, (3) outplacement services for one year, and (4) medical, dental, accident, disability, and life insurance coverage for three years,
legal fee reimbursement of up to $500,000 if the severance agreement is challenged after a change in control,
a three-year term, renewing automatically each year for one additional year, and
the agreements employ the definition of the resulting corporation immediately after the merger or consolidationterm change in control that is held by persons who were Cortland Bancorp shareholders immediately before the merger or consolidation;
(b)Acquisition of Significant Share Ownership: a person or group of persons actingcontained in concert acquires the power to vote 25% or more of Cortland Bancorp’s common shares;
(c)Acquisition of Control of Cortland Bancorp: Cortland Bancorp’s Board of Directors determines (i) that a person has acquired the power to direct Cortland Bancorp’s management or policiesInternal Revenue Code Section 409A and (ii) that this constitutes an acquisition of control for purposes of the Bank Holding Company Act and the Change in Bank Control Act and regulations thereunder. Under the Bank Holding Company Act and the Change in Bank
17implementing regulations.
Control Act, control is conclusively presumed to exist when an acquiror has 25% ownership of a bank holding company, and control may be rebuttably presumed to exist when the acquiror has 10% ownership. Control determinations under the Bank Holding Company Act and the Change in Bank Control Act are highly dependent on the facts of each case and are not necessarily based on stock ownership alone;
(d)Change in Board Composition:during any period of two consecutive years individuals who constituted the Board of Directors of Cortland Bancorp or the Bank at the beginning of the two-year period cease for any reason to constitute at least a majority (but directors first elected during the two-year period who were nominated by vote of at least two-thirds (2/3) of the directors are treated as if they were themselves directors at the beginning of the two-year period); or
(e)Sale of Assets:Cortland Bancorp sells substantially all of its assets to a third party.
If a change in control occurs and the total benefits or payments to which an officerexecutive is entitled as a resultconstitute so-called “excess parachute payments” and are therefore subject to the 20% excise taxestax under Internal Revenue Code Sections 280G and 4999 of the Internal Revenue Code (whether the benefits or payments arise under the severance agreement or under anotherany other compensation plan or arrangement, such as the salary continuation agreements or the Group Term Carve-Out Plan)arrangement), the officer will be entitled towe must also make an additional “gross-up” benefit. Theadjusted gross-up payment would approximate 80% of the amount that would be necessaryto Messrs. Gasior, Carney and Lucido, compensating them for the officer’s net benefits after payment of income, payroll, and excise taxes to equal the total change-in-control benefits promised under the severance agreement, the salary continuation agreement, or other benefit plans and arrangements. Specifically, the payment would include reimbursement of 100% of the excise tax plus 80% of the excess amount necessary to fully reimburse the officeras well as for income, payroll, and excise taxes imposed. The gross-upimposed on that parachute payment would not be deductible by Cortland Bancorp orexcise tax reimbursement payment. A 20% excise tax is imposed under Section 4999 if the Bank. Not partyvalue of an executive’s aggregate change-in-control benefits – calculated according to a severance agreement, Mr. Platt is entitled to a similar gross-up benefit under his Amended Salary Continuation Agreement. Internal Revenue Codeprocedures specified in Section 280G disallows an employer’s compensation deduction for so-called “excess parachute payments,” and Internal Revenue Code Section 4999 imposesaccompanying IRS regulations – equals or exceeds three times the executive’s five-year average taxable compensation. The five-year average is known as the base amount. If the value of the aggregate change-in-control benefits equals or exceeds three times the base amount, a 20% excise tax is imposed on an officer who receives an excess parachute payment. In general,all benefits arising out of a change in control, such as severance benefits and accelerated payment or accelerated vesting under salary continuation agreements or stock options, constitute parachute payments underexceeding the Internal Revenue Code if their value – calculated according to IRS procedures – exceeds the officer’s average taxable compensation over the preceding five years multiplied by three. If the change-in-control benefits exceed that threshold, the officer incurs an excise tax equal to 20% of thebase amount exceeding his or her average taxable compensation over the preceding five years, and the employer forfeits its compensation deduction for those same benefits. The total adjusted gross-up payment to Messrs. Gasior, Carney and Lucido would consist of (1) a payment equal to the initial excise tax and (2) a gross-up payment that is equal to 80% of the difference between (x) the amount that would fully compensate the executives for all income, payroll, and excise taxes imposed on the excise tax reimbursement payment and (y) the excise tax payment itself. The gross-up benefit is not deductible compensation.
Salary Continuation Agreements. Messrs. Gasior, Carney and Lucido are also parties to salary continuation agreements with The Cortland Savings and Banking Company. A copy of the agreement of Mr. Gasior and Mr. Carney – the March 27, 2012 Fifth Amended Salary Continuation Agreement – is included as an exhibit to our Form 10-K Annual Report for the year ended December 31, 2011, which we filed with the SEC on March 29, 2012. A copy of Mr. Lucido’s June 1, 2010 Salary Continuation Agreement is included as an exhibit to the Form 8-K Current Report that we filed with the SEC on June 2, 2010.
The salary continuation agreements provide Messrs. Gasior, Carney and Lucido with an annual normal retirement benefit payable for 15 years, beginning at age 65 and payable regardless of whether the executives continue working past age 65. The annual benefit amount is $109,700 for Mr. Gasior, $112,500 for Mr. Carney and $80,900 for Mr. Lucido. A reduced benefit is payable for termination before attaining age 65, the amount of the reduced benefit being the amount that amortizes over 15 years the liability accrual balance existing when termination occurs. Mr. Lucido’s early termination benefit is also subject to a vesting requirement, vesting in equal 10% increments on the first ten anniversaries of the agreement’s June 1, 2010 effective date, but becoming fully vested if a change in control first occurs. For termination before full vesting, Mr. Lucido’s early termination would be based on the vested accrual balance. If a change in control occurs before attaining age 65, instead of an annual retirement-age benefit Mr. Gasior and Mr. Carney would be entitled to an immediate lump-sum payment equal to the liability accrual balance projected to exist at their age 65 normal retirement age, but the payment would be discounted to present value. After a change in control Mr. Lucido would be entitled to a lump-sum payment equal to the existing liability accrual balance, but only if within 24 months after the change in control Mr. Lucido’s employment termination occurs
involuntarily but without cause or voluntarily on account of an adverse change in employment circumstances to which he did not consent in advance. The salary continuation agreements employ the definition of the term change in control that is contained in Internal Revenue Code Section 409A and implementing regulations.
The salary continuation agreements of Messrs. Gasior and Carney were amended in March of 2012, with the Fifth Amended Salary Continuation Agreements replacing the Fourth Amended agreements. The Fifth Amended agreements eliminated the vesting condition that applied to the early termination benefits exceedingof Messrs. Carney and Gasior. However, the five-year average.Fifth Amended agreements add a promise on their part that for two years after employment termination they will not compete with Cortland. Like the severance agreements, the salary continuation agreements provide for reimbursement of up to $500,000 in legal expenses for the executives if the agreements are challenged after a change in control occurs.
If Messrs. Gasior, Carney and Lucido die before age 65 in active service to the Bank, instead of salary continuation agreement benefits payable to Messrs. Gasior and Carney, their beneficiaries will receive a life insurance death benefit in a fixed amount. As informal financing for the salary continuation agreement payment obligation arising out of an officer’sexecutive’s death before retirement, the Cortland Savings and Banking Company purchased life insurance policies on certain officers’ lives, including Messrs. Gasior and Carney. The life insurance policies are owned by the Bank, but the Bank entered into endorsement split dollar arrangements allowing the executives to designate the beneficiary of a portion of the policy death benefits. The Bank will receive the remainder of the death benefits. Messrs. Gasior’s, Carney’s and Lucido’s split dollar agreements provide that the split dollar life insurance benefit expires when the nonqualified deferred compensation obligation is fully accrued at age 65, even if the executive is still working for the Bank. Although the Bank expects the split dollar life insurance policy benefits to finance the expense for the payment obligations under the salary continuation agreements of Messrs. Gasior, Carney and Lucido, the executives’ contractual entitlements under the agreements are not funded and remain contractual liabilities of the Bank. A copy of the agreement of Mr. Gasior and Mr. Carney – the April 19, 2011 Fourth Amended Split Dollar Agreement and Endorsement – is included as an exhibit to the Form 8-K Current Report that we filed with the SEC on April 22, 2011. A copy of the agreement of Mr. Lucido – the March 27, 2012 Endorsement Split Dollar Agreement – is included as an exhibit to the Form 10-K Annual Report that we filed with the SEC on March 29, 2012.
