SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[ X ] Filed by the registrant
[ ] Filed by a party other than the registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
[GRAPHIC-LOGO]
[ADIRONDACK FINANCIAL SERVICES BANCORP, INC. LETTERHEAD]
September 4, 1998
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Adirondack
Financial Services Bancorp, Inc.(the "Company"), we cordially invite you to
attend a Special Meeting of Stockholders of the Company. The meeting will be
held at 3:15 p.m., New York time, on October 7, 1998 at the main office of the
Company located at 52 North Main Street, Gloversville, New York 12078.
An important aspect of the meeting process is the stockholder vote on
corporate business items. We urge you to exercise your rights as a stockholder
to vote and participate in this process. Stockholders are being asked to
consider and vote upon the proposals to ratify the adoption of the 1998 Stock
Option and Incentive Plan and 1998 Recognition and Retention Plan. The Board of
Directors has carefully considered both of these proposals and believes that
their approval will enhance the ability of the Company to recruit and retain
quality directors and management. Accordingly, your Board of Directors
unanimously recommends that you vote "For" both of the proposals.
We encourage you to attend the meeting in person. Whether or not you
plan to attend, please read the enclosed Proxy Statement and then complete, sign
and date the enclosed proxy card and return it in the accompanying postage
prepaid return envelope as promptly as possible. This will save the Company
additional expense in soliciting proxies and will ensure that your shares are
represented at the meeting.
Sincerely,
/s/Lewis E. Kolar
--------------
Lewis E. Kolar
Chief Executive Officer
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
52 North Main Street
Gloversville, New York 12078-3084
(518) 725-6331
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held on October 7, 1998
Notice is hereby given that a Special Meeting of Stockholders (the
"Special Meeting") of Adirondack Financial Services Bancorp, Inc. (the
"Company") will be held at the main office of the Association located at 52
North Main Street, Gloversville, New York, on October 7, 1998 at 3:15 p.m.,
Gloversville, New York time.
A Proxy Card and Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The ratification of the adoption of the Company's 1998 Stock
Option and Incentive Plan;
2. The ratification of the adoption of the Company's 1998
Recognition and Retention Plan; and
such other business as may properly come before the Special Meeting or any
adjournment thereof. The Board of Directors is not aware of any such other
business.
Any action may be taken on the foregoing proposals at the Meeting on
the date specified above, or on any date or dates to which the Meeting may be
adjourned. Stockholders of record at the close of business on August 20, 1998
are the stockholders entitled to vote at the Meeting and any adjournments
thereof.
You are requested to complete and sign the enclosed form of Proxy which
is solicited on behalf of the Board of Directors, and to mail it promptly in the
enclosed envelope. The Proxy will not be used if you attend and vote at the
Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Richard D. Ruby
---------------
Richard D. Ruby
Chairman of the Board
Gloversville, New York
September 4, 1998
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
RATIFICATION OF THE ADOPTION OF THE COMPANY'S 1998 STOCK OPTION AND INCENTIVE
PLAN AND FOR THE COMPANY'S 1998 RECOGNITION AND RETENTION PLAN BY COMPLETING
THE ENCLOSED PROXY CARD AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID
ENVELOPE AS SOON AS POSSIBLE. YOUR VOTE IS VERY IMPORTANT.
PROXY STATEMENT
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
52 North Main Street
Gloversville, New York 12078
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 7, 1998
PURPOSE OF MEETING
This Proxy Statement is being furnished to you in connection with the
solicitation on behalf of the Board of Directors of Adirondack Financial
Services Bancorp, Inc. (the "Company") of the proxies to be voted at the Special
Meeting of Stockholders (the "Special Meeting") of the Company to be held at the
Company's main office located at 52 North Main Street, Gloversville, New York
12078-3084, on October 7, 1998 at 3:15 p.m., New York time, and at any
adjournments thereof. The accompanying Notice of Meeting and this Proxy
Statement are first being mailed to stockholders on or about September 4, 1998.
Certain information provided herein relates to Gloversville Federal Savings and
Loan Association (the "Association"), a wholly owned subsidiary and predecessor
of the Company. The Special Meeting is being held for the purpose of considering
and ratifying the adoption of the Company's 1998 Stock Option and Incentive Plan
(the "Stock Option Plan") and the Company's 1998 Recognition and Retention Plan
(the "RRP").
Vote Required and Proxy Information
All shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), represented at the Meeting by properly executed proxies
received prior to or at the Meeting, and not revoked, will be voted at the
Meeting in accordance with the instructions thereon. If no instructions are
indicated, properly executed proxies will be voted for the proposals set forth
in this Proxy Statement. The Company does not know of any matters, other than
those described in the Notice of Special Meeting, that are to come before the
Meeting. If any other matters are properly presented at the Meeting for action,
the persons named in the enclosed form of proxy and acting thereunder will have
the discretion to vote on such matters in accordance with their best judgment.
Proposals to ratify the adoption of the Stock Option Plan and the RRP
require the affirmative vote of a majority of shares entitled to vote at the
Meeting. Proxies marked to abstain with respect to any proposal have the same
effect as votes against the proposal. Broker non-votes have no effect on the
vote. One-third of the shares of the Common Stock, present in person or
represented by proxy, shall constitute a quorum for purposes of the Meeting.
Abstentions and broker non-votes are counted for purposes of determining a
quorum.
A proxy given pursuant to the solicitation may be revoked at any time
before it is voted. Proxies may be revoked by: (i) filing with the Secretary of
the Company at or before the Meeting a written notice of revocation bearing a
later date than the proxy, (ii) duly executing a subsequent proxy relating to
the same shares and delivering it to the Secretary of the Company at or before
the Meeting, or (iii) attending the Meeting and voting in person (although
attendance at the Meeting will not in and of itself constitute revocation of a
proxy). Any written notice revoking a proxy should be delivered to Menzo D.
Case, Executive Vice President, Chief Financial Officer and Secretary,
Adirondack Financial Services Bancorp, Inc., 52 North Main Street, Gloversville,
New York 12078.
Voting Securities and Certain Holders Thereof
Stockholders of record as of the close of business on August 20, 1998
will be entitled to one vote for each share of Common Stock then held. As of
that date, the Company had 661,250 shares of Common Stock issued and
outstanding. The following table sets forth information regarding share
ownership of (i) those persons or entities known by management to beneficially
own more than five percent of the Common Stock ("Five Percent Beneficial
Owners"), (ii) each member of the Company's board of directors, (iii) each
officer of the Company and the Association who made in excess of $100,000
(salary and bonus) (the "Named Officers") during the 1997 fiscal year ("fiscal
1997"); and (iv) all directors and executive officers of the Company and the
Association as a group.
Shares Beneficially Owned Percent
Beneficial Owner at August 20, 1998 of Class
---------------- ------------------ --------
Five Percent Beneficial Owners
- ------------------------------
Gloversville Federal Savings and Loan Association Employee Stock 52,900 8.00%
Ownership Plan.
Directors and Named Officers
- ----------------------------
Lewis E. Kolar, Director, President and Chief Executive Officer 7,702 1.16%
Menzo D. Case, Executive Vice-President, 2,488 0.38%
Chief Financial Officer and Secretary
Priscilla J. Bell, Director 4,250 0.64%
Timothy E. Delaney, Director 15,000 2.27%
Donald I. Lee, Director 500 0.08%
Richard D. Ruby, Chairman of the Board 16,000 2.42%
Robert J. Sofarelli, Director 1,420 0.21%
All Directors and Officers as a Group (8 persons) 48,360 7.31%
Director Compensation
The Company does not compensate the directors for serving on the Board
of the Company. Directors of the Association are paid a fee of $950 per meeting
for serving on the Board of Directors, and the Chairman of the Board is paid a
fee of $1,050 per meeting. These fees are paid only to Board members who are not
employees.
For information regarding option and restricted stock awards to be
granted to directors pursuant to the Stock Option Plan and the RRP, subject to
stockholder approval of such plans, see "Proposal I - Ratification of the 1998
Stock Option and Incentive Plan" and "Proposal II - Ratification of the 1998
Recognition and Retention Plan."
2
Executive Compensation
The following table sets forth information concerning the compensation
paid or granted to the Named Officers in fiscal 1997. No executive officer had
compensation (salary and bonus) in excess of $100,000 in fiscal 1997.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation(1) Awards
-------------------------------- --------------------------------------
Restricted
Other Annual Stock Options/ All Other
Name and Principal Position Year Salary Bonus Compensation Award(s) SARs Compensation
($) ($) ($) ($) (#) ($)
--------------------------- ---- ------- ------ ------------ -------- ------- ------------
Lewis E. Kolar 1997 $83,077 $8,400 --- N/A N/A 11,731(2)
- ---------------
(1) In accordance with the revised rules on executive compensation disclosure
adopted by the Securities and Exchange Commission ("SEC"), Summary
Compensation information is excluded for the fiscal years ended December
31, 1995 and 1996.
(2) Pursuant to SEC rules, the table above excludes perquisites and other
personal benefits which do not exceed the lesser of $50,000 or 10% of
salary and bonus.
Change in Control Severance Agreements
The Association has entered into change in control severance agreements
with Messrs. Kolar and Case. The agreements provide for an initial term of 24
months and 12 months, respectively. The agreements provide for extensions of one
year, on each anniversary of the effective date of the agreement, subject to a
formal performance evaluation performed by disinterested members of the Board of
Directors of the Association. The agreement provides for termination for cause
or in certain events specified by OTS regulations.
The agreements provide for a lump sum payment to Mr. Kolar and Mr. Case of
200% and 100% of their respective annual base compensation and the continued
payment for the remaining term of the contract of life and health insurance
coverage maintained by the Association in the event there is a "change in
control" of the Association where employment terminates involuntarily following
such change in control. This termination payment is subject to reduction to the
extent non-deductible for federal income tax purposes. For the purposes of the
agreements, a "change in control" is defined as any event which would require
the filing of an application for acquisition of control or notice of change in
control pursuant to 12 C.F.R. ss. 574.3 or 4 or any successor regulation. Such
events are generally triggered prior to the acquisition of control of 10% of the
Company's Common Stock.
