CANANDAIGUA NATIONAL CORPORATION |
72 South Main Street |
Canandaigua, NY 14424 |
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February 13, 2008 |
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Dear Fellow Shareholder: |
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You are cordially invited to attend the 2008 Annual Meeting of Shareholders of Canandaigua National Corporation. Our annual meeting will be held in the Community Board Room on the second floor of the Main Office at 72 South Main Street, Canandaigua, NY, on Wednesday, March 12, 2008, at 1:00 p.m. |
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Shareholders will elect four Class 2 Directors for terms of three years. Information about the nominees can be found in the attached proxy statement. |
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Whether or not you presently plan to attend the meeting, please indicate your vote by using the enclosed proxy card. You may withdraw your proxy if you attend the meeting and wish to vote in person. |
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I urge you to vote for the election of all four nominees. |
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/s/ George W. Hamlin, IV |
George W. Hamlin, IV |
President and CEO |
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CANANDAIGUA NATIONAL CORPORATION |
72 South Main Street |
Canandaigua, NY 14424 |
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS |
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TIME | 1:00 p.m., Eastern Standard Time, on Wednesday, March 12, 2008 |
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PLACE | The Canandaigua National Bank and Trust Company |
| 72 South Main Street |
| Canandaigua, NY 14424 |
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ITEMS OF BUSINESS | (1) To elect four Class 2 Directors for a term of three (3) years and until their successors have been elected and qualified. |
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RECORD DATE | Holders of the Common Stock of record at 5:00 p.m., on January 9, 2008, are entitled to vote at the meeting. |
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VOTING | It is important that your shares be represented and voted at the meeting. You can vote your shares by proxy by using the following method: mark, sign, date and promptly return the enclosed proxy card in the postage-paid envelope furnished for that purpose. Any proxy may be revoked in the manner described in the accompanying Proxy Statement at any time prior to its exercise at the Annual Meeting of Shareholders. Any shareholder present at the meeting may withdraw his or her proxy and vote personally on any matter brought before the meeting. |
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February 13, 2008 |
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/s/ Robert G. Sheridan |
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Robert G. Sheridan |
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Secretary |
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TABLE OF CONTENTS | |||
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SHAREHOLDERS ENTITLED TO VOTE AND REVOCATION OF PROXIES | 1 | ||
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VOTING PROCEDURES AND METHOD OF COUNTING VOTES | 1 | ||
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 1 | ||
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PROPOSAL 1 ELECTION OF DIRECTORS |
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BOARD OF DIRECTORS |
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TRANSACTIONS WITH CERTAIN RELATED PERSONS | 5 | ||
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | 5 | ||
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CORPORATE GOVERNANCE |
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COMMITTEES OF THE BOARD OF DIRECTORS |
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DIRECTORS COMPENSATION |
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REPORT OF THE AUDIT COMMITTEE |
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COMPENSATION DISCUSSION AND ANALYSIS |
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THE COMPENSATION COMMITTEE REPORT |
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CANANDAIGUA NATIONAL CORPORATION |
72 South Main Street |
Canandaigua, NY 14424 (585) 394-4260 |
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PROXY STATEMENT Annual Meeting of Shareholders Wednesday, March 12, 2008 |
This Proxy Statement is being mailed to holders of common stock in connection with solicitation of proxies by the Board of Directors of Canandaigua National Corporation (the Corporation") for use at the Annual Meeting of Shareholders to be held Wednesday, March 12, 2008, at 1:00 p.m., at The Canandaigua National Bank and Trust Company, 72 South Main Street, Canandaigua, NY 14424 and any adjournment thereof. Each proxy that is properly executed and returned will be voted at the meeting and, if a choice is specified therein, will be voted in accordance with the specification made. If no choice is specified, it will be voted in favor of the proposals set forth in the notice enclosed with this Proxy Statement. |
SHAREHOLDERS ENTITLED TO VOTE AND REVOCATION OF PROXIES |
Only shareholders of record as of the close of business on January 9, 2008, are entitled to notice of, and to vote at, the Annual Meeting. On that date, there were outstanding and entitled to vote 475,078 shares of common stock. Each share of common stock is entitled to one vote. A quorum will consist of the holders of not less than a majority of the shares entitled to vote, present either in person or by proxy. Any proxy may be revoked by the person giving it at any time prior to its exercise by giving written notice of revocation to Robert G. Sheridan, Secretary, prior to the vote at the meeting, by submitting a proxy with a later date, or by voting in person at the meeting. |
If your shares are registered in your name on the Corporation's stock records, you are considered the shareholder of record with respect to those shares. As the shareholder of record, you have the right to vote your shares in person or by proxy at the Annual Meeting. The Corporation has sent its proxy materials directly to you, including a proxy card for you to use. If you hold shares of common stock through an account with a broker, bank, or other nominee rather than directly in your own name, then your broker, bank, or other nominee is considered the shareholder of record, and you are considered the beneficial owner of these shares. The Corporation has supplied copies of its proxy materials for its 2008 Annual Meeting to the broker, bank, or other nominee holding your shares of record, and they have the responsibility to send these proxy materials to you. As the beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote your shares at the Annual Meeting. The broker, bank, or other nominee that is the shareholder of record for your shares is obligated to provide you with a voting instruction card for you to use for this purpose. |