Group Term Carve Out Plan. In December 2000, the Bank purchased with a single premium payment approximately $2.8 million in life insurance on the lives of 22 officers for the Group Term Carve Out Plan. A number of the original 22 officers have since terminated, but those who remain include Messrs. Gasior and Carney. Under group term split dollar endorsements, the Bank and the executives share the rights to death benefits payable under the life insurance policies. An executive’s beneficiaries are entitled to one of the following death benefit amounts:
Pre-Retirement Death Benefit. If the executive dies before retirement, the death benefit is the lesser of (a) $500,000 or (b) twice the executive’s current annual salary at the time of death, less $50,000; or
Post-Retirement Death Benefit. If the executive was no longer employed by the Bank at the time of death, but had terminated employment terminates(i) within one year after a change in control, Cortland Bancorp must(ii) due to disability, or (iii) on or after the early retirement age of 62, the death benefit is the lesser of (a) $500,000 or (b) the Executive’s most recent salary at the time of death.
The Bank receives the remainder of the life insurance policy death benefits, which should be sufficient to recover in full the Bank’s life insurance investment. No benefits are payable under the plan to any executive whose employment terminates before the age of 62, unless termination is due to disability or unless termination occurs within one year after a change in control. Benefits are payable to the executives’ beneficiaries in a lump sum.
Employees also continue hishave life health and disability insurance coverage forbenefits under the Bank’s group term life insurance program, paying benefits up to three years, alongtwice the executive’s current annual salary at the time of death to the executive’s beneficiaries if the executive dies while employed by the Bank, but limited to $50,000 for participants in the Group Term Carve Out Plan. Messrs. Gasior and Carney are limited to the $50,000 cap, while Mr. Lucido’s benefit is twice his salary.
Profit Sharing Program. If the Bank achieves its profit goal for the fiscal year, the Board may (but is not required to) approve profit sharing. The Bank’s profit goal for profit sharing purposes was not achieved in 2013. As a result, no profit-sharing distributions were made. Should the Bank achieve its profit goal in the future, the Board may (but is not required to) approve profit sharing. If the Board does approve profit sharing, all employees in good standing are eligible.
Employee Benefit Plan 401(k). The Bank maintains a traditional 401(k) retirement plan for employees. In general, the Bank matches participants’ voluntary contributions up to 5% of gross pay. Employee contributions and matching contributions under the plan accumulate tax free until distributions begin at the employee’s normal retirement age. The goal of the 401(k) plan is to enable employees to provide for their own retirement and, combined with fringeSocial Security benefits, such asto ensure that their aggregate post-retirement income is maintained at a percentage of pre-retirement income sufficient to sustain a long-term retirement.
Perquisites and Other Compensation. The Corporate Governance Committee annually reviews the perquisites that the management team receives. In the case of Messrs. Gasior, Carney and Lucido, membership in a golf or social club memberships. The officer will also be entitledis encouraged to out-placement servicesprovide an appropriate forum for one year,entertaining existing customers, developing and promoting new business and generally interacting with influential members of the local community.
IRC Limits. Cortland considers tax and financial planning services for three years after termination. The severance agreements also includeaccounting implications in the design of its compensation programs. Section 162(m) of the IRC places a promiselimit on the parttax deduction for compensation in excess of $1 million paid to the chief executive officer and four most highly compensated executive officers of a corporation in a taxable year. All of the compensation Cortland Bancorp andpaid in 2013 to the Banknamed executive officers is expected to be deductible under Section 162(m). The Executive Compensation Committee retains the flexibility, however, to pay officers’ legal fees associated with the interpretation, enforcement, or defense of their rights under the severance agreements, up to a maximum of $500,000, individually, as adjusted for inflation from time to time.
The term “change in control” is defined in Mr. Platt’s Amended Salary Continuation Agreement in the same way the term is defined in the severance agreements. The Second Amended Salary Continuation Agreements of Messrs. Carney, Fantauzzi, Gasior, and Telego define the term “change in control” to mean any of the transactions or events described in clauses (a) [merger], (b) [acquisition of 25% of Cortland Bancorp’s shares], (d) [change in a majority of the board], and (e) [sale of assets] above.
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CORTLAND BANCORP PERFORMANCE GRAPHCUMULATIVE VALUE OF $100 INVESTMENTComparison of Five-Year Cumulative Total Return Among Cortland Bancorp,The Russell 3000 Index and SNL Securities Index of Banks with Assets Under $500Million. (1)
Period Ending | ||||||||||||||||||||||||
Index | 12/31/1999 | 12/31/2000 | 12/31/2001 | 12/31/2002 | 12/31/2003 | 12/31/2004 | ||||||||||||||||||
Cortland Bancorp | 100.00 | 114.32 | 153.65 | 199.72 | 243.98 | 208.60 | ||||||||||||||||||
Russell 3000 Index | 100.00 | 92.54 | 81.94 | 64.29 | 84.25 | 94.32 | ||||||||||||||||||
SNL Bank Index (under $500 million) | 100.00 | 96.47 | 133.45 | 170.90 | 249.47 | 287.96 |
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of reports filed by our directors and executive officers, all stock ownership reports required to be filed by such persons with the SEC were timely made during 2004.
CORTLAND BANCORP SHARE OWNERSHIP BYDIRECTORS AND EXECUTIVE OFFICERS
The following table lists the ownership of Cortland Bancorp’s common shares by directors and executive officers. Ownership includes direct and indirect (beneficial) ownership, as defined by rules established and promulgated by the SEC. To the best of our knowledge, each person, along with his spouse (if any), has sole voting and investment power unless otherwise noted. Information in this table is based upon 4,188,597 outstanding common shares of Cortland Bancorp as of March 1, 2005. No person or entity owns more than 5% of the outstanding common shares of Cortland Bancorp.
Directors’ | Number of | Percentage of | ||||||||
Name and Address | Position | Shares | Outstanding Shares | |||||||
Jerry A. Carleton | Director | 648.00 | 0.015 | |||||||
4314 Mahoning Avenue NW | ||||||||||
Warren, Ohio 44483 | ||||||||||
David C. Cole | Director | 2,981.747 | 0.071 | |||||||
4111 Elm Road NE | ||||||||||
Warren, Ohio 44483 | ||||||||||
Lawrence A. Fantauzzi | Director, Senior Vice | 11,698.477 | 0.279 | |||||||
194 West Main Street | President, Controller, | |||||||||
Cortland, Ohio 44410 | Chief Financial Officer | |||||||||
and Secretary-Treasurer | ||||||||||
George E. Gessner | Director | 21,566.061 | 0.515 | |||||||
212 West Main Street | ||||||||||
Cortland, Ohio 44410 | ||||||||||
James E. Hoffman, III (2) | Director | 3,309.684 | 0.079 | |||||||
7553 Warren Sharon Road | ||||||||||
Brookfield, Ohio 44403 | ||||||||||
Neil J. Kaback | Director | 180.000 | 0.004 | |||||||
1386 Virginia Trail | ||||||||||
Youngstown, Ohio 44505 | ||||||||||
K. Ray Mahan | Director | 116,389.336 | 2.779 | |||||||
6540 State Route 45 | ||||||||||
Bristolville, Ohio 44402 | ||||||||||
Rodger W. Platt | Chairman, President, and | 29,413.000 | 0.702 | |||||||
194 West Main Street | Chief Executive Officer | |||||||||
Cortland, Ohio 44410 | ||||||||||
Richard B. Thompson | Director | 71,948.984 | 1.718 | |||||||
621 Dana Street NE | ||||||||||
Warren, Ohio 44483 | ||||||||||
Timothy K. Woofter | Director | 53,305.993 | 1.273 | |||||||
6868 State Route 305 West NE | ||||||||||
Hartford, Ohio 44424 |
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Executive Officers’ | Number of | Percentage of | ||||||||
Name and Address | Position | Shares | Outstanding Shares | |||||||
Timothy Carney | Senior Vice President and | 1,597.875 | 0.038 | |||||||
194 West Main Street | Chief Operations Officer | |||||||||
Cortland, Ohio 44410 | ||||||||||
James M. Gasior | Senior Vice President | 5,394.547 | 0.129 | |||||||
194 West Main Street | and Chief Lending | |||||||||
Cortland, Ohio 44410 | Officer | |||||||||
Stephen A. Telego | Senior Vice President | 2,017.531 | (1) | 0.048 | ||||||
194 West Main Street | and Chief of Corporate | |||||||||
Cortland, Ohio 44410 | Administration and | |||||||||
Director of Human | ||||||||||
Resources |
Other Unnamed | ||||||||
Executive Officers’ | Shares | Outstanding Shares | ||||||
Unnamed executive officers as a group (5 persons) | 10,973.816 | 0.262 | ||||||
Grand Total for Directors and Executive Officers, as a Group (18 Persons) | 331,425.051 | 7.912 |
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The Board recommends that shareholders vote “FOR” the amendment to the Code of Regulations
Why Provide Indemnification?