Benefit Plans
General. The Association currently provides insurance benefits to its
employees, including health and life insurance, subject to certain deductibles
and copayments.
Employee Severance Compensation Plan. The Association's Board of Directors
has established the Gloversville Federal Employee Severance Compensation Plan
("Severance Compensation Plan") which will provide certain employees with
severance pay benefits in the event of a change in control of the Association or
the Company. Management personnel with change in control severance agreements
are not eligible to participate in the Severance Compensation Plan. The purpose
of the Severance Compensation Plan is to recognize the valuable services and
contributions of the Association's employees and the uncertainties relating to
continuing employment, reduced employee benefits, management changes and
relocations in the event of a change in control. The Association believes that
the Severance Compensation Plan will assist it in attracting and retaining
highly qualified individuals and reduce the distractions and other adverse
effects on the employees' performance in the event of a change in control. The
Severance Compensation Plan vests in each participant a contractual right to the
benefits such participant is entitled to thereunder. Under the Severance
Compensation Plan, in the event of a change in control as defined in the
Severance Compensation Plan, eligible employees who are terminated or who
voluntarily terminate employment (for reasons specified under the Severance
Compensation Plan), within one year of a change in control will be entitled to
receive a severance payment. Payments pursuant to the Severance Compensation
Plan are equal to the product of two weeks Annual Compensation (as defined)
times the number of years of service up to a maximum of twelve years in the case
of officers or seven years
3
in the case of other employees. Such payments may tend to discourage takeover
attempts by increasing costs to be incurred by the Association in the event of a
takeover. As it is management's belief that substantially all of the
Association's employees would be retained in the event of a change in control,
and that any amount payable under the Severance Compensation Plan, therefore,
would be considerably less than the total amount that could possibly be paid
under the Severance Compensation Plan, management cannot estimate the potential
effect of the Severance Compensation Plan. The Severance Compensation Plan may
be amended or terminated by the Board of Directors by a majority vote at any
time prior to a change in control but may not be amended or terminated
thereafter.
Employee Stock Ownership Plan. The Association and the Company have
adopted an ESOP for the benefit of employees of Gloversville Federal Savings and
Loan Association. The ESOP was funded with a loan from the Company in the
original amount of $529,000 (8% of the proceeds from the Company's initial
public offering). The ESOP is also designed to meet the requirements of an
employee stock ownership plan as described at Section 4975(e)(7) of the Code and
Section 407(d)(6) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
All employees of the Association are eligible to participate in the ESOP
after they attain age 21 and complete one year of service. The Association's
contribution to the ESOP is allocated among participants on the basis of their
relative compensation. Each participant's account is credited with cash and
shares of Company Common Stock based upon compensation earned during the year
with respect to which the contribution is made. Contributions credited to a
participant's account become fully vested upon such participant's completing
five years of service. Credit is given for prior years of service for vesting
purposes. ESOP participants are entitled to receive distributions from their
ESOP accounts only upon termination of service. Distributions are made in cash
and in whole shares of the Company's Common Stock. Fractional shares will be
paid in cash. Participants do not incur a tax liability until a distribution is
made.
Each participating employee is entitled to instruct the trustee of the
ESOP as to how to vote the shares allocated to his or her account. The trustee
will not be affiliated with the Company or the Association.
The ESOP may be amended by the Board of Directors, except that no
amendment may be made which would reduce the interest of any participant in the
ESOP trust fund or divert any of the assets of the ESOP trust fund for purposes
other than the benefit of participants or their beneficiaries.
401(k) Savings Plan. The Association has a qualified, tax-exempt savings
plan with a cash or deferred feature qualifying under Section 401(k) (the
"401(k) Plan") of the Internal Revenue Code of 1986, as amended (the "Code").
All employees who have completed the service requirement, during which they
worked at least 1,000 hours, are eligible to participate. The 401(k) Plan has
been amended to permit self-directed investments by participants into Company
stock.
Stock Option and Incentive Plan. The Stock Option Plan was adopted by the
Board of Directors, subject to ratification by stockholders of the Meeting. See
"Proposal I - Ratification of the 1998 Stock Option Incentive Plan."
Recognition and Retention Plan. The Recognition and Retention Plan was
adopted by the Board of Directors, subject to ratification by stockholders of
the Meeting. See "Proposal II - Ratification of the 1998 Recognition and
Retention Plan."
Certain Transactions
The Association follows a policy of granting loans to the Association's
directors, officers and employees. The loans to executive officers and directors
are made in the ordinary course of business and on the same terms and conditions
as those of comparable transactions prevailing at the time, in accordance with
the Association's underwriting guidelines and do not involve more than the
normal risk of collectibility or present other unfavorable features; provided
however, that under the Association's current policy, employees are eligible for
a 50 basis point reduction on interest rates on residential mortgage loans.
Loans to all directors and executive officers and their associates, including
outstanding balances and commitments totaled $405,000 at June 30, 1998, which
was 12% of the Association's retained earnings at that date.
4
PROPOSAL I - RATIFICATION OF THE 1998 STOCK OPTION AND INCENTIVE PLAN
General
Establishment and implementation of the Stock Option Plan is subject to
ratification by stockholders. The Stock Option Plan is in compliance with OTS
regulations; however, the OTS has not endorsed or approved the Stock Option Plan
and no written or oral representation to the contrary is made hereby.
The Stock Option Plan has been adopted by the Board of Directors of the
Company, subject to ratification by stockholders at the Meeting. Ratification by
stockholders of the adoption of the Stock Option Plan will ratify the awards
proposed thereunder and as described in "Awards Under the Stock Option Plan"
herein, and will ratify the granting of additional awards pursuant to the
provisions of the Stock Option Plan. Pursuant to the Stock Option Plan, the
Company will reserve for issuance thereunder either from authorized but unissued
shares or from issued shares reacquired and held as treasury shares, 66,125
shares of the Common Stock (10% of the shares issued in the Association's
Conversion). Management may, to the extent practicable and feasible, fund the
Stock Option Plan from issued shares reacquired by the Company in the open
market. To the extent the Company utilizes authorized but unissued Common Stock
to fund the Stock Option Plan, the exercise of stock options will have the
effect of diluting the holdings of persons who own the Common Stock. Assuming
all options under the Stock Option Plan are awarded and exercised through the
use of authorized but unissued Common Stock, current stockholders would be
diluted by approximately 9.1%. Upon ratification of the Stock Option Plan by
stockholders, it is proposed that options to purchase an aggregate of 62,820
shares of Common Stock will be awarded, which will leave available 3,305 shares
for future awards.
The Board of Directors believes that it is appropriate for the Company to
adopt a flexible and comprehensive Stock Option Plan which permits the granting
of a variety of long-term incentive awards to directors, officers and employees
as a means of enhancing and encouraging the recruitment and retention of those
individuals on whom the continued success of the Company most depends. However,
because the awards are granted only to persons affiliated with the Company, the
adoption of the Stock Option Plan could make it more difficult for a third party
to acquire control of the Company and therefore could discourage offers for the
Company's stock that may be viewed by the Company's stockholders to be in their
best interest. In addition, certain provisions included in the Company's
Certificate of Incorporation and Bylaws may discourage potential takeover
attempts, particularly those that have not been negotiated directly with the
Board of Directors of the Company. Included among these provisions are
provisions (i) limiting the voting power of shares held by persons owning 10% or
more of the Common Stock, (ii) requiring a supermajority vote of stockholders
for approval of certain business combinations, (iii) establishing a staggered
Board of Directors, (iv) permitting special meetings of stockholders to be
called only by the Board of Directors and (v) authorizing a class of preferred
stock with terms to be established by the Board of Directors. These provisions
could prevent the sale or merger of the Company even where a majority of the
stockholders approve of such transaction.
In addition, federal regulations prohibit the beneficial ownership of more
than 10% of the stock of a converted savings institution or its Company without
prior approval of the OTS. Federal law and regulations also require OTS approval
prior to the acquisition of "control" (as defined in the OTS regulations) of an
insured institution, including a Company thereof. These regulations could have
the effect of discouraging takeover attempts of the Company.
Attached as Exhibit A to this Proxy Statement is the complete text of the
Stock Option Plan. The principal features of the Stock Option Plan are
summarized below.
Principal Features of the Stock Option Plan
The Stock Option Plan provides for awards in the form of stock options,
stock appreciation rights ("SARs") and limited stock appreciation rights
("LSARs"). Each award shall be on such terms and conditions, consistent with the
Stock Option Plan and applicable OTS regulations, as the committee administering
the Stock Option Plan may determine. Subject to certain exceptions described
herein, awards made under such plan generally vest at a rate of no quicker than
one-fifth of the initial award per year, subject to the participant maintaining
continuous service to the Company or its subsidiaries from the date of grant.
Pursuant to OTS regulations, each non-employee director of the Company and
all non-employee directors of the Company as a group, may not be awarded more
than 5% and 30% of the total shares subject to the Stock Option
5
Plan, respectively. In addition, no individual may be granted awards with
respect to more than 25% of the total shares subject to the Stock Option Plan.
Shares awarded pursuant to the Stock Option Plan may be either authorized
but unissued shares or reacquired shares held by the Company in its treasury.
Any shares subject to an award which expires or is terminated unexercised will
again be available for issuance under the Stock Option Plan or any other plan of
the Company or its subsidiaries. Generally, no award or any right or interest
therein is assignable or transferable except under certain limited exceptions
set forth in the Stock Option Plan.
The Stock Option Plan is administered by the Stock Plan Committee of the
Board of Directors of the Company (the "Stock Plan Committee"), which is
comprised of non-employee directors of the Company. The outside directors of the
Company serve as members of the Stock Plan Committee. Pursuant to the terms of
the Stock Option Plan, any director, officer or employee of the Company or its
affiliates is eligible to participate in the Stock Option Plan. Accordingly,
there are currently 30 persons eligible to participate in the Plan. In granting
awards under the Stock Option Plan, the Stock Plan Committee considers, among
other things, position and years of service, value of the participant's services
to the Company and the Association and the added responsibilities of such
individuals as employees, directors and officers of a public company.
