Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SHS BANCORP, INC.
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(Name of Registrant as Specified in Its Charter)
SHS BANCORP, INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
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(2) Aggregate number of securities to which transactions applies:
N/A
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
N/A
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(2) Form, schedule or registration statement no.:
N/A
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(3) Filing party:
N/A
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(4) Date filed:
N/A
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March 20, 1998
Dear Shareholder:
You are cordially invited to attend the first Annual Meeting of
Shareholders of SHS Bancorp, Inc. to be held at One North Shore Center, Fourth
Floor, Pittsburgh, Pennsylvania, on Thursday, April 23, 1998, at 10:00 a.m.,
local time. Effective September 30, 1997, the Company became the holding
company for Spring Hill Savings Bank, F.S.B.
The Notice of Annual Meeting of Shareholders and Proxy Statement
appearing on the following pages describe the formal business to be transacted
at the meeting. During the meeting, we will also report on the operations of
the Company. Directors and officers of the Company, as well as a
representative of S.R. Snodgrass, A.C., the Company's independent auditors,
will be present to respond to appropriate questions of shareholders.
It is important that your shares be represented at this meeting, whether
or not you attend the meeting in person and regardless of the number of shares
you own. To make sure your shares are represented, we urge you to complete
and mail the enclosed proxy card. If you attend the meeting, you may vote in
person even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Thomas F. Angotti
Thomas F. Angotti
President and Chief Executive Officer
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SHS BANCORP, INC.
One North Shore Center, Suite 120
Pittsburgh, Pennsylvania 15212
(412) 231-0809
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On April 23, 1998
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of SHS
Bancorp, Inc. will be held at One North Shore Center, Fourth Floor,
Pittsburgh, Pennsylvania, on Thursday, April 23, 1998, at 10:00 a.m., local
time, for the following purposes:
(1) To elect one director to serve for a term of three years;
(2) To consider and vote upon a proposal to adopt the SHS Bancorp, Inc.
1998 Stock Option Plan;
(3) To consider and vote upon a proposal to adopt the SHS Bancorp, Inc.
Management Recognition and Development Plan; and
(4) To consider and act upon such other matters as may properly come
before the meeting or any adjournments thereof.
NOTE: The Board of Directors is not aware of any other business to come
before the meeting.
Any action may be taken on the foregoing proposals at the meeting on the
date specified above or on any date or dates to which, by original or later
adjournment, the meeting may be adjourned. Shareholders of record at the
close of business on March 11, 1998 are entitled to notice of and to vote at
the meeting and any adjournments or postponements thereof.
You are requested to complete and sign the enclosed form of proxy, which
is solicited by the Board of Directors, and to mail it promptly in the
enclosed envelope. The proxy will not be used if you attend the meeting and
vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Joanne C. Wienand
Joanne C. Wienand
Secretary
Pittsburgh, Pennsylvania
March 20, 1998
IMPORTANT: The prompt return of proxies will save the company the expense of
further requests for proxies in order to ensure a quorum. A self-addressed
envelope is enclosed for your convenience. No postage is required if mailed
in the United States.
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PROXY STATEMENT
OF
SHS BANCORP, INC.
One North Shore Center, Suite 120
Pittsburgh, Pennsylvania 15212
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ANNUAL MEETING OF SHAREHOLDERS
April 23, 1998
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of SHS Bancorp, Inc. ("Company"), the
holding company for Spring Hill Savings Bank, F.S.B. ("Savings Bank"), to be
used at the Annual Meeting of Shareholders of the Company. The Annual Meeting
will be held at One North Shore Center, Fourth Floor, Pittsburgh, Pennsylvania
on Thursday, April 23, 1998, at 10:00 a.m., local time. This Proxy Statement
and the enclosed proxy card are being first mailed to shareholders on or about
March 20, 1998.
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VOTING AND PROXY PROCEDURE
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Shareholders Entitled to Vote. Shareholders of record as of the close of
business on March 11, 1998 are entitled to one vote for each share of common
stock ("Common Stock") of the Company then held. As of March 11, 1998, the
Company had 819,950 shares of Common Stock issued and outstanding.
Quorum. The presence, in person or by proxy, of at least a majority of
the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum at the Annual Meeting. Abstentions will be
counted as shares present and entitled to vote at the Annual Meeting for
purposes of determining the existence of a quorum. Broker non-votes will be
considered shares present and will be included in determining whether a quorum
is present.
Voting. The Board of Directors solicits proxies so that each shareholder
has the opportunity to vote on the proposals to be considered at the Annual
Meeting. When a proxy card is returned properly signed and dated the shares
represented thereby will be voted in accordance with the instructions on the
proxy card. If a shareholder of record attends the Annual Meeting, he or she
may vote by ballot. Where no instructions are indicated, proxies will be
voted in accordance with the recommendations of the Board of Directors. The
Board recommends a vote:
-- FOR the election of the nominee for director;
-- FOR adoption of the SHS Bancorp, Inc. 1998 Stock Option Plan; and
-- FOR adoption of the SHS Bancorp, Inc. Management Recognition and
Development Plan.
The affirmative vote of a plurality of the votes cast at the Annual
Meeting is required for the election of directors. Shareholders are not
permitted to cumulate their votes for the election of directors. With respect
to the election of directors, votes may be cast for or withheld from the
nominee. Votes that are withheld and broker non-votes will have no effect on
the outcome of the election because the nominee receiving the greatest number
of votes will be elected. With respect to the other proposals to be voted
upon, shareholders may vote for a proposal, against a proposal or may abstain
from voting. Adoption of the 1998 Stock Option Plan and the Management
Recognition and Development Plan will require the affirmative vote of a
majority of the votes cast. Thus, abstentions and broker non- votes will have
no effect on the voting.
Revocation of a Proxy. Shareholders who execute proxies retain the right
to revoke them at any time before they are voted. Proxies may be revoked by
written notice delivered in person or mailed to the Secretary of the Company
or by filing a later proxy prior to a vote being taken on a particular
proposal at the Annual Meeting. Attendance at the Annual Meeting will not
automatically revoke a proxy, but a shareholder in attendance may request a
ballot and vote in person, thereby revoking a prior granted proxy.
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Participants in the Savings Bank's ESOP or 401(k) Profit Sharing Plan.
If you are a participant in the Spring Hill Savings Bank, F.S.B. Employee
Stock Ownership Plan (the "ESOP") or if you hold shares through the Savings
Bank's 401(k) Profit Sharing Plan, the proxy card represents a voting
instruction to the trustees as to the number of shares in your plan account.