Like every other company, Cortland Bancorp must attract and retain qualified people to serve as directors and officers. Itnon-deductible compensation if it believes doing so is in Cortland Bancorp’s and its shareholders’ best interests that these people be able to exercise judgment on the company’s behalf without exposure to unreasonable personal risk. Increases in directors’ and officers’ litigation risks impair a company’s ability to recruit and retain qualified people. Therefore, Cortland Bancorp believes it is necessary and desirable to provide directors and officers
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with assurance that the burden of liability and litigation expenses arising out of their services will be indemnified to the full extent permitted by the Ohio General Corporation Law.
The proposed form of indemnification agreement included in Appendix A does not alter the standard of care directors owe to Cortland Bancorp and its shareholders under the Ohio General Corporation Law. Indemnification also cannot affect a director’s potential liability under the federal securities laws. Insofar as indemnification for liabilities under the Securities Act of 1933 may be permitted under the articles of incorporation, the regulations and the proposed form of indemnification agreement, it is the opinion of the Securities and Exchange Commission that such indemnification is against public policy and is therefore unenforceable.
Like the corporate law of most if not all states, Ohio’s General Corporation Law allows an Ohio corporation to indemnify its directors and officers against liabilities arising out of their service to the corporation, and it allows the corporation to advance a director’s or officer’s litigation expenses before the litigation is concluded. And like the corporate law of most if not all states, the Ohio General Corporation Law makes clear that a corporation may provide broader indemnification rights to its directors and officers through indemnification provisions in its governing documents – its articles of incorporation and regulations – and through private indemnification contracts. In addition to the limited indemnification powers that exist under the Ohio General Corporation Law, Cortland Bancorp’s regulations provide for indemnification of directors and officers. Cortland Bancorp proposes to enter into indemnification agreements with directors and officers in substantially the form attached to this proxy statement as Appendix A.
The following discussion of the indemnification and other provisions of the Ohio General Corporation Law and Cortland Bancorp’s regulations is merely a summary. The discussion is qualified in its entirety by reference to the Ohio General Corporation Law and Cortland Bancorp’s regulations, including the provisions cited in the discussion. Cortland Bancorp is not aware of any pending or threatened litigation that would lead to claims under the articles of incorporation, the regulations or the form of indemnification agreements.
The Ohio General Corporation Law Provides Limited Statutory Indemnification Rights
Permitted Indemnification in General. Section 1701.13(E) of the Ohio General Corporation Law grants to Ohio corporations the power to indemnify directors within prescribed limits, requiring indemnification in some circumstances. The scope of authorized indemnification is more limited in the context of a shareholder’s lawsuit brought on behalf of the corporation – a so-called “derivative suit” – than it is in other litigation contexts.
Indemnification Is Required If the Director Is Successful on the Merits. Under Ohio General Corporation Law section 1701.13(E)(3), an Ohio corporation must indemnify a director who is wholly successful in a derivative suit or in a non-derivative suit, whether the director is successful on the merits or on another basis.
Indemnification Is Allowed, Even If He Is Not Successful on the Merits. If a director is not successful in the defense of litigation but nevertheless satisfied the standard of conduct established under the Ohio General Corporation Law, indemnification is discretionary. The standard of conduct requires that the director “acted” in good faith and in the manner the director reasonably believed to be in or not opposed to the best interests of the corporationCortland.
TRANSACTIONS WITH RELATED PERSONS
In 2013, executive officers and with respectdirectors of Cortland, members of their immediate families, and corporations or organizations as to any criminal actionwhich directors of Cortland serve as executive officers or proceeding, if he had no reasonable cause to believe his conduct was unlawful. Indemnification also may be ordered by a court even if the director did not satisfy the required standard of conduct for indemnification. The general standard of conduct required of directors is stated in section 1701.59(B)beneficially own more than 10% of the Ohio General Corporation Law –
(B) A director shall performequity interest, were involved in banking transactions with the director’s dutiesBank in the ordinary course of their respective businesses and in compliance with applicable federal and state laws and regulations. It is expected that similar banking transactions will be entered into in the future. Transactions with such persons in connection with the deposit of funds or the Bank acting in an agency capacity have been made on substantially the same terms as a director,those prevailing at the time for comparable transactions with persons not affiliated with Cortland or its subsidiaries. Loans to these persons have been made on substantially the same terms, including the dutiesinterest rate charged and collateral required, as those prevailing at the time for comparable transactions with persons not affiliated with Cortland or its subsidiaries. These loans have been subject to and are presently subject to no more than a membernormal risk of any committeecollectability and present no other unfavorable features. As of the directors upon which the director may serve,
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in good faith, in a manner the director reasonably believes to be in or not opposed to the best interestsdate of this proxy statement, all of the corporation, andloans described in this paragraph were performing in accordance with the care that an ordinarily prudent person in a like position would use under similar circumstances.their original terms.
No Indemnification If the Director Acted Negligently or Improperly Obtained a Personal Benefit. The Ohio General Corporation Law does not authorize indemnification in a derivative suit if the director is held liable to the corporation for his actions. Indemnification in those cases may be ordered by a court, however.ADVISORY VOTE ON EXECUTIVE COMPENSATION
Advancement of Directors’ Expenses. If a director of an Ohio corporation is named as a defendant in litigation, the corporation may advance his expenses if the director agrees to repay the amount advanced if it is ultimately determined that the director did not satisfy the applicable standard of conduct. Expenses includes attorneys’ fees.
Cortland Bancorp’s Governing Documents Also Provide for Indemnification
Code of Regulations. Many corporations provide for indemnification in their governing documents, clarifying and in some cases expanding upon the indemnification provided by statute. Rather than the discretionary indemnification allowed under Ohio General Corporation Law section 1701.13(E), section 5.01 of Cortland Bancorp’s Code of Regulations requires indemnification if the director satisfied the standard of conduct established in section 1701.59(B) of the Ohio General Corporation Law, stating also that a person seeking indemnification is presumed to have acted according to the required standard of conduct. Like section 1701.13(E)(5) of the Ohio General Corporation Law, section 5.05 of Cortland Bancorp’s regulations also allows a director’s litigation expenses to be advanced if the director agrees to repay the amount advanced if it is ultimately determined that the director is not entitled to indemnification.
Indemnification Rights under a Company’s Governing Instruments or and under the Ohio General Corporation Law Are Not Exclusive of Indemnification Rights under Private Agreements. Both section 1701.13(E)(6) of the Ohio General Corporation Law and section 5.06 of Cortland Bancorp’s regulations allow Cortland Bancorp to purchase and maintain insurance and enter into private indemnification agreements to protect directors, officers, employees, and agents from liability, regardless of whether the power to indemnify those individuals exists under the Ohio General Corporation Law.(Proposal Two)
We Propose That Shareholders Approve the Form and Use of Director Indemnification Agreements
Indemnification Rights under the Code of Regulations Can Be Taken Away Without Directors’ and Officers’ Consent. The indemnification protection of Cortland Bancorp’s regulations could become ineffective. For example, if Cortland Bancorp merges into another company, Cortland Bancorp’s regulations would be cancelled. Additionally, the regulations could be amended after a change in control of Cortland Bancorpare subject to delete or limit indemnification rights.
Indemnification Agreements Are Private Contracts; Directors’ and Officers’ Contract Rights Cannot Be Taken Away Unless They Consent. In contrast, if Cortland Bancorp enters into indemnification agreements with directors, the indemnification rights under those agreements would not be eliminated automatically by a merger and they would not be affected by amendment of the articles of incorporation or regulations. Indemnification agreements are private contracts, granting indemnification rights that can be modified or taken away solely with the approval of the parties to the contract, regardless of whether the articles of incorporation and regulations are cancelled or amended.
