Exhibit 99.2
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
52 North Main Street
Gloversville, New York 12078-3084
(518) 725-6331
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members (the "Special
Meeting") of Gloversville Federal Savings and Loan Association ("Gloversville
Federal" or the "Association") will be held at the main office of the
Association located at 52 North Main Street, Gloversville, New York, on
________, 1998 at _____ _.m., Gloversville, New York time. The purpose of this
Special Meeting is to consider and vote upon:
A plan to convert the Association from a federally chartered mutual
savings and loan association to a federally chartered stock savings and
loan association, including the adoption of a federal stock savings and
loan association charter and bylaws, with the concurrent sale of all
the Association's common stock to Adirondack Financial Services
Bancorp, Inc. a Delaware corporation (the "Holding Company"), and sale
by the Holding Company of shares of its common stock;
such other business as may properly come before the Special Meeting or any
adjournment thereof. Management is not aware of any such other business.
The members who shall be entitled to notice of and to vote at the
Special Meeting and any adjournment thereof are depositors of the Association at
the close of business on __________, 1998 and borrowers of the Bank as of
___________, 19__ and __________, 1998 who continue to be depositors and
borrowers as of the date of the Special Meeting. In the event there are not
sufficient votes for approval of the Plan of Conversion at the time of the
Special Meeting, the Special Meeting may be adjourned from time to time in order
to permit further solicitation of proxies.
BY ORDER OF THE BOARD OF DIRECTORS
Richard D. Ruby
Chairman of the Board
Gloversville, New York
___________, 1998
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF THE PLAN OF CONVERSION BY COMPLETING THE
ENCLOSED PROXY CARD AND RETURNING IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
YOUR VOTE IS VERY IMPORTANT.
SUMMARY OF PROPOSED CONVERSION
This summary does not purport to be complete and is qualified in its
entirety by the more detailed information contained in the remainder of this
Proxy Statement and the accompanying Prospectus.
Under its present "mutual" form of organization, Gloversville Federal
has no stockholders. Its deposit account holders are members of the Association
and have voting rights in that capacity. In the unlikely event of liquidation,
the Association's deposit account holders would have the sole right to receive
any assets of the Association remaining after payment of its liabilities
(including the claims of all deposit account holders to the withdrawal value of
their deposits). Under the Plan of Conversion (the "Plan of Conversion") to be
voted on at the Special Meeting, the Association would be converted into a
federally chartered savings and loan association organized in stock form, and
all of the Association's common stock would be sold concurrently to the Holding
Company (the "Conversion"). The Holding Company will offer and sell its common
stock (the "Common Stock") in an offering (1) to account holders with an account
balance of $50 or more on September 30, 1996 ("Eligible Account Holders"), (2)
tax-qualified employee plans of the Association and the Holding Company
("Tax-Qualified Employee Plans"), (3) account holders of the Association with an
account balance of $50 or more as of ___________, 1998 ("Supplemental Eligible
Account Holders"), (4) certain other members of the Association as of
__________, 1998 who are not Eligible or Supplemental Eligible Account Holders
("Other Members") and (5) employees, officers and directors of the Association
(the "Subscription Offering"). Notwithstanding the foregoing, to the extent
orders for shares exceed the maximum of the appraisal range, Tax-Qualified
Employee Plans shall be afforded a first priority to purchase shares sold above
the maximum of the appraisal range. It is anticipated that Tax-Qualified
Employee Plans will purchase 8% of the Common Stock sold in the Conversion.
To the extent the Common Stock is not all sold to the persons in the
foregoing categories, the Holding Company may offer and sell the remainder of
the Common Stock in a public offering (the "Public Offering and/or Direct
Community Offering") through Capital Resources, Inc. ("Capital Resources") to
selected persons to whom a prospectus (the "Prospectus") is delivered. The
Subscription Offering and the Public Offering and/or Direct Community Offering
are referred to collectively as the "Offering." Voting and liquidation rights
with respect to the Association would thereafter be held by the Holding Company,
except to the limited extent of the liquidation account (the "Liquidation
Account") that will be established for the benefit of Eligible and Supplemental
Eligible Account Holders of the Association and voting and liquidation rights in
the Holding Company would be held only by those persons who become stockholders
of the Holding Company through purchase of shares of its Common Stock. See
"Description of the Plan of Conversion - Principal Effects of Conversion -
Liquidation Rights of Depositor Members."
