EXHIBIT 99.6
Prospectus Supplement
FINGER LAKES BANCORP, INC.
SAVINGS BANK OF THE FINGER LAKES
401(K) SAVINGS PLAN
Finger Lakes Bancorp, Inc. is providing this prospectus supplement to
participants in the Savings Bank of the Finger Lakes 401(k) Savings Plan
("401(k) Plan"). As a participant in this 401(k) plan, you may direct the
trustee of the 401(k) plan to purchase common stock of Finger Lakes Bancorp,
Inc. in its stock offering with amounts allocated to your account under the
401(k) plan. If you cannot acquire all the common stock you want in the stock
offering, the trustee of the 401(k) plan will apply the amounts which were not
used to acquire common stock in the stock offering among the funds in which your
account is invested in proportion to your current investment allocation
percentages.
The prospectus of Finger Lakes Bancorp, Inc. dated _____________, 2000
attached to this prospectus supplement includes detailed information with
respect to the offering and the financial condition, results of operations and
business of Savings Bank of the Finger Lakes. You should read this prospectus
supplement, which provides information with respect to the 401(k) plan, together
with the prospectus.
____________________
For a discussion of risks that you should consider, see "Risk Factors"
beginning on page __ of the prospectus.
The interests in the 401(k) plan and the offering of the common stock have
not been approved or disapproved by the Office of Thrift Supervision, the
Securities and Exchange Commission or any other Federal or state agency. Any
representation to the contrary is a criminal offense.
The securities offered in this prospectus supplement are not deposits or
accounts and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
The 401(k) plan's investment in common stock is subject to loss.
The date of this prospectus supplement is ___________, 2000.
TABLE OF CONTENTS
THE OFFERING........................................................................ 1
Securities Offered............................................................. 1
Election to Purchase Common Stock in the Offering; Priorities.................. 1
Value of 401(k) Plan Assets.................................................... 2
Method of Directing Transfer................................................... 2
Time for Directing Transfer.................................................... 2
Irrevocability of Transfer Direction........................................... 2
Direction to Purchase Common Stock After the Offering.......................... 3
Purchase Price of Common Stock................................................. 3
Nature of a Participant's Interest in the Common Stock......................... 3
Voting Rights of Common Stock.................................................. 3
DESCRIPTION OF THE 401(k) PLAN...................................................... 4
Introduction................................................................... 4
Eligibility and Participation.................................................. 4
Contributions Under the 401(k) Plan............................................ 5
Limitations on 401(k) Plan Contributions....................................... 5
Investment of Contributions and Account Balances............................... 7
Benefits Under the 401(k) Plan................................................. 11
Withdrawals and Distributions From the 401(k) Plan............................. 11
Trustee........................................................................ 12
Plan Administrator............................................................. 13
Reports to 401(k) Plan Participants............................................ 13
Amendment and Termination...................................................... 13
Merger, Consolidation or Transfer.............................................. 13
Federal Income Tax Consequences................................................ 14
Additional Employee Retirement Income and Security Act Considerations.......... 18
Securities and Exchange Commission Reporting and Short-Swing Profit Liability.. 19
Financial Information Regarding 401(k) Plan Assets............................. 20
LEGAL OPINION....................................................................... 20
THE OFFERING
Securities Offered
Finger Lakes Bancorp, Inc. is offering participation interests in the
Savings Bank of the Finger Lakes 401(k) Savings Plan (the "401(k) plan"). The
participation interests represent indirect ownership of Finger Lakes Bancorp,
Inc.'s common stock through the 401(k) plan. The 401(k) plan may acquire up to
60,000 shares of Finger Lakes Bancorp, Inc. common stock in the offering. This
will be in addition to shares of Finger Lakes Bancorp, Inc. which are received
in exchange for shares of Finger Lakes Financial Corp. common stock it presently
holds. The shares of common stock of Finger Lakes Financial Corp., will be
exchanged for shares of Finger Lakes Bancorp, Inc. pursuant to the exchange
ratio established in the reorganization and conversion of Finger Lakes Financial
Corp. to stock holding company form, as is more fully discussed in the
prospectus. In connection with the above, the name of the Finger Lakes Financial
Corp. Stock Fund will be changed to the Finger Lakes Bancorp, Inc. Stock Fund
(in this prospectus supplement, we will refer to the stock fund as the "Finger
Lakes Stock Fund"). Only employees of Savings Bank of the Finger Lakes may
become participants in the 401(k) plan. The common stock of Finger Lakes
Bancorp, Inc. to be issued hereby is conditioned on the consummation of the
conversion. Your investment in the common stock of Finger Lakes Bancorp, Inc.
through the 401(k) plan in the offering is subject to the priorities listed
below. Information with regard to the 401(k) plan is contained in this
prospectus supplement and information with regard to the financial condition,
results of operations and business of Savings Bank of the Finger Lakes is
contained in the attached prospectus. The address of the principal executive
office of Savings Bank of the Finger Lakes is 470 Exchange Street, Geneva, New
York 14456. Savings Bank of the Finger Lakes' telephone number is (315) 789-
3838.
Election to Purchase Common Stock in the Offering; Priorities
In connection with the conversion and stock offering, you may elect to
transfer all or part of your account balances in the 401(k) plan to the Finger
Lakes Stock Fund, to be used to purchase common stock issued in the offering.
The trustee of the Finger Lakes Stock Fund will purchase common stock in
accordance with your directions. In the event the offering is oversubscribed,
i.e. there are more orders for common stock than shares available for sale in
the offering, and the trustee is unable to use the full amount allocated by you
to purchase common stock in the offering, the amount that cannot be invested in
common stock will be reinvested in the investment funds of the 401(k) plan in
accordance with your then existing investment election (in proportion to your
investment direction allocation percentages). If you fail to direct the
investment of your account balances towards the purchase of any shares in
connection with the offering, your account balances will remain in the
investment funds of the 401(k) plan as previously directed by you.