Why Is the Director Indemnification Agreement Being Submitted to Shareholders for Their Approval? Section 1701.60(A)(1)(b) of the Ohio General Corporation Law provides that a conflict of interest transaction between a corporation and one or more of its directors, including entry into an indemnification contract between a corporation and a director, is not voidable by the corporation simply because of the director’s interest in the transaction if the material facts of the transaction and the director’s interest in the transaction are disclosed to shareholders and if the shareholders nevertheless approve the
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transaction. The minimum shareholder vote that is necessary for this purpose is the affirmative vote of a majority of the shares issued and outstanding, excluding shares held by interested directors. Shareholder approval is not necessary if the transaction or contract is fair to the corporation. Although the Board believes the form of indemnification agreement is fair to Cortland Bancorp – and that shareholder approval is therefore not absolutely necessary under Ohio law – the Board nevertheless believes it is appropriate that shareholders be given the opportunity to vote on this matter. Shareholder approval would make it unnecessary for the directors to prove that the indemnification agreement is fair to Cortland Bancorp if the agreement is ever challenged. For that reason, the Board is submitting this proposal for shareholders’ consideration and vote at the annual meeting.
What Rights Do the Indemnification Agreements Provide? Shareholders should read the form of indemnification agreement included in Appendix B. The agreement requires Cortland Bancorp to indemnify directors, allowing directors to select the most favorable indemnification rights provided under –
The director would have the right to be reimbursed for expenses as they are incurred, but only if he files with Cortland Bancorp an undertaking to repay that amount if it is later determined that he must repay it. No indemnification will be required under the indemnification agreements for actions, fines, or penalties that are specifically excluded from indemnification coverage under applicable law, for claims arising under the short-swing trading prohibition of Section 16(b)14A of the Securities Exchange Act of 1934, or for any proceeding initiated bywhich requires that we provide to our shareholders the director withoutopportunity to vote on the consentcompensation of the board, exceptexecutive officers named in limited cases.the Summary Compensation Table. Added by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010, Section 14A was not applicable to us until 2013.
What If Shareholders Do Not ApproveCommonly known as a say-on-pay vote, the Form and Useshareholder vote required by Section 14A is an advisory vote, which means that the vote is not binding on us, on our Board of Director Indemnification Agreements? The Board has not determined what action, if any, it will take if shareholders do not approve the form and use of director indemnification agreements. Even if shareholders do not approve the agreements, the Board could nevertheless enter into the proposed agreements with directors basedDirectors, or on the Board’s opinionCorporate Governance Committee. The say-on-pay vote is intended to be a vote on the executive officer compensation that the agreements are fair to Cortland Bancorp. Cortland Bancorp may also enter into indemnification agreementsis disclosed in the form attached to this proxy statement in accordance with the disclosure rules of the Securities and Exchange Commission.
The goals of our compensation arrangements are to provide fair and competitive compensation, to provide compensation that promotes the hiring and retention of the most talented personnel, to create incentives for and to reward superior performance, and to align the interests of our officers and employees with the interests of shareholders. We seek to avoid creating incentives for unnecessary or excessive risk-taking, avoid creating incentives for excessive focus on stock price performance instead of fundamental business values, avoid creating incentives to seek short-term benefits at the expense of long-term results, and avoid creating incentives to achieve short-term benefits with long-term risks. With the assistance of the Corporate Governance Committee, the Board believes that Cortland’s compensation arrangements avoid these adverse incentives and instead reward performance promoting our long-term prosperity, although the arrangements are continually evolving and are and will remain subject to ongoing review and evaluation by the board and by the Corporate Governance Committee. We are asking shareholders to vote on the following resolution at the 2014 Annual Meeting:
“RESOLVED, that the compensation paid to the company’s named executive officers, as Appendix Bdisclosed in Cortland Bancorp’s Proxy Statement for the 2014 Annual Meeting in compliance with officers.Item 402 of the Securities and Exchange Commission’s Regulation S-K, including the compensation tables and narrative discussion, is hereby APPROVED.”
Approval of the Form and Use of Director Indemnification Agreements Requires the Affirmative Vote of a Majority Votemajority of the Shares Outstanding
Under section 1701.60(A)(1)(b)votes cast will constitute approval of this proposal to approve the named executive officer compensation disclosed in this proxy statement. An abstention or broker non-vote is not counted as a vote cast, and as a result will have no effect on the vote to approve the proposal. A proxy that does not specify voting instructions will be voted in favor of this non-binding, advisory proposal. Although the results of the Ohio General Corporation Law,say-on-pay vote will not be binding on us, we expect to take the results into account in future compensation decisions.
The Board recommends a vote “FOR” approval of the formcompensation of our named executive officers, as disclosed in this proxy statement.
AMENDMENT OF THE CODE OF REGULATIONS
(Proposal Three)
Proposed amendment of Section 2.02. We are asking shareholders to adopt an amendment of the Code of Regulations. If adopted, the amendment will replace Section 2.02 of the Code of Regulations in its entirety with the following revised Section 2.02:
Section 2.02. Number of Directors and useTerm of indemnification agreements forOffice. The board of directors requiresshall consist of no fewer than nine and no more than 15 directors, the exact number being fixed from time to time within that range either (x) by the Board or (y) at an annual meeting, by the affirmative vote of holders of a majority of the voting power meaningof the corporation represented at the meeting and entitled to vote on such proposal. The board of directors shall be divided into three classes as nearly equal in number as possible. The classes shall serve staggered three-year terms so that one of the three classes stands for election at each annual meeting. At each annual meeting of shareholders, successors of the class of directors whose term then expires shall be elected to hold office for a three-year term. If the number of directors of the corporation increases or decreases, the change in the number of directors shall be apportioned among director classes so that class sizes are maintained as nearly equal in number as possible. No reduction in the number of directors constituting the board of directors may shorten the term of any incumbent director, however.
Our board approved the amended Section 2.02, but the amendment will not be considered adopted and will not become effective unless it also is adopted by shareholders.
Effect of the amendment. The proposed amendment does not affect the right of the board or the right of shareholders to change the board’s size. Both the board itself and shareholders have that right under the current Section 2.02 of the Code of Regulations and they will continue to have that right under revised Section 2.02. The amendment does not affect the provision of Section 2.02 establishing a classified board. That is, the board is and will continue to be divided into three classes, with each class having a number of directors as nearly equal as possible to the other classes. Directors in each class serve a three-year term, and class terms are staggered so that only one of the three classes stands for election each year. A decrease or increase in the number of directors is required to be – and will continue to be required to be – apportioned among the three classes so that class sizes remain as nearly equal as possible, and a reduction in board size will not shorten the term of any serving director.
What the proposed amendment will do is allow the board size to increase beyond 11 directors. Section 2.02 of the Code of Regulations currently does not permit the size of the board to exceed 11 directors, which is the size of our board now, so in order to add a new director we would first have to amend the Code of Regulations to allow for a board of 12 or more directors. The proposed revised Section 2.02 will allow the board size to change within the range of 9 to 15 directors, rather than the very limited range of 9 to 11 that Section 2.02 currently provides for. Although the amendment will allow it, we currently do not plan to increase the board’s size. There are no new director candidates whom we have identified for board service, nor are we actively seeking new candidates.
Reasons for the amendment. The purpose of the amendment is to restore flexibility where there currently is none. With a board that has expanded to eleven directors, neither our board nor our shareholders can add a twelfth unless we first obtain shareholder approval of an amendment of the Code of Regulations, an amendment raising from 11 to 12 or to some greater number the maximum number of directors. Having first to amend the Code of Regulations in order to achieve the goal of adding a director maintains shareholders’ control over the Board’s size. But we believe that it also greatly increases the costs for adding a director, adds a significant amount of delay and uncertainty, and fails to account for the fact that the opportunity to add a qualified and talented candidate to the board might be open for a very limited time only.
Calling and holding a special meeting so that shareholders can consider and vote upon an amendment of the Code of Regulations is an expensive process, involving preparation and mailing of proxy materials, filings with the SEC, administrative details associated with the conduct of the meeting, and preparation of and board approval of the actual amendment. Although considering and voting upon an amendment at a regular annual meeting of shareholders is not as expensive as doing so at a special meeting, the Code of Regulations amendment would add to our costs even at an annual meeting. Moreover, whether the amendment is considered at an annual meeting or at a special meeting, the process of soliciting shareholder approval of an amendment and holding a meeting means months can elapse between the time a new director candidate is identified and the date when the Code of Regulations is finally amended to allow for the board expansion that is necessary, with no certainty during that time that the process will succeed. The delays also put us at a competitive disadvantage. Another company also seeking director talent might be able to offer a board seat to our director candidate without having first to amend its governing documents to make that possible.