Stock Options
Under the terms of the SOP, the Stock Plan Committee may grant either
"incentive stock options" as defined under Section 422 of the Code or stock
options not intended to qualify as such ("non-qualified stock options").
In general, stock options will not be exercisable after the expiration of
their terms. The term of stock options may not exceed ten years from the date of
grant. Unless otherwise determined by the Stock Plan Committee, in the event a
participant ceases to maintain continuous service (as defined in the Stock
Option Plan) with the Company or one of its affiliates, for any reason
(excluding death, disability and termination for cause), an exercisable stock
option will continue to be exercisable for three months thereafter but in no
event after the expiration date of the option. Unless otherwise provided by the
Stock Plan Committee, in the event that continuous service terminates as a
result of the disability of a participant, all options not then exercisable
shall become exercisable in full and remain exercisable for a period of three
months from the date of such disability. Unless otherwise provided by the Stock
Plan Committee, in the event of death of a participant, all options not then
exercisable shall become exercisable in full. Unless otherwise provided by the
Stock Plan Committee, in the event of the death of a participant during such
service or within the three-month period described above following termination
of service described above, an exercisable option will continue to be
exercisable for one year, to the extent exercisable by the participant upon his
death, but in no event later than ten years after grant. Following the death of
any participant, the Stock Plan Committee may, as an alternative means of
settlement of an option, elect to pay to the holder thereof an amount of cash
equal to the amount by which the market value of the shares covered by the
option on the date of exercise exceeds the exercise price. A stock option will
automatically terminate and will no longer be exercisable as of the date a
participant is notified of termination for cause.
The exercise price for the purchase of shares subject to a stock option at
the date of grant may not be less than 100% of the market value of the shares
covered by the option on that date. The exercise price must be paid in full in
cash or, if permitted by the Stock Plan Committee, shares of Common Stock, or a
combination of both.
The Stock Option Plan provides for the grant of a non-qualified stock
option to purchase 3,306 shares of Common Stock to each director who is not a
full-time employee of the Company, as of the date of stockholder ratification of
the Stock Option Plan. Such options have a term of ten years, are not
transferable, and vest at the rate of 20% per year commencing on the one-year
anniversary of the date of grant. The exercise price per share of such options
shall be equal to the fair market value of the Common Stock on the date of
grant.
Stock Appreciation Rights
The Stock Plan Committee may grant SARs at any time, whether or not the
participant then holds stock options, granting the right to receive the excess
of the market value of the shares represented by the SARs on the date exercised
over the exercise price. SARs generally will be subject to the same terms and
conditions and exercisable to the same extent as stock options, as described
above. Upon the exercise of a SAR, the participant will receive the amount due
in cash or shares, or a combination of both, as determined by the Stock Plan
Committee. SARs may be related to stock
6
options ("tandem SARs"), in which case the exercise of one will reduce to that
extent the number of shares represented by the other.
SARs will require an expense accrual by the Company each year for the
appreciation on the SARs which it is anticipated will be exercised. The amount
of the accrual is dependent upon whether and the extent to which the SARs are
granted and the amount, if any, by which the market value of the SARs exceeds
the exercise price.
Limited Stock Appreciation Rights
Limited SARs will be exercisable only for a limited period in the event of
a tender or exchange offer for shares of the Company's Common Stock, other than
by the Company, where 25% or more of the outstanding shares are acquired in that
offer or any other offer which expires within 60 days of that offer. The amount
paid on exercise of a Limited SAR will be the excess of (a) the market value of
the shares on the date of exercise, or (b) the highest price paid pursuant to
the offer, over the exercise price. Payment upon exercise of a Limited SAR will
be in cash.
Limited SARs may be granted at the time of, and must be related to, the
grant of a stock option or SAR. The exercise of one will reduce to that extent
the number of shares represented by the other. Subject to vesting requirements
contained in OTS regulations, Limited SARs will be exercisable only for the 45
days following the expiration of the tender or exchange offer, during which
period the related stock option or SAR will be exercisable. However, no Limited
SAR will be exercisable by a director, Senior Officer or Ten Percent Beneficial
Owner of the Company within six months of the date of its grant.
Effect of Merger and Other Adjustments
Shares as to which awards may be granted under the Stock Option Plan, and
shares then subject to awards, will be adjusted appropriately by the Stock Plan
Committee in the event of any merger, consolidation, reorganization,
recapitalization (including a return of capital, whether non-taxable or
otherwise), combination or exchange of shares, stock dividend, stock split or
other change in the corporate structure or Common Stock of the Company.
In the event of any merger, consolidation or combination of the Company
with or into another company or other entity, whereby either the Company is not
the continuing entity or its outstanding shares of Common Stock are converted
into or exchanged for different securities, cash or property, or any combination
thereof, pursuant to a plan or agreement the terms of which are binding upon all
stockholders, any participant to whom a stock option or SAR has been granted at
least six months prior to such event will have the right upon exercise of the
option or SAR (subject to the terms of the Stock Option Plan and any other
limitation or vesting period applicable to such option or SAR) to an amount
equal to the excess of fair market value on the date of exercise of the
consideration receivable in the merger, consolidation or combination with
respect to the shares covered or represented by the stock option or SAR over the
exercise price of the option or SAR multiplied by the number of shares with
respect to which the option or SAR has been exercised.
Amendment and Termination
The Board of Directors of the Company may at any time amend, suspend or
terminate the Stock Option Plan or any portion thereof, subject to compliance
with OTS regulations, but may not, without the prior ratification of the
stockholders, make any amendment which shall (i) increase the aggregate number
of securities which may be issued under the Stock Option Plan (except as
specifically set forth under the Stock Option Plan), (ii) materially change the
requirements as to eligibility for participation in the Stock Option Plan or
(iii) change the class of persons eligible to participate in the Stock Option
Plan, provided, however, that no such amendment, suspension or termination shall
impair the rights of any participant, without his consent, in any award made
pursuant to the Stock Option Plan. Unless previously terminated, the Stock
Option Plan shall continue in effect for a term of ten years, after which no
further awards may be granted under the Stock Option Plan.
7
Federal Income Tax Consequences
Under present federal income tax laws, awards under the Stock Option Plan
will have the following consequences:
(1) The grant of an award, by itself, will generally neither result in the
recognition of taxable income to the participant nor entitle the Company
to a deduction at the time of such grant.
(2) In order to qualify as an Incentive Stock Option, a stock option awarded
under the Stock Option Plan must meet the conditions contained in Section
422 of the Code, including the requirement that the shares acquired upon
the exercise of the stock option be held for at least one year after the
date of exercise and at least two years after the grant of the option. The
exercise of an Incentive Stock Option will generally not, by itself,
result in the recognition of taxable income to the participant nor entitle
the Company to a deduction at the time of such exercise. However, the
difference between the exercise price and the fair market value of the
option shares on the date of exercise is an item of adjustment which may,
in certain situations, trigger the alterative minimum tax. The alternative
minimum tax is incurred only when it exceeds the regular income tax. The
alternative minimum tax will be payable at the rate of 26% on the first
$175,000 of "alternative minimum taxable income" above the exemption
amount ($33,750 for a single individual or $45,000 for married individuals
filing jointly). This tax applies at a flat rate of 28% on alternative
minimum taxable income more than $175,000 above the applicable exemption
amounts. If a taxpayer has alternative minimum taxable income in excess of
$150,000 (married individuals filing jointly) or $112,500 (single
individual), the $45,000 or $33,750 exemptions will be reduced by an
amount equal to 25% of the amount by which the alternative minimum taxable
income of the taxpayer exceeds $150,000 or $112,500, respectively.
(3) If the shares are held by the participant for at least one year after the
Incentive Stock Option is exercised and two years after the Incentive
Stock Option was granted, the participant will recognize a middle- or
long-term capital gain or loss upon disposition of the shares and the
Company will not be entitled to a corresponding deduction. The capital
gain will be considered middle-term if the shares are held for more than
one year and not more than 18 months prior to disposition, and long-term
if they are held for more than 18 months. The amount of such gain or loss
will be equal to the difference between the amount realized by the
participant upon disposition of the shares and the amount paid by the
participant for such shares.
(4) If the shares acquired upon exercise of an Incentive Stock Option are not
held for at least one year after transfer of such shares to the
participant and two years after the grant of the Incentive Stock Option,
the participant generally will recognize ordinary income or loss upon
disposition of the shares in an amount equal to the difference between the
exercise price and the fair market value of the shares on the date of
exercise. In such an event, the Company will generally be entitled to a
corresponding deduction, provided the Company meets its federal tax
reporting obligations. The participant will also recognize capital gain or
loss in an amount of the difference, if any, between the sale price and
the fair market value of the shares on the date of exercise of the
Incentive Stock Option; such capital gain or loss will be characterized as
short-, middle- or long-term depending on how long the shares are held
after the date of exercise of the Incentive Stock Option. The Company will
not be entitled to a corresponding deduction for such capital gain or
loss.
(5) The exercise of a Non-Qualified Stock Option will result in the
recognition of ordinary income by the participant on the date of exercise
in an amount equal to the difference between the exercise price and the
fair market value on the date of exercise of the shares acquired pursuant
to the stock option. The Company will be allowed a deduction at the time
and in the amount of any ordinary income recognized by the participant
upon the exercise of a Non-Qualified Stock Option, provided the Company
meets its federal tax reporting obligations. Upon sale of the shares
acquired upon exercise of a Non-Qualified Stock Option, any appreciation
or depreciation in the value of such shares from the time of exercise will
result in the recognition of a capital gain or loss by the participant.
Such gain or loss will be short-, middle- or long-term capital gain or
loss depending upon how long the participant held the shares following
exercise of the Non-Qualified Stock Option.
(6) The exercise of an SAR will result in the recognition of ordinary income
by the participant on the date of exercise in an amount of cash, and/or
the fair market value on that date of the shares, acquired pursuant to the
exercise. The Company will be entitled to a corresponding deduction
provided that it meets its federal tax reporting obligations.