Each participant in the ESOP and 401(k) Profit Sharing Plan may direct the
trustees as to the manner in which shares of Common Stock allocated to the
participant's plan account are to be voted. Unallocated shares of Common
Stock held by the ESOP and allocated shares for which no voting instructions
are received will be voted by the trustees in the same proportion as shares
for which the trustees have received voting instructions.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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Persons and groups who beneficially own in excess of 5% of the Company's
Common Stock are required to file certain reports disclosing such ownership
pursuant to the Securities Exchange Act of 1934, as amended ("Exchange Act").
Based on such reports, the following table sets forth, as of March 1, 1998,
certain information as to those persons who were beneficial owners of more
than 5% of the outstanding shares of Common Stock. Management knows of no
persons other than those set forth below who beneficially owned more than 5%
of the outstanding shares of Common Stock at March 1, 1998. The following
table also sets forth, as of March 1, 1998, information as to the shares of
Common Stock beneficially owned by each director, by the Chief Executive
Officer of the Company and by all executive officers and directors of the
Company as a group.
Number of Shares Percent of Shares
Beneficial Owner Beneficially Owned (1) Outstanding
- ---------------- ---------------------- -----------
Beneficial Owners of More Than 5%
Spring Hill Savings Bank, FSB 65,596 8.0%
Employee Stock Ownership Plan Trust
Jeffrey L. Gendell 69,900(2) 8.5
Tontine Financial Partners, L.P.
Tontine Management, L.L.C.
Tontine Overseas Associates, L.L.C.
200 Park Avenue, Suite 3900
New York, NY 10166
Directors
Guy Dille 5,000 *
George C. Dorsch 4,853 *
Edward W. Preskar 5,000 *
Thomas F. Angotti** 8,739(3) 1.1
James G. Caliendo 200 *
All Executive Officers and
Directors as a Group 42,761 5.2
(nine persons)
_______________
* Less than 1% of shares outstanding.
** Mr. Angotti is also Chief Executive Officer of the Company.
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be the beneficial owner, for purposes of this table, of any shares of
Common Stock if he or she has voting or investment power with respect to
such security. The table includes shares owned by spouses, other
immediate family members in trust, shares held in retirement accounts or
funds for the benefit of the named individuals, and other forms of
ownership, over which shares the persons named in the table may possess
voting and/or investment power. Shares held in accounts under
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the Savings Bank's ESOP, as to which the holders have voting power but
not investment power, are included as follows: Mr. Angotti, 239 shares;
all executive officers and directors as a group, 802 shares.
(2) Information concerning the shares owned by Mr. Gendell and related
entities was obtained from a Schedule 13D dated December 3, 1997.
According to this filing, Mr. Gendell, has shared voting and dispositive
power with respect to 69,900 shares, Tontine Financial Partners, L.P. has
shared voting and dispositive power with respect to 54,000 shares,
Tontine Management, L.L.C. has shared voting and dispositive power with
respect to 54,000 shares, and Tontine Overseas Associates, L.L.C. has
shared voting and dispositive power with respect to 15,900 shares.
(3) Includes 3,500 shares owned by Mr. Angotti's spouse.
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PROPOSAL I -- ELECTION OF DIRECTORS
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The Company's Board of Directors consists of five members. The Board of
Directors is divided into three classes with three-year staggered terms, with
approximately one third of the directors elected each year. One director will
be elected at the Annual Meeting to serve for a three-year term, or until his
successor has been elected and qualified. The nominee for election this year
is Guy Dille. Mr. Dille is a current member of the Board of Directors of the
Company and the Savings Bank.
It is intended that the proxies solicited by the Board of Directors will
be voted for the election of the above named nominee. If the nominee is
unable to serve, the shares represented by all valid proxies will be voted for
the election of such substitute as the Board of Directors may recommend. At
this time the Board of Directors knows of no reason why the nominee might be
unable to serve.
The Board of Directors recommends a vote "FOR" the election of Mr. Dille.
The following table sets forth certain information regarding the nominee
for election at the Annual Meeting, as well as information regarding those
directors continuing in office after the Annual Meeting.
Year First
Elected Term to
Name Age (1) Director (2) Expire
---- ------- ------------ ------
BOARD NOMINEES
Guy Dille 68 1988 2001(3)
DIRECTORS CONTINUING IN OFFICE
George C. Dorsch 64 1980 1999
Edward W. Preskar 69 1976 1999
Thomas F. Angotti 50 1989 2000
James G. Caliendo 44 1993 2000
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(1) As of December 31, 1997.
(2) Includes prior service on the Board of Directors of the Savings Bank.
(3) Assuming the individual is re-elected.
The present principal occupation and other business experience during the
last five years of the nominee for election and each director continuing in
office is set forth below:
Guy Dille is a retired businessman. Prior to his retirement, Mr. Dille
had been associated for 34 years with Williams and Company, Inc., a
distributor of ferrous and nonferrous metals and welding, commercial
refrigeration and
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air conditioning equipment and supplies, where from 1986 through 1992 he
served as Vice-President, Finance, Treasurer and Chief Financial Officer.
George C. Dorsch retired in 1991 as a construction engineer for the
Department of Transportation of the Commonwealth of Pennsylvania. From 1991
to 1995, Mr. Dorsch worked as a Quality Assurance Engineer for McGuire
Engineering on various bridge and highway projects.
Edward W. Preskar, who currently serves as Chairman of the Board of the
Company and the Savings Bank, spent 30 years as a registered architect in
private practice. Mr. Preskar was then employed by the School District of
Pittsburgh as Director of Facilities from 1983 to 1995.
Thomas F. Angotti joined the Savings Bank in 1987 as Operations Manager
after 12 years with the Office of Thrift Supervision, formerly known as the
Federal Home Loan Bank Board, and the Examination Division of the Federal Home
Loan Bank. In 1989 he became the President of the Savings Bank and joined the
Board of Directors. In April 1997, Mr. Angotti added the title of Chief
Executive Officer.
James G. Caliendo is a partner at the management consulting and skill
development firm of Solutions 21. Previously, Mr. Caliendo was the Firm
Administrator for Meyer, Unkovic & Scott and held the position of Senior Vice
President-Chief Administrative Officer at Landmark Savings Association of
Pittsburgh. At Landmark Savings Association, he spent 20 years concentrating
mainly in Retail Banking, Marketing and Operations.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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The Boards of Directors of the Company and the Savings Bank conduct their
business through meetings of the Boards and through their committees. During
the year ended December 31, 1997, the Board of Directors of the Company held
three meetings and the Board of Directors of the Savings Bank held 24
meetings. No director of the Company or the Savings Bank attended fewer than
75% of the total meetings of the Boards and committees on which such person
served during this period.