We believe that most companies of our size or larger preserve the flexibility to add quickly to the board the director talent that they need to compete and to prosper. We believe amending Section 2.02 will restore that flexibility to Cortland Bancorp as well.
Required vote for adoption of the amendment. Cortland’s Articles of Incorporation state in Article Nine that amendment of the Code of Regulations requires approval of 80% of the outstanding shares if the amendment is not first approved by two thirds of the directors, but that approval of a majority of allthe shares issued and outstanding and with shares heldis sufficient if the amendment is first approved by directors excluded from the calculationtwo thirds of the numberdirectors. The proposed amendment of Section 2.02 has been approved by two thirds of the directors. The proposal to amend Section 2.02 of the Code of Regulations will not be considered adopted and percentagewill not become effective unless it receives the affirmative vote of the holders of shares voting. Asentitled to exercise a group, Cortland Bancorp directors own or control the power to vote approximately 7.435%majority of the voting power of Cortland Bancorp’sthe outstanding shares.shares of Cortland’s common stock. Shareholders may vote “FOR,” “AGAINST,” or “ABSTAIN.” Abstentions and broker non-votes will have the same effect as votes against the form and useproposal to amend the Code of indemnification agreements with directors, because this matter requires the affirmative vote of a specified percentage of all shares outstanding, excluding shares held by directors.Regulations.
The preceding discussion of the indemnification agreement is merely a summary. The discussion is qualified in its entirety by reference to the form of indemnification agreement attached to this proxy statement as Appendix B.
The Board recommends that shareholdersa vote “FOR” approval the proposal to adopt amended Section 2.02 of the form and useCode of director indemnification agreementsRegulations.
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NOTIFICATION OF APPOINTMENTRATIFICATION OF INDEPENDENT AUDITORS
The Audit Committee has appointed the firm of Packer Thomas to serve as(Proposal Four)
Cortland’s independent auditors for Cortland Bancorpauditor for the 2005 fiscal year. They have served as independent auditors for Cortland Bancorp since 1994. Representatives of Packer Thomas planyear ended December 31, 2013, was S.R. Snodgrass, P.C. Subject to shareholder ratification, the audit committee has selected S.R. Snodgrass, P.C. to be in attendanceCortland’s independent auditor for the fiscal year ending December 31, 2014. We expect one or more representatives of S.R. Snodgrass, P.C. to be present at the Annual MeetingMeeting. The representative of S.R. Snodgrass, P.C. will have the opportunity to make a statement if desired, and will be available to answer shareholderrespond to appropriate questions.
Audit Fees of Independent Registered Public Accounting Firm. Fees contracted for the fiscal years ended December 31, 2004 and 2003 wereservices by S. R. Snodgrass, P.C. for professional services rendered for the auditseach of the consolidated2013 fiscal year and the 2012 fiscal year were as follows:
2013 | 2012 | |||||||
Audit Fees (1) | $ | 118,500 | $ | 117,100 | ||||
Audit-Related Fees (2) | 9,107 | 8,754 | ||||||
Tax Fees (3) | 10,743 | 9,938 | ||||||
All Other Fees (4) | 11,369 | 7,731 |
(1) | Audit fees consist of fees for professional services rendered for the audit of the Company’s financial statements, review of financial statements included in the Company’s quarterly reports, and for services normally provided by the independent auditor in connection with statutory and regulatory filings or engagements. |
(2) | Audit-related fees are fees principally for professional services for the audit of the Company’s employee benefit plan. |
(3) | Tax service fees consist of compliance fees for the preparation of original tax returns. |
(4) | All other fees relate to consulting services in relation to strategic planning. |
Pre-Approval of the Company, quarterly reviews of the financial statements included in Cortland Bancorp’s Quarterly Reports on Form 10-Q and services associated with SEC registrations.
Audit Related Feesinclude the financial statement audits of employee benefit plans.
Tax Feesinclude U.S. federal, state and local tax planning and advice, and U.S. federal, state and local tax compliance.
All Other Feesmust be pre-approvedServices Performed by the Audit Committee to ensure that such services do not impair the auditor’s independence.
Fiscal Year | Fiscal Year | |||||||
2004 | 2003 | |||||||
Audit Fees | $ | 92,285 | $ | 77,600 | ||||
Audit Related Fees | $ | 11,897 | $ | 6,200 | ||||
Tax Fees | $ | 11,100 | $ | 15,970 | ||||
All Other Fees | $ | -0- | $ | -0– |
Independent Registered Public Accounting Firm. The Audit Committee pre-approves all audit and non-audit services provided by the independent auditors prior to the engagement of the independent auditors with respect to such services. The Chairman of the Audit Committee has been designated the authority by the Committee to pre-approve the engagement of the independent auditors when the entire Audit Committee is unable to do so. The Chairman must report all such pre-approvals to the entire Audit Committee at its next meeting. All of the next committee meeting.
Auditor Independence. The Audit Committee believes that the non-audit services provided by S.R. Snodgrass, P.C. are compatible with maintaining the auditor’s independence. To the best of Cortland’s knowledge, none of the time devoted by S.R. Snodgrass, P.C. on its engagement to audit Cortland’s financial statements for the year ended December 31, 2013, is attributable to work performed by persons other thanfull-time, permanent employees of S.R. Snodgrass, P.C.
Cortland’s Code of Regulations do not require the submission of the selection of independent auditors to shareholders for approval. However, the Board believes it is appropriate to give shareholders the opportunity to ratify the decision of the Audit Committee to appoint S.R. Snodgrass, P.C. as Cortland’s principal accountant. Neither the Audit Committee nor the Board will be bound by the shareholders’ vote at the Annual Meeting, but may take the shareholders’ vote into account in future determinations regarding the retention of an independent auditor.
Recommendation and Vote
The Board recommends a voteFOR ratification of the appointment of S.R. Snodgrass, P.C. as Cortland’s independent auditor for the fiscal year ending December 31, 2014.
Audit Committee Report for the Fiscal Year Ended December 31, 2013
The Audit Committee has reviewed the audited financial statements for the year ended December 31, 2013, and has discussed the audited financial statements with management. The Audit Committee has also discussed with S.R. Snodgrass, P.C., Cortland’s independent registered public accounting firm, the matters required to be discussed by Statement on Auditing Standards No. 61 (having to do with accounting methods used in the financial statements). The Audit Committee has received the written disclosures and the letter from S.R. Snodgrass, P.C. required by Independence Standards Board Standard No. 1 (having to do with matters that could affect the independent registered accounting firm’s independence), and has discussed with S.R. Snodgrass, P.C. the independent registered accounting firm’s independence. Based on this, the Audit Committee recommended to the Board that Cortland’s audited consolidated financial statements be included in Cortland’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee
David C. Cole, Neil J. Kaback, Richard B. Thompson, and Anthony R. Vross
SUBMISSION OF SHAREHOLDER PROPOSALS
If any Cortland shareholder of the Corporation wishes to submit a proposal to be included in next year’s Proxy Statementproxy statement and acted upon at the annual meeting of the CorporationCortland’s Annual Meeting to be held in 2006,2015, the proposal must be received by the CorporationCortland’s Secretary prior to the close of business on November 17, 2005. December 19, 2014. Upon receipt of a shareholder proposal, Cortland will determine whether or not to include the proposal in the proxy materials in accordance with applicable SEC Rules.
If a shareholder intends to present a proposal at the 20062015 Annual Meeting, but has not sought the inclusion of such proposal in the Corporation’sCortland’s proxy materials, such proposal must be received by the CorporationSecretary of Cortland prior to January 31, 2006,March 4, 2015, or the Corporation’s management proxies for the 20062015 Annual Meeting will be entitled to use their discretionary voting authority, should such proposal then be raised, without any discussion of the matter in Cortland Bancorp’sCortland’s proxy material.
DELIVERY OF PROXY MATERIALS TO SHAREHOLDERS SHARING AN ADDRESS
SEC rules provide for “householding,” which permits the Cortland Bancorp to send a single annual report and a single proxy statement to any household at which two or more different shareholders reside if Cortland Bancorp believes such shareholders are members of the same family or otherwise share the same address or in which one shareholder has multiple accounts, if in each case such shareholder(s) have not opted out of the householding process. Each shareholder would continue to receive a separate notice of any meeting of shareholders and a separate proxy card. The householding procedure reduces the volume of duplicate information that shareholders may receive and reduces the company’sCortland’s expense. Cortland
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Bancorp may institute householding in the future, and will notify those registered shareholders who will be affected by householding at that time.