The shares of common stock are being offered for sale in the following
priorities:
(1) depositors of Savings Bank of the Finger Lakes with aggregate account
balances of $50 or more as of December 31, 1998;
(2) Savings Bank of the Finger Lakes's tax-qualified employee stock
benefit plans, including the employee stock ownership plan and the
401(k) plan;
(3) depositors of Savings Bank of the Finger Lakes with aggregate account
balances of $50 or more as of March 31, 2000;
(4) directors, officers and employees of Savings Bank of the Finger Lakes;
and
(5) the general public who hold shares of common stock of Savings Bank of
the Finger Lakes with preference given to residents of the New York
counties of Ontario, Seneca, Tompkins and Cayuga.
To the extent you fall into one of these categories, you may use funds in
your plan account to subscribe or pay for the common stock being acquired.
Common stock so purchased will be placed in the Finger Lakes Stock Fund and
allocated to your 401(k) plan account.
Value of 401(k) Plan Assets
As of June 30, 2000, the market value of the assets of the 401(k) plan was
approximately $763,912. The plan administrator informed each participant of the
value of his or her account balance under the 401(k) plan as of June 30, 2000.
Method of Directing Transfer
You will receive a form on which you can elect to transfer all or a portion
of your account balance in the 401(k) plan to the Finger Lakes Stock Fund for
the purchase of stock in the offering (other than amounts you currently have
invested in such fund). If you wish to use all or part of your account balance
in the 401(k) plan to purchase common stock issued in the offering (other than
amounts you currently have invested in the Finger Lakes Stock Fund), you should
indicate that decision on the investment allocation form.
Time for Directing Transfer
If you wish to purchase common stock with your 401(k) account balances, you
must return your election form to Mary Raeman, Human Resources Manager, Savings
Bank of the Finger Lakes, 470 Exchange Street, Geneva, New York 14456 no later
than 12:00 noon on _________, 2000.
Irrevocability of Transfer Direction
You may not revoke your special election to transfer amounts credited to
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your account in the 401(k) plan to the Finger Lakes Stock Fund for the purchase
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of stock in the offering. You
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will, however, continue to have the ability to transfer amounts not directed
towards the purchase of stock in the offering amongst all of the investment
funds, including the Finger Lakes Stock Fund, on a daily basis.
Direction to Purchase Common Stock After the Offering
Whether you choose to purchase stock in the offering, or attempt to
purchase stock in the offering but are unable to do so because the offering is
oversubscribed, you will also be able to purchase stock after the offering
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through your investment in the Finger Lakes Stock Fund. You may direct that a
certain percentage of your account balance in the 401(k) plan be transferred to
the Finger Lakes Stock Fund and invested in common stock, or to the other
investment funds available under the 401(k) plan. You may change your
investment allocation on a daily basis. Special restrictions may apply to
transfers directed to and from the Finger Lakes Stock Fund by the participants
who are subject to the provisions of section 16(b) of the Securities Exchange
Act of 1934, as amended, relating to the purchase and sale of securities by
officers, directors and principal shareholders of Finger Lakes Bancorp, Inc.
Purchase Price of Common Stock
The trustee will use the funds transferred to the Finger Lakes Stock Fund
to purchase common stock in the offering, except in the event of an
oversubscription, as discussed above. The trustee will pay $7.00 per share,
which will be the same price paid by all other persons in the offering.
After the offering, the trustee will acquire common stock in open market
transactions at the prevailing price. The trustee will pay transaction fees
associated with the purchase, sale or transfer of the common stock after the
offering.
Nature of a Participant's Interest in the Common Stock
The trustee will hold the common stock, in trust, for the participants of
the 401(k) plan. Shares of common stock acquired by the trustee at your
direction will be allocated to your account. Therefore, investment decisions of
other participants should not affect the earnings allocated to your account.
Voting Rights of Common Stock
The trustee generally will exercise voting rights attributable to all
common stock held by the Finger Lakes Stock Fund as directed by participants
with accounts invested in the fund. When stockholders have a right to vote on a
matter, you will be allocated voting instruction rights reflecting your
proportionate interest in the fund. The trustee will vote the common stock
affirmatively and negatively on each matter, in proportion to the voting
instructions the trustee receives from the participants.
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DESCRIPTION OF THE 401(k) PLAN
Introduction
Savings Bank of the Finger Lakes adopted the Savings Bank of the Finger
Lakes 401(k) Savings Plan, effective January 1, 1996, as a substitution and
restatement of an existing retirement plan originally established January 1,
1985. The 401(k) plan is a tax-qualified plan that permits participants to
defer current compensation to their account balances. The plan also permits
participant direction of investment.
Savings Bank of the Finger Lakes intends that the 401(k) plan, in
operation, will comply with the requirements of the Internal Revenue Code and
the Employee Retirement Income Security Act. Savings Bank of the Finger Lakes
may amend the 401(k) plan from time to time in the future, as it sees fit or to
maintain compliance with Federal law. Since the 401(k) plan is governed by the
Employee Retirement Income Securities Act, Federal law provides you with various
rights and protections as a participant in the 401(k) plan. Although the 401(k)
plan is subject to many of the provisions of the Employee Retirement Income
Security Act, your benefits under the 401(k) plan are not governed by the
Pension Benefit Guaranty Corporation.
Reference to full text of plan. The following statements are summaries of
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certain provisions of the 401(k) plan. They are not complete and are qualified
in their entirety by the full text of the 401(k) plan. You may obtain a copy of
the 401(k) plan by filing a request with Savings Bank of the Finger Lakes, c/o
Savings Bank of the Finger Lakes, Attention: Mary Raeman, Human Resources
Manager, 470 Exchange Street, Geneva, New York 14456. We urge each employee to
read carefully the full text of the 401(k) plan.
Eligibility and Participation
Any employee of Savings Bank of the Finger Lakes is eligible to become a
participant in the 401(k) plan on the first day of the month following
attainment of age 21 and completion of one "year of service" during which an
employee completes at least 1000 hours of service with Savings Bank of the
Finger Lakes. The 401(k) plan year is January 1 to December 31.
As of June 30, 2000, there were 73 employees eligible to participate in the
401(k) plan and 59 employees participating by making elective deferral
contributions.