The Audit Committee, consisting of Directors Dille and Dorsch and
Executive Vice President Vincent Ashoff, meets with the Savings Bank's outside
auditor to discuss the results of the annual audit. The Audit Committee met
seven times during the year ended December 31, 1997.
In April 1997, the Board of Directors designated the entire Board to act
as the Compensation/Personnel Committee. The Compensation/Personnel Committee
is responsible for determining compensation for all employees and handling
other personnel related matters. The Compensation/Personnel Committee met
four times during the year ended December 31, 1997.
The Board of Directors also maintains a standing Corporate Strategy
Committee.
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DIRECTORS' COMPENSATION
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Directors of the Savings Bank receive a monthly retainer of $750. No
separate fees are paid for service on the Board of Directors of the Company.
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EXECUTIVE COMPENSATION
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Summary Compensation Table
The following information is furnished for the Chief Executive Officer of
the Company. No executive officer of the Company or the Savings Bank received
salary and bonus in excess of $100,000 during the year ended December 31,
1997.
Annual Compensation(1)
------------------------------------------------------
Name and Other Annual All Other
Position Year Salary($) Bonus($) Compensation($)(2) Compensation($)
- -------- ---- --------- -------- ------------------ ---------------
Thomas F. Angotti 1997 $77,063 $ 6,500 -- 6,189(3)
Chief Executive 1996 72,500 15,365 -- 2,548
Officer and
President
- ---------------
(1) Compensation information for the year ended December 31, 1995 has been
omitted as the Company was not a public company nor a subsidiary thereof
at such time.
(2) Consists of directors' fees. Does not include perquisites which did not
exceed the lesser of $50,000 or 10% of salary and bonus.
(3) Consists of $2,610 employer contribution to 401(k) Plan and $3,579
employer contribution to ESOP.
Employment Agreement
On September 30, 1997, the Company and the Savings Bank (collectively,
the "Employers") entered into a three-year employment agreement with Mr.
Angotti. Mr. Angotti's base salary under the agreement currently is $80,500,
which amount is paid by the Savings Bank and may be increased at the
discretion of the Board of Directors or an authorized committee of the Board.
On each anniversary of the commencement date of the agreement, the term of the
agreement may be extended for an additional year. The agreement is terminable
by the Employers at any time or upon the occurrence of certain events
specified by federal regulations.
The employment agreement provides for severance payments and other
benefits in the event of involuntary termination of employment in connection
with any change in control of the Employers. Severance payments also will be
provided on a similar basis in connection with a voluntary termination of
employment where, subsequent to a change in control, Mr. Angotti is assigned
duties inconsistent with his position, duties, responsibilities and status
immediately prior to such change in control. The term "change in control" is
defined in the agreement as having occurred when, among other things, (a) a
person other than the Company purchases shares of Common Stock pursuant to a
tender or exchange offer for such shares, (b) any person (as such term is used
in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities, (c) the membership of the Board of Directors changes
as the result of a contested election, or (d) shareholders of the Company
approve a merger, consolidation, sale or disposition of all or substantially
all of the Company's assets, or a plan of partial or complete liquidation.
The severance payment from the Employers will equal 2.99 times Mr.
Angotti's average annual compensation during the five-year period preceding
the change in control. Such amount will be paid in a lump sum within ten
business days following the termination of employment. Assuming that a change
in control had occurred at December 31, 1997, Mr. Angotti would be entitled to
a severance payment of approximately $218,000. Section 280G of the Internal
Revenue Code states that severance payments which equal or exceed three times
the base compensation of the individual are deemed to be "excess parachute
payments" if they are contingent upon a change in control. Individuals
receiving excess parachute payments are subject to a 20% excise tax on the
amount of such excess payments, and the Employers would not be entitled to
deduct the amount of such excess payments.
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The agreement restricts Mr. Angotti's right to compete against the
Employers for a period of one year from the date of termination of the
agreement if Mr. Angotti voluntarily terminates employment, except in the
event of a change in control.
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COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
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Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than 10% of any registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Executive
officers, directors and greater than 10% shareholders are required by
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms provided to the
Company by the above referenced persons, the Company believes that, during the
fiscal year ended December 31, 1997, all filing requirements applicable to its
reporting officers, directors and greater than 10% shareholders were properly
and timely complied with.
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TRANSACTIONS WITH MANAGEMENT
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Federal regulations require that all loans or extensions of credit to
executive officers and directors must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, except for loans made pursuant to
programs generally available to all employees, and must not involve more than
the normal risk of repayment or present other unfavorable features. The
Savings Bank is therefore prohibited from making any new loans or extensions
of credit to the Savings Bank's executive officers and directors at different
rates or terms than those offered to the general public, except for loans made
pursuant to programs generally available to all employees, and has adopted a
policy to this effect. In addition, loans made to a director or executive
officer in an amount that, when aggregated with the amount of all other loans
to such person and his or her related interests, are in excess of the greater
of $25,000, or 5% of the Savings Bank's capital and surplus (up to a maximum
of $500,000) must be approved in advance by a majority of the disinterested
members of the Board of Directors.
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PROPOSAL II -- RATIFICATION OF 1998 STOCK OPTION PLAN
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General
The Company's Board of Directors adopted the SHS Bancorp, Inc. 1998 Stock
Option Plan (the "Plan") on February 18, 1998, subject to approval by the
Company's shareholders. The objective of the Plan is to reward performance
and build the participant's equity interest in the Company by providing
long-term incentives and rewards to officers, key employees and other persons
who provide services to the Company and its subsidiaries and who contribute to
the success of the Company by their innovation, ability, industry, loyalty and
exceptional service.
The following summary is a brief description of the materials features of
the Plan. This summary is qualified in its entirety by reference to the Plan,
a copy of which is attached as Exhibit A.
Summary of the Plan
Type of Stock Option Grants. The Plan provides for the grant of
incentive stock options ("ISOs"), within the meaning of Section 422 of the
Internal Revenue Code, and Non-Qualified Stock Options ("NQSOs"), which do not
satisfy the requirements for ISO treatment.