Many brokerage firms and other holders of record have instituted householding. If your family has one or more “street name” accounts under which you beneficially own common shares of the Cortland, Bancorp, you may have received householding information from your broker, bank, or other nominee in the past. Please contact the holder of record directly if you have any questions, require additional copies of the Form 10-K or proxy statement or our annual report to shareholders for the 20042013 fiscal year, or to revoke your consent to household and, thereby, receive multiple copies once again. These options are available to you at any time.
OTHER BUSINESS
As of the date of this proxy statement, the Board of Directors knows of no other matters that will be presented for action at the Annual Meetingannual meeting other than those discussed in this proxy statement. If any other business should properly arise, the persons acting under the proxies solicited by the Board of Directors have the discretionary authority to vote in accordance with their best judgement.
By Order of the Board of Directors.
Lawrence A. FantauzziSecretary-Treasurer
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Appendix A
CHARTER OF THE NOMINATING AND CORPORATEGOVERNANCE COMMITTEE OF THE BOARD OF DIRECTORS OFCORTLAND BANCORP(Approved by Board of Directors, October 26, 2004)
This Charter (this “Charter”) identifies the purpose, composition, meetings and responsibilities of the Nominating and Corporate Governance Committee (the “Nominating Committee”) of the Board of Directors (the “Board”) of Cortland Bancorp (the “Company”).
PURPOSE
The purpose of the Nominating Committee is to:Timothy Carney
Secretary
April [18], 2014
COMMON | ||||
CORTLAND BANCORP | ||||
Shareholders | ||||
PRELIMINARY | 10:00 a.m. Eastern Daylight Time | |||
COMPOSITION
The members of the Nominating Committee shall serve at the pleasure of the Board. The Nominating Committee shall consist of at least three members of the Board, each of whom shall be appointed by the Board. Each member of the Nominating Committee shall be free of any relationship that, in the opinion of the Board, may interfere with the exercise of his or her independent judgment in carrying out the responsibilities of a director of the Company. Each member of the Nominating Committee must meet the independence requirements of the Nasdaq Stock Market (“Nasdaq”) and any other applicable requirements, standards, laws or regulations relating to the Nominating Committee’s duties and responsibilities.
MEETINGS
The Nominating Committee shall meet at least two times annually and may convene more frequently as circumstances dictate. The Nominating Committee shall be chaired by one of its members appointed by the Board. If the Board does not appoint a Chairperson or if the Chairperson is not present at a meeting, the members of Nominating Committee may designate a Chairperson by majority vote of the full Nominating Committee membership, or those members present, as the case may be. All Nominating Committee members are expected to attend each meeting, in person or via teleconference or other means of electronic communications permitted under applicable law and the Company’s By-laws.
The Nominating Committee shall maintain written minutes of its meetings, which minutes shall be filed with the minutes of the meetings of the Board. The Nominating Committee may act by a majority of its members at a meeting or without a meeting if all members of the Nominating Committee consent to the action in writing or by other means of electronic transmission permitted under applicable law and the Company’s By-laws. The Chairperson of the Nominating Committee shall provide the Board with a report of the Nominating Committee’s activities and proceedings at each regularly scheduled meeting of the Board.
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The Committee may have in attendance at its meetings such members of management, consultants, other directors or others as the Committee may deem necessary or desirable to provide the information the Nominating Committee needs to carry out its duties and responsibilities.
RESPONSIBILITIES
The Nominating Committee shall have the authority to undertake the specific responsibilities outlined in this Charter and to undertake such other responsibilities as the Board may prescribe from time to time.
A.Board and Committee Membership:
The following are the principal duties and responsibilities of the Nominating Committee with respect to membership on the Board and committees of the Board:
VOTER CONTROL NUMBER: | ||||
PROXY NUMBER: | ||||
ACCOUNT NUMBER: SHARES: | ||||
NUMBER OF PERSONS ATTENDING |
You may vote by: | ||||
B.Corporate Governance:
The following are the principal duties and responsibilities of the Nominating Committee with respect to corporate governance matters and practices:
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GENERAL
The Nominating Committee has the authority, to the extent it deems necessary or appropriate, to retain one or more consultants or search firms to assist in the identification of director nominees. The Nominating Committee shall have sole authority to retain and terminate any such consultant or search firm, including sole authority to approve the consultant’s or search firm’s fees and other retention terms. The Nominating Committee also has the authority, to the extent it deems necessary or appropriate, to retain other advisors, including legal advisors. The Company will provide for appropriate funding, as determined by the Nominating Committee, for payment of compensation to any consultants, search firms or other advisors retained by the Nominating Committee.
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Appendix B
Indemnification Agreement
This Indemnification Agreement (this “Agreement”) is made as of this ___day of ___, ___, by and between Cortland Bancorp, an Ohio corporation (the “Corporation”), and ______, a director, officer, employee, agent, or representative (as hereinafter defined) of the Corporation (the “Indemnitee”).
Recitals:
A. The Corporation and the Indemnitee are each aware of the exposure to litigation that officers, directors, employees, agents, and representatives of the Corporation have as they exercise their duties to the Corporation,
B. The Corporation and the Indemnitee are also aware of conditions in the insurance industry that have affected and may continue to affect the Corporation’s ability to obtain appropriate liability insurance on an economically acceptable basis,
C. The Corporation desires to continue to benefit from the services of highly qualified, experienced, and otherwise competent persons such as the Indemnitee, and
D. The Indemnitee desires to serve or to continue to serve the Corporation as a director, officer, employee, or agent or as a director, officer, employee, agent, or trustee of another corporation, joint venture, trust, or other enterprise in which the Corporation has a direct or indirect ownership interest, for so long as the Corporation continues to provide, on an acceptable basis, adequate and reliable indemnification against liabilities and expenses that may be incurred by the Indemnitee.
Now, Therefore, in consideration of the foregoing premises and the mutual covenants herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.
1. Indemnification. Subject to the exclusions contained in Section 9 of this Agreement, the Corporation shall indemnify the Indemnitee with respect to his activities as a director, officer, employee, or agent of the Corporation or as a person who is serving or has served at the request of the Corporation (“representative”) as a director, officer, employee, agent, or trustee of another corporation, joint venture, trust, or other enterprise, domestic or foreign, in which the Corporation has a direct or indirect ownership interest (an “affiliated entity”) against expenses (including, without limitation, attorneys’ and experts’ fees, judgments, fines, and amounts paid or payable in settlement) actually and reasonably incurred by him (“Expenses”) in connection with any claim against Indemnitee that is the subject of any threatened, pending, or completed action, suit, or other type of proceeding, whether civil, criminal, administrative, investigative, or otherwise and whether formal or informal (a “Proceeding”), to which Indemnitee was, is, or is threatened to be made a party by reason of facts that include Indemnitee’s being or having been such a director, officer, employee, agent, or representative, to the extent of the highest and most advantageous to the Indemnitee, as determined by the Indemnitee, of one or any combination of the following –
(a) The benefits provided by the Corporation’s Articles of Incorporation (“Articles”) or Regulations, or the Articles of Incorporation or Bylaws or Regulations of an affiliated entity of which the Indemnitee serves as a representative, in each case as in effect on the date hereof,
(b) The benefits provided by the Corporation’s Articles or Regulations, or the Articles of Incorporation or Bylaws or Regulations of an affiliated entity of which the Indemnitee serves as a representative, in each case as in effect at the time Expenses are incurred by the Indemnitee,
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(c) The benefits allowable under Ohio law in effect at the date hereof or as amended to increase the scope of indemnification,
(d) The benefits allowable under the law of the jurisdiction under which the Corporation exists at the time Expenses are incurred by the Indemnitee,
(e) The benefits available under any liability insurance obtained by the Corporation in effect when a claim is made against Indemnitee,
(f) The benefits available under any liability insurance obtained by the Corporation in effect at the time Expenses are incurred by the Indemnitee, and
(g) Such other benefits as are or may be otherwise available to Indemnitee.
A combination of two or more of the benefits provided by (a) through (g) shall be available to the extent that the Applicable Document (as hereafter defined) does not require that the benefits provided therein be exclusive of other benefits. The document or law providing for the benefits listed in items (a) through (g) above is called the “Applicable Document” in this Agreement. The Corporation hereby undertakes to use its best efforts to assist Indemnitee in all proper and legal ways to obtain the benefits selected by Indemnitee under item (a) through (g) above.