8
Awards Under the Stock Option Plan
The following table presents information at August 20, 1998 with
respect to the number of awards, all of which are options, which are currently
intended to be granted under the Stock Option Plan, subject to stockholder
ratification of the Stock Option Plan, to (i) the Named Officers, (ii) all
executive officers of the Company and the Association as a group, (iii)
directors who are not executive officers of the Company and the Association as a
group, and (iv) all non-executive officer employees of the Company or the
Association as a group. The last known sales price on the OTC Bulletin Board was
$12.50 per share on August 31, 1998.
1998 STOCK OPTION AND INCENTIVE PLAN
Name and Position Dollar Value(1) Number of Shares
----------------- --------------- ----------------
Lewis E. Kolar, President and Chief Executive Officer....................... $ --- 13,225
Executive Officer Group (3 persons)......................................... --- 31,950
Non-Executive Director Group (5 persons).................................... --- 16,530
Non-Executive Officer and Employee Group (9 persons)........................ --- 14,340
(1) Any value realized will be the difference between the exercise price and
the market value upon exercise. Since the options have not been granted,
there is no current value.
Subject to the conditions of the Stock Option Plan, the proposed awards
described in the preceding table will vest in five equal annual installments
with the first installment vesting on the one-year anniversary of the date of
grant and the additional installments vesting ratably on each subsequent
anniversary of the date of grant. Pursuant to the terms of the Stock Option
Plan, all options are required to be granted with an exercise price equal to not
less than the fair market value of the shares on the date of grant. To the
extent permitted under applicable law, all options granted to officers are
intended to be incentive stock options. All awards to directors who are not full
time employees of the Company will be non-qualified stock options.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE ADOPTION OF THE 1998 STOCK OPTION AND INCENTIVE PLAN.
PROPOSAL II - RATIFICATION OF THE 1998 RECOGNITION AND RETENTION PLAN
General
Establishment and implementation of the RRP is subject to ratification
by stockholders. The RRP complies with OTS regulations, however, the OTS has not
endorsed or approved the RRP and no written or oral representation to the
contrary is made hereby.
The RRP has been adopted by the Board of Directors of the Company,
subject to stockholder ratification. The RRP is designed to provide directors,
officers and employees with a proprietary interest in the Company in a manner
designed to encourage such individuals to remain with the Company and the
Association. Ratification by stockholders of the adoption of the RRP will ratify
the awards proposed thereunder as described in "Awards under the RRP" herein,
and will ratify the granting of additional restricted stock awards pursuant to
the provisions of the RRP. Pursuant to the RRP, 26,450 shares of Common Stock
(or 4.0% of the shares sold in the Association's Conversion), funded from either
authorized but unissued shares or issued shares subsequently reacquired and held
as treasury shares, will be available for awards. The Board currently intends,
to the extent practicable and feasible, to fund the RRP from issued shares
reacquired by the Company in the open market. To the extent the Company utilizes
authorized but unissued shares to fund the RRP, the interests of current
stockholders will be diluted. Assuming all RRP Shares are awarded through the
use of authorized but unissued Common Stock, current stockholders would be
diluted by approximately 3.85%. Upon ratification of the RRP by stockholders, it
is proposed that an aggregate of 25,123 shares of Common Stock will be awarded
to directors, officers and employees of the Company and the Association, which
will leave 1,327 shares available for future awards.
9
Attached as Exhibit B to this Proxy Statement is the complete text of
the form of the RRP. The principal features of the RRP are summarized below.
Principle Features of the RRP
The RRP provides for the award of shares of Common Stock ("RRP Shares")
subject to the restrictions described below. Each award under the RRP will be
made on such terms and conditions, consistent with the terms of the RRP and
applicable OTS regulations, as the Stock Plan Committee shall determine.
The RRP is administered by the Company's Stock Plan Committee. The
Stock Plan Committee will select the recipients and terms of awards pursuant to
the RRP. For information regarding the membership of this Committee, see
"Proposal I - Ratification of the 1998 Stock Option and Incentive Plan." In
determining to whom and in what amount to grant awards, the Stock Plan Committee
considers the position and responsibilities of eligible individuals, the value
of their services to the Company and the Association and other factors it deems
relevant. Pursuant to the terms of the RRP, any director, officer or employee of
the Company or its affiliates may be selected by the Stock Plan Committee to
participate in the RRP. As of the date hereof, there are approximately 30
persons eligible to participate in the RRP.
The RRP provides that RRP Shares used to fund awards under the RRP may
be either authorized but unissued shares or reacquired shares held by the
Company in its treasury. Any RRP Shares which are forfeited will again be
available for issuance under the RRP.
As required by OTS regulations, award recipients earn (i.e., become
vested in) awards, over a period of time as determined by the Stock Plan
Committee at the time of grant, provided that no award may vest earlier than one
year from the date of stockholder approval of the RRP and shall vest at a rate
not to exceed 20% of the initial award per year except in the event of death or
disability. Pursuant to OTS Regulations, no director who is not an employee of
the Company shall be granted awards with respect to more than 5% of the total
shares subject to the RRP. All non-employee directors of the Company, in the
aggregate, may not be granted awards with respect to more than 30% of the total
RRP Shares and no individual shall be granted awards with respect to more than
25% of the total RRP Shares. It is intended that no award granted to an
executive officer of the Company or its affiliates shall vest in any fiscal year
(and shall be carried over to the subsequent fiscal year) in which the
Association fails to meet all of its fully phased-in capital requirements.
Subject to compliance with OTS regulations, the Stock Plan Committee
may, in its discretion, accelerate the time at which any or all restrictions
will lapse, or may remove any or all of the restrictions. In the event a
participant ceases to maintain continuous service with the Company or the
Association by reason of death or disability, RRP Shares still subject to
restrictions will be free of these restrictions and shall not be forfeited. In
the event of termination for any other reason, all shares will be forfeited and
returned to the Company.
Holders of RRP Shares may not vote or sell, assign, transfer, pledge or
otherwise encumber any of the RRP Shares during the restricted period. During
the restricted period, RRP Shares will be voted by an independent trustee and
not by the holder of such shares. In addition, all dividends declared and paid
on RRP Shares still subject to restrictions will be deferred and held for the
account of the participant thereof until the earlier to lapse of the
restrictions on such shares or the death or disability of the participant.
Finally, the RRP provides for an award as of the date of stockholder
ratification of the RRP of 1,322 Shares to each director who is not a full-time
employee of the Company ("non-employee director"). As provided in the RRP, no
RRP Shares granted to a non-employee director shall not be earned in any fiscal
year (and shall be carried over to the subsequent fiscal year) in which the
Association fails to meet all of its fully phased-in capital requirements.
Adjustments Upon Changes in Capitalization
RRP Shares awarded under the RRP will be adjusted by the Stock Plan
Committee in the event of a reorganization, recapitalization, stock split, stock
dividend, combination or exchange of shares, merger, consolidation or other
change in corporate structure or the Common Stock of the Company.
10
Federal Income Tax Consequences
Holders of Restricted Stock will recognize ordinary income on the
earlier of the date that the Restricted Stock is transferable or is no longer
subject to a substantial risk of forfeiture, in an amount equal to the fair
market value of the shares on that date. In certain circumstances, a holder may
elect to recognize ordinary income and determine such fair market value on the
date of the grant of the Restricted Stock. Holders of Restricted Stock will also
recognize ordinary income equal to their dividend or dividend equivalent
payments when such payments are received. Generally, the amount of income
recognized by participants will be a deductible expense for tax purposes for the
Company as long as the Company meets its federal tax reporting obligations.
Amendment to the RRP
The Board of Directors of the Company may amend, suspend or terminate
the RRP or any portion thereof at any time, subject to OTS Regulations,
provided, however, that no such amendment, suspension or termination shall
impair the rights of any participant, without his consent, in any award
theretofore made pursuant to the RRP.
Awards Under the RRP
The following table presents information at August 20, 1998 with
respect to the number of RRP Shares which are currently intended to be granted
under the RRP, subject to stockholder ratification of the RRP, to (i) the Named
Officers, (ii) all executive officers of the Company and the Association as a
group, (iii) directors who are not executive officers of the Company or the
Association as a group, and (iv) all non-executive officer employees of the
Company or the Association as a group.
1998 RECOGNITION AND RETENTION PLAN
Name and Position Dollar value(1) Shares of Restricted Stock
----------------- --------------- --------------------------
Lewis E. Kolar, President and Chief Executive Officer................... $82,663 6,613
Executive Officer Group (3 persons)..................................... 157,063 12,565
Non-Executive Director Group (5 persons)................................ 82,625 6,610
Non-Executive Officer and Employee Group (22 persons)................... 74,350 5,948
- -----------
(1) Assumes an aggregate market value of the RRP Shares based on the last
known sales price of the Common Stock of $12.50 as indicated on the OTC
Bulletin Board on August 31, 1998.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE ADOPTION OF THE 1998 RECOGNITION AND RETENTION PLAN.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials
for next year's Annual Meeting of Shareholders, any shareholder proposal to take
action at such meeting must be received at the Company's executive office at 52
North Main Street, Gloversville, New York 12078-3084 no later than September 21,
1998. Any such proposal shall be subject to the requirements of the proxy rules
adopted under the Securities Exchange Act of 1934, as amended. Otherwise, any
shareholder proposal to take action at such meeting must be received at the
Company's executive office at 52 North Main Street, Gloversville, New York
12078-3084 by November 21, 1998; provided, however, that in the event that the
date of the annual meeting is held before December 21, 1998 or after February
18, 1999, the shareholder proposal must be received not later than the close of
business on the later of the 60th day prior to such annual meeting or the tenth
day following the day on which notice of the date of the annual meeting was
mailed or public announcement of the date of such meeting was first made. All
shareholder proposals must also comply with the Company's bylaws and Delaware
law.
11
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matter should properly come before the Meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. The Company has retained Regan &
Associates to assist in the solicitation of proxies for a fee not to exceed
$3,000, plus out-of-pocket expenses, not to exceed $1,500. In addition,
directors, officers and regular employees of the Company and/or the Association
may solicit proxies personally or by telegraph or telephone without additional
compensation.