VOTING PROCEDURES AND METHOD OF COUNTING VOTES |
The holders of a majority in interest of all common stock issued, outstanding and entitled to vote are required to be present in person or to be represented by proxy at the meeting in order to constitute a quorum for transaction of business. Directors are elected by a plurality of the votes cast by shareholders entitled to vote in the election. Proxies indicating abstentions and broker non-votes are counted as present for quorum purposes but are not counted for or against the election of directors. |
This Proxy Statement and the accompanying proxy are being mailed by first-class mail on or about February 18, 2008. All expenses incurred in connection with the solicitation of proxies will be borne by the Corporation. |
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
Set forth below, as of January 9, 2008, is the name and address of each person who owns of record or who is known by the Board of Directors to be the beneficial owner ("beneficial ownership" as used in this Proxy Statement is defined in Rule 13d-3 under the Securities Exchange Act of 1934, the Exchange Act) of more than 5% of the Corporation's outstanding common stock, the number of shares beneficially owned, and the percentage of the Corporation's outstanding common stock so owned. |
| Common Stock | Percentage of Common Stock |
George W. Hamlin, IV, Director, President | 30,093 Shares | 6.33% |
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The Canandaigua National Bank and Trust Company | 45,331 Shares | 9.54% |
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
The following table sets forth, as of January 9, 2008, the amount and percentage of the common stock of the Corporation beneficially owned by each Director and each executive officer. |
Name and Address | Shares of | Options | Total | Total |
Patricia A. Boland, Director | 150 | - | 150 | 0.03% |
Richard C. Fox, Director | 1,921 | - | 1,921 | 0.40% |
Daniel P. Fuller, Director | 655 | - | 655 | 0.14% |
Frank H. Hamlin, III, Director | 1,098 | - | 1,098 | 0.23% |
George W. Hamlin, IV, Director, President and Chief Executive Officer | 19,147 | 10,946 | 30,093 | 6.33% |
Stephen D. Hamlin, Director | 7,009 | - | 7,009 | 1.48% |
Richard P. Miller, Jr., Director | 30 | - | 30 | 0.01% |
Thomas S. Richards, Director | 100 | - | 100 | 0.02% |
Robert G. Sheridan, Director and Secretary | 553 | 4,272 | 4,825 | 1.02% |
Caroline C. Shipley, Director | 563 | - | 563 | 0.12% |
Sue S. Stewart, Director | 120 | - | 120 | 0.03% |
Alan J. Stone, Director | 15,507 | - | 15,507 | 3.26% |
Joseph L. Dugan, Executive Vice President Pittsford, NY | 432 | - | 432 | 0.09% |
Lawrence A. Heilbronner, Executive Vice President and Chief Financial Officer Rochester, NY | 275 | 623 | 898 | 0.19% |
Gregory S. MacKay, Senior Vice President Canandaigua, NY | 394 | 1,746 | 2,140 | 0.45% |
Steven H. Swartout, Esq., Executive Vice President and General Counsel Canandaigua, NY | 396 | 419 | 815 | 0.17% |
The Canandaigua National Bank and Trust Company held in various fiduciary capacities | 45,331 | - | 45,331 | 9.54% |
All Directors and executive officers as a group (15 individuals) and fiduciary capacities | 93,681 | 18,006 | 111,687 | 23.51% |
1 Includes shares held directly, as well as shares held jointly with family members, and shares held in retirement accounts, in a fiduciary capacity, by certain of the individual's family members, or held by trusts of which the individual is a trustee or substantial beneficiary, with respect to which shares the individual may be deemed to have sole or shared voting or investment powers, and shares which may be acquired under option agreements as defined in Rule 13d-3. |
As of January 9, 2008, the Trust Department of The Canandaigua National Bank and Trust Company ("the Bank") held in various fiduciary capacities 156,273 shares or 32.89%, of the outstanding shares. The Trust Department of the Bank has the power to vote 45,331 shares, or 9.54%, of the outstanding shares. These shares are included within the total set forth in the table above. |
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PROPOSAL 1 |
ELECTION OF DIRECTORS |
The number of Directors to be elected at the 2008 Annual Meeting is four. If elected, Class 2 Directors will hold office for three years and until their successors are elected and qualified. The Board of Directors has nominated as Directors, and recommends the election of the four persons listed below as Class 2 Directors. Under the terms of the Stock Purchase Agreement between the Corporation and the shareholders of Genesee Valley Trust Company, nominee Richard C. Fox was elected by the Board of Directors at the July 2007 meeting of the Board of Directors to take office upon consummation of the acquisition of Genesee Valley Trust Company which occurred on January 2, 2008. Nominee Daniel P. Fuller is a member of the present Board and was first elected by the shareholders at the Annual Meeting held in 1996. Nominee Stephen D. Hamlin is a member of the present Board and was first appointed by the Board in 1984. Nominee Thomas S. Richards is a member of the present Board and was first elected by the shareholders at the Annual Meeting held in 2004. Each nominee has consented to be named in this Proxy Statement and to serve if elected. If at the time of the Annual Meeting any of them becomes unavailable for election, the proxies may exercise discretionary authority to vote for substitutes proposed by the Board of Directors. Management has no reason to believe that any substitute nominees will be required. |
The Board of Directors recommends a vote FOR the election of all four nominees. |
INFORMATION ON DIRECTORS AND NOMINEES |
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Incumbent Class 2 Directors - Term Expiring 2008 | ||||
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Name | Age | Corporation | Bank | Principal Occupation |
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Richard C. Fox | 61 | 2008 | 2008 | President, Wendys Restaurants of Rochester, Inc. 1976 to present |
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Daniel P. Fuller | 57 | 1996 | 1996 | President and General Manager, Bristol Mountain Ski Resort December 1984 present; |
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Stephen D. Hamlin | 71 | 1984 | 1973 | Retired Cultural Leader; |
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Thomas S. Richards | 64 | 2004 | 2004 | Corporation Counsel, City of Rochester January 1, 2006 present; |
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Retirement of James S. Fralick from the Board of Directors.