For purposes of this Agreement, references to “other enterprises” shall include employee benefit plans for employees of the Corporation or of any affiliated entity, without regard to ownership of such plans; references to “fines” shall include any excise taxes assessed on the Indemnitee with respect to any employee benefit plan; references to “serving at the request of the Corporation” shall include any service as a director, officer, employee, or agent of the Corporation that imposes duties on or involves services by the Indemnitee with respect to an employee benefit plan, its participants, or beneficiaries; references to the masculine shall include the feminine; references to the singular shall include the plural andvice versa; and if the Indemnitee acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan, he shall be deemed to have acted in a manner consistent with the standards required for indemnification by the Corporation under the Applicable Documents.
2. Insurance. The Corporation shall maintain liability insurance for so long as Indemnitee’s services are covered hereunder, provided and to the extent that such insurance is available on a basis acceptable to the Corporation. However, the Corporation agrees that the provisions hereof shall remain in effect regardless of whether liability or other insurance coverage is at any time obtained or retained by the Corporation. But payments made to Indemnitee under an insurance policy obtained or retained by the Corporation shall reduce the obligation of the Corporation to make payments hereunder by the amount of the payments made under any such insurance policy.
3. Payment of Expenses. At Indemnitee’s request, after receipt of written notice under Section 5 hereof and an undertaking in the form of Exhibit 1 attached hereto by or on behalf of Indemnitee to repay such amounts so paid on Indemnitee’s behalf if it shall ultimately be determined under the Applicable Document that Indemnitee is not entitled to be indemnified by the Corporation for such Expenses, the Corporation shall pay the Expenses as and when incurred by Indemnitee. That portion of Expenses representing attorneys’ fees and other costs incurred in defending any proceeding shall be paid by the Corporation within 30 days after the Corporation receives the request and reasonable documentation evidencing the amount and nature of the Expenses, subject to its also having received such a notice and undertaking.
4. Additional Rights. The indemnification provided in this Agreement shall not be exclusive of any other indemnification or right to which Indemnitee may be entitled and shall continue after Indemnitee has ceased to occupy a position as an officer, director, employee, agent, or representative as described in Section 1 above with respect to Proceedings relating to or arising out of Indemnitee’s acts or omissions during his service in such position. The benefits provided to Indemnitee under this Agreement for the Indemnitee’s service as a representative of an affiliated entity shall be payable if and only if and
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only to the extent that reimbursement to Indemnitee by the affiliated entity with which Indemnitee has served as a representative, whether pursuant to agreement, applicable law, articles of incorporation or association, bylaws or regulations of the entity, or insurance maintained by such affiliated entity, is insufficient to compensate Indemnitee for Expenses actually incurred and otherwise payable by the Corporation under this Agreement. Any payments in fact made to or on behalf of the Indemnitee directly or indirectly by the affiliated entity with which Indemnitee served as a representative shall reduce the obligation of the Corporation hereunder.
5. Notice to Corporation. Indemnitee shall provide to the Corporation prompt written notice of any Proceeding brought, threatened, asserted, or commenced against Indemnitee with respect to which Indemnitee may assert a right to indemnification hereunder;provided, however, that failure to provide such notice shall not in any way limit Indemnitee’s rights under this Agreement.
6. Cooperation in Defense and Settlement. Indemnitee shall not make any admission or effect any settlement without the Corporation’s written consent unless Indemnitee shall have determined to undertake his own defense in such matter and has waived the benefits of this Agreement. The Corporation shall not settle any Proceeding to which Indemnitee is a party in a manner that would impose any Expense on Indemnitee without his written consent. Neither Indemnitee nor the Corporation will unreasonably withhold consent to the proposed settlement. Indemnitee and the Corporation shall cooperate to the extent reasonably possible with each other and with the Corporation’s insurers in attempts to defend or settle such Proceeding.
7. Assumption of Defense. Except as otherwise provided below, the Corporation jointly with any other indemnifying party similarly notified may assume Indemnitee’s defense in any Proceeding, with counsel mutually satisfactory to Indemnitee and the Corporation. After notice from the Corporation to Indemnitee of the Corporation’s election to assume such defense, the Corporation will not be liable to Indemnitee under this Agreement for Expenses subsequently incurred by Indemnitee in connection with the defense thereof, other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ counsel in such Proceeding, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at Indemnitee’s expense unless:
(a) The employment of counsel by Indemnitee has been authorized by the Corporation,
(b) Counsel employed by the Corporation initially is unacceptable or later becomes unacceptable to Indemnitee and such unacceptability is reasonable under then existing circumstances,
(c) Indemnitee shall have reasonably concluded that there may be a conflict of interest between Indemnitee and the Corporation (or another party being represented jointly with the Corporation) in the conduct of the defense of such Proceeding, or
(d) The Corporation shall not have employed counsel promptly to assume the defense of such Proceeding,
in each of which cases the fees and expenses of counsel shall be at the expense of the Corporation and subject to payment pursuant to this Agreement. The Corporation shall not be entitled to assume the defense of Indemnitee in any Proceeding brought by or on behalf of the Corporation or as to which Indemnitee shall have made either of the conclusions provided for in clauses (b) or (c) above.
8. Enforcement. If a dispute or controversy arises under this Agreement between Indemnitee and the Corporation with respect to whether the Indemnitee is entitled to indemnification for any Proceeding or for Expenses incurred, then for each such dispute or controversy the Indemnitee may seek to enforce the Agreement through legal action or, at Indemnitee’s sole option and written request, through arbitration. If the Indemnitee requests arbitration, the dispute or controversy shall be submitted by the parties to binding arbitration in Trumbull County, Ohio before a single arbitrator agreeable to both parties;
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provided, however, that indemnification for any claim, issue, or matter in a Proceeding brought against Indemnitee by or in the right of the Corporation and as to which Indemnitee is adjudged liable for negligence or misconduct in the performance of his duty to the Corporation shall be submitted to arbitration only to the extent permitted under the Applicable Document and applicable law then in effect. If the parties cannot agree on a designated arbitrator within 15 days after arbitration is requested in writing by the Indemnitee, the arbitration shall proceed in Trumbull County, Ohio before an arbitrator appointed by the American Arbitration Association. In either case, the arbitration proceeding shall commence promptly under the rules then in effect of that Association. And the arbitrator agreed to by the parties or appointed by that Association shall be an attorney other than an attorney who has been or is associated with a firm having associated with it an attorney who has been retained by or performed services for the Corporation or Indemnitee at any time during the five years preceding commencement of arbitration. The award shall be rendered in such form that judgment may be entered thereon in any court having jurisdiction thereof. The prevailing party shall be entitled to prompt reimbursement of any costs and expenses (including, without limitation, reasonable attorneys’ fees) incurred in connection with such legal action or arbitration;provided, however, that the Indemnitee shall not be required to reimburse the Corporation unless the arbitrator or court resolving the dispute determines that Indemnitee acted in bad faith in bringing the action or arbitration.
9. Exclusions. Notwithstanding the scope of indemnification available to Indemnitees from time to time under any Applicable Document, no indemnification, reimbursement or payment shall be required of the Corporation hereunder with respect to –
(a) Any claim or any part thereof as to which Indemnitee shall have been determined by a court of competent jurisdiction, from which no appeal is or can be taken, by clear and convincing evidence, to have acted with deliberate intent to cause injury to the Corporation or with reckless disregard for the best interests of the Corporation,
(b) Any claim or any part thereof arising out of acts or omissions for which applicable law prohibits elimination of liability,
(c) Any claim or any part thereof arising under Section 16(b) of the Securities Exchange Act of 1934 pursuant to which Indemnitee shall be obligated to pay any penalty, fine, settlement or judgment,
(d) Any obligation of Indemnitee based upon or attributable to the Indemnitee gaining in fact any improper personal benefit, gain, profit, or advantage, or
(e) Any proceeding initiated by Indemnitee without the consent or authorization of the Board of Directors of the Corporation, provided that this exclusion shall not apply with respect to any claims brought by Indemnitee (1) to enforce his rights under this Agreement or (2) in any Proceeding initiated by another person or entity whether or not such claims were brought by Indemnitee against a person or entity who was otherwise a party to such proceeding.
Nothing in this Section 9 shall eliminate or diminish the Corporation’s obligations to advance that portion of Indemnitee’s Expenses representing attorneys’ fees and other costs incurred in defending any proceeding pursuant to Section 3 of this Agreement.