September 4, 1998
12
EXHIBIT A
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining directors, advisory directors, directors emeriti,
officers and employees of the Corporation and its Affiliates. It is intended
that designated Options granted pursuant to the provi sions of this Plan to
persons employed by the Corporation or its Affiliates will qualify as Incentive
Stock Options. Options granted to persons who are not employees will be
Non-Qualified Stock Options.
2. Definitions. The following definitions are applicable to the Plan:
"Affiliate" - means any "parent corporation" or "subsidiary corporation"
of the Corporation, as such terms are defined in Section 424(e) and (f),
respectively, of the Code.
"Bank" - means Gloversville Federal Savings & Loan Association and any
successor entity.
"Award" - means the grant of an Incentive Stock Option, a Non-Qualified
Stock Option, a Stock Appreciation Right, a Limited Stock Appreciation Right or
any combination thereof, as provided in the Plan.
"Code" - means the Internal Revenue Code of 1986, as amended.
"Committee" - means the Committee referred to in Section 3 hereof.
"Continuous Service" - means the absence of any interruption or
termination of service as a director, advisory director, director emeritus,
officer or employee of the Corporation or an Affiliate, except that when used
with respect to any Options or Rights which at the time of exercise are intended
to be Incentive Stock Options, continuous service means the absence of any
interruption or termination of service as an employee of the Corporation or an
Affiliate. Service shall not be considered interrupted in the case of sick
leave, military leave or any other leave of absence approved by the Corporation
or in the case of transfers between payroll locations of the Corporation or
between the Corporation, its parent, its subsidiaries or its successor. With
respect to any advisory director or director emeritus, continuous service shall
mean availability to perform such functions as may be required of such persons.
"Corporation" - means Adirondack Financial Services Bancorp, Inc., a
Delaware corporation.
"Employee" - means any person, including an officer or director, who is
employed by the Corporation or any Affiliate.
"ERISA" - means the Employee Retirement Income Security Act of 1974, as
amended.
"Exercise Price" - means (i) in the case of an Option, the price per Share
at which the Shares subject to such Option may be purchased upon exercise of
such Option and (ii) in the case of a Right, the price per Share (other than the
Market Value per Share on the date of exercise and the Offer Price per Share as
defined in Section 10 hereof) which, upon grant, the Committee determines shall
be utilized in calculating the aggregate value which a Participant shall be
entitled to receive pursuant to Sections 9, 10 or 12 hereof upon exercise of
such Right.
"Incentive Stock Option" - means an option to purchase Shares granted by
the Committee pursuant to Section 6 hereof which is subject to the limitations
and restrictions of Section 8 hereof and is intended to qualify under Section
422(b) of the Code.
"Limited Stock Appreciation Right" - means a stock appreciation right with
respect to Shares granted by the Committee pursuant to Sections 6 and 10 hereof.
"Market Value" - means the average of the high and low quoted sales price
on the date in question (or, if there is no reported sale on such date, on the
last preceding date on which any reported sale occurred) of a Share on the
Composite Tape for the New York Stock Exchange-Listed Stocks, or, if on such
date the Shares are not quoted on the Composite Tape, on the New York Stock
Exchange, or, if the Shares are not listed or admitted to trading on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which the Shares are listed or admitted
to trading, or, if the Shares are not listed or admitted to trading on any such
exchange, the mean between the closing high bid and low asked quotations with
respect to a Share on such date on the NASDAQ System, or any similar system then
in use, or, if no such quotations are available, the fair market value on such
date of a Share as the Committee shall determine.
"Non-Employee Director" - means a director who a) is not currently an
officer or employee of the Corporation; b) is not a former employee of the
Corporation who receives compensation for prior services (other than from a tax-
qualified retirement plan); c) has not been an officer of the Corporation; d)
does not receive remuneration from the Corporation in any capacity other than as
a director; and e) does not possess an interest in any other transactions or is
not engaged in a business relationship for which disclosure would be required
under Item 404(a) or (b) of Regulation S-K.
"Non-Qualified Stock Option" - means an option to purchase Shares granted
by the Committee pursuant to Section 6 hereof which is not intended to qualify
under Section 422(b) of the Code.
"Option" - means an Incentive Stock Option or a Non-Qualified Stock Option.
"Participant" - means any director, advisory director, director emeritus,
officer or employee of the Corporation or any Affiliate who is selected by the
Committee to receive an Award or who is granted an Award pursuant to Section 19
hereof.
"Plan" - means the 1998 Stock Option and Incentive Plan of the
Corporation.
"Related" - means (i) in the case of a Right, a Right which is granted in
connection with, and to the extent exercis able, in whole or in part, in lieu
of, an Option or another Right and (ii) in the case of an Option, an Option with
respect to which and to the extent a Right is exercisable, in whole or in part,
in lieu thereof has been granted.
"Right" - means a Limited Stock Appreciation Right or a Stock Appreciation
Right.
"Shares" - means the shares of common stock of the Corporation.
"Stock Appreciation Right" - means a stock appreciation right with respect
to Shares granted by the Committee pursuant to Sections 6 and 9 hereof.
"Ten Percent Beneficial Owner" - means the beneficial owner of more than
ten percent of any class of the Corporation's equity securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934.
3. Administration. The Plan shall be administered by a Committee
consisting of two or more members, each of whom shall be a Non-Employee
Director. The members of the Committee shall be appointed by the Board of
Directors of the Corporation. Except as limited by the express provisions of the
Plan, the Committee shall have sole and complete authority and discretion,
subject to Office of Thrift Supervision Regulations, to (i) select Participants
and grant Awards; (ii) determine the number of Shares to be subject to types of
Awards generally, as well as to individual Awards granted under the Plan; (iii)
determine the terms and conditions upon which Awards shall be granted under the
Plan; (iv) prescribe the form and terms of instruments evidencing such grants;
and (v) establish from time to time regulations for the administration of the
Plan, interpret the Plan, and make all determinations deemed necessary or
advisable for the administration of the Plan.
A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by a majority of the Committee without a meeting, shall
be acts of the Committee.
2
4. Participation in Committee Awards. The Committee may select from time
to time Participants in the Plan from those directors (including advisory
directors and directors emeriti), officers and employees of the Corporation or
its Affiliates who, in the opinion of the Committee, have the capacity for
contributing to the successful performance of the Corporation or its Affiliates.
5. Shares Subject to Plan. Subject to adjustment by the operation of
Section 11 hereof, the maximum number of Shares with respect to which Awards may
be made under the Plan is 10% of the total Shares issued in the Bank's
conversion to the capital stock form. The Shares with respect to which Awards
may be made under the Plan may be either authorized and unissued shares or
issued shares heretofore or hereafter reacquired and held as treasury shares.
Shares which are subject to Related Rights and Related Options shall be counted
only once in determining whether the maximum number of Shares with respect to
which Awards may be granted under the Plan has been exceeded. An Award shall not
be considered to have been made under the Plan with respect to any Option or
Right which terminates and new Awards may be granted under the Plan with respect
to the number of Shares as to which such termination has occurred.
6. General Terms and Conditions of Options and Rights. The Committee shall
have full and complete authority and discretion, subject to Office of Thrift
Supervision Regulations and except as expressly limited by the Plan, to grant
Options and/or Rights and to provide the terms and conditions (which need not be
identical among Participants) thereof. In particular, the Committee shall
prescribe the following terms and conditions: (i) the Exercise Price of any
Option or Right, which shall not be less than the Market Value per Share at the
date of grant of such Option or Right, (ii) the number of Shares subject to, and
the expiration date of, any Option or Right, which expiration date shall not
exceed ten years from the date of grant, (iii) the manner, time and rate
(cumulative or otherwise) of exercise of such Option or Right, and (iv) the
restrictions, if any, to be placed upon such Option or Right or upon Shares
which may be issued upon exercise of such Option or Right. As required by Office
of Thrift Supervision Regulations, each non-employee director of the Corporation
may not be granted Awards with respect to more than 5% of the total shares
subject to the Plan and all non-employee directors of the Corporation, in the
aggregate, may not be granted Awards with respect to more than 30% of the total
shares subject to the Plan. Notwithstanding the foregoing and subject to
compliance with applicable Office of Thrift Supervision Regulations, no
individual shall be granted Awards in any calendar year with respect to more
than 25% of the total shares subject to the Plan in any calendar year or during
the entire term of the Plan.
Any Award made pursuant to this Plan, which Award is subject to the
requirements of Office of Thrift Supervision Regulations, shall vest in five
equal annual installments with the first installment vesting no sooner than the
one-year anniversary of the date of grant, except in the event of death or
disability. In the event Office of Thrift Supervision Regulations are amended
(the "Amended Regulations") to permit shorter vesting periods, any Award made
pursuant to this Plan, which Award is subject to the requirements of such
Amended Regulations, may vest, at the sole discretion of the Committee, in
accordance with such Amended Regulations.
Furthermore, at the time of any Award, the Participant shall enter into an
agreement with the Corporation in a form specified by the Committee, agreeing to
the terms and conditions of the Award and such other matters as the Committee,
in its sole discretion, shall determine (the "Option Agreement").
7. Exercise of Options or Rights.
(a) Except as provided herein, an Option or Right granted under the Plan shall
be exercisable during the lifetime of the Participant to whom such Option
or Right was granted only by such Participant and, except as provided in
paragraphs (c) and (d) of this Section 7, no such Option or Right may be
exercised unless at the time such Participant exercises such Option or
Right, such Participant has maintained Continuous Service since the date
of grant of such Option or Right.
(b) To exercise an Option or Right under the Plan, the Participant to whom
such Option or Right was granted shall give written notice to the
Corporation in form satisfactory to the Committee (and, if partial
exercises have been permitted by the Committee, by specifying the number
of Shares with respect to which such Participant elects to exercise such
Option or Right) together with full payment of the Exercise Price, if any
and to the extent required. The date of exercise shall be the date on
which such notice is received by the Corporation. Payment, if any is
required, shall be made either (i) in cash (including check, bank draft or
money order) or (ii) by delivering (A) Shares already owned by the
Participant and having a fair market value equal to the applicable
exercise price, such
3
fair market value to be determined in such appropriate manner as may be
provided by the Committee or as may be required in order to comply with or
to conform to requirements of any applicable laws or regulations, or (B) a
combination of cash and such Shares.