James S. Fralick, the current Board Chairman, and a Class 2 director, has advised the Board of Directors that he will not stand for re-election as a director upon the expiration of his current term at the 2008 Annual Meeting of the Corporation. Mr. Fralicks decision is based upon his desire to spend more time with his family and to pursue charitable and educational interests. The Board of Directors thanks Mr. Fralick for the ten years of leadership and service he has provided to the Corporation.
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Class 1 Directors - Term Expiring 2009 | ||||||
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Name | Age | Corporation | Bank | Principal Occupation | ||
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Frank H. Hamlin, III | 35 | 2004 | 2004 | Of Counsel, Croucher, Jones & Johns, July 2007-present Attorney, June 2002 - 2007 Member, Ontario County Bar Association 2001- present | ||
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George W. Hamlin, IV | 66 | 1984 | 1979 | President, CEO and Trust Officer, The Canandaigua National Bank and Trust Company 1979 - present; Director, Constellation Brands Marvin Sands Performing Arts Center | ||
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Caroline C. Shipley | 68 | 1984 | 1984 | Retired; | ||
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Sue S. Stewart | 65 | 2000 | 2000 | Sr. Vice President and General Counsel, University of Rochester 2003 - present Director, United Way of Greater Rochester Chair and Treasurer, National Center for Education and the Economy | ||
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Class 3 Directors - Term Expiring 2010 | ||||||
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Name | Age | Corporation | Bank | Principal Occupation | ||
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Patricia A. Boland | 72 | 1986 | 1986 | Retired Educator; | ||
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Richard P. Miller, Jr. | 64 | 1998 | 1998 | President, Hartwick College 2003 - present; | ||
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Robert G. Sheridan | 59 | 1992 | 1992 | Executive Vice President and Cashier, The Canandaigua National Bank and Trust Company 2007 - present; Senior Vice President and Cashier, The Canandaigua National Bank and Trust Company 1989 - 2006; | ||
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Alan J. Stone | 66 | 1986 | 1986 | Director, Stone Construction Equipment, Inc. 1969 - present; |
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TRANSACTIONS WITH CERTAIN RELATED PERSONS |
The family relationships between the above-named Directors are as follows: Frank H. Hamlin, III is the son of George W. Hamlin, IV. Stephen D. Hamlin is the first cousin of George W. Hamlin, IV. |
George W. Hamlin, IV is the beneficial owner of a 75 percent interest in Canandaigua Aircraft, LLC which is unaffiliated with Canandaigua National Corporation. From time to time, the Bank charters a plane from Canandaigua Aircraft, LLC for business use by Mr. Hamlin, the Named Executive Officers, and other employees for time-critical business trips that could not easily be accommodated by commercial airline services. In 2007, the Bank paid Canandaigua Aircraft, LLC $25,346 for charter services. Use of the aircraft and payments were approved by our Board of Directors and, based upon a competitive analysis of comparable leased aircraft, our Board of Directors determined that the amounts billed for our use of the aircraft were at or below market rates for the charter of similar aircraft. |
Through an entity controlled by Richard C. Fox, Mr. Fox is the owner and lessor of the Banks Brighton, NY banking office. The lease is triple-net and commenced in 2002 for twenty years plus two five-year renewal options. Rent escalates each five-year period commencing in 2007 based upon a combination of predetermined amounts and the consumer price index (CPI). Total payments made by the Bank to Mr. Foxs entity for the year ended December 31, 2007, were $216,030. |
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Directors and executive officers of the Corporation and their associates are, as they have been in the past, customers of, and have had financial transactions with, the Bank, and additional transactions may be expected to occur in the future between such persons and the Bank or other subsidiaries of the Corporation. Any loans from the Bank to such persons and their associates outstanding at any time since the beginning of 2007 were made, in accordance with Federal Reserve Board Regulation O, in the ordinary course of business of the Bank and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other customers of the Bank, and did not involve more than normal risk of collection or present other unfavorable features. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE |
Section 16(a) of the Securities and Exchange Act of 1934, as amended, requires the Corporation's directors and executive officers, and persons who own more than ten percent of the Corporation's common stock, to file with the Securities and Exchange Commission (SEC) initial reports of ownership and reports of changes in ownership of Common Stock. Executive officers, directors, and greater than ten percent shareholders are required by the rules of the SEC to furnish the Corporation with copies of all Section 16(a) forms they file. To the Corporation's knowledge, based solely on a review of copies of such reports furnished to the Corporation or written representations that no reports were required, the Corporation believes that the filing requirements of Section 16(a) were satisfied by its Directors and Officers. |
CORPORATE GOVERNANCE |
The business of the Corporation, property and affairs are managed under the direction of our Board of Directors. Members of our Board are kept informed of our business through discussions with our President and Chief Executive Officer and other officers, by reviewing reports and other materials provided to them, by visiting our offices and by participating in meetings of the Board and its Committees. The Board of Directors is committed to employing good business practices, transparency in financial reporting and the highest level of corporate governance. |