Administration. The Plan is administered by the Company's Board of
Directors. Subject to the terms of the Plan and resolutions of the Board, the
Board interprets the Plan and is authorized to make all determinations and
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decisions thereunder. The Board also determines the participants to whom
stock options will be granted, the type and amount of stock options that will
be granted and the terms and conditions applicable to such grants.
Participants. All officers and employees of the Company and its
subsidiaries, as well as other persons who render services to the Company, are
eligible to participate in the Plan. In addition, non-employee directors of
the Company are eligible to participate in the Plan.
Number of Shares of Common Stock Available. The Company has reserved
81,995 shares of Common Stock for issuance under the Plan in connection with
the exercise of options. Shares of Common Stock to be issued under the Plan
may be either authorized but unissued shares, or reacquired shares held by the
Company in its treasury. Any shares subject to an award which expires or is
terminated unexercised will again be available for issuance under the Plan.
Stock Option Grants. The exercise price of each ISO or NQSO will not be
less than the fair market value of the Common Stock on the date the ISO or
NQSO is granted. The aggregate fair market value of the shares for which ISOs
granted to any employee may be exercisable for the first time by such employee
during any calendar year (under all stock option plans of the Company and its
subsidiaries) may not exceed $100,000.
The exercise price of an option may be paid in cash, Common Stock or
other property, by the surrender of all or part of the option being exercised,
by the immediate sale through a broker of the number of shares being acquired
sufficient to pay the purchase price, or by a combination of these methods, as
and to the extent permitted by the Board.
Under the Plan, the Board may permit participants to transfer options to
eligible transferees (as such eligibility is determined by the Board). Each
option may be exercised during the holder's lifetime only by the holder or the
holder's guardian or legal representative, and after death only by the
holder's beneficiary or, absent a beneficiary, by the estate or by a person
who acquired the right to exercise the option by will or the laws of descent
and distribution. Options may become exercisable in full at the time of grant
or at such other times and in such installments as the Board determines or as
may be specified in the Plan. It is anticipated that initial option grants
under the Plan will become exercisable in equal installments over a three- to
five-year period following the date of grant. Options may be exercised during
periods before and after the participant terminates employment, as the case
may be, to the extent authorized by the Board or specified in the Plan.
However, no option may be exercised after the tenth anniversary of the date
the option was granted. The Board may, at any time and without additional
consideration, accelerate the date on which an option becomes exercisable.
Effect of a Change in Control. In the event of a change in control (as
defined in the Plan) of the Company, each outstanding stock option grant will
become fully vested and immediately exercisable. In addition, in the event of
a change in control, the Plan provides for the cash settlement of any
outstanding stock option if provision is not made for the assumption of the
options in connection with the change in control.
Term of the Plan. The Plan will be effective on October 1, 1998 but only
if, before that date, the Plan is approved by the shareholders of the Company.
By postponing the effective date of the Plan, options granted under the Plan
will not be subject to certain restrictions under Office of Thrift Supervision
("OTS") regulations (including a limitation on the acceleration of vesting in
the event of a change in control) otherwise applicable to stock compensation
plans implemented prior to the first anniversary of the Savings Bank's
mutual-to-stock conversion. The Plan will expire on the tenth anniversary of
the effective date, unless terminated sooner by the Board.
Amendment of the Plan. The Plan allows the Board to amend the Plan
without shareholder approval unless such approval is required to comply with a
tax law or regulatory requirement.
Certain Federal Income Tax Consequences. The following brief description
of the tax consequences of stock option grants under the Plan is based on
federal income tax laws currently in effect and does not purport to be a
complete description of such federal income tax consequences.
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There are no federal income tax consequences either to the optionee or to
the Company upon the grant of an ISO or and NQSO. On the exercise of an ISO
during employment or within three months thereafter, the optionee will not
recognize any income and the Company will not be entitled to a deduction,
although the excess of the fair market value of the shares on the date of
exercise over the option price is includible in the optionee's alternative
minimum taxable income, which may give rise to alternative minimum tax
liability for the optionee. Generally, if the optionee disposes of shares
acquired upon exercise of an ISO within two years of the date of grant or one
year of the date of exercise, the optionee will recognize ordinary income, and
the Company will be entitled to a deduction, equal to the excess of the fair
market value of the shares on the date of exercise over the option price
(limited generally to the gain on the sale). The balance of any gain or loss
will be treated as a capital gain or loss to the optionee. If the shares are
disposed of after the two year and one year periods mentioned above, the
Company will not be entitled to any deduction, and the entire gain or loss for
the optionee will be treated as a capital gain or loss.
On exercise of an NQSO, the excess of the date-of-exercise fair market
value of the shares acquired over the option price will generally be taxable
to the optionee as ordinary income and deductible by the Company, provided the
Company properly withholds taxes in respect of the exercise. The disposition
of shares acquired upon the exercise of a NQSO will generally result in a
capital gain or loss for the optionee, but will have no tax consequences for
the Company.
New Plan Benefits
The Company anticipates that option grants will be made to non-employee
directors, officers and employees on or after the effective date of the Plan
at levels consistent with other recently converted thrift institutions.
However, the Board has not made specific determinations regarding the size of
individual awards.
Board of Directors Recommendation
The Board of Directors recommends a vote "FOR" the adoption of the 1998
Stock Option Plan attached as Exhibit A.
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PROPOSAL III -- RATIFICATION OF MANAGEMENT
RECOGNITION AND DEVELOPMENT PLAN
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General
Subject to approval by the Company's shareholders, the Board of Directors
of the Company adopted the SHS Bancorp, Inc. Management Recognition and
Development Plan ("MRDP") on February 18, 1998 for the benefit of officers,
employees and non-employee directors of the Company and its subsidiaries.
The objective of the MRDP is to reward performance and build the
participant's equity interest in the Company by providing long-term incentives
and rewards to officers, key employees and other persons who provide services
to the Company and its subsidiaries and who contribute to the success of the
Company by their innovation, ability, industry, loyalty and exceptional
service. In addition, the company believes that the MRDP will provide an
important retention incentive for key personnel.
The following summary is a brief description of the materials features of
the MRDP. This summary is qualified in its entirety by reference to the MRDP,
a copy of which is attached as Exhibit B.
Summary of the MRDP
Type of Stock Awards. The MRDP provides for the award of Common Stock in
the form of restricted stock awards which are subject to the restrictions
specified in the MRDP or as determined by the Company's Board of Directors.