(c) If a Participant to whom an Option or Right was granted shall cease to
maintain Continuous Service for any reason (excluding death, disability
and termination of employment by the Corporation or any Affiliate for
cause), such Participant may, but only within the period of three months
immediately succeeding such cessation of Continuous Service and in no
event after the expiration date of such Option or Right, exercise such
Option or Right to the extent that such Participant was entitled to
exercise such Option or Right at the date of such cessation, provided,
however, that such right of exercise after cessation of Continuous Service
shall not be available to a Participant if the Committee otherwise
determines and so provides in the applicable instrument or instruments
evidencing the grant of such Option or Right. If a Participant to whom an
Option or Right was granted shall cease to maintain Continuous Service by
reason of death or disability then, unless the Committee shall have
otherwise provided in the instrument evidencing the grant of an Option or
Right, all Options and Rights granted and not fully exercisable shall
become exercisable in full upon the happening of such event and shall
remain so exercisable (i) in the event of death for the period described
in paragraph (d) of this Section 7 and (ii) in the event of disability for
a period of one year following such date. If the Continuous Service of a
Participant to whom an Option or Right was granted by the Corporation is
terminated for cause, all rights under any Option or Right of such
Participant shall expire immediately upon the effective date of such
termination.
(d) In the event of the death of a Participant while in the Continuous Service
of the Corporation or an Affiliate or within the three-month period
referred to in paragraph (c) of this Section 7, the person to whom any
Option or Right held by the Participant at the time of his death is
transferred by will or the laws of descent and distribution, or in the
case of an Award other than an Incentive Stock Option, pursuant to a
qualified domestic relations order, as defined in the Code or Title 1 of
ERISA or the rules thereunder may, but only to the extent such Participant
was entitled to exercise such Option or Right upon his death as provided
in paragraph (c) above, exercise such Option or Right at any time within a
period of one year succeeding the date of death of such Participant, but
in no event later than ten years from the date of grant of such Option or
Right. Following the death of any Participant to whom an Option was
granted under the Plan, irrespective of whether any Related Right shall
have theretofore been granted to the Participant or whether the person
entitled to exercise such Related Right desires to do so, the Committee
may, as an alternative means of settlement of such Option, elect to pay to
the person to whom such Option is transferred by will or by the laws of
descent and distribution, or in the case of an Option other than an
Incentive Stock Option, pursuant to a qualified domestic relations order,
as defined in the Code or Title I of ERISA or the rules thereunder, the
amount by which the Market Value per Share on the date of exercise of such
Option shall exceed the Exercise Price of such Option, multiplied by the
number of Shares with respect to which such Option is properly exercised.
Any such settlement of an Option shall be considered an exercise of such
Option for all purposes of the Plan.
8. Incentive Stock Options. Incentive Stock Options may be granted only to
Participants who are Employees. Any provision of the Plan to the contrary
notwithstanding, (i) no Incentive Stock Option shall be granted more than ten
years from the date the Plan is adopted by the Board of Directors of the
Corporation and no Incentive Stock Option shall be exercisable more than ten
years from the date such Incentive Stock Option is granted, (ii) the Exercise
Price of any Incentive Stock Option shall not be less than the Market Value per
Share on the date such Incentive Stock Option is granted, (iii) any Incentive
Stock Option shall not be transferable by the Participant to whom such Incentive
Stock Option is granted other than by will or the laws of descent and
distribution, and shall be exercisable during such Participant's lifetime only
by such Participant, (iv) no Incentive Stock Option shall be granted to any
individual who, at the time such Incentive Stock Option is granted, owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Corporation or any Affiliate unless the Exercise Price
of such Incentive Stock Option is at least 110 percent of the Market Value per
Share at the date of grant and such Incentive Stock Option is not exercisable
after the expiration of five years from the date such Incentive Stock Option is
granted, and (v) the aggregate Market Value (determined as of the time any
Incentive Stock Option is granted) of the Shares with respect to which Incentive
Stock Options are exercisable for the first time by a Participant in any
calendar year shall not exceed $100,000.
9. Stock Appreciation Rights. A Stock Appreciation Right shall, upon its
exercise, entitle the Participant to whom such Stock Appreciation Right was
granted to receive a number of Shares or cash or combination thereof, as the
4
Committee in its discretion shall determine, the aggregate value of which (i.e.,
the sum of the amount of cash and/or Market Value of such Shares on date of
exercise) shall equal (as nearly as possible, it being understood that the
Corporation shall not issue any fractional shares) the amount by which the
Market Value per Share on the date of such exercise shall exceed the Exercise
Price of such Stock Appreciation Right, multiplied by the number of Shares with
respect of which such Stock Appreciation Right shall have been exercised. A
Stock Appreciation Right may be Related to an Option or may be granted
independently of any Option as the Committee shall from time to time in each
case determine. At the time of grant of an Option the Committee shall determine
whether and to what extent a Related Stock Appreciation Right shall be granted
with respect thereto, provided, however, and notwithstanding any other provision
of the Plan, that if the Related Option is an Incentive Stock Option, the
Related Stock Appreciation Right shall satisfy all the restrictions and
limitations of Section 8 hereof as if such Related Stock Appreciation Right were
an Incentive Stock Option and as if other rights which are Related to Incentive
Stock Options were Incentive Stock Options. In the case of a Related Option,
such Related Option shall cease to be exercisable to the extent of the Shares
with respect to which the Related Stock Appreciation Right was exercised. Upon
the exercise or termination of a Related Option, any Related Stock Appreciation
Right shall terminate to the extent of the Shares with respect to which the
Related Option was exercised or terminated.
10. Limited Stock Appreciation Rights. At the time of grant of an Option
or Stock Appreciation Right to any Participant, the Committee shall have full
and complete authority and discretion to also grant to such Participant a
Limited Stock Appreciation Right which is Related to such Option or Stock
Appreciation Right, provided, however and notwithstanding any other provision of
the Plan, that if the Related Option is an Incentive Stock Option, the Related
Limited Stock Appreciation Right shall satisfy all the restrictions and
limitations of Section 8 hereof as if such Related Limited Stock Appreciation
Right were an Incentive Stock Option and as if all other Rights which are
Related to Incentive Stock Options were Incentive Stock Options. Subject to
vesting requirements contained in 12 C.F.R. ss. 563b.3(g)(4) or any successor
regulation, a Limited Stock Appreciation Right shall be exercisable only during
the period beginning on the first day following the date of expiration of any
"offer" (as such term is hereinafter defined) and ending on the forty-fifth day
following such date.
A Limited Stock Appreciation Right shall, upon its exercise, entitle the
Participant to whom such Limited Stock Appreciation Right was granted to receive
an amount of cash equal to the amount by which the "Offer Price per Share" (as
such term is hereinafter defined) or the Market Value on the date of such
exercise, as shall have been provided by the Committee in its discretion at the
time of grant, shall exceed the Exercise Price of such Limited Stock
Appreciation Right, multiplied by the number of Shares with respect to which
such Limited Stock Appreciation Right shall have been exercised. Upon the
exercise of a Limited Stock Appreciation Right, any Related Option and/or
Related Stock Appreciation Right shall cease to be exercisable to the extent of
the Shares with respect to which such Limited Stock Appreciation Right was
exercised. Upon the exercise or termination of a Related Option or Related Stock
Appreciation Right, any Related Limited Stock Appreciation Right shall terminate
to the extent of the Shares with respect to which such Related Option or Related
Stock Appreciation Right was exercised or terminated.
For the purposes of this Section 10, the term "Offer" shall mean any
tender offer or exchange offer for Shares other than one made by the
Corporation, provided that the corporation, person or other entity making the
offer acquires pursuant to such offer either (i) 25% of the Shares outstanding
immediately prior to the commencement of such offer or (ii) a number of Shares
which, together with all other Shares acquired in any tender offer or exchange
offer (other than one made by the Corporation) which expired within sixty days
of the expiration date of the offer in question, equals 25% of the Shares
outstanding immediately prior to the commencement of the offer in question. The
term "Offer Price per Share" as used in this Section 10 shall mean the highest
price per Share paid in any Offer which Offer is in effect any time during the
period beginning on the sixtieth day prior to the date on which a Limited Stock
Appreciation Right is exercised and ending on the date on which such Limited
Stock Appreciation Right is exercised. Any securities or property which are part
or all of the consideration paid for Shares in the Offer shall be valued in
determining the Offer Price per Share at the higher of (A) the valuation placed
on such securities or property by the corporation, person or other entity making
such Offer or (B) the valuation placed on such securities or property by the
Committee.
11. Adjustments Upon Changes in Capitalization. In the event of any change
in the outstanding Shares subsequent to the effective date of the Plan by reason
of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Corporation, the maximum aggregate number
and class of shares as to which Awards may be granted under the Plan
5
and the number, class and exercise price of shares with respect to which Awards
theretofore have been granted under the Plan shall be appropriately adjusted by
the Committee, whose determination shall be conclusive.
12. Effect of Merger. In the event of any merger, consolidation or
combination of the Corporation (other than a merger, consolidation or
combination in which the Corporation is the continuing entity and which does not
result in the outstanding Shares being converted into or exchanged for different
securities, cash or other property, or any combination thereof) pursuant to a
plan or agreement the terms of which are binding upon all stockholders of the
Corporation (except to the extent that dissenting stockholders may be entitled,
under statutory provisions or provisions contained in the certificate or
articles of incorporation, to receive the appraised or fair value of their
holdings), any Participant to whom an Option or Right has been granted at least
six months prior to such event shall have the right (subject to the provisions
of the Plan and any limitation or vesting period applicable to such Option or
Right), thereafter and during the term of each such Option or Right, to receive
upon exercise of any such Option or Right an amount equal to the excess of the
fair market value on the date of such exercise of the securities, cash or other
property, or combination thereof, receivable upon such merger, consolidation or
combination in respect of a Share over the Exercise Price of such Right or
Option, multiplied by the number of Shares with respect to which such Option or
Right shall have been exercised. Such amount may be payable fully in cash, fully
in one or more of the kind or kinds of property payable in such merger,
consolidation or combination, or partly in cash and partly in one or more of
such kind or kinds of property, all in the discretion of the Committee.