The Directors of the Corporation and the Directors of the Bank are the same people. The Corporation has an Audit Committee, but does not have standing Compensation or Nominating Committees. These functions are performed by committees of the Board of the Bank. |
The Board of Directors of the Corporation held seven meetings during 2007. The Board of Directors of the Bank held 12 meetings during 2007. No incumbent Director of the Corporation attended fewer than 75% of the aggregate of all the meetings of the Board of Directors and the Committees of which they were members. Directors are encouraged to attend the Annual Meeting of Shareholders. All Directors who were serving at the time of the prior year's annual meeting attended the meeting. |
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COMMITTEES OF THE BOARD OF DIRECTORS |
The following chart shows the composition of the committees of the Board of Directors, the number of meetings held by each committee during 2007, and which directors are independent as defined by applicable listing standards of the Marketplace Rules of the NASDAQ Global Market and the Securities and Exchange Commission. The Audit Committee of the Board is composed exclusively of independent directors. |
Director | Independent | Executive (12 meetings) | Audit/Examining (5 meetings) | Nominating/Corporate Governance (2 meetings) | Compensation (7 meetings) |
Patricia A. Boland | X |
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James S. Fralick | X | Chair |
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Daniel P. Fuller | X | X |
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Frank H. Hamlin, III |
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George W. Hamlin, IV |
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Stephen D. Hamlin | X |
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Richard P. Miller, Jr. | X |
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Thomas S. Richards | X |
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Robert G. Sheridan |
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Caroline C. Shipley | X | X | Chair | X | X |
Sue S. Stewart | X |
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Alan J. Stone | X |
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DIRECTORS COMPENSATION |
For the year 2007, no compensation was paid to members of the Board of Directors of Canandaigua National Corporation. Directors of the Bank are paid an annual cash retainer of $3,500. For the year 2007, the Chairman of the Board of Directors of the Bank was paid in cash at the rate of $1,300 per meeting attended and the remaining members, including employee-directors, were paid in cash at the rate of $1,050 per meeting attended. All fees are paid in cash when earned. |
Name | Total ($) |
Patricia A. Boland | 21,100 |
Richard C. Fox | - |
James F. Fralick | 36,550 |
Daniel P. Fuller | 34,850 |
Frank H. Hamlin, III | 30,500 |
George W. Hamlin, IV | 37,300 |
Stephen D. Hamlin | 25,500 |
Richard P. Miller Jr. | 23,900 |
Thomas S. Richards | 22,250 |
Robert G. Sheridan | 35,500 |
Caroline C. Shipley | 36,150 |
Sue S. Stewart | 17,600 |
Alan J. Stone | 21,800 |
Total | 343,000 |
NOMINATING AND GOVERNANCE COMMITTEE |
The Nominating and Governance Committee consists of six Directors, five of whom are independent under the NASDAQ listing standards, not employees of the Bank, and who are appointed by the Board of Directors each year. The Committee has adopted the independence standard required of NASDAQ listed companies. Members of the Committee are as follows: | |||||||
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| Patricia A. Boland | Richard P. Miller, Jr. | Thomas S. Richards |
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| Sue S. Stewart | Caroline C. Shipley | George W. Hamlin, IV |
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The Nominating and Governance Committee met twice during 2007 to determine personal and professional qualifications for Board of Director candidates. A current copy of the Charter of the Nominating and Governance Committee is available for review on the Corporations website at www.cnbank.com. The Committee reviews the qualifications of and interviews candidates for Director and makes recommendations to the Board of Directors. In its deliberations, the Nominating and Governance Committee considers the skills represented among the existing Board members and identifies any particular qualifications that might be sought in new Directors for the purpose of augmenting the skills and experience represented on the Board, all in the context of the perceived needs of the Board at that time. | |||||||
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In addition, the Nominating and Governance Committee will consider nominations submitted by shareholders. Any shareholder wishing to make such a nomination should submit it to the Secretary of the Corporation. Notice of intention to make any nominations, other than by the Board of Directors, must be made in writing and must be received by the Secretary of the Corporation no less than twenty (20) days prior to any meeting of shareholders called for the election of Directors. Such notification should contain the following information to the extent known to the notifying shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the total number of shares of capital stock of the Corporation that will be voted for each proposed nominee; and (d) the number of shares of common stock of the Corporation owned by the notifying shareholder. The Nominating and Governance Committee will evaluate shareholder nominees for the Board in the same manner as nominees proposed by management. | |||||||
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Shareholders, and other interested parties, may communicate with the Board of Directors by sending such communications to the attention of Robert G. Sheridan, Secretary, who will forward all such communications to the Board of Directors. | |||||||
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AUDIT COMMITTEE | |||||||