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Administration. The MRDP is administered by the Board. Subject to the
terms of the MRDP and resolutions of the Board, the Board interprets the MRDP
and is authorized to make all determinations and decisions thereunder. The
Board also determines the participants to whom restricted stock awards will be
made, the number of shares of Common Stock covered by each award and the terms
and conditions applicable to such award.
Participants. All officers and employees of the Company and its
subsidiaries, as well as other persons who render services to the Company, are
eligible to participate in the MRDP. In addition, non-employee directors of
the Company are eligible to participate in the MRDP.
Number of Shares of Common Stock Available. The Company has reserved
32,798 shares of Common Stock for issuance under the MRDP in the form of
restricted stock. Shares of Common Stock to be issued under the MRDP may be
either authorized but unissued shares, or reacquired shares held by the
Company in its treasury. Any shares subject to an award which is forfeited or
is terminated will again be available for issuance under the MRDP.
Restricted Stock Awards. Awards under the MRDP will be made in the form
of restricted shares of Common Stock that are subject to restrictions on
transfer of ownership. It is anticipated that the initial awards under the
MRDP will vest in equal installments over a five-year period beginning on the
first anniversary of the date of grant. Compensation expense in the amount of
the fair market value of the Common Stock at the date of the grant to the
officer or director will be recognized during the period over which the shares
vest. If a recipient terminates employment or service with the Company or its
subsidiaries for reasons other than death or disability, the recipient
forfeits all rights to shares under restriction. If such termination is
caused by death or disability, all restrictions expire and all shares
allocated become unrestricted. A recipient will be entitled to voting and
other shareholder rights with respect to the shares while restricted.
Dividends paid during the period of restriction will, at the Board's
discretion, be distributed to the recipient when paid or held in escrow for
the benefit of the recipient until the shares to which the dividends relate
are vested.
Effect of a Change in Control. In the event of a change in control (as
defined in the MRDP) of the Company, each outstanding award under the MRDP
will become fully vested.
Term of the MRDP. The MRDP will be effective on October 1, 1998 but only
if, before that date, the MRDP is approved by the shareholders of the Company.
By postponing the effective date of the MRDP, awards under the MRDP will not
be subject to certain restrictions under OTS regulations (including a
limitation on the acceleration of vesting in the event of a change in control)
otherwise applicable to stock compensation plans implemented prior to the
first anniversary of the Savings Bank's mutual-to-stock conversion. The MRDP
will expire on the tenth anniversary of the effective date, unless sooner
terminated by the Board.
Amendment of the MRDP. The MRDP allows the Board to amend the MRDP
without shareholder approval unless such approval is required to comply with a
tax law or regulatory requirement.
Certain Federal Income Tax Consequences. The following brief description
of the tax consequences of awards of restricted stock under the MRDP is based
on federal income tax laws currently in effect and does not purport to be a
complete description of such federal income tax consequences.
A participant who has been awarded restricted stock under the MRDP and
does not make an election under Section 83(b) of the Code will not recognize
taxable income at the time of the award. At the time any transfer or
forfeiture restrictions applicable to the restricted stock award lapse, the
recipient will recognize ordinary income and the Company will be entitled to a
corresponding deduction equal to the excess of the fair market value of such
stock at such time over the amount paid therefor. Any dividend paid to the
recipient on the restricted stock at or prior to such time will be ordinary
compensation income to the recipient and deductible as such by the Company.
A recipient of a restricted stock award who makes an election under
Section 83(b) of the Code will recognize ordinary income at the time of the
award and the Company will be entitled to a corresponding deduction equal to
the fair market value of such stock at such time over the amount paid
therefor. Any dividends subsequently paid to the
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recipient on the restricted stock will be dividend income to the recipient and
not deductible by the Company. If the recipient makes a Section 83(b)
election, there are no federal income tax consequences either to the recipient
or the Company at the time any transfer or forfeiture restrictions applicable
to the restricted stock award lapse.
New Plan Benefits
The Company anticipates that stock awards will be made to non-employee
directors, officers and employees on or after the effective date of the MRDP
at levels consistent with other recently converted thrift institutions.
However, the Board has not made specific determinations regarding the size of
individual awards.
Recommendation of the Board of Directors
The Board of Directors recommends a vote "FOR" the adoption of the
Management Recognition and Development Plan attached as Exhibit B.
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AUDITORS
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The Board of Directors has appointed S.R. Snodgrass, A.C., independent
public accountants, to serve as the Company's auditors for the fiscal year
ending December 31, 1998. A representative of S.R. Snodgrass, A.C. is
expected to be present at the Annual Meeting to respond to appropriate
questions from shareholders and will have the opportunity to make a statement
if he or she so desires.
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OTHER MATTERS
- ------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described above in this Proxy
Statement. However, if any other matters should properly come before the
Annual Meeting, it is intended that proxies in the accompanying form will be
voted in respect thereof in accordance with the judgment of the person or
persons voting the proxies.
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MISCELLANEOUS
- ------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy
materials to the beneficial owners of the Common Stock. In addition to
solicitations by mail, directors, officers and regular employees of the
Company or the Savings Bank may solicit proxies personally or by telecopier or
telephone without additional compensation. The Company has retained Regan &
Associates, New York, New York, to assist in soliciting proxies at a cost of
$2,750 plus expenses up to $1,250.
The Company's 1997 Annual Report to Shareholders, including financial
statements, has been mailed to all shareholders of record as of the close of
business on March 11, 1998. Any shareholder who has not received a copy of
such annual report may obtain a copy by writing to the Company. The Annual
Report is not to be treated as part of the proxy solicitation material or as
having been incorporated herein by reference.
A copy of the Company's Form 10-KSB for the fiscal year ended December
31, 1997, as filed with the Securities and Exchange Commission, will be
furnished without charge to shareholders of record as of March 11, 1998 upon
written request to Joanne C. Wienand, Corporate Secretary, SHS Bancorp, Inc.,
One North Shore Center, Suite 120, Pittsburgh, Pennsylvania 15212.
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SHAREHOLDER PROPOSALS
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Proposals of shareholders intended to be presented at the Company's
Annual Meeting expected to be held in April 1999 must be received by the
Company no later than November 21, 1998 to be considered for inclusion in the
proxy materials and form of proxy relating to such meeting. Any such
proposals shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.