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Contributions Under the 401(k) Plan
401(k) plan contributions. As a participant in the 401(k) plan, you are
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permitted to defer any whole percentage (not less than 1% nor more than 15%) of
your compensation on a pre-tax basis, subject to the limitations of the Internal
Revenue Code and to have that amount contributed to the 401(k) plan on your
behalf. For purposes of the 401(k) plan, "compensation" means, generally, your
total compensation reported on Internal Revenue Service Form W-2, plus pre-tax
contributions made to this 401(k) plan or a section 125 cafeteria plan. In
2000, the maximum amount of your annual salary that can be taken into account
under the 401(k) plan is limited to $170,000. Limits established by the Internal
Revenue Service are subject to increase pursuant to an annual cost-of-living
adjustment. You may elect to modify the amount contributed to the 401(k) plan
by filing a new elective deferral agreement with the 401(k) plan administrator
which will be effective the first day of the following month.
Employer contributions. Savings Bank of the Finger Lakes may make
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discretionary contributions to the 401(k) plan, which are allocated to eligible
employees based on the ratio of such employees annual compensation as of the
last day of the plan year to the total of such compensation for all eligible
employees. On and after January 1, 1996, Matching Contributions will not be
made to the 401(k) Plan.
Limitations on 401(k) Plan Contributions
Limitation on employee salary deferrals. The amount of your elective
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deferral contributions may not currently exceed $10,500 per calendar year. The
Internal Revenue Service will periodically increase this annual limitation. If
you defer salary in excess of this limitation, your gross income for Federal
income tax purposes will include the excess in the year of the deferral. In
addition, unless the excess deferral is distributed before April 15 of the
following year, it will be taxed again in the year distributed. Income on the
excess deferral distributed by April 15 of the immediately succeeding year will
be treated, for Federal income tax purposes, as earned and received by the
participant in the tax year in which the distribution is made.
Limitations on annual additions and benefits. The contributions and
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forfeitures you receive under the 401(k) plan and employee stock ownership plan,
in the aggregate, cannot exceed the lesser of $30,000 or 25% of your
compensation, as defined in the 401(k) plan. To the extent contributions and
forfeitures exceed these limitations, the plan administrator will reallocate
discretionary contributions in the same manner as initial allocations of
discretionary contributions to these eligible employees to whom the limitations
do not apply for the year. The discretionary contributions shall be limited if
there are no remaining eligible employees.
If you are also covered under Savings Bank of the Finger Lakes's employee
stock ownership plan and annual additions exceed the maximum permissible amount,
the plan administrator will reduce your contributions under the 401(k) plan, so
that the total annual additions do not exceed the maximum permissible amount.
If discretionary contributions and
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elective deferral contributions are both made to the plan in the year that the
excess occurs, discretionary contribution shall be reduced before elective
deferral contribution.
Limitation on plan contributions for highly compensated employees. The
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Internal Revenue Code limits the amount of elective deferral contributions that
may be made to the 401(k) plan in any plan year on behalf of highly compensated
employees in relation to the amount of elective deferral contributions made by
or on behalf of all other employees eligible to participate in the 401(k) plan.
Specifically, the actual deferral percentage, i.e., the average of the actual
deferral ratios, expressed as a percentage, of each eligible employee's elective
deferral contribution, if any, for the plan year over the employee's
compensation, must meet either of the following tests:
(1) the actual deferral percentage of the eligible highly compensated
employees is not more than 125% of the actual deferral percentage of all other
eligible employees; or
(2) the actual deferral percentage of the eligible highly compensated
employees is not more than 200% of the actual deferral percentage of all other
eligible employees, and the excess of the actual deferral percentage for the
eligible highly compensated employees over the actual deferral percentage of all
other eligible employees is not more than two percentage points.
Similarly, the actual contribution percentage, i.e., the average of the
actual contribution ratios, expressed as a percentage, of each eligible
employee's matching contributions, if any, for the plan year over the employee's
salary, must meet either of the following tests:
(1) the actual contribution percentage of the eligible highly compensated
employees is not more than 125% of the actual contribution percentage of all
other eligible employees; or
(2) the actual contribution percentage of the eligible highly compensated
employees is not more than 200% of the actual contribution percentage of all
other eligible employees, and the excess of the actual contribution percentage
for the eligible highly compensated employees over the actual contribution
percentage of all other employees is not more than two percentage points.
Example: If the actual deferral percentage of non-highly
compensated employees is 4%, the actual deferral
percentage of highly compensated employees cannot
exceed 6%. Alternatively, if the actual deferral
percentage of non-highly compensated employees is 10%,
the maximum deferral percentage of highly compensated
employees cannot exceed 12.5%.
6
In general, for plan years beginning in 1998, a highly compensated
employee includes:
(1) an employee who, during the plan year or the preceding plan year, was
at any time a 5% owner of the stock of Finger Lakes Bancorp, Inc., (formerly,
Finger Lakes Financial Corp.) or stock possessing more than 5% of the total
combined voting power of all stock of Finger Lakes Bancorp, Inc. (formerly,
Finger Lakes Financial Corp.); or
(2) an employee who, for the preceding plan year, received salary from
Savings Bank of the Finger Lakes in excess of $80,000, and, if Savings Bank of
the Finger Lakes elects for a plan year, was in the group consisting of the top
20% of employees when ranked on the basis of salary paid during the plan year.
The dollar amounts set forth above are adjusted annually to reflect increases in
the cost of living.
The trustee will distribute amounts contributed by highly compensated
employees that exceed the actual deferral percentage limitation in any plan
year, together with any income allocable. These contributions must be
distributed before the close of the following plan year, first to highly
compensated employees with the greatest dollar amount of deferrals, until the
plan satisfies the actual deferral percentage test. Moreover, Savings Bank of
the Finger Lakes will be subject to a 10% excise tax on these contributions
unless, together with any income allocable thereto, they either are re-
characterized or are distributed before the close of the first 2- 1/2 months
following the plan year to which the contributions relate. In addition, the
trustee will distribute any contributions by highly compensated employees that
exceed the actual contribution percentage limitation in any plan year, together
with any income allocable thereto, before the close of the following plan year.