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The Audit Committee consists of four Directors who are not employees of the Bank and who are appointed annually by the Board of Directors. Members of the Committee are: | |||||||
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Patricia A. Boland | Caroline C. Shipley | Stephen D. Hamlin | Thomas S. Richards | ||||
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The Audit Committee met five times during 2007 to supervise external audit, internal audit, and compliance activities of the Bank. The function of the Committee is to make or cause to be made suitable examinations every year and to ensure that the Bank's activities are being conducted in accordance with the law and the banking rules and regulations established by the Comptroller of the Currency, other regulatory and supervisory authorities, and in conformance with established policy. The Committee works directly with the internal auditor to review audit plans, staffing, and the results of individual audits. At least annually, the Committee meets in executive session independently with both the internal and external auditors. In addition, the Audit Committee retains the services of a reputable independent registered public accounting firm. The Committee receives and reviews the reports of the independent registered public accounting firm and presents them to the Board of Directors with comments and recommendations. At least once during each twelve-month period, this Committee makes audits of the Trust Department or causes audits to be made and ascertains whether an adequate review of the assets in each trust has been made. | |||||||
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REPORT OF THE AUDIT COMMITTEE | |||||||
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Financial Statement Audit: | $ | 219,500 |
| $ | 233,000 |
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All other fees: |
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Audit related fees | $ | - |
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Other non-audit fees - income tax compliance | $ | 30,445 |
| $ | 26,800 |
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- other tax services | $ | 28,380 |
| $ | 4,130 |
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Audit Committee Financial Expert: The Corporation's Board of Directors does not have a "financial expert" serving on its Audit Committee. It is the opinion of the Board of Directors that the cumulative experience of the Directors serving on the Audit Committee is adequate to provide appropriate oversight of the audit functions. |
COMPENSATION COMMITTEE |
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The Compensation Committee consists of five Directors who are not employees of the Bank and who are appointed by the Board of Directors each year. The Chief Executive Officer is a non-voting, ex-officio member of the Committee. The Compensation Committee has a Charter. A current copy of the Charter of the Compensation Committee is available for review on the Corporations website at www.cnbank.com. |
The Compensation Committee met seven times during 2007 to perform annual reviews of executive officers' performance. Based on the Committee's reviews, recommendations on executive officers' titles and salaries for the upcoming year are made to the Board of Directors for approval. |
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COMPENSATION DISCUSSION AND ANALYSIS |
The Compensation Committee is responsible for determining and recommending to the full Board the compensation of the Corporation's executive officers, including the executive officers identified in the Summary Compensation Tables and other tables on the following pages of this Proxy Statement. Through its work, the Compensation Committee endeavors to maintain executive compensation that is fair, reasonable, and consistent with the Corporation's size and the compensation practices of the financial services industry. The goal of the Committee is to attract, develop and retain high caliber executives who are capable of optimizing the Corporation's performance for the benefit of its shareholders while maintaining the philosophy of Community Banking. The Chief Executive Officer, Chief Financial Officer, and Director of Human Resources each provide information and analysis to the Compensation Committee that is used in determining compensation of the executive officers. |
The Committee's considerations consists of, but are not limited to, analysis of the following factors: financial performance of the Corporation, including return on equity, return on assets, growth of the Corporation, and management of assets, liabilities, capital, and risk. In addition, the Compensation Committee conducts a comparison study of the Bank's executive compensation with the executive compensation for comparable positions in similar financial services companies within the Banks peer group. The Banks peer group is generally financial institutions having assets between $1billion and $3billion with trust departments. Compensation Surveys produced by L. R. Weber Associates, Inc., and Mercer Human Resource Consulting, Inc., for financial institutions located in New York State, the Mid-Atlantic region, for all U. S. financial institutions, and for the group of financial institutions having less than $5billion in assets are used as reference material in evaluating the compensation of the Named Executive Officers. In 2005, the Committee engaged the services of L. R. Webber and Associates, Inc., a consultant specializing in financial industry executive compensation, to review the compensation of the executive officers of the Bank and make recommendations to the Compensation Committee. In formulating total compensation, the Committee also considers intangible factors such as: the scope of responsibility of the executive; leadership within the Corporation, the community, and the financial services industry; and, whether the Corporation, under the executive's leadership, has been able to serve worthwhile public purposes while enhancing shareholder value. All of these factors