The Company's Articles of Incorporation provides that in order for a
shareholder to make nominations for the election of directors or proposals for
business to be brought before the Annual Meeting, a shareholder must deliver
notice of such nominations and/or proposals to the Secretary not less than 30
nor more than 60 days prior to the date of the Annual Meeting; provided that
if less than 31 days' notice of the Annual Meeting is given to shareholders,
such notice must be delivered not later than the close of the tenth day
following the day on which notice of the Annual Meeting was mailed to
shareholders. As specified in the Articles of Incorporation, the notice with
respect to nominations for election of directors must set forth certain
information regarding each nominee for election as a director, including such
person's written consent to being named in the proxy statement as a nominee
and to serving as a director, if elected, and certain information regarding
the shareholder giving such notice. The notice with respect to business
proposals to be brought before the Annual Meeting must state the shareholder's
name, address and number of shares of Common Stock held, and briefly discuss
the business to be brought before the Annual Meeting, the reasons for
conducting such business at the Annual Meeting and any interest of the
shareholder in the proposal.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Joanne C. Wienand
Joanne C. Wienand
Secretary
Pittsburgh, Pennsylvania
March 20, 1998
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Exhibit A
SHS BANCORP, INC.
1998 STOCK OPTION PLAN
SECTION 1. PURPOSE
The SHS Bancorp, Inc. 1998 Stock Option Plan (the "Plan") is hereby
established to foster and promote the long-term success of SHS Bancorp, Inc.
and its shareholders by providing directors, officers and employees of the
Corporation and its subsidiaries with an equity interest in the Corporation.
The Plan will assist the Corporation in attracting and retaining the highest
quality of experienced persons as directors, officers and employees and in
aligning the interests of such persons more closely with the interests of the
Corporation's shareholders by encouraging such parties to maintain an equity
interest in the Corporation.
SECTION 2. DEFINITIONS
For purposes of this Plan, the capitalized terms set forth below shall
have the following meanings:
BOARD means the Board of Directors of the Corporation.
CHANGE IN CONTROL shall mean an event deemed to occur if and when (a) an
offeror other than the Corporation purchases shares of the stock of the
Corporation pursuant to a tender or exchange offer for such shares, (b) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act) is or becomes the beneficial owner, directly or indirectly, of securities
of the Corporation representing twenty-five percent (25%) or more of the
combined voting power of the Corporation's then outstanding securities, (c)
the membership of the board of directors of the Corporation changes as the
result of a contested election, such that individuals who were directors at
the beginning of any twenty-four (24) month period (whether commencing before
or after the date of adoption of this Plan) do not constitute a majority of
the Board at the end of such period, or (d) shareholders of the Corporation
approve a merger, consolidation, sale or disposition of all or substantially
all of the Corporation's assets, or a plan of partial or complete liquidation.
If any of the events enumerated in clauses (a) - (d) occur, the Board shall
determine the effective date of the change in control resulting therefrom, for
purposes of the Plan.
CODE means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated thereunder.
CORPORATION means SHS Bancorp, Inc., a Pennsylvania corporation.
DIRECTOR shall mean a director of the Corporation who is not also an
employee of the Corporation or its subsidiaries.
DISABILITY means any physical or mental injury or disease of a permanent
nature which renders a Participant incapable of meeting the requirements of
the employment or service performed by such Participant immediately prior to
the commencement of such disability. The determination of whether a
Participant is disabled shall be made by the Board in its sole and absolute
discretion.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations promulgated thereunder.
FAIR MARKET VALUE shall be determined as follows:
(a) If the Stock is traded or quoted on the Nasdaq Stock Market or other
national securities exchange on any date, then the Fair Market Value shall be
the average of the highest and lowest selling price on such exchange on such
date or, if there were no sales on such date, then on the next prior business
day on which there was a sale.
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(b) If the Stock is not traded or quoted on the Nasdaq Stock Market or
other national securities exchange, then the Fair Market Value shall be a
value determined by the Board in good faith on such basis as it deems
appropriate.
INCENTIVE STOCK OPTION means an option to purchase shares of Stock
granted to a Participant under the Plan which is intended to meet the
requirements of Section 422 of the Code.
NON-QUALIFIED STOCK OPTION means an option to purchase shares of Stock
granted to a Participant under the Plan which is not intended to be an
Incentive Stock Option.
OPTION means an Incentive Stock Option or a Non-Qualified Stock Option.
PARTICIPANT means a Director or employee of the Corporation or its
subsidiaries selected by the Board to receive an Option under the Plan.
PLAN means this SHS Bancorp, Inc. 1998 Stock Option Plan.
STOCK means the common stock, $0.01 par value, of the Corporation.
TERMINATION FOR CAUSE shall mean termination because of a Participant's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or material breach of any provision of any
employment agreement between the Corporation and/or any subsidiary of the
Corporation and a Participant.
SECTION 3. ADMINISTRATION
(a) The Plan shall be administered by the Board. Among other things, the
Board shall have authority, subject to the terms of the Plan, to grant
Options, to determine the individuals to whom and the time or times at which
Options may be granted, to determine whether such Options are to be Incentive
Stock Options or Non-Qualified Stock Options (subject to the requirements of
the Code), to determine the terms and conditions of any Option granted
hereunder, and the exercise price thereof.
(b) Subject to the other provisions of the Plan, the Board shall have
authority to adopt, amend, alter and repeal such administrative rules,
guidelines and practices governing the operation of the Plan as it shall from
time to time consider advisable, to interpret the provisions of the Plan and
any Option and to decide all disputes arising in connection with the Plan. The
Board may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement in the manner and to the
extent it shall deem appropriate to carry the Plan into effect, in its sole
and absolute discretion. The Board's decision and interpretations shall be
final and binding. Any action of the Board with respect to the administration
of the Plan shall be taken pursuant to a majority vote or by the unanimous
written consent of its members.
SECTION 4. ELIGIBILITY AND PARTICIPATION
Officers and employees of the Corporation and its subsidiaries and
Directors shall be eligible to participate in the Plan. The Participants under
the Plan shall be selected from time to time by the Board, in its sole
discretion, from among those eligible, and the Board shall determine, in its
sole discretion, the numbers of shares to be covered by the Option or Options
granted to each Participant. Options intended to qualify as Incentive Stock
Options shall be granted only to persons who are eligible to receive such
options under Section 422 of the Code.
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SECTION 5. SHARES OF STOCK AVAILABLE FOR OPTIONS
(a) The maximum number of shares of Stock which may be issued and
purchased pursuant to Options granted under the Plan is 81,995, subject to the
adjustments as provided in Section 5 and Section 9, to the extent applicable.