A 10% excise tax will also be imposed on Savings Bank of the Finger Lakes with
respect to these contributions, unless such contributions, plus any income
allocable thereto, are distributed within 2- 1/2 months following the close of
the plan year in which they arose.
Investment of Contributions and Account Balances
All amounts credited to your accounts under the 401(k) plan are held in the
plan trust which is administered by the trustee appointed by Savings Bank of the
Finger Lakes' board of directors.
Participants in the 401(k) Plan are provided the opportunity to direct the
investment of your accounts into one of the following funds:
A. RSGroup Trust Company Stable Value Fund
B. RSI Retirement Trust Actively Managed Bond Fund
C. RSGroup Trust Company Conservative Asset Allocation Fund
D. RSGroup Trust Company Moderate Asset Allocation Fund
E. RSGroup Trust Company Aggressive Asset Allocation Fund
F. RSI Retirement Trust Value Equity Fund
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G. RSI Retirement Trust Core Equity Fund
H. Janus Aspen Growth Portfolio
I. American Century Value Fund
J. RSI Retirement Trust International Equity Fund
K. RSI Retirement Trust Emerging Growth Equity Fund
L. Finger Lakes Stock Fund
You may elect to have both past contributions and earnings, as well as
future contributions to your account invested among the funds listed above.
Transfers of past contributions and the earnings thereon do not affect the
investment mix of future contributions. Generally, if you make an election to
direct investment of assets into the Finger Lakes Stock Fund, you may change
your investment at any time. This may be done by a telephone transfer in
accordance with established procedures to dispose of a 401(k) plan investment
and reinvest the net proceeds in an alternative investment under the 401(k)
plan. The proceeds of the sale, net of expenses, will be allocated to your
account and reinvested in accordance with your election. If you make a special
election to invest all or a portion of your account (other than amounts
presently invested in the Finger Lakes Stock Fund) towards the purchase of
Finger Lake Bancorp, Inc. common stock in the offering, you will not be able to
change this investment election until the stock offering is concluded.
Therefore you should carefully consider whether to allocate any portion of your
account to the purchase of stock in the offering.
Performance History
The following table provides performance data with respect to the
investment funds available under the 401(k) plan:
Net Investment Performance - Fund Returns through June 30, 2000
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Annualized
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YTD 1 Yr. 3 Yr. 5Yr. 10 Yr.
A. Stable Value Fund 1.50% 6.00% n/a n/a 6.03%
B. Actively Managed Bond Fund 1.11% 2.35% 5.46% 5.63% 7.57%
C. Conservative Asset Allocation Fund 1.34% 8.21% n/a n/a 11.12%
D. Moderate Asset Allocation Fund 1.18% 12.67% n/a n/a 17.21%
E. Aggressive Asset Allocation Fund 1.27% 15.84% n/a n/a 21.49%
F. Value Equity Fund 0.33% 4.98% 16.92% 22.22% 15.28%
G. Core Equity Fund 3.40% 10.42% 19.72% 23.22% 16.74%
H. Janus Aspen Growth Portfolio -6.60% 24.97% 28.73% 26.37% 21.87%
I. American Century Value Fund -1.56% 15.71% 3.71% 11.89% 12.49%
J. International Equity Fund -1.91% 21.47% 8.85% 12.68% 8.34%
K. Emerging Growth Equity Fund -2.29% 68.90% 24.43% 24.53% 20.73%
L. Finger Lakes Stock Fund -10.94% -30.43% 5.45% 19.38% n/a
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8
The following is a description of each of the 401(k) plan's eleven
investment funds:
Actively Managed Bond Fund. The RSI Retirement Trust Actively Managed Bond
Fund seeks principal appreciation and income return over time by investing in
high-quality fixed income securities. The Fund is appropriate for investors
whose goals include greater stability of principal or higher current income than
can be expected from investing only in common stocks. Historically, the price of
bonds has fluctuated less than the price of common stocks.
Conservative Asset Allocation Fund. The RSGroup Trust Company
Conservative Asset Allocation Fund is an asset allocation fund that seeks
preservation of principal with a modest opportunity for growth. The Fund's
target allocation is 40% stocks (15% Core Equity, 15% Value Equity, 5% Emerging
Growth and 5% International Equity) and 60% bonds. The fund is appropriate for
investors with a long-term investment horizon.
Moderate Asset Allocation Fund. The RSGroup Trust Company Moderate Asset
Allocation Fund is an asset allocation fund that seeks significant long-term
growth. The fund's target allocation is 60% stocks (20% Core Equity, 20% Value
Equity, 10% Emerging Growth and 10% International Equity) and 40% bonds. The
fund is appropriate for investors with a long-term investment horizon. Stocks
require a long investment period because their higher historical returns
relative to other types of investments have been accompanied by greater price
fluctuations.
Aggressive Asset Allocation Fund. The RSGroup Trust Company Aggressive
Asset Allocation Fund is an asset allocation fund that is likely to exceed other
asset allocation funds in long-term growth. The Fund's target allocation is 75%
stocks (25% Core Equity, 25% Value Equity, 12.5% Emerging Growth, and 12.5%
International Equity) and 25% bonds.
Value Equity Fund. The RSI Retirement Trust Value Equity Fund seeks
capital appreciation over the long term by investing in stocks of a broadly
diversified group of financially strong, medium-to-large sized companies with
below market price-to-earnings ratios. The Fund is appropriate for investors
with a long-term investment horizon. Stocks require a long investment period
because their higher historical returns relative to other types of investments
have been accompanied by greater price fluctuations.
Core Equity Fund. The RSI Retirement Core Equity Fund seeks capital
appreciation over the long term by investing in stocks of a broadly diversified
group of high-quality, medium-to-large sized companies with attractive earnings
potential and valuations. The Fund is appropriate for investors with a long-
term investment horizon.