are considered in the context of the market for the Corporation's products and services, and the complexity and difficulty of managing business risks in the prevailing economic conditions and regulatory environment. The analysis is conducted with respect to each of the Named Executive Officers including the Chief Executive Officer. Details regarding the compensation of each of the Named Executive Officers are set forth in the Tables that follow this report. There are no employment contracts, termination of employment agreements, or change in control agreements with the executive officers, except Joseph L. Dugan who has an employment contract that provides that he will be paid six months of salary in the event of involuntary termination of employment from the Bank. Executive officers are required to return cash and equity incentive awards if the relevant performance targets upon which the awards are based are ever restated or otherwise adjusted in a manner that would reduce the size of the award. |
COMPENSATION COMMITTEE REPORT |
The Compensation Committee of the Corporations Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based on the Committees review of and the discussions with management with respect to the Compensation Discussion and Analysis, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2007, for filing with the SEC. |
The foregoing report on executive compensation for 2007 is provided by the following directors, who constitute the Officers' Compensation Committee: |
THE COMPENSATION COMMITTEE |
| Daniel P. Fuller | Alan J. Stone | James S. Fralick |
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| Richard P. Miller, Jr. | Caroline C. Shipley | George W. Hamlin, IV (non-voting) |
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Compensation Committee Interlocks and Insider Participation in Compensation Decisions. |
George W. Hamlin, IV, President and CEO of the Corporation and the Bank, served as a non-voting member of the Compensation Committee during 2007. The non-employee director members of the Compensation Committee meet in executive session, outside the presence of management, to consider and decide upon the compensation of the CEO and other officers. |
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Summary Compensation Table |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Appreciation Awards ($) (1) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |
George W. Hamlin, IV President & CEO | 2007 2006 | 355,472 325,983 | 112,886 101,173 | 8,423 5,547 | 69,130 26,121 | 48,082 41,052 | 593,993 499,876 | |
Lawrence A. Heilbronner Executive Vice President & CFO | 2007 2006 | 176,654 171,392 | 46,583 25,861 | 12,432 (28,495) | 1,076 705 | 29,831 24,547 | 266,576 194,010 | |
Joseph L. Dugan Executive Vice President(2) | 2007 2006 | 162,836 144,178 | 50,166 46,025 | 20,528 (67,627) | 2,113 1,297 | 28,049 24,589 | 263,692 148,462 | |
Gregory S. MacKay Treasurer | 2007 2006 | 143,655 135,474 | 17,068 15,005 | - - | 626 67 | 29,270 28,564 | 190,619 179,110 | |
Robert G. Sheridan Secretary | 2007 2006 | 188,332 182,722 | 60,783 48,920 | 5,925 (9,022) | 7,940 4,564 | 32,293 32,889 | 295,273 260,073 | |
Steven H. Swartout, Esq. Executive Vice President | 2007 2006 | 169,572 149,968 | 28,247 20,807 | 14,754 (24,180) | 1,110 680 | 26,295 25,610 | 239,978 172,885 |
(2) Represents the fair value of stock option and stock incentive award expenses accrued during the year. Negative dollar amounts reflect the net reduction in fair value of the underlying awards during the year associated with the reduction in the market value of the Companys stock during the year. (2) Officer of subsidiary Bank only. |
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| All Other Compensation Detail | |||
Name | Year | Defined Contribution Profit Sharing & (401(k)) Plan ($) | Employee Stock Ownership Plan ($) | Life Insurance ($) | Other ($) |
George W. Hamlin, IV | 2007 2006 | 29,778 29,281 | 2,366 2,234 | 15,938 9,537 | - - |
Lawrence A. Heilbronner | 2007 2006 | 24,724 18,945 | 1,843 1,383 | 3,264 1,250 | - 2,969 |
Joseph L. Dugan | 2007 2006 | 21,516 21,467 | 1,550 1,461 | 4,983 1,661 | - - |
Gregory S. MacKay | 2007 2006 | 21,707 20,850 | 1,457 1,360 | 4,156 4,156 | 1,950 2,198 |
Robert G. Sheridan | 2007 2006 | 26,881 25,628 | 1,965 1,762 | 3,447 3,447 | - 2,052 |
Steven H. Swartout | 2007 2006 | 21,603 18,384 | 1,613 1,338 | 2,578 2,919 | 501 2,969 |
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Base Salary and Cash Bonus: The Base Salary of each of the Named Executive Officers is increased each year by an amount approximating the rate of inflation (CPI-W) for the prior year. Each of the Named Executive Officers has a score card established by management and approved by the Compensation Committee containing individual objectives for the year that forms the basis for the calculation of a potential performance bonus. The numerical score received by each Named Executive Officer for accomplishment of the specific objectives, as reviewed and approved by the Compensation Committee, is multiplied by the Return on Assets for the Corporation for the year with the resulting percentage being used to calculate the bonus. The target performance goal is increased by 2% in each year with a maximum increase to 50% so that the Named Executive Officers with the longest tenure will have approximately 1/3 of annual compensation determined by reference to achievement of specific goals set annually by management and approved by the Board of Directors. Cash Bonuses, if paid, are paid 90% within the first month of the fiscal year and the remaining 10% upon finalization of the audited financial statements of the Corporation. If the initial bonus payment exceeds the finalized total bonus, the Executive Officer is required to repay the excess. |
Defined Contribution Plan: The Bank maintains a Defined Contribution Profit Sharing Plan with a cash or deferred compensation (401(k)) plan covering all employees of the Bank who meet the one-year service eligibility requirement of the plan.
Employee Stock Ownership Plan (ESOP): The Bank maintains an Employee Stock Ownership Plan covering all employees of the Bank.