13. Assignments and Transfers. No Award nor any right or interest of a
Participant under the Plan in any instrument evidencing any Award under the Plan
may be assigned, encumbered or transferred except, in the event of the death of
a Participant, by will or the laws of descent and distribution or in the case of
Awards other than Incentive Stock Options pursuant to a qualified domestic
relations order, as defined in the Code or Title I of ERISA or the rules
thereunder.
14. Employee Rights Under the Plan. No director, officer or employee shall
have a right to be selected as a Participant nor, having been so selected, to be
selected again as a Participant and no director, officer, employee or other
person shall have any claim or right to be granted an Award under the Plan or
under any other incentive or similar plan of the Corporation or any Affiliate.
Neither the Plan nor any action taken thereunder shall be construed as giving
any employee any right to be retained in the employ of the Corporation or any
Affiliate.
15. Delivery and Registration of Stock. The Corporation's obligation to
deliver Shares with respect to an Award shall, if the Committee so requests, be
conditioned upon the receipt of a representation as to the investment intention
of the Participant to whom such Shares are to be delivered, in such form as the
Committee shall determine to be necessary or advisable to comply with the
provisions of the Securities Act of 1933 or any other Federal, state or local
securities legislation or regulation. It may be provided that any representation
requirement shall become inoperative upon a registration of the Shares or other
action eliminating the necessity of such representation under such Securities
Act or other securities legislation. The Corporation shall not be required to
deliver any Shares under the Plan prior to (i) the admission of such shares to
listing on any stock exchange or other system on which Shares may then be
listed, and (ii) the completion of such registration or other qualification of
such Shares under any state or Federal law, rule or regulation, as the Committee
shall determine to be necessary or advisable.
16. Withholding Tax. The Corporation shall have the right to deduct from
all amounts paid in cash with respect to the exercise of a Right under the Plan
any taxes required by law to be withheld with respect to such cash payments.
Where a Participant or other person is entitled to receive Shares pursuant to
the exercise of an Option or Right pursuant to the Plan, the Corporation shall
have the right to require the Participant or such other person to pay the
Corporation the amount of any taxes which the Corporation is required to
withhold with respect to such Shares, and may, in its sole discretion, withhold
sufficient Shares to cover the amount of taxes which the Corporation is required
to withhold.
17. Amendment or Termination. The Board of Directors of the Corporation
may amend, suspend or terminate the Plan or any portion thereof at any time,
subject to Office of Thrift Supervision Regulations, but (except as provided in
Section 11 hereof) no amendment shall be made without approval of the
stockholders of the Corporation which shall (i) increase the aggregate number of
Shares with respect to which Awards may be made under the Plan, (ii) materially
increase the benefits accruing to Participants, (iii) materially change the
requirements as to eligibility for participation in the Plan or (iv) change the
class of persons eligible to participate in the Plan; provided, however, that no
such
6
amendment, suspension or termination shall impair the rights of any Participant,
without his consent, in any Award theretofore made pursuant to the Plan.
18. Effective Date and Term of Plan. The Plan shall become effective upon
its ratification by stockholders of the Corporation. It shall continue in effect
for a term of ten years unless sooner terminated under Section 17 hereof.
19. Initial Grant. By, and simultaneously with, the ratification of this
Plan by the stockholders of the Corporation, each member of the Board of
Directors of the Corporation at the time of stockholder ratification of this
Plan who is not a full-time Employee is hereby granted a ten-year Non-Qualified
Stock Option to purchase .5% of the shares sold in the Conversion at an Exercise
Price per share equal to the Market Value per share of the Shares on the date of
grant. Each such Option shall be evidenced by a Non-Qualified Stock Option
Agreement in a form approved by the Board of Directors and shall be subject in
all respects to the terms and conditions of this Plan, which are controlling.
All Options granted pursuant to this section shall vest in five equal annual
installments with the first installment vesting on the first anniversary of the
date of grant, subject to the Director maintaining Continuous Service with the
Corporation or its Affiliates since the date of grant. All Options granted
pursuant to this Section 19 shall be rounded down to the nearest whole share to
the extent necessary to ensure that no Options to purchase stock representing
fractional shares are granted.
7
EXHIBIT B
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
1998 RECOGNITION AND RETENTION PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining directors, executive officers and employees of the
Corporation and its Affiliates.
2. Definitions. The following definitions are applicable to the Plan:
"Award" - means the grant of Restricted Stock pursuant to the terms of
Section 12 of the Plan or by the Committee, as provided in the Plan.
"Affiliate" - means any "parent corporation" or "subsidiary corporation"
of the Corporation, as such terms are defined in Section 424(e) and (f),
respectively, of the Code.
"Bank" - means Gloversville Federal Savings & Loan Association, a savings
institution and its successors.
"Beneficiary" - means the person or persons designated by a Participant to
receive any benefits payable under the Plan in the event of such Participant's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if
any, or if none, his estate.
"Code" - means the Internal Revenue Code of 1986, as amended.
"Committee" - means the Committee of the Board of Directors of the
Corporation referred to in Section 6 hereof.
"Continuous Service" - means the absence of any interruption or
termination of service as a director, director emeritus, advisory director,
executive officer or employee of the Corporation or any Affiliate. Service shall
not be considered interrupted in the case of sick leave, military leave or any
other leave of absence approved by the Corporation or any Affiliate or in the
case of transfers between payroll locations of the Corporation or its Affiliates
or between the Corporation, its Affiliates or its successor. With respect to any
director emeritus or advisory director, continuous service shall mean
availability to perform such functions as may be required of such individuals.
"Conversion" - means the conversion of the Bank from the mutual to the
stock form of organization.
"Corporation" - means Adirondack Financial Services Bancorp, Inc., a
Delaware corporation.
"Disability" - means any physical or mental impairment which qualifies an
employee, director, director emeritus or advisor director for disability
benefits under any applicable long-term disability plan maintained by the Bank
or an Affiliate, or, if no such plan applies to such individual, which renders
such employee or director, in the judgment of the Committee, unable to perform
his customary duties and responsibilities.
"ERISA" - means the Employee Retirement Income Security Act of 1974, as
amended.
"Non-Employee Director" - means a director who a) is not currently an
officer or employee of the Corporation; b) is not a former employee of the
Corporation who receives compensation for prior services (other than from a
tax-qualified retirement plan); c) has not been an officer of the Corporation;
d) does not receive remuneration from the Corporation in any capacity other than
as a director; and e) does not possess an interest in any other transactions or
is not engaged in a business relationship for which disclosure would be required
under Item 404(a) or (b) of Regulation S-K.
"Participant" - means any director, director emeritus, advisory director,
executive officer or employee of the Corporation or any Affiliate who is
selected by the Committee to receive an Award or a director who is granted an
award pursuant to Section 12.
"Plan" - means the 1998 Recognition and Retention Plan of the Corporation.
"Restricted Period" - means the period of time selected by the Committee
for the purpose of determining when restrictions are in effect under Section 3
hereof with respect to Restricted Stock awarded under the Plan.
"Restricted Stock" - means Shares which have been contingently awarded to
a Participant by the Committee subject to the restrictions referred to in
Section 3 hereof, so long as such restrictions are in effect.
"Shares" - means the common stock, par value $0.01 per share, of the
Corporation.
3. Terms and Conditions of Restricted Stock. The Committee shall have full
and complete authority, subject to the limitations of the Plan, to grant Awards
and, in addition to the terms and conditions contained in paragraphs (a) through
(f) of this Section 3, to provide such other terms and conditions (which need
not be identical among Participants) in respect of such Awards, and the vesting
thereof, as the Committee shall determine, subject to Office of Thrift
Supervision Regulations.
(a) At the time of an award of Restricted Stock, the Committee shall establish
for each Participant a Restricted Period, during which or at the
expiration of which, as the Committee shall determine and provide in the
agreement referred to in paragraph (d) of this Section 3, the Shares
awarded as Restricted Stock shall vest, and subject to any such other
terms and conditions as the Committee shall provide, shares of Restricted
Stock may not be sold, assigned, transferred, pledged, voted or otherwise
encumbered by the Participant, except as hereinafter provided, during the
Restricted Period. Except for such restrictions, and subject to paragraphs
(c) and (e) of this Section 3 and Section 4 hereof, the Participant as
owner of such shares shall have all the rights of a stockholder.
No director who is not an employee of the Corporation shall be granted
Awards with respect to more than 5% of the total shares subject to the
Plan. All non-employee directors of the Corporation, in the aggregate, may
not be granted Awards with respect to more than 30% of the total shares
subject to the Plan and no individual shall be granted Awards with respect
to more than 25% of the total shares subject to the Plan. No Awards shall
begin vesting earlier than one year from the date the Plan is approved by
stockholders of the Corporation and no Award shall vest at a rate in
excess of 20% per year, except in the event of death or disability. In the
event Office of Thrift Supervision Regulations are amended (the "Amended
Regulations") to permit shorter vesting periods, any Award made pursuant
to this Plan, which Award is subject to the requirements of such Amended
Regulations, may vest, at the sole discretion of the Committee, in
accordance with such Amended Regulations.
Subject to compliance with Office of Thrift Supervision Regulations, the
Committee shall have the authority, in its discretion, to accelerate the
time at which any or all of the restrictions shall lapse with respect to
an Award, or to remove any or all of such restrictions, whenever it may
determine that such
2
action is appropriate by reason of changes in applicable tax or other laws
or other changes in circum stances occurring after the commencement of
such Restricted Period.
(b) Except as provided in Section 5 hereof, if a Participant ceases to
maintain Continuous Service for any reason (other than death or
disability), unless the Committee shall otherwise determine, all Shares of
Restricted Stock theretofore awarded to such Participant and which at the
time of such termination of Continuous Service are subject to the
restrictions imposed by paragraph (a) of this Section 3 shall upon such
termination of Continuous Service be forfeited and returned to the
Corporation. If a Participant ceases to maintain Continuous Service by
reason of death or disability, Restricted Stock then still subject to
restrictions imposed by paragraph (a) of this Section 3 will be free of
those restrictions.