Janus Aspen Growth Portfolio. The Janus Aspen Growth Portfolio seeks long-
term growth of capital by investing primarily in common stocks, with an emphasis
on companies with larger market capitalizations. The Fund is appropriate for
investors with a long-term investment
9
horizon. Stocks require a long investment period because their higher historical
returns relative to other types of investments have been accompanied by greater
price fluctuations.
American Century Value Fund. The American Century Value Fund seeks long-
term capital growth by investing in securities that management believes to be
undervalued at the time of purchase. The Fund is appropriate for investors with
a long-term investment horizon. Stocks require a long investment period
because their higher historical returns relative to other types of investments
have been accompanied by greater price fluctuations.
International Equity Fund. The RSI Retirement Trust International Equity
Fund seeks capital appreciation by investing primarily in stocks of companies
that are headquartered in foreign countries. The Fund is appropriate for
investors with a long-term investment horizon. There are special risks
associated with an investment in this Fund including fluctuations in exchange
rates and political uncertainty.
Emerging Growth Equity Fund. The RSI Retirement Trust International
Equity Fund seeks capital appreciation by investing in quality growth stocks of
smaller, relatively new companies that demonstrate higher than average potential
for earnings growth. The Fund is appropriate for investors with a long-term
investment horizon who are willing to accept greater short-term changes in value
for the potential of a higher long-term return. Small company equities require
a longer investment period because their higher historical returns relative to
equities of larger companies have been accompanied by greater price
fluctuations.
Finger Lakes Stock Fund. The Finger Lakes Stock Fund will consist primarily
of investments in common stock of Finger Lakes Bancorp, Inc. The trustee will
use all amounts reallocated to the Finger Lakes Stock Fund in the special
election to acquire shares in the offering. Shares of Finger Lakes Financial
Corp. which were held in the Finger Lakes Stock Fund prior to the conversion and
offering will be converted into shares of common stock of Finger Lakes Bancorp,
Inc., in accordance with the exchange ratio. After the offering, the trustee
will, to the extent practicable, use all amounts held by it in the Finger Lakes
Stock Fund, including cash dividends paid on common stock held in the Finger
Lakes Stock Fund, to purchase shares of common stock of Finger Lakes Bancorp,
Inc. It is expected that all purchases will be made at prevailing market
prices. Under certain circumstances, the trustee may be required to limit the
daily volume of shares purchased. Pending investment in common stock, amounts
allocated towards the purchase of shares in the offering will be held in the
Finger Lakes Stock Fund in an interest-bearing account. In the event of an
oversubscription, any earnings that result therefrom will be reinvested among
the other funds of the 401(k) plan in accordance with your then existing
investment election (in proportion to your investment direction allocation
percentages).
As of the date of this prospectus supplement, none of the shares of common
stock of Finger Lakes Bancorp. Inc. have been issued or are outstanding.
However, shares of its predecessor Finger Lakes Financial Corp. have been
actively traded on an established market
10
since 1998. The historical performance of the Finger Lakes Stock Fund is set
forth in the table above. Performance of the Finger Lakes Stock Fund will be
dependent upon a number of factors, including the financial condition and
profitability of Finger Lakes Bancorp, Inc. and Savings Bank of the Finger Lakes
and market conditions for the common stock generally.
For a discussion of risks that you should consider, see "Risk Factors"
beginning on page __ of the prospectus.
Benefits Under the 401(k) Plan
Vesting. At all times, you have a fully vested, nonforfeitable interest in
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your elective deferral contributions and earnings under the 401(k) plan. You
are vested in any employer matching contributions and discretionary
contributions, in accordance with the following schedule:
Years of Service Vesting Percentage
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Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
You are also 100% vested in employer matching contributions, if any, and
discretionary contributions made to your account, regardless of your years of
employment, upon attainment of your normal or early retirement age (as defined
by the 401(k) plan), your death or total and permanent disability. Any non-
vested employer contributions which are forfeited shall be treated as
discretionary contributions and allocated as such.
Withdrawals and Distributions from the 401(k) Plan
Federal law requires the 401(k) plan to impose substantial restrictions on
your right to withdraw amounts held for your benefit under the 401(k) plan prior
to your termination of employment with Savings Bank of the Finger Lakes. A
Federal tax penalty equal to 10% of the withdrawal, over and above the normal
Federal and state income tax, may also be imposed on withdrawals made prior to
your attainment of age 59-1/2, regardless of whether the withdrawals occur
during your employment with Savings Bank of the Finger Lakes or after
termination of employment.
Withdrawals prior to termination of employment. You may withdraw your
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employee elective deferral contributions, matching contributions (if any),
discretionary contributions and rollover contributions prior to termination of
employment in the event of financial hardship,
11
subject to the hardship distribution rules under the plan. These requirements
insure that you have a true financial need before you make a withdrawal.
In addition, once you attain age 59-1/2, you may withdraw all or any
portion of your vested account, provided that you may make only one such
withdrawals in any 12-month period.
Finally, you may receive a loan from the 401(k) plan of a portion of your
account balance, not to exceed the lesser of (i) $50,000 (reduced by your
highest outstanding loan balance in the last 12 months); or (ii) one-half of
your vested account balance (reduced by any outstanding loan balance on the date
of the new loan), provided that, in the latter case, you may borrow up to
$10,000 (reduced by any outstanding loan balance on the date of the new loan),
if that is greater than one-half of your vested account balance.
Distribution upon termination of employment or disability. Payment of your
---------------------------------------------------------
benefits upon your normal or early retirement (as defined under the 401(k)plan),
disability, or other termination of employment shall be made in a single-sum
payment or in installments, over a fixed period, which period can not exceed 10
years or the life expectancy of the participant, whichever is longer.
Alternatively, your benefit may be transferred to another qualified employee
benefit plan or individual retirement account. You may elect to receive your
distribution payable from the Finger Lakes Stock Fund in shares of Finger Lakes
Bancorp, Inc. common stock.