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Incentive Compensation Awards: The Corporation has a non-qualified incentive stock option plan (1989 Incentive Stock Option Plan) in which five of the Named Executive Officers participate. Awards of Stock Appreciation Rights (SARs) and Phantom Stock Awards (PSAs) are calculated based on a table using Return on Beginning Equity. PSAs are exercisable at the latter of 55 years of age or 15 years of tenure and represent approximately 60% of the annual award of this form of compensation. SARs are exercisable after five years and represent approximately 40% of this form of compensation. |
Grants of Plan-Based Awards (1) |
Name | Grant Date | Estimated Future Award Payout-PSA related (#) | Estimated Future Award Payout-SAR related (#) | Exercise on Base Price of Awards
| Full Grant Date Fair Value of Awards |
George W. Hamlin, IV | 1/1/2007 | 468 | 312 | $340.18 | $ 52,432 |
Lawrence A. Heilbronner | 1/1/2007 | 281 | 187 | $340.18 | $ 31,459 |
Joseph L. Dugan | 1/1/2007 | 281 | 187 | $340.18 | $ 31,459 |
Gregory S. MacKay | n/a | n/a | n/a | n/a | n/a |
Robert G. Sheridan | 1/1/2007 | 281 | 187 | $340.18 | $ 31,459 |
Steven H. Swartout | 1/1/2007 | 281 | 187 | $340.18 | $ 31,459 |
(1) Represents awards granted under the Companys Incentive Stock Plan. |
For additional information regarding awards under the Corporations incentive compensation plans, see note 14 Stock-Based Compensation Plans to the Consolidated Financial Statements in the 2007 Annual Report. |
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Outstanding Equity Awards at Fiscal Year-End |
| Stock - Option Awards | Stock Appreciation Awards (1) | ||||||
Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price ($) | Option Expiration Date (2) | Number of Securities Underlying Unexercised Stock Awards Exercisable | Number of Securities Underlying Unexercised Stock Awards Unexercisable | Stock Award Exercise Price ($) | Stock Award Expiration Date (2) |
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George W. | - | - | - | - | 314 | - | $ 0.00 | n/a |
Hamlin, IV | - | - | - | - | - | 117 | $ 111.94 | n/a |
| 3,784 | - | $ 120.17 | n/a | - | - | - | - |
| - | - | - | - | - | 197 | $129.02 | n/a |
| 1,113 | - | $ 145.73 | n/a | - | - | - | - |
| 1,794 | - | $ 150.28 | n/a | - | - | - | - |
| 1,728 | - | $ 157.64 | n/a | - | - | - | - |
| 1,062 | 708 | $ 171.88 | n/a | - | - | - | - |
| 757 | 504 | $ 293.85 | n/a | - | - | - | - |
| - | - | - | - | 368 | 245 | $360.28 | n/a |
| - | - | - | - | 468 | 312 | $340.18 | n/a |
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Lawrence A. A. | - | - | - | - | - | 94 | $ 0.00 | 4/13/2030 |
Heilbronner | - | - | - | - | - | 35 | $ 111.94 | 4/13/2030 |
| 204 | - | $ 120.17 | 4/13/2030 | - | - | - | - |
| - | - | - | - | - | 59 | $129.02 | 4/13/2030 |
| 207 | 312 | $ 157.64 | 4/13/2030 | - | - | - | - |
| - | 531 | $ 171.88 | 4/13/2030 | - | - | - | - |
| - | 379 | $ 293.85 | 4/13/2030 | - | - | - | - |
| - | - | - | - | - | 368 | $360.28 | 4/13/2030 |
| - | - | - | - | - | 468 | $340.18 | 4/13/2030 |
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Joseph L. | - | - | - | - | - | 188 | $ 0.00 | 12/1/2027 |
Dugan | - | - | - | - | - | 70 | $ 111.94 | 12/1/2027 |
| - | - | - | - | - | 118 | $129.02 | 12/1/2027 |
| - | 621 | $ 157.64 | 12/2/2027 | - | - | - | - |
| - | 1,062 | $ 171.88 | 12/2/2027 | - | - | - | - |
| - | 758 | $ 293.85 | 12/2/2027 | - | - | - | - |
| - | - | - | - | - | 368 | $360.28 | 12/1/2007 |
| - | - | - | - | - | 468 | $340.18 | 4/13/2030 |
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Gregory S. | 669 | - | $ 145.73 | 8/3/2014 | - | - | - | - |
MacKay | 1,077 | - | $ 150.28 | 8/3/2014 | - | - | - | - |
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Robert G. | - | - | - | - | 188 | - | $ 0.00 | 9/11/2013 |
Sheridan | - | - | - | - | - | 70 | $ 111.94 | 9/11/2013 |
| - | - | - | - | - | - | - | - |
| - | - | - | - | - | 118 | $129.02 | 9/11/2013 |
| 643 | - | $ 145.73 | 9/11/2013 | - | - | - | - |
| 1,077 | - | $ 150.28 | 9/11/2013 | - | - | - | - |
| 1,035 | - | $ 157.64 | 9/11/2013 | - | - | - | - |
| 637 | 425 | $ 171.88 | 9/11/2013 | - | - | - | - |
| 455 | 303 | $ 293.85 | 9/11/2013 | - | - | - | - |
| - | - | - | - | 221 | 147 | $360.28 | 9/11/2013 |
| - | - | - | - | 281 | 187 | $340.18 | 9/11/2013 |
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Steven H. | - | - | - | - | - | 94 | $ 0.00 | 10/17/2023 |
Swartout | - | - | - | - | - | 35 | $ 111.94 | 10/17/2023 |
| - | - | - | - | - | 59 | $129.02 | 10/17/2023 |
| 207 | 312 | $ 157.64 | 10/17/2023 | - | - | - | - |
| - | 531 | $ 171.88 | 10/17/2023 | - | - | - | - |
| - | 379 | $ 293.85 | 10/17/2023 | - | - | - | - |
| - | - | - | - | - | 368 | $360.28 | 10/17/2023 |
| - | - | - | - | - | 468 | $340.18 | 10/17/2023 |
(1) Represents Phantom Stock Awards (PSA) and Stock Appreciation Rights (SAR) granted under the Companys Incentive Stock Plan. |
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(2) These awards have no stated expiration date. The date presented is the holders 65th birthday, assumed to be normal retirement date, except in the case of Mr. Hamlin who has passed his 65th birthday. |
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Stock Option Exercises and Stock Options Vested |
| Stock Option Awards | ||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | |
George W. Hamlin, IV | - | - | |
Lawrence A. Heilbronner | - | - | |
Joseph L. Dugan | 414 | 75,572 | |
Gregory S. MacKay | - | - | |
Robert G. Sheridan | 420 | 88,165 | |
Steven H. Swartout | - | - |