Furthermore, anything herein to the contrary notwithstanding, nothing in this Agreement requires indemnification, reimbursement or payment by the Corporation, and the Indemnitee shall not be entitled to demand indemnification, reimbursement or payment under this Agreement, if and to the extent indemnification, reimbursement, or payment constitutes a “prohibited indemnification payment” within the meaning of Federal Deposit Insurance Corporation Rule 359.1(l)(1) [12 CFR 359.1(l)(1)].
10. Extraordinary Transactions. The Corporation covenants and agrees that in the event of any merger, consolidation, or reorganization in which the Corporation is not the surviving entity, any sale
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of all or substantially all of the assets of the Corporation, or any liquidation of the Corporation (each such event is hereinafter referred to as an “extraordinary transaction”), the Corporation shall –
(a) Have the obligations of the Corporation under this Agreement expressly assumed by the survivor, purchaser, or successor, as the case may be, in such extraordinary transaction, or
(b) Otherwise adequately provide for the satisfaction of the Corporation’s obligations under this Agreement, in a manner acceptable to Indemnitee.
11. No Personal Liability. Indemnitee agrees that neither the directors nor any officer, employee, representative, or agent of the Corporation shall be personally liable for the satisfaction of the Corporation’s obligations under this Agreement, and Indemnitee shall look solely to the assets of the Corporation for satisfaction of any claims hereunder.
12. Severability. If any provision, phrase, or other portion of this Agreement is determined by any court of competent jurisdiction to be invalid, illegal, or unenforceable, in whole or in part, and such determination becomes final, such provision, phrase, or other portion shall be deemed to be severed or limited, but only to the extent required to render the remaining provisions and portions of the Agreement enforceable, and the Agreement as thus amended shall be enforced to give effect to the intention of the parties insofar as that is possible.
13. Subrogation. If any payments are made under this Agreement, the Corporation shall be subrogated to the extent thereof to all rights to indemnification or reimbursement against any insurer or other entity or person vested in the Indemnitee, who shall execute all instruments and take all other actions as shall be reasonably necessary for the Corporation to enforce such rights.
14. Governing Law. The parties hereto agree that this Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Ohio.
15. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following addresses or to such other address as either party may designate by like notice. If to the Corporation, notice shall be given to the board of directors, Cortland Bancorp, 194 W. Main Street, P.O. Box 98, Cortland, Ohio 44410-1466, or to such other or additional person or persons as the Corporation shall have designated to the Indemnitee in writing. If to the Indemnitee, notice shall be given to the Indemnitee at the address of the Indemnitee appearing on the Corporation’s records, or to such other or additional person or persons as the Indemnitee shall have designated to the Corporation in writing.
16. Termination. This Agreement may be terminated by either party upon not less than 60 days’ prior written notice delivered to the other party, but such termination shall not diminish the obligations of the Corporation hereunder with respect to Indemnitee’s activities before the effective date of termination.
17. Amendments and Binding Effect. This Agreement and the rights and duties of Indemnitee and the Corporation hereunder may not be amended, modified, or terminated except by written instrument signed and delivered by the parties hereto. This Agreement is binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, and assigns.
In Witness Whereof, the undersigned have executed this Agreement as of the date first above written.
Cortland Bancorp
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Exhibit 1
Form of UndertakingPROXY - CORTLAND BANCORP
This Undertaking has been entered into by _______(“Indemnitee”) pursuant to an Indemnification Agreement dated as of _______, ___ (the “Indemnification Agreement”), by and between Cortland Bancorp, an Ohio corporation (the “Corporation”), and Indemnitee.
Recitals:
A. Under the Indemnification Agreement, the Corporation has agreed to pay Expenses (within the meaning of the Indemnification Agreement) as and when incurred by Indemnitee in connection with any claim against Indemnitee that is the subject of any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, or investigative, to which Indemnitee was, is, or is threatened to be made a party by reason of facts that include Indemnitee’s being or having been a director, officer, or representative (within the meaning of the Indemnification Agreement) of the Corporation,
B. Such a claim has arisen against Indemnitee and Indemnitee has notified the Corporation thereof in accordance with the terms of Section 5 of the Indemnification Agreement (hereinafter the “Proceeding”), and
C. Indemnitee believes that Indemnitee should prevail in the Proceeding, and it is in the interest of both Indemnitee and the Corporation to defend against the claims against Indemnitee thereunder.
Now, Therefore, Indemnitee hereby agrees that in consideration of the Corporation’s advance payment of Indemnitee’s Expenses incurred before final disposition of the Proceeding, Indemnitee hereby undertakes to reimburse the Corporation for any and all expenses paid by the Corporation on behalf of Indemnitee before final disposition of the Proceeding if the Indemnitee is determined under the Applicable Document (within the meaning of the Indemnification Agreement) to be required to repay such amounts to the Corporation under the Indemnification Agreement and applicable law, provided that if Indemnitee is entitled under the Applicable Document to indemnification for some or a portion of such Expenses, Indemnitee’s obligation to reimburse the Corporation shall only be for those Expenses for which Indemnitee is determined to be required to repay such amounts to the Corporation. Such reimbursement or arrangements for reimbursement by Indemnitee shall be consummated within 90 days after a determination that Indemnitee is required to repay such amounts to the Corporation under the Indemnification Agreement and applicable law.
Further, the Indemnitee agrees to reasonably cooperate with the Corporation concerning such proceeding.
In Witness Whereof, the undersigned has set his hand this ___day of ___, ___.
Indemnitee
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FORM OF PROXYCORTLAND BANCORP
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS.
The undersigned holder(s) of common shares of Cortland Bancorp hereby appoints Timothy K. Ray Mahan,Woofter, Richard B. Thompson and Jerry A. Carleton, or any one ofGeorge E. Gessner as proxies, each with the power to appoint his substitute,and hereby authorizes them with full power of substitution, to serve as my(our) proxy to attend the Annual Meeting of Shareholders of the Cortland Bancorp to be held on Tuesday, April 12, 2005 at 7:00 p.m. at The Cortland Savings and Banking Company, 194 West Main Street, Cortland, Ohio 44410,represent and to vote, as designated below, all of the shares of common sharesstock of Cortland Bancorp which the undersigned is entitled to vote at suchthe Annual Meeting of Shareholders to be held at the Squaw Creek Country Club, 761 Youngstown-Kingsville Road, Vienna, Ohio 44473 on Tuesday, May 27, 2014 at 10:00 a.m. EDT, or any adjournment as follows:
1. | To elect four directors to serve for terms of three years each until the Annual Meeting in 2017 and until their successors are elected and qualified. |
FOR | WITHHOLD | |||||||
¨ | ||||||||
02 | ||||||||
¨ | ¨ | |||||||
¨ | ||||||||
04 | ||||||||
¨ | ¨ |
2. | To approve, on an advisory basis, the executive compensation of Cortland’s named executive officers as described in this proxy statement. |
AGAINST | ¨ | ABSTAIN |
3. | To consider and vote upon amendment of Section 2.02 of Cortland’s Code of Regulations. |
¨ | FOR |
(INSTRUCTIONS: To vote for an individual nominee, place an ‘X’ in the box marked “FOR” following his name. If you prefer not to vote for an individual nominee, place an ‘X’ in the box marked ‘WITHHOLD AUTHORITY’ following his name.)
¨ | ||
To |
AGAINST | ¨ | ABSTAIN |
AGAINST | ¨ | ABSTAIN |
This proxy when properly executed will be voted in the manner directed herein by the undersigned shareholder(s).
SHARES WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, SHARES WILL BE VOTEDIf no direction is made, this proxy will be voted FOR THE ELECTION OF ALL OF THE NOMINEES LISTED IN ITEM (1),the nominees listed in proposal 1 and FOR ITEM (2) AND ITEM (3) AND, AT THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER WHICH PROPERLY COMES BEFORE THE ANNUAL MEETING.
Receiptproposals 2, 3 and 4.Management and the Board recommend a vote FOR each of the accompanying Proxy Statement is acknowledged. Please sign, date, and return this proxy promptly in the enclosed envelope.proposals presented above.
Dated:, 2005
SIGNATURE | DATE | SIGNATURE | DATE |
NOTE: PLEASE DATE PROXY AND SIGN IT EXACTLY AS NAME OR NAMES APPEAR ON THIS CARD. ALL JOINT OWNERS OF SHARES SHOULD SIGN. STATE FULL TITLE WHEN SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC. PLEASE PROMPTLY RETURN SIGNED PROXY IN THE ENCLOSED ENVELOPE.
Please sign exactly as the name appears. Ifexecutor, trustee, etc., give full title. If sharesare registered in two names, both should sign.