Distribution upon death. If you die prior to the benefit commencement date
-----------------------
for retirement, disability or termination of employment, your benefit will be
paid to your surviving spouse or other properly designated beneficiary in a lump
sum or installments over a period not to exceed 10 years or your designated
beneficiary's life expectancy. If no election is in effect at the time of your
death, your beneficiary may elect to receive the benefit in the form of a lump
sum or installments over a period not to exceed 5 years. If you die after
distribution of your interest has begun, the remaining portion of such interests
will continue to be distributed as rapidly as under the method of distribution
being used prior to your death.
Nonalienation of benefits. Except for Federal income tax withholding or a
-------------------------
qualified domestic relations order, your benefits payable under the 401(k) plan
cannot be alienated. Examples of alienation include transferring your benefits
voluntarily and a creditor placing a lien on your benefits. Any attempt to
alienate your benefits, whether voluntary or involuntary, shall be void.
Trustee
The trustee of the Savings Bank of the Finger Lakes 401(k) Savings Plan is
RSGroup Trust Company. The trustee receives, holds and invests the
contributions to the 401(k) plan in trust and distributes them to you and your
beneficiaries in accordance with the terms of the 401(k) plan and the directions
of the plan administrator. The trustee is responsible for investment of the
assets of the trust.
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Plan Administrator
The 401(k) plan is administered by the plan administrator. Savings Bank of
the Finger Lakes is the 401(k) plan administrator. The address of the 401(k)
plan administrator is 470 Exchange Street, Geneva, New York 14456, and its
telephone number is (315) 789-3838. The 401(k) plan administrator is
responsible for the administration of the 401(k) plan, interpretation of the
provisions of the 401(k) plan, prescribing procedures for filing applications
for benefits, preparation and distribution of information explaining the 401(k)
plan, maintenance of 401(k) plan records, books of account and all other data
necessary for the proper administration of the 401(k) plan, preparation and
filing of all returns and reports relating to the 401(k) plan which are required
to be filed and for all disclosures required to be made to participants,
beneficiaries and others.
Reports to 401(k) Plan Participants
The plan administrator will furnish you with a quarterly statement showing:
(1) the current market value of each fund as of the end of the quarter; and
(2) the amount of contributions and earnings allocated to your account for
that period.
Amendment and Termination
It is the intention of Savings Bank of the Finger Lakes to continue the
401(k) plan indefinitely. Nevertheless, Savings Bank of the Finger Lakes may
terminate the 401(k) plan at any time. If the 401(k) plan is terminated in
whole or in part, then regardless of other provisions in the 401(k) plan, you
will have a fully vested interest in your accounts. Savings Bank of the Finger
Lakes reserves the right to make, from time to time, any amendment or amendments
to the 401(k) plan which do not cause any part of the trust to be used for, or
diverted to, any purpose other than the exclusive benefit of participants or
their beneficiaries; provided, however, that Savings Bank of the Finger Lakes
may make any amendment it determines necessary or desirable, with or without
retroactive effect, to comply with the Employee Retirement Income Security Act.
Merger, Consolidation or Transfer
In the event of the merger or consolidation of the 401(k) plan with another
401(k) plan, or the transfer of the trust assets to another plan, the 401(k)
plan requires that you would, if either the 401(k) plan or the other plan then
terminated, receive a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit you would have been
13
entitled to receive immediately before the merger, consolidation or transfer, if
the plan had then terminated.
Federal Income Tax Consequences
The following is a summary of the material Federal income tax aspects of
the 401(k) plan. However, statutory provisions are subject to change, as are
their interpretations, and their application may vary in individual
circumstances. The consequences under state and local income tax laws may not
be the same as under the Federal income tax laws. You are urged to consult your
tax advisors with respect to any distribution from the 401(k) plan and
transactions involving the 401(k) plan.
The 401(k) plan is tax-qualified and the related trust is exempt from tax
under the Internal Revenue Code. As a result, the 401(k) plan is afforded
special tax treatment which include the following:
(1) Savings Bank of the Finger Lakes is allowed an immediate tax deduction
for the amount contributed to the 401(k) plan each year;
(2) you pay no current income tax on amounts contributed by Savings Bank of
the Finger Lakes on your behalf; and
(3) earnings of the 401(k) plan are tax-exempt, thereby permitting the tax-
free accumulation of income and gains on investments.
The 401(k) plan will be administered to comply in operation with the
requirements of the Internal Revenue Code as of the effective date of any change
in the law. Savings Bank of the Finger Lakes expects to timely adopt any
amendments to the 401(k) plan that may be necessary to maintain the qualified
status of the 401(k) plan under the Internal Revenue Code.
Assuming that the 401(k) plan is administered in accordance with the
requirements of the Internal Revenue Code, participation in the 401(k) plan
under existing Federal income tax laws will have the following effects:
(1) The contributions to your account and the investment earnings on the
account are not includable in your Federal taxable income until the
contributions or earnings are actually distributed or withdrawn from the 401(k)
plan. Special tax treatment may apply to the taxable portion of any
distribution that includes common stock or qualifies as a lump-sum distribution,
as described below; and
(2) Income earned on assets held by the trust will not be taxable to the
trust.
Lump-sum distribution. A distribution from the 401(k) plan to you or your
---------------------
beneficiary will qualify as a lump-sum distribution if it:
14
(1) is made within one calendar year;
(2) is on account of your death, disability or separation from service, or
after you attain age 59-1/2; and
(3) consists of your balance under this 401(k) plan and all other profit
sharing plans, if any, maintained by Savings Bank of the Finger Lakes. The
portion of any lump-sum distribution that is required to be included in your
taxable income for Federal income tax purposes consists of the entire amount of
the lump-sum distribution less the amount of after-tax contributions, if any,
made by you to this or any other profit sharing plan maintained by Savings Bank
of the Finger Lakes which is included as part of the lump-sum distribution.
Averaging rules. The portion of the total taxable amount of a lump-sum
---------------
distribution that is attributable to participation after 1973 in the 401(k) plan
or in any other profit-sharing plan maintained by Savings Bank of the Finger
Lakes, referred to as the ordinary income portion, will be taxable generally as
ordinary income for Federal income tax purposes.