(c) Each certificate in respect of Shares of Restricted Stock awarded under
the Plan shall be registered in the name of the Participant and deposited
by the Participant, together with a stock power endorsed in blank, with
the Corporation and shall bear the following (or a similar) legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the 1998 Recognition and Retention Plan of
Adirondack Financial Services Bancorp, Inc. Copies of such Plan are
on file in the offices of the Secretary of Adirondack Financial
Services Bancorp, Inc., 52 North Main Street, Gloversville, New York
l2078
(d) At the time of any Award, the Participant shall enter into an Agreement
with the Corporation in a form specified by the Committee, agreeing to the
terms and conditions of the Award and such other matters as the Committee,
in its sole discretion, shall determine (the "Restricted Stock
Agreement").
(e) The payment to the Participant of dividends or other distributions
declared or paid on such shares by the Corporation shall be deferred until
the lapsing of the restrictions imposed under paragraph (a) of this
Section 3, and such dividends or other distributions shall be held by the
Corporation for the account of the Participant until such time. There
shall be credited at the end of each year (or portion thereof) interest on
the amount of the deferred dividends or other distributions at a rate per
annum as the Committee, in its discretion, may determine. Payment of
deferred dividends or other distributions, together with interest accrued
thereon, shall be made upon the earlier to occur of the lapsing of the
restrictions imposed under paragraph (a) of this Section 3 or upon death
or disability of the Participant. Shares of Restricted Stock subject to
restriction on the date of any shareholder vote shall be voted by an
independent party to be named by the Committee.
(f) At the lapsing of the restrictions imposed by paragraph (a) of this
Section 3, the Corporation shall deliver to the Participant (or where the
relevant provision of paragraph (b) of this Section 3 applies in the case
of a deceased Participant, to his legal representative, beneficiary or
heir) the certificate(s) and stock power deposited with it pursuant to
paragraph (c) of this Section 3 and the Shares represented by such
certificate(s) shall be free of the restrictions referred to in paragraph
(a) of this Section 3.
4. Adjustments Upon Changes in Capitalization. In the event of any change
in the outstanding Shares subsequent to the effective date of the Plan by reason
of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Corporation, the maximum aggregate number
and class of shares as to which Awards may be granted under the Plan and the
number and class of shares with respect to which Awards theretofore have been
granted under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive. Any shares of stock or other securities
received as a result of any of the foregoing by a Participant with respect to
Restricted Stock shall be subject to the same restrictions and the
certificate(s) or other
3
instruments representing or evidencing such shares or securities shall be
legended and deposited with the Corporation in the manner provided in Section 3
hereof.
5. Assignments and Transfers. During the Restricted Period, no Award nor
any right or interest of a Participant under the Plan in any instrument
evidencing any Award under the Plan may be assigned, encumbered or transferred
except (i) in the event of the death of a Participant, by will or the laws of
descent and distribution, or (ii) pursuant to a qualified domestic relations
order as defined in the Code or Title I of ERISA or the rules thereunder.
6. Administration. The Plan shall be administered by a Committee
consisting of two or more members, each of whom shall be a Non-Employee
Director. The members of the Committee shall be appointed by the Board of
Directors of the Corporation. Except as limited by the express provisions of the
Plan, the Committee shall have sole and complete authority and discretion,
subject to Office of Thrift Supervision Regulations, to (i) select Participants
and grant Awards; (ii) determine the number of Shares to be subject to types of
Awards generally, as well as individual Awards granted under the Plan; (iii)
determine the terms and conditions upon which Awards shall be granted under the
Plan; (iv) prescribe the form and terms of instruments evidencing such grants;
and (v) establish from time to time regulations for the administration of the
Plan, interpret the Plan, and make all determinations deemed necessary or
advisable for the administration of the Plan. The Committee may maintain, and
update from time to time as appropriate, a list designating selected directors
as Non-Employee Directors. The purpose of such list shall be to evidence the
status of such individuals as Non-Employee Directors and the Board of Directors
may appoint to the Committee any individual actually qualifying as a
Non-Employee Directors regardless of whether identified as such on said list.
A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by a majority of the Committee without a meeting, shall
be acts of the Committee.
7. Shares Subject to Plan. Subject to adjustment by the operation of
Section 4 hereof, the maximum number of Shares with respect to which Awards may
be made under the Plan is 4% of the total Shares issued in the Association's
Conversion. The Shares with respect to which Awards may be made under the Plan
may be either authorized and unissued Shares or issued Shares heretofore or
hereafter reacquired and held as treasury Shares. An Award shall not be
considered to have been made under the Plan with respect to Restricted Stock
which is forfeited and new Awards may be granted under the Plan with respect to
the number of Shares as to which such forfeiture has occurred.
The Corporation's obligation to deliver Shares with respect to an Award
shall, if the Committee so requests, be conditioned upon the receipt of a
representation as to the investment intention of the Participant to whom such
Shares are to be delivered, in such form as the Committee shall determine to be
necessary or advisable to comply with the provisions of the Securities Act of
1933 or any other Federal, state or local securities legislation or regulation.
It may be provided that any representation requirement shall become inoperative
upon a registration of the Shares or other action eliminating the necessity of
such representation under such Securities Act or other securities legislation.
The Corporation shall not be required to deliver any Shares under the Plan prior
to (i) the admission of such shares to listing on any stock exchange on which
Shares may then be listed, and (ii) the completion of such registration or other
qualification of such Shares under any state or Federal law, rule or regulation,
as the Committee shall determine to be necessary or advisable.
8. Employee Rights Under the Plan. No director, director emeritus,
advisory director, officer or employee shall have a right to be selected as a
Participant nor, having been so selected, to be selected again as a Participant
and no director, officer, employee or other person shall have any claim or right
to be granted an Award under the Plan or under any other incentive or similar
plan of the Corporation or any Affiliate. Neither
4
the Plan nor any action taken thereunder shall be construed as giving any
officer or employee any right to be retained in the employ of the Corporation,
the Bank or any Affiliate.
9. Withholding Tax. Upon the termination of the Restricted Period with
respect to any shares of Restricted Stock (or at such earlier time, if any, that
an election is made by the Participant under Section 83(b) of the Code, or any
successor provision thereto, to include the value of such shares in taxable
income), the Corporation may, in its sole discretion, withhold from any payment
or distribution made under this Plan sufficient Shares or withhold sufficient
cash to cover any applicable withholding and employment taxes. The Corporation
shall have the right to deduct from all dividends paid with respect to shares of
Restricted Stock the amount of any taxes which the Corporation is required to
withhold with respect to such dividend payments. No discretion or choice shall
be conferred upon any Participant with respect to the form, timing or method of
any such tax withholding.
10. Amendment or Termination. The Board of Directors of the Corporation
may amend, suspend or terminate the Plan or any portion thereof at any time,
subject to Office of Thrift Supervision Regulations, but (except as provided in
Section 4 hereof) no amendment shall be made without approval of the
stockholders of the Corporation which shall (i) increase the aggregate number of
Shares with respect to which Awards may be made under the Plan, (ii) materially
increase the benefits accruing to Participants, (iii) materially change the
requirements as to eligibility for participation in the Plan or (iv) change the
class of persons eligible to participate in the Plan; provided, however, that no
such amendment, suspension or termination shall impair the rights of any
Participant, without his consent, in any Award theretofore made pursuant to the
Plan.
11. Term of Plan. The Plan shall become effective upon its ratification by
the stockholders of the Corporation. It shall continue in effect for a term of
ten years unless sooner terminated under Section 11 hereof.
12. Director Awards. By, and simultaneously with, the ratification of this
Plan by the stockholders of the Corporation, each member of the Board of
Directors of the Corporation who is not a full-time employee of the Corporation
is hereby granted an Award equal to .5% of the shares sold in the Conversion.
Each of the Awards granted in this Section 12 shall be earned in five equal
annual installments, with the first installment vesting on the first anniversary
of the date of grant, as long as the director maintains Continuous Service with
the Corporation or its affiliates, provided, however, that no Award shall be
earned in any fiscal year in which the Bank fails to meet all of its fully
phased-in capital requirements.
5
REVOCABLE PROXY
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
SPECIAL MEETING OF STOCKHOLDERS
October 7, 1998
The undersigned hereby appoints the Board of Directors of Adirondack Financial
Services Bancorp, Inc. (the "Company"), and its survivor, with full power of
substitution, to act as attorneys and proxies for the undersigned to vote all
shares of common stock of the Company which the undersigned is entitled to vote
at the Special Meeting of Stockholders (the "Meeting"), to be held on October 7,
1998 at the main office of the Company located at 52 North Main Street,
Gloversville, New York, at 3:15 P.M. local time, and at any and all adjournments
thereof, as follows;
I. The ratification of the adoption of the Company's 1998 Stock Option and
Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
II. The ratification of the adoption of the Company's 1998 Recognition and
Retention Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote on any other business
that may come before the Meeting or any adjournment thereof.
The Board of Directors recommends a vote "FOR" the listed proposals
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE PROPOSALS STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY
IN THEIR BEST JUDGEMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The stockholder may revoke this proxy by: (i) filing with the Secretary of the
Company at or before the Meeting a written notice of revocation bearing a later
date than the proxy; (ii) duly executing a subsequent proxy relating to the same
shares and delivering it to the Secretary of the Company at or before the
Meeting; or (iii) attending the Meeting and voting in person (although
attendance at the Meeting will not of itself constitute revocation of a proxy).
The undersigned acknowledges receipt from the Company, prior to the execution
of this Proxy, of Notice of the Meeting and a Proxy Statement dated on or about
September 4, 1998.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee, guardian or corporate officer please
give your full title. If shares are held jointly, each holder should sign.
Please be sure to sign and date
this Proxy in the box below.
_________________________________________
Date
_________________________________________
Stockholder sign above
_________________________________________
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
PLEASE PROMPTLY COMPLETE, DATE, SIGN & MAIL THIS PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.