If an Option granted under this Plan expires or terminates before exercise or
is forfeited for any reason, the shares of Stock subject to such Option, to
the extent of such expiration, termination or forfeiture, shall again be
available for subsequent Option grants under Plan. Shares of Stock issued
under the Plan may consist in whole or in part of authorized but unissued
shares or treasury shares.
(b) In the event that the Board determines, in its sole discretion, that
any stock dividend, stock split, reverse stock split or combination,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reclassification, reorganization, merger, consolidation,
split-up, spin-off, combination, exchange of shares, or other similar
transaction affects the Stock such that an adjustment is required in order to
preserve the benefits or potential benefits intended to be granted or made
available under the Plan to Participants, the Board shall have the right to
proportionately and appropriately adjust equitably any or all of (i) the
maximum number and kind of shares of Stock in respect of which Options may be
granted under the Plan to Participants, (ii) the number and kind of shares of
Stock subject to outstanding Options held by Participants, and (iii) the
exercise price with respect to any Options held by Participants, without
changing the aggregate purchase price as to which such Options remain
exercisable, provided that no adjustment shall be made pursuant to this
Section if such adjustment would cause the Plan to fail to comply with Section
422 of the Code with regard to any Incentive Stock Options granted hereunder.
No fractional Shares shall be issued on account of any such adjustment.
(c) Any adjustments under this Section will be made by the Board, whose
determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive.
SECTION 6. NON-QUALIFIED STOCK OPTIONS
The Board may, from time to time, grant Non-Qualified Stock Options to
Participants upon such terms and conditions as the Board may determine.
Non-Qualified Stock Options granted under this Plan are subject to the
following terms and conditions:
(a) Price. The purchase price per share of Stock deliverable upon the
exercise of each Non-Qualified Stock Option shall be determined by the Board
on the date the option is granted. Such purchase price shall not be less than
one hundred percent (100%) of the Fair Market Value of the Stock on the date
of grant. Shares may be purchased only upon full payment of the purchase
price. Payment of the purchase price may be made, in whole or in part, through
the surrender of shares of the Stock at the Fair Market Value of such shares
on the date of surrender or through a "cashless exercise" involving a stock
brokerage firm.
(b) Terms of Options. The term during which each Non-Qualified Stock
Option may be exercised shall be determined by the Board, but in no event
shall a Non-Qualified Stock Option be exercisable in whole or in part more
than ten (10) years from the date of grant. Except as provided herein, no
Non-Qualified Stock Option granted under this Plan is transferable except by
will or the laws of descent and distribution. The Board shall have
discretionary authority to permit the transfer of any Non-Qualified Stock
Option to members of a Participant's immediate family, including trusts for
the benefit of such family members and partnerships in which such family
members are the only partners; provided, however, that a transferred
Non-Qualified Stock Option may be exercised by the transferee on any date only
to the extent that the Participant would have been entitled to exercise the
Non-Qualified Stock Option on such date had the Non-Qualified Stock Option
not been transferred. Any transferred Non-Qualified Stock Option shall remain
subject to the terms and conditions of the Participant's stock option
agreement.
(c) Termination of Service. Unless otherwise determined by the Board,
upon the termination of a Participant's employment (or, in the case of a
Director, service as a member of the Board) for any reason other than
Disability, death or Termination for Cause, the Participant's Non-Qualified
Stock Options shall be exercisable only as to those shares which were
immediately exercisable by the Participant at the date of termination and only
for a period
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of one (1) year following termination. Notwithstanding any provision set forth
herein nor contained in any Agreement relating to the award of an Option, in
the event of Termination for Cause, all rights under the Participant's
Non-Qualified Stock Options shall expire upon termination. In the event of
death or termination as a result of Disability of any Participant, all
Non-Qualified Stock Options held by the Participant, whether or not
exercisable at such time, shall be exercisable by the Participant or his legal
representatives or beneficiaries of the Participant for two (2) years or such
longer period as determined by the Board following the date of the
Participant's death or termination of service due to Disability, provided that
in no event shall the period extend beyond the expiration of the Non-Qualified
Stock Option term.
SECTION 7. INCENTIVE STOCK OPTIONS
The Board may, from time to time, grant Incentive Stock Options to
eligible employees. Incentive Stock Options granted pursuant to the Plan shall
be subject to the following terms and conditions:
(a) Price. The purchase price per share of Stock deliverable upon the
exercise of each Incentive Stock Option shall be not less than one hundred
percent (100%) of the Fair Market Value of the Stock on the date of grant.
However, if a Participant owns (or, under Section 422(d) of the Code, is
deemed to own) stock possessing more than ten percent (10%) of the total
combined voting power of all classes of Stock, the purchase price per share of
Stock deliverable upon the exercise of each Incentive Stock Option shall not
be less than one hundred ten percent (110%) of the Fair Market Value of the
Stock on the date of grant. Shares may be purchased only upon payment of the
full purchase price. Payment of the purchase price may be made, in whole or in
part, through the surrender of shares of the Stock at the Fair Market Value of
such shares on the date of surrender or through a "cashless exercise"
involving a stock brokerage firm.
(b) Amounts of Options. Subject to Sections 4(b) and (c), Incentive
Stock Options may be granted to any eligible employee in such amounts as
determined by the Board. In the case of an option intended to qualify as an
Incentive Stock Option, the aggregate Fair Market Value (determined as of the
time the option is granted) of the Stock with respect to which Incentive Stock
Options granted are exercisable for the first time by the Participant during
any calendar year shall not exceed $100,000. The provisions of this Section
7(b) shall be construed and applied in accordance with Section 422(d) of the
Code and the regulations, if any, promulgated thereunder. To the extent an
award is in excess of such limit, it shall be deemed a Non-Qualified Stock
Option. The Board shall have discretion to redesignate options granted as
Incentive Stock Options as Non-Qualified Stock Options.
(c) Terms of Options. The term during which each Incentive Stock Option
may be exercised shall be determined by the Board, but in no event shall an
Incentive Stock Option be exercisable in whole or in part more than ten (10)
years from the date of grant. If at the time an Incentive Stock Option is
granted to an employee, the employee owns Stock representing more than ten
percent (10%) of the total combined voting power of the Corporation (or, under
Section 422(d) of the Code, is deemed to own Stock representing more than ten
percent (10%) of the total combined voting power of all such classes of Stock,
by reason of the ownership of such classes of Stock, directly or indirectly,
by or for any brother, sister, spouse, ancestor or lineal descendent of such
employee, or by or for any corporation, partnership, estate or trust of which
such employee is a shareholder, partner or beneficiary), the Incentive Stock
Option granted to such employee shall not be exercisable after the expiration
of five (5) years from the date of grant. No Incentive Stock Option granted
under this Plan is transferable except by will or the laws of descent and
distribution.