THE CONVERSION WILL NOT AFFECT THE BALANCE, INTEREST RATE OR FEDERAL
INSURANCE PROTECTION OF ANY SAVINGS DEPOSIT, AND NO PERSON WILL BE OBLIGATED TO
PURCHASE ANY STOCK IN THE CONVERSION.
Business Purposes Net Conversion proceeds are expected to increase the capital
for Conversion of Gloversville Federal, which will support the expansion of
its financial services to the public. The conversion to
stock form and the use of a holding company structure are
also expected to enhance its ability to expand through
possible mergers and acquisitions (although no such
transactions are contemplated at this time) and will
facilitate its future access to the capital markets. The
Association will continue to be subject to comprehensive
regulation and examination by the Office of Thrift
Supervision, Department of Treasury ("OTS") and the Federal
Deposit Insurance Corporation ("FDIC").
Subscription As part of the Conversion, Common Stock is being offered for
Offering sale in the Subscription Offering, in the priorities
summarized below, to the Association's (1) Eligible Account
Holders, (2) Tax-Qualified Employee Plans, (3) Supplemental
Eligible Account Holders (4) Other Members, and (5)
employees, officers and directors. If necessary, all shares
of Common Stock not purchased in the Subscription Offering,
if any, may be offered in
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connection with the Public Offering and/or Direct Community Offering for sale to
selected persons through Capital Resources.
Subscription Rights Each Eligible Account Holder has been given non-transferable
of Eligible rights to subscribe for an amount equal to the greater of
Account Holders $150,000 of Common Stock, one-tenth of one percent of the
total number of shares offered in the Subscription Offering
or 15 times the product (rounded down to the whole next
number) obtained by multiplying the total number of shares
to be issued by a fraction of which the numerator is the
amount of qualifying deposits of such subscriber and the
denominator is the total qualifying deposits of all account
holders in this category on the qualifying date.
Subscription Rights The Association's Tax-Qualified Employee Plans have been
of Tax-Qualified given non-transferable rights to subscribe, individually and
Employee Plans in the aggregate, for up to 10% of the total number of
shares sold in the Conversion after satisfaction of
subscriptions of Eligible Account Holders. Notwithstanding
the foregoing, to the extent orders for shares exceed the
maximum of the appraisal range, Tax-Qualified Employee Plans
shall be afforded a first priority to purchase shares sold
above the maximum of the appraisal range. It is anticipated
that Tax-Qualified Employee Plans will purchase 8% of the
Common Stock sold in the Conversion.
Subscription Rights After satisfaction of subscriptions of Eligible Account
of Supplemental Holders and Tax-Qualified Employee Plans, each Supplemental
Eligible Account Eligible Account Holder (other than directors and officers
Holders of the Association) has been given non-transferable rights
to subscribe for an amount equal to the greater of $150,000
of Common Stock, one-tenth of one percent of the total
number of shares offered in the Conversion or 15 times the
product (rounded down to the whole next number) obtained by
multiplying the total number of shares to be issued by a
fraction of which the numerator is the amount of qualifying
deposits of such subscriber and the denominator is the total
qualifying deposits of all account holders in this category
on the qualifying date. The subscription rights of each
Supplemental Eligible Account Holder shall be reduced to the
extent of such person's subscription rights as an Eligible
Account Holder.
Subscription Rights Each Other Member has been given non-transferable rights to
of Other Members subscribe for an amount equal to the greater of $150,000 of
Common Stock or one-tenth of one percent of the total number
of shares offered in the Conversion after satisfaction of
the subscriptions of the Association's Eligible Account
Holders, Tax-Qualified Employee Plans and Supplemental
Eligible Account Holders.
Subscription Rights Each individual employee, officer and director of the
of Association Association has been given the right to subscribe for an
Personnel amount equal to the greater of $150,000 of Common Stock
after satisfaction of the subscriptions of Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental Eligible
Account Holders and Other Members. Total shares subscribed
for by the employees, officers and directors in this
category may not exceed 22% of the total shares offered in
the Conversion.
Public Offering Subject to prior rights of holders of subscription rights,
and/or Direct the Holding Company may also offer the Common Stock for sale
Community to selected persons through Capital Resources in a Public
Offering Offering and/or Direct Community Offering.
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Purchase No person may purchase more than $150,000 of Common Stock in
Limitations the Subscription Offering. No person, together with
associates of and persons acting in concert with such
person, may purchase more than $150,000 of Common Stock in
the Public Offering and/or Direct Community Offering. The
aggregate purchases of directors and executive officers and
their associates may not exceed 34% of the total number of
shares offered in the Conversion. These purchase limitations
do not apply to the Association's Tax-Qualified Employee
Plans.