For years beginning after December 31, 1999, five-year income averaging is
repealed. Under a special rule adopted in the 1986 Tax Reform Act, if you turned
50 by 1985, you may elect to have your lump-sum distribution taxed under a ten-
year income averaging rule which would allow you to pay a separate tax on the
lump-sum distribution that would approximate the tax (under the rates in effect
in 1986) that would have been due if the distribution had been received in ten
equal annual installments; you also may elect to have that portion of the lump-
sum distribution attributable to your pre-1974 participation in the 401(k) plan
treated as a long-term capital gain and taxed at a rate of 20%.
Common stock included in lump-sum distribution. If a lump-sum distribution
----------------------------------------------
includes common stock, the distribution generally will be taxed in the manner
described above under lump-sum distributions, except that the total taxable
amount will be reduced by the amount of any net unrealized appreciation with
respect to such common stock, i.e., the net unrealized appreciation is the
excess of the value of such common stock at the time of the distribution over
the cost or other basis to the trust.
Example: Assume the 401(k) plan purchases 100 shares of common stock
in the offering at $10 per share. Ten dollars would be the
cost basis of the stock to the 401(k) plan. If the 401(k)
plan distributes the common stock to you in a lump-sum
distribution when the stock is trading at $18 per share, you
will be taxed in the year of distribution on the $10 cost
basis of the stock to the 401(k) plan. The additional $8 per
share, or the net unrealized appreciation, will not be taxed
until you sell the stock.
15
The tax basis of such common stock for purposes of computing gain or loss
on its subsequent sale will be the value of the common stock at the time of
distribution less the amount of net unrealized appreciation.
Example: Assuming the same facts as above, your cost basis in the
stock is $10, which is the $18 value of the stock at the
time of distribution minus the $8 of net unrealized
-----
appreciation.
Any gain on a sale or other taxable disposition of such common stock, to
the extent of the amount of net unrealized appreciation at the time of
distribution, will be considered long-term capital gain regardless of the
holding period of such common stock. Any gain on a sale or other taxable
disposition of the common stock in excess of the amount of net unrealized
appreciation at the time of distribution will be considered short-term, mid-term
or long-term capital gain depending upon the length of the holding period of the
common stock.
Example: Assume you sell 50 shares of the stock in January, seven
months after you receive the distribution, for $20 per
share. You will be taxed as follows: You will not be taxed
again on the $10 cost basis you recognized as income at the
time of distribution. The $8 in net unrealized appreciation
will be taxed at long-term capital gains rates. However, the
$2 appreciation in the value of the stock that occurred
since the distribution will be taxed at short-term capital
gains rates since you have only held the stock for seven
months following its distribution to you.
As a recipient of a distribution, you may elect to include the amount of
any net unrealized appreciation in the total taxable amount of such distribution
to the extent allowed by the regulations to be issued by the Internal Revenue
Service.
Contribution to another qualified plan or to an individual retirement
---------------------------------------------------------------------
account. You may defer Federal income taxation of all or any portion of the
- -------
total taxable amount of a lump-sum distribution, including the proceeds from the
sale of any common stock included in the lump-sum distribution, to the extent
that such amount, or a portion thereof, is contributed, within 60 days after the
date of its receipt by you, to another qualified plan or to an individual
retirement account. If less than the total taxable amount of a lump-sum
distribution is contributed to another qualified plan or to an individual
retirement account within the applicable 60-day period, the amount not so
contributed must be included in your income for Federal income tax purposes and
will not be eligible for the special averaging rules or for capital gains
treatment.
Example: You receive a distribution of 500 shares of stock and $3,000
cash from the 401(k) plan on June 30. If you intend
16
to roll your distribution over to another tax qualified plan
or individual retirement account, you must do so no later
than August 29, which is 60 days after you received the
distribution. If you roll over all the stock but none of the
cash, you must include the $3,000 cash in your income for
the calendar year in which the distribution is made to you.
You generally may defer the Federal income taxation of any portion of any
other distribution made on account of your disability or separation from
service, if the amount is distributed within one taxable year, and is
contributed, within 60 days after the date of its receipt by you, to an
individual retirement account.
Effective January 1, 1993, you have the right to elect to have the trustee
transfer all or any portion of an "eligible rollover distribution" directly to
another qualified plan or to an individual retirement account. If you do not
elect to have an eligible rollover distribution transferred directly to another
qualified plan or to an individual retirement account, the distribution will be
subject to a mandatory Federal withholding tax equal to 20% of the taxable
distribution. An eligible rollover distribution means any amount distributed
from the 401(k) plan except:
(1) a distribution that is (a) one of a series of substantially equal
periodic payments made, not less frequently than annually, over your life or the
joint lives of you and your designated beneficiary, or (b) for a specified
period of ten years or more;
(2) any amount that is required to be distributed under the minimum
distribution rules; and
(3) any other distributions excepted under applicable Federal law.
If your beneficiary is your surviving spouse, he or she also may defer
Federal income taxation of all or any portion of a distribution from the 401(k)
plan to the extent that such amount, or a portion thereof, is contributed within
60 days after the date of its receipt by your surviving spouse, to an individual
retirement account. If all or any portion of the total taxable amount of a
lump-sum distribution is contributed by your surviving spouse to an individual
retirement account within the applicable 60-day period, any subsequent
distribution from the individual retirement account will not be eligible for the
special averaging rules or for capital gains treatment. Any amount received by
your surviving spouse that is not contributed to another qualified plan or to an
individual retirement account within the applicable 60-day period and any amount
received by a nonspouse beneficiary will be included in such beneficiary's
income for Federal tax purposes in the year in which it is received.
Additional Tax on Early Distributions. If you receive a distribution from
-------------------------------------
the 401(k) plan prior to attaining age 59-1/2, it will be subject to an
additional income tax equal to 10% of the taxable amount of the distribution.