(d) Termination of Employment. Upon the termination of a Participant's
service for any reason other than Disability, death or Termination for Cause,
the Participant's Incentive Stock Options which are then exercisable at the
date of termination may only be exercised by the Participant for a period of
three (3) months following termination, after which time they shall be void.
Notwithstanding any provisions set forth herein nor contained in any Agreement
relating to an award of an Option, in the event of Termination for Cause, all
rights under the Participant's Incentive Stock Options shall expire
immediately upon termination.
Unless otherwise determined by the Board, in the event of death or
termination of service as a result of Disability of any Participant, all
Incentive Stock Options held by such Participant, whether or not exercisable
at such
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time, shall be exercisable by the Participant or the Participant's legal
representatives or the beneficiaries of the Participant for one (1) year
following the date of the Participant's death or termination of employment as
a result of Disability. In no event shall the exercise period extend beyond
the expiration of the Incentive Stock Option term.
(e) Compliance with Code. The options granted under this Section 7 of
the Plan are intended to qualify as incentive stock options within the meaning
of Section 422 of the Code, but the Corporation makes no warranty as to the
qualification of any option as an incentive stock option within the meaning of
Section 422 of the Code. A Participant shall notify the Board in writing in
the event that he disposes of Stock acquired upon exercise of an Incentive
Stock Option within the two-year period following the date the Incentive Stock
Option was granted or within the one-year period following the date he
received Stock upon the exercise of an Incentive Stock Option and shall comply
with any other requirements imposed by the Corporation in order to enable the
Corporation to secure the related income tax deduction to which it will be
entitled in such event under the Code.
SECTION 8. EXTENSION
The Board may, in its sole discretion, extend the dates during which all
or any particular Option or Options granted under the Plan may be exercised;
provided, however, that no such extension shall be permitted without the
Participant's consent if it would cause Incentive Stock Options issued under
the Plan to fail to comply with Section 422 of the Code.
SECTION 9. GENERAL PROVISIONS APPLICABLE TO OPTIONS
(a) Each Option under the Plan shall be evidenced by a writing delivered
to the Participant specifying the terms and conditions thereof and containing
such other terms and conditions not inconsistent with the provisions of the
Plan as the Board considers necessary or advisable to achieve the purposes of
the Plan or comply with applicable tax and regulatory laws and accounting
principles.
(b) Each Option may be granted alone, in addition to or in relation to
any other Option. The terms of each Option need not be identical, and the
Board need not treat Participants uniformly. Except as otherwise provided by
the Plan or a particular Option, any determination with respect to an Option
may be made by the Board at the time of grant or at any time thereafter.
(c) Notwithstanding anything in this Plan to the contrary, in the event
of a Change in Control, all then outstanding Options shall become one hundred
percent vested and exercisable as of the effective date of the Change in
Control. If, in connection with or as a consequence of a Change in Control,
the Corporation is merged into or consolidated with another corporation, if
the Corporation becomes a subsidiary of another corporation or if the
Corporation sells or otherwise disposes of substantially all of its assets to
another corporation, then unless provisions are made in connection with such
transactions for the continuance of the Plan and/or the assumption or
substitution of then outstanding Options with new options covering the stock
of the successor corporation, or parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices, such
Options shall be canceled as of the effective date of the merger,
consolidation, or sale and the Participant shall be paid in cash an amount
equal to the difference between the Fair Market Value of the Stock subject to
the Options on the effective date of such corporate event and the exercise
price of the Options. Notwithstanding anything in this Section 9(c) or any
Option agreement to the contrary, in the event that the consummation of a
Change in Control is contingent on using pooling of interests accounting
methodology, the Board may, in its discretion, take any action necessary to
preserve the use of pooling of interests accounting.
(d) The Corporation shall be entitled to withhold (or secure payment
from the Participant in lieu of withholding) the amount of any withholding or
other tax required by law to be withheld or paid by the Corporation with
respect to any Options exercised under this Plan, and the Corporation may
defer issuance of Stock hereunder until and unless indemnified to its
satisfaction against any liability for any such tax. The amount of such
withholding or tax payment shall be determined by the Board or its delegate
and shall be payable by the Participant at such time as the Board determines.
To the extent authorized by the Board, such withholding obligation may also be
satisfied by the
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payment of cash by the Participant to the Corporation, the tendering of
previously acquired shares of Stock of the Participant or the withholding, at
the appropriate time, of shares of Stock otherwise issuable to the
Participant, in a number sufficient, based upon the Fair Market Value of such
Stock, to satisfy such tax withholding requirements. The Board shall be
authorized, in its sole discretion, to establish such rules and procedures
relating to any such withholding methods as it deems necessary or appropriate,
including, without limitation, rules and procedures relating to elections by
Participants who are subject to the provisions of Section 16 of the Exchange
Act.
(e) Subject to the terms of the Plan, the Board may at any time, and
from time to time, amend, modify or terminate the Plan or any outstanding
Option held by a Participant, including substituting therefor another Option
of the same or a different type or changing the date of exercise or
realization, provided that the Participant's consent to each action shall be
required unless the Board determines that the action, taking into account any
related action, would not materially and adversely affect the Participant.
SECTION 10. MISCELLANEOUS
(a) No person shall have any claim or right to be granted an Option, and
the grant of an Option shall not be construed as giving a Participant the
right to continued employment or service on the Board. The Corporation
expressly reserves the right at any time to dismiss a Participant free from
any liability or claim under the Plan, except as expressly provided in the
Plan or the applicable Option.
(b) Nothing contained in the Plan shall prevent the Corporation from
adopting other or additional compensation arrangements.
(c) Subject to the provisions of the applicable Option, no Participant
shall have any rights as a shareholder (including, without limitation, any
rights to receive dividends, or non cash distributions with respect to such
shares) with respect to any shares of Stock to be distributed under the Plan
until he or she becomes the holder thereof.
(d) Notwithstanding anything to the contrary expressed in this Plan, any
provisions hereof that vary from or conflict with any applicable Federal or
State securities laws (including any regulations promulgated thereunder) shall
be deemed to be modified to conform to and comply with such laws.
(e) No member of the Board