Expiration Date of All subscriptions for Common Stock in connection with the
the Subscription Subscription Offering must be received by noon,
Offering Gloversville, New York time on ________, 1998.
How to Subscribe For information on how to subscribe for Common Stock being
for Shares offered in the Subscription Offering, please read the
Prospectus and the order form and instructions accompanying
this Proxy Statement. Subscriptions will not become
effective until the Plan of Conversion has been approved by
the Association's members and all of the Common Stock
offered in the Conversion has been subscribed for or sold in
the Offering or through such other means as may be approved
by the OTS.
Price of Common All sales of Common Stock in the Offering will be made at
Stock the same price per share which is currently expected to be
$10.00 per share on the basis of an independent appraisal of
the pro forma market value of the Association and the
Holding Company upon Conversion. On the basis of a
preliminary appraisal by RP Financial, Inc. ("RP
Financial"), which has been reviewed by the OTS, a minimum
of 425,000 and a maximum of 575,000 shares will be offered
in the Conversion. See "The Conversion - Stock Pricing and
Number of Shares to be Issued" in the Prospectus.
Tax Consequences The Association has received an opinion from its special
counsel, Silver, Freedman & Taff, L.L.P., stating that the
Conversion is a nontaxable reorganization under Section
368(a)(1)(F) of the Internal Revenue Code. The Association
has also received an opinion from KPMG Peat Marwick, LLP
("KPMG Peat Marwick") stating that the Conversion will not
be a taxable transaction for New York income tax purposes.
Required Vote Approval of the Plan of Conversion will require the
affirmative vote of a majority of all votes eligible to be
cast at the Special Meeting.
YOUR BOARD OF DIRECTORS URGES
YOU TO VOTE FOR THE PLAN OF CONVERSION
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GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
PROXY STATEMENT
SPECIAL MEETING OF MEMBERS TO BE HELD ON ________, 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 Gloversville Federal Savings
and Loan Association ("Gloversville Federal" or the "Association") of the
proxies to be voted at the Special Meeting of Members (the "Special Meeting") of
the Association to be held at the Association's main office located at 52 North
Main Street, Gloversville, New York 12078-3084, on ________, 1998 at _____ _.m.,
Gloversville, New York time, and at any adjournments thereof. The Special
Meeting is being held for the purpose of considering and voting upon a Plan of
Conversion under which the Association would be converted (the "Conversion")
from a federally chartered mutual savings and loan association into a federally
chartered stock savings and loan association, the concurrent sale of all the
common stock of the stock savings and loan association to Adirondack Financial
Services Bancorp, Inc. (the "Holding Company"), a Delaware corporation, and the
sale by the Holding Company of shares of its common stock (the "Common Stock").
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE ASSOCIATION UNANIMOUSLY RECOMMENDS THAT
YOU VOTE TO APPROVE THE PLAN OF CONVERSION
The Association is currently organized in "mutual" rather than "stock"
form, meaning that it has no stockholders and no authority under its federal
mutual charter to issue capital stock. The Association's Board of Directors has
adopted the Plan of Conversion providing for the Conversion. The sale of Common
Stock of the Holding Company, which was recently formed to become the holding
company of the Association, will substantially increase the Association's net
worth. The Holding Company will exchange 50% of the net proceeds from the sale
of the Common Stock for the common stock of the Association to be issued upon
Conversion; provided that the amount retained by the Holding Company will be
reduced to the extent required that, upon the completion of the transaction, the
Association's ratio of capital to assets is at least 10%. The Holding Company
expects to retain the balance of the net proceeds as its initial capitalization,
a portion of which the Holding Company intends to lend to the ESOP to fund its
purchase of Common Stock. This increased capital will support the expansion of
the Association's financial services to the public. The Board of Directors of
the Association also believes that the conversion to stock form and the use of a
holding company structure will enhance the Association's ability to expand
through possible mergers and acquisitions (although no such transactions are
contemplated at this time) and will facilitate its future access to the capital
markets.
The Board of Directors of the Association believes that the Conversion
will further benefit the Association by enabling it to attract and retain key
personnel through prudent use of stock-related incentive compensation and
benefit plans. The Board of Directors of the Holding Company intends to adopt a
stock option and incentive plan and a recognition and retention plan, subject to
approval of Holding Company stockholders following completion of the Conversion.
See "Management - Benefit Plans" in the accompanying Prospectus.
Voting in favor of the Plan of Conversion will not obligate any person
to purchase any Common Stock.
THE OFFICE OF THRIFT SUPERVISION ("OTS") HAS APPROVED THE PLAN OF
CONVERSION SUBJECT TO THE APPROVAL OF THE ASSOCIATION'S MEMBERS AND THE
SATISFACTION OF CERTAIN OTHER CONDITIONS. HOWEVER, SUCH APPROVAL DOES NOT
CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION BY THE OTS.
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INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
The Board of Directors of the Association has fixed __________, 1998 as
the voting record date ("Voting Record Date") for the determination of members
entitled to notice of the Special Meeting. All Association depositors are
members of the Association under its current charter. All Association depositors
of record as of the close of business on the Voting Record Date and borrowers as
of ___________, 19__ and the Voting Record Date who continue to be depositors
and borrowers as of the date of the Special Meeting will be entitled to vote at
the Special Meeting or any adjournment thereof.
Each depositor member (including IRA and Keogh account beneficiaries)
will be entitled at the Special Meeting to cast one vote for each $100, or
fraction thereof, of the aggregate withdrawal value of all of such depositor's
accounts in the Association as of the Voting Record Date, up to a maximum of
1,000 votes. In general, accounts held in different ownership capacities will be
treated as separate memberships for purposes of applying the 1,000 vote
limitation. For example, if two persons hold a $100,000 account in their joint
names and each of the persons also holds a separate account for $100,000 in his
own name, each person would be entitled to 1,000 votes for each separate account
and they would together be entitled to cast 1,000 votes on the basis of the
joint account. Where no proxies are received from IRA and Keogh account
beneficiaries, after due notification, the Association, as trustee of these
accounts, is entitled to vote these accounts in favor of the Plan of Conversion.
Each member borrower is entitled to one vote in addition to any other vote the
borrower may otherwise have.
Approval of the Plan of Conversion requires the affirmative vote of a
majority of the total outstanding votes of the Association's members eligible to
be cast at the Special Meeting. As of __________, 1998, the Association had
approximately ______ members who were entitled to cast a total of approximately
_________ votes at the Special Meeting.
Association members may vote at the Special Meeting or any adjournment
thereof in person or by proxy. Any member giving a proxy will have the right to
revoke the proxy at any time before it is voted by giving written notice to the
Secretary of the Association, provided that such written notice is received by
the Secretary prior to the Special Meeting or any adjournment thereof, or upon
request if the member is present and chooses to vote in person.
All properly executed proxies received by the Board of Directors of the
Association will be voted in accordance with the instructions indicated thereon
by the members giving such proxies. If no instructions are given, such proxies
will be voted in favor of the Plan of Conversion. If any other matters are
properly presented at the Special Meeting and may properly be voted on, the
proxies solicited hereby will be voted on such matters in accordance with the
best judgment of the proxy holders named thereon. Management is not aware of any
other business to be presented at the Special Meeting.
If a proxy is not executed and is returned or the member does not vote
in person, the Association is prohibited by OTS regulations from using a
previously executed proxy to vote for the Conversion. As a result, failure to
vote may have the same effect as a vote against the Plan of Conversion.
To the extent necessary to permit approval of the Plan of Conversion,
proxies may be solicited by officers, directors or regular employees of the
Association, in person, by telephone or through other forms of communication
and, if necessary, the Special Meeting may be adjourned to a later date. In
addition, Capital Resources will assist the Association in the solicitation of
proxies. Such persons will be reimbursed by the Association for their expenses
incurred in connection with such solicitation. The Association will bear all
costs of this solicitation. The proxies solicited hereby will be used only at
the Special Meeting and at any adjournment thereof.
DESCRIPTION OF THE PLAN OF CONVERSION
The Plan of Conversion to be presented for approval at the Special
Meeting provides for the Conversion to be accomplished through adoption of
amended charter and bylaws for the Association to authorize the issuance of
capital stock along with the concurrent formation of a holding company. As part
of the Conversion, the Plan of Conversion provides for the subscription offering
(the "Subscription Offering") of the Common Stock to the Association's (i)
Eligible Account Holders (deposit account holders with an account balance of $50
or more as of September 30, 1996; (ii) Tax-Qualified Employee Plans, (iii)
Supplemental Eligible Account Holders (deposit account holders with an
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account balance of $50 or more as of ___________, 1997); (iv) Other Members
(deposit account holders eligible to vote at the Special Meeting who are not as
Eligible Account Holders or Supplemental Eligible Account Holders); and (v) the
Association's employees, officers and directors. Notwithstanding the foregoing,
to the extent orders for shares exceed the maximum of the appraisal range,
Tax-Qualified Employee Plans shall be afforded a first priority to purchase
shares sold above the maximum of the appraisal range. It is anticipated that
Tax-Qualified Employee Plans will purchase 8% of the Common Stock sold in the
Conversion. If necessary, all shares of Common Stock not purchased in the
Subscription Offering, if any, may be offered to selected persons in connection
with the Public Offering and/or Direct Community Offering through Capital
Resources.
THE SUBSCRIPTION OFFERING HAS COMMENCED AS OF THE DATE OF MAILING OF
THIS PROXY STATEMENT. A PROSPECTUS EXPLAINING THE TERMS OF THE SUBSCRIPTION
OFFERING, INCLUDING HOW TO ORDER AND PAY FOR SHARES AND DESCRIBING THE BUSINESS
OF THE ASSOCIATION AND THE HOLDING COMPANY, ACCOMPANIES THIS PROXY STATEMENT AND
SHOULD BE READ BY ALL PERSONS WHO WISH TO CONSIDER SUBSCRIBING FOR COMMON STOCK.
THE SUBSCRIPTION OFFERING EXPIRES AT NOON, GLOVERSVILLE, NEW YORK TIME ON
________, 1998 UNLESS EXTENDED BY THE ASSOCIATION AND THE HOLDING COMPANY.
The federal conversion regulations require that all stock offered in a
conversion must be sold in order for the conversion to become effective. The
conversion regulations require that the offering be completed within 45 days
after completion of the Subscription Offering period unless extended by the
Association and the Holding Company with the approval of the OTS. This 45-day
period expires _____, 1998 unless the Subscription Offering is extended. If this
is not possible, an occurrence that is currently not anticipated, the Board of
Directors of the Association and the Holding Company will consult with the OTS
to determine an appropriate alternative method of selling all unsubscribed
shares offered in the Conversion. The Plan of Conversion provides that the
Conversion must be completed within 24 months after the date of the Special
Meeting.
The Public Offering and/or Direct Community Offering or any other sale
of the unsubscribed shares will be made as soon as practicable after the
completion of the Subscription Offering. No sales of shares may be completed,
either in the Subscription Offering or otherwise, unless the Plan of Conversion
is approved by the members of the Association.
The commencement and completion of the Offering, however, is subject to
market conditions and other factors beyond the Association's control. Due to
adverse conditions in the stock market in the past, a number of converting
thrift institutions encountered significant delays in completing their stock
offerings or were not able to complete them at all. No assurance can be given as
to the length of time after approval of the Plan of Conversion at the Special
Meeting that will be required to complete the Public Offering and/or Direct
Community Offering or other sale of the Common Stock to be offered in the
Conversion. If delays are experienced, significant changes may occur in the
estimated pro forma market value of the Holding Company's Common Stock, together
with corresponding changes in the offering price and the net proceeds realized
by the Association and the Holding Company from the sale of the Common Stock.
The Association and the Holding Company may also incur substantial additional
printing, legal, accounting and other expenses in completing the Conversion.
The following is a brief summary of the Conversion and is qualified in
its entirety by reference to the Plan of Conversion, a complete copy of which is
attached hereto. The Association's federal stock charter and bylaws that will
become effective upon completion of the Conversion are available from the
Association upon request. A copy of the Holding Company's articles of
incorporation and bylaws are also available from the Association upon request.
Principal Effects of Conversion
Depositors. The Conversion will not change the amount, interest rate,
withdrawal rights or federal insurance protection of deposit accounts, or affect
deposit accounts in any way other than with respect to voting and liquidation
rights as discussed below.
Borrowers. The rights and obligations of borrowers under their loan
agreements with the Association will remain unchanged by the Conversion. The
principal amount, interest rate and maturity date of loans will remain as they
were contractually fixed prior to the Conversion.
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Voting Rights of Members. Under the Association's current federal
mutual charter, depositors have voting rights as members of the Association with
respect to the election of directors and certain other affairs of the
Association. After the Conversion, exclusive voting rights with respect to all
such matters will be vested in the Holding Company as the sole stockholder of
the Association. Depositors will no longer have any voting rights, except to the
extent that they become stockholders of the Holding Company through the purchase
of its Common Stock. Voting rights in the Holding Company will be held
exclusively by its stockholders.
Liquidation Rights of Depositor Members. Currently, in the unlikely
event of liquidation of the Association, any assets remaining after satisfaction
of all creditors' claims in full (including the claims of all depositors to the
withdrawal value of their accounts) would be distributed pro rata among the
depositors of the Association, with the pro rata share of each being the same
proportion of all such remaining assets as the withdrawal value of each
depositor's account is of the total withdrawal value of all accounts in the
Association at the time of liquidation. After the Conversion, the assets of the
Association would first be applied, in the event of liquidation, against the
claims of all creditors (including the claims of all depositors to the
withdrawal value of their accounts). Any remaining assets would then be
distributed to the persons who qualified as Eligible Account Holders or
Supplemental Eligible Account Holders under the Plan of Conversion to the extent
of their interests in a "Liquidation Account" that will be established at the
time of the completion of the Conversion and then to the Holding Company as the
sole stockholder of the Association's outstanding common stock. The
Association's depositors who did not qualify as Eligible Account Holders or
Supplemental Eligible Account Holders would have no right to share in any
residual net worth of the Association in the event of liquidation after the
Conversion, but would continue to have the right as creditors of the Association
to receive the full withdrawal value of their deposits prior to any distribution
to the Holding Company as the Association's sole stockholder. In addition, the
Association's deposit accounts will continue to be insured by the Federal
Deposit Insurance Corporation ("FDIC") to the maximum extent permitted by law,
currently up to $100,000 per insured account. The Liquidation Account will
initially be established in an amount equal to the net worth of the Association
as of the date of the Association's latest statement of financial condition
contained in the final prospectus used in connection with the Conversion. Each
Eligible Account Holder and/or Supplemental Eligible Account Holder will receive
an initial interest in the Liquidation Account in the same proportion as the
balance in all of his qualifying deposit accounts was of the aggregate balance
in all qualifying deposit accounts of all Eligible Account Holders and
Supplemental Eligible Account Holders on September 30, 1996 or____________,
1997, respectively. For accounts in existence on both dates, separate
subaccounts shall be determined on the basis of the qualifying deposits in such
accounts on the record dates. However, if the amount in the qualifying deposit
account on any annual closing date of the Association is less than the lowest
amount in such deposit account on the Eligibility Record Date and/or
Supplemental Eligibility Record Date, and any subsequent annual closing date,
this interest in the Liquidation Account will be reduced by an amount
proportionate to such reduction in the related deposit account and will not
thereafter be increased despite any subsequent increase in the related deposit
account.
The Association. Under federal law, the stock savings and loan
association resulting from the Conversion will be deemed to be a continuation of
the mutual savings and loan association rather than a new entity and will
continue to have all of the rights, privileges, properties, assets and
liabilities of the Association prior to the Conversion. The Conversion will
enable the Association to issue capital stock, but will not change the general
objectives, purposes or types of business currently conducted by the
Association, and no assets of the Association will be distributed in order to
effect the Conversion, other than to pay the expenses incident thereto. After
the Conversion, the Association will remain subject to examination and
regulation by the OTS and will continue to be a member of the Federal Home Loan
Bank System. The Conversion will not cause any change in the executive officers
or directors of the Association.
Tax Consequences. Consummation of the Conversion is expressly
conditioned upon prior receipt of either a ruling of the United States Internal
Revenue Service ("IRS") or an opinion letter of the Association's counsel with
respect to federal taxation, and either a ruling of the New York taxation
authorities or an opinion letter with respect to New York taxation, to the
effect that the Conversion will not be a taxable transaction to the Holding
Company, the Association or the Association's deposit account holders receiving
subscription rights.
The Association has received an opinion of its special counsel, Silver,
Freedman & Taff, L.L.P., to the effect that (i) the Conversion will qualify as a
reorganization under Section 368(a)(1)(F) of the Internal Revenue Code of 1986,
as amended, and no gain or loss will be recognized to the Association in either
its mutual form or its stock form by reason of the proposed Conversion, (ii) no
gain or loss will be recognized to the Association upon the receipt of money
from the Holding Company for stock of the Association; and no gain or loss will
be recognized to the Holding Company
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upon the receipt of money for Common Stock of the Holding Company; (iii) the
assets of the Association in either its mutual or its stock form will have the
same basis before and after the Conversion; (iv) the holding period of the
assets of the Association will include the period during which the assets were
held by the Association in its mutual form prior to conversion; (v) gain, if
any, will be realized by the Eligible Account Holders and Supplemental Eligible
Account Holders of the Association, upon the constructive issuance to them of
withdrawable deposit accounts of the Association immediately after the proposed
Conversion, interests in the Liquidation Account, and on the receipt or
distribution to them of the nontransferable Subscription Rights to purchase
Holding Company Common Stock (any such gain will be recognized by such account
holder, but only to the extent, if any, of an amount not in excess of the fair
market value of the Subscription Rights and Liquidation Account interests
received); (vi) the basis of the account holder's savings accounts in the
Association after the Conversion will be the same as the basis of his or her
savings accounts in the Association prior to the Conversion; (vii) the basis of
each account holder's interest in the Liquidation Account will be zero; (viii)
the basis of the Holding Company Common Stock to its shareholders will be the
Purchase Price thereof and a shareholder's holding period for Holding Company
Common Stock acquired through the exercise of Subscription Rights shall begin on
the date on which the Subscription Rights are exercised; (ix) the converted
Association, immediately after Conversion, will succeed to and take into account
the earnings and profits or deficit in earnings and profits of the Association
in mutual form as of the date of the Conversion; and (x) the creation of the
liquidation account will not diminish the Association's accumulated earnings and
profits available for subsequent distribution of dividends.
The opinion from Silver, Freedman & Taff, L.L.P. is based, among other
things, on certain assumptions, including the assumptions that the exercise
price of the Subscription Rights to purchase Holding Company Common Stock will
be approximately equal to the fair market value of that stock at the time of the
completion of the proposed Conversion. With respect to the Subscription Rights,
the Association has received the letter of RP Financial (the "Appraiser Letter")
which, based on certain assumptions, concludes that the Subscription Rights to
be received by Eligible Account Holders, Supplemental Eligible Account Holders
and other eligible subscribers do not have any economic value at the time of
distribution or at the time the Subscription Rights are exercised, whether or
not a public offering takes place.
The Association has also received an opinion of Silver, Freedman &
Taff, L.L.P. to the effect that, based in part on the Appraiser Letter, no
taxable income will be realized by a stock subscriber as a result of the
exercise of non-transferable Subscription Rights to purchase shares of Holding
Company Common Stock or upon the lapse of such rights.
If it is subsequently established that the subscription rights received
by such persons have an ascertainable fair market value, or in the case of
employees, directors and officers are compensatory in nature, then, in such
event, the subscription rights will be taxable to the recipient in the amount of
their fair market value. In this regard, the subscription rights may be taxed
partially or entirely at ordinary income tax rates.
With respect to New York taxation, the Association has received an
opinion from KPMG Peat Marwick, to the effect that, assuming the Conversion does
not result in any federal taxable income, gain or loss to the Association in its
mutual or stock form, the Holding Company, the account holders, borrowers,
officers, directors and employees and Tax-Qualified Employee Plans of the
Association, the Conversion should not result in any New York income tax
liability to such entities or persons.
Unlike a private letter ruling, the opinions of Silver, Freedman &
Taff, L.L.P. and KPMG Peat Marwick, LLP as well as the Appraiser Letter, have no
binding effect or official status, and no assurance can be given that the
conclusions reached in any of those opinions would be sustained by a court if
contested by the IRS or the New York tax authorities.
Approval, Interpretation, Amendment and Termination
Under the Plan of Conversion, the letter from the OTS giving approval
thereto, and applicable regulations, consummation of the Conversion is subject
to the satisfaction of the following conditions: (a) approval of the Plan of
Conversion by members of the Association casting at least a majority of the
votes eligible to be cast at the Special Meeting; (b) sale of all of the Common
Stock to be offered in the Conversion; and (c) receipt of favorable rulings or
opinions of counsel as to the federal and New York tax consequences of the
Conversion.
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The Plan of Conversion may be substantively amended by the Boards of
Directors of the Association and the Holding Company with the concurrence of the
OTS. If the Plan of Conversion is amended, proxies which have been received
prior to such amendment will not be resolicited unless otherwise required by the
OTS. Also, as required by the federal regulations, the Plan of Conversion
provides that the transactions contemplated thereby may be terminated by the
Board of Directors of the Association alone at any time prior to the Special
Meeting and may be terminated by the Board of Directors of the Association at
any time thereafter with the concurrence of the OTS, notwithstanding approval of
the Plan of Conversion by the members of the Association at the Special Meeting.
All interpretations by the Association and the Holding Company of the Plan of
Conversion and of the order forms and related materials for the Subscription
Offering will be final, except as regards or affects the OTS.
Judicial Review
Section 5(i)(2)(B) of the Home Owners' Loan Act, as amended, 12 U.S.C.
ss.1464(i)(2)(B) and Section 563b.8(u) of the Rules and Regulations promulgated
thereunder (12 C.F.R. Section 563b.8(u)) provide: (i) that persons aggrieved by
a final action of the OTS which approves, with or without conditions, or
disapproves a plan of conversion, may obtain review of such final action only by
filing a written petition in the United States Court of Appeals for the circuit
in which the principal office or residence of such person is located, or in the
United States Court of Appeals for the District of Columbia, requesting that the
final action of the OTS be modified, terminated or set aside, and (ii) that such
petition must be filed within 30 days after publication of notice of such final
action in the Federal Register, or 30 days after the date of mailing of the
notice and proxy statement for the meeting of the converting institution's
members at which the conversion is to be voted on, whichever is later. The
notice of the Special Meeting of the Association's members to vote on the Plan
of Conversion described herein is included at the beginning of this Proxy
Statement. The statute and regulation referred to above should be consulted for
further information.
YOUR VOTE IS VERY IMPORTANT TO US. PLEASE TAKE A MOMENT NOW TO COMPLETE
AND RETURN YOUR PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. YOU MAY STILL
ATTEND THE SPECIAL MEETING AND VOTE IN PERSON EVEN THOUGH YOU HAVE VOTED YOUR
PROXY. FAILURE TO SUBMIT A PROXY WILL HAVE THE SAME EFFECT AS VOTING AGAINST THE
CONVERSION.
If you have any questions, please call our Information Center at (518)
___-____.
IMPORTANT: YOU MAY BE ENTITLED TO VOTE IN MORE THAN ONE CAPACITY.
PLEASE SIGN, DATE AND PROMPTLY RETURN EACH PROXY CARD YOU RECEIVE.
-----------------------
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY STOCK. THE OFFER WILL BE MADE ONLY BY THE PROSPECTUS.
THE COMMON STOCK IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY
INSURED OR GUARANTEED.
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REVOCABLE PROXY
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
The undersigned member of Gloversville Federal Savings and Loan
Association (the "Association") hereby appoints the Board of Directors of the
Association as proxies to cast all votes which the undersigned member is
entitled to cast at a Special Meeting of Members to be held at the Association's
office located at 52 North Main Street, Gloversville, New York 12078-3084, at
the hour and date stated in the Proxy Statement, and at any and all adjournments
and postponements thereof, and to act with respect to all votes that the
undersigned would be entitled to cast, if then personally present, in accordance
with the instructions on the reverse side hereof to vote FOR or AGAINST:
The adoption of the Plan of Conversion to convert the
Association from a federally chartered mutual savings and loan
association to a federally chartered stock savings and loan
association, including the adoption of a federal stock savings
and loan association charter and bylaws, with the simultaneous
issuance of its common stock to Adirondack Financial Services
Bancorp, Inc., a Delaware corporation (the "Holding Company")
and sale by the Holding Company of shares of its Common Stock.
This proxy will be voted as directed by the undersigned member. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ADOPTION OF THE PLAN
OF CONVERSION. In addition, this proxy will be voted at the discretion of the
Board of Directors upon any other matter as may properly come before the Special
Meeting.
The undersigned member may revoke this proxy at any time before it is
voted by delivering to the Secretary of the Association either by a written
revocation of the proxy or a duly executed proxy bearing a later date, or by
appearing at the Special Meeting and voting in person. The undersigned member
hereby acknowledges receipt of the Notice of Special Meeting and Proxy
Statement.
(IMPORTANT: PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE)
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GLOVERSVILLE FEDERAL SAVINGS AND LOAN ASSOCIATION
Please Mark Votes Below
Approval of the Plan of Conversion
FOR [ ] AGAINST [ ] DATE:_______________________, 1997
X_______________________
X_______________________
IMPORTANT: Please sign your name
exactly as it appears on this proxy.
Joint accounts need only one
signature. When signing as an
attorney, administrator, agent,
corporation, officer, executor,
trustee or guardian, etc., please
add your full title to your
signature.
NOTE: IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN
ALL CARDS IN THE ACCOMPANYING ENVELOPE.
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