The 10% additional income tax will not apply, however, to
17
the extent the distribution is rolled over into an IRA or another qualified plan
or the distribution is:
(1) made to a beneficiary, or to your estate, on or after your death;
(2) attributable to your disability;
(3) part of a series of substantially equal periodic payments not less
frequently than annually made for your life or life expectancy or the joint
lives or joint life expectancies of you and your beneficiary;
(4) made to you after separation from service on account of early
retirement under the 401(k) plan after attainment of age 55;
(5) made to pay medical expenses to the extent deductible for Federal
income tax purposes;
(6) made to an alternate payee pursuant to a qualified domestic relations
order; or
(7) made to effect the distribution of excess contributions or excess
deferrals.
Additional Employee Retirement Income and Security Act Considerations
As noted above, the 401(k) plan is subject to certain provisions of the
Employee Retirement Income Security Act, including special provisions relating
to control over the 401(k) plan's assets by participants and beneficiaries. The
401(k) plan's feature that allows you to direct the investment of your account
balances is intended to satisfy the requirements of section 404(c) of the
Employee Retirement Income Security Act of 1974 relating to control over plan
assets by a participant or beneficiary. The effect of this is two-fold. First,
you will not be deemed a "fiduciary" because of your exercise of investment
discretion. Second, no person who otherwise is a fiduciary, such as your
employer, the plan administrator, or the plan's trustee is liable under the
fiduciary responsibility provision of the Employee Retirement Income Security
Act for any loss which results from your exercise of control over the assets in
your 401(k) plan account.
Because you will be entitled to invest all or a portion of your account
balance in the 401(k) plan in Finger Lakes Bancorp, Inc. common stock, the
regulations under section 404(c) of the Employee Retirement Income Security Act
require that the 401(k) plan establish procedures that ensure the
confidentiality of your decision to purchase, hold, or sell employer securities,
except to the extent that disclosure of such information is necessary to comply
with Federal or state laws not preempted by the Employee Retirement Income
Security Act. These regulations also require that your exercise of voting and
similar rights with respect to the common stock be conducted in a way that
ensures the confidentiality of your exercise of these rights. Accordingly, the
401(k) plan committee designates Mary Raeman, Human Resources Manager of Savings
18
Bank of the Finger Lakes, as the person to whom your investment instructions
should be returned. Ms. Raeman will transfer your investment instructions
directly to RSGroup Trust Company, the plan's trustee. In the case of an event
that involves a potential for undue employer influence such as a tender offer,
you will be instructed to return your instructions directly to RS Group Trust
Company.
Securities and Exchange Commission Reporting and Short-Swing Profit Liability
Section 16 of the Securities Exchange Act of 1934 imposes reporting and
liability requirements on officers, directors, and persons beneficially owning
more than 10% of public companies such as Finger Lakes Bancorp, Inc. Section
16(a) of the Securities Exchange Act of 1934 requires the filing of reports of
beneficial ownership. Within 10 days of becoming an officer, director or person
beneficially owning more than 10% of the shares of Finger Lakes Bancorp, Inc., a
Form 3 reporting initial beneficial ownership must be filed with the Securities
and Exchange Commission. Changes in beneficial ownership, such as purchases,
sales and gifts generally must be reported periodically, either on a Form 4
within 10 days after the end of the month in which a change occurs, or annually
on a Form 5 within 45 days after the close of Finger Lakes Bancorp, Inc.'s
fiscal year. Discretionary transactions in and beneficial ownership of the
common stock through the Finger Lakes Bancorp, Inc. stock fund of the 401(k)
plan by officers, directors and persons beneficially owning more than 10% of the
common stock of Finger Lakes Bancorp, Inc. generally must be reported to the
Securities and Exchange Commission by such individuals.
In addition to the reporting requirements described above, section 16(b) of
the Securities Exchange Act of 1934 provides for the recovery by Finger Lakes
Bancorp, Inc. of profits realized by an officer, director or any person
beneficially owning more than 10% of Finger Lakes Bancorp, Inc.'s common stock
resulting from non-exempt purchases and sales of Finger Lakes Bancorp, Inc.
common stock within any six-month period.
The Securities and Exchange Commission has adopted rules that provide
exemptions from the profit recovery provisions of section 16(b) for all
transactions in employer securities within an employee benefit plan, provided
certain requirements are met. These requirements generally involve restrictions
upon the timing of elections to acquire or dispose of employer securities for
the accounts of section 16(b) persons.
Except for distributions of common stock due to death, disability,
retirement, termination of employment or under a qualified domestic relations
order, persons affected by section 16(b) are required to hold shares of common
stock distributed from the 401(k) plan for six months following such
distribution and are prohibited from directing additional purchases of units
within the Finger Lakes Bancorp, Inc. stock fund for six months after receiving
such a distribution.
19
Financial Information Regarding 401(k) Plan Assets
Unaudited financial statements representing the net assets available for
401(k) plan benefits at June 30, 2000, are attached to this prospectus
supplement.
LEGAL OPINION
The validity of the issuance of the common stock will be passed upon by
Luse Lehman Gorman Pomerenk & Schick, P.C., Washington, D.C., which firm acted
as special counsel to Finger Lakes Bancorp, Inc. in connection with Finger Lakes
Bancorp, Inc.'s stock offering.
20
SAVINGS BANK OF THE FINGER LAKES
Statement of Net Assets Available for Plan Benefits
with Fund Information
June 30, 2000
Actively Conservative Moderate Aggressive Janus
Stable Managed Asset Asset Asset Value Core Aspen
Value Bond Allocation Allocation Allocation Equity Equity Growth
Fund Fund Fund Fund Fund Fund Fund Portfolio
---------- ---------- ---------- ----------- ---------- ---------- ----------- -----------
Assets
- ------
Investments $30,228.25 $28,379.90 $38,077.32 $108,443.54 $87,114.92 $10,490.79 $110,107.98 $136,098.48
American Emerging Finger
Century International Growth Lakes
Value Equity Equity Stock Loan
Fund Fund Fund Fund Fund
--------- ------------- ---------- ----------- ----------
Assets
- ------
Investments $3,175.81 $2,463.74 $19,620.75 $166,751.39 $20,974.87
Total Value of Accounts $761,927.74
Total Assets $763,912.00
Liabilities $ 0
- ----------- -----------
Net Assets Available for Plan Benefits $763,911.98
===========
21