Incentive Stock Award (PSA and SAR) Exercises and Incentive Stock Awards Vested |
| Incentive Stock Awards (1) | |||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized upon Vesting ($) |
George W. Hamlin, IV | None | None | 690 | 25,847 |
Lawrence A. Heilbronner | None | None | 207 | 7,754 |
Joseph L. Dugan | None | None | 414 | 15,508 |
Gregory S. MacKay | None | None | None | None |
Robert G. Sheridan | None | None | 414 | 15,508 |
Steven H. Swartout | None | None | 207 | 7,754 |
(1) Value realized upon vesting is calculated using the estimated fair value of the award on the date the awards vested. Since none of these awards vested during the year were exercised, the named executive officer has elected to defer this value until a future exercise date. |
Supplemental Executive Retirement Plans: Determination of the annual allocation of employer contribution to the Banks Defined Contribution Retirement Plan is based primarily on base salary of the individual plan participants. Because the Named Executive Officers do not receive contributions to their profit sharing accounts at the same rate as they would if they were not restricted to base salary increases approximating the rate of inflation (CPI-W) for the prior year, or capped by the Internal Revenue Code, a Supplemental Executive Retirement Plan is provided. |
SERP 1 is an unfunded, nonqualified, deferred compensation plan that accrues to the participant an amount equal to what would have been payable as an annual profit sharing contribution based on salary if it were not for the cap imposed by IRC §415(c)(1)(A). Accrued amounts are then credited with earnings credit over time based on the performance of the companys profit sharing plan. |
SERP 2 is an unfunded, nonqualified, deferred compensation plan that accrues to the participants an amount equal to the difference between the annual management base salary increase cap percentage and the increase percentage the participant would have received based upon the annual performance appraisal at the participants grade and quintile. Accrued amounts are then credited with earnings credit over time based on the performance of the companys profit sharing plan. |
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Nonqualified Deferred Compensation |
Name | Executive Contributions in 2007 ($) | Registrant Contributions in 2007 ($) | Aggregate Earnings in 2007 ($) | Aggregate Withdrawals/ during 2007 ($) | Aggregate Balance at December 31, 2007 ($) |
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George W. Hamlin, IV | None | 25,741 | 43,389 | None | 335,021 |
Lawrence A. Heilbronner | None | 851 | 225 | None | 2,103 |
Joseph L Dugan | None | 1,554 | 559 | None | 5,058 |
Gregory S. MacKay | None | - | 626 | None | 5,190 |
Robert G. Sheridan | None | 4,385 | 3,555 | None | 30,668 |
Steven H. Swartout | None | 886 | 224 | None | 2,101 |
These plans are non-contributory by the executive and are unfunded by the Company. Amounts included in columns (a) and (b) in the table above, represent accruals for the year, and are included in the column titled Change in Pension Value and Nonqualified Deferred Compensation Earnings in the Summary Compensation Table. |
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS |
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The Audit Committee of the Board of Directors selected KPMG LLP as independent certified public accountants of Canandaigua National Corporation for the year ended December 31, 2007. Representatives of KPMG LLP are expected to be present at the Annual Meeting and to be available to respond to appropriate questions. They will be given the opportunity to make a statement if they so desire. |
SHAREHOLDER PROPOSALS |
To be considered for inclusion in the Corporation's Proxy Statement and form of Proxy relating to the 2009 Annual Meeting of Shareholders, which is anticipated to be held on March 11, 2009, a Shareholder proposal must be received by the Secretary at the address set forth on the first page of this Proxy Statement not later than October 17, 2008. Shareholders intending to submit proposals to be included in the Corporation's Proxy Statement must comply with the provisions of SEC Rule 14a-8. Proposals so presented may be excluded from the proxy solicitation materials if they fail to meet the criteria established under the Exchange Act. |
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OTHER MATTERS |
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The Board of Directors knows of no other matters to be brought before the 2008 Annual Meeting of Shareholders. However, if other matters should come before the meeting, it is the intention of each person named in the Proxy to vote it in accordance with his or her judgment on such matters. |
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To the extent permitted under the rules of the Securities and Exchange Commission, the information presented in this Proxy Statement under the captions "Report of the Audit Committee and Compensation Committee Report" shall not be deemed to be "soliciting material," shall not be deemed filed with the Commission, and shall not be incorporated by reference in any filing by the Corporation under the Securities Act of 1933, or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. |
By Order of the Board of Directors |
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/s/ Robert G. Sheridan | |
Robert G. Sheridan |
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Secretary |
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February 13, 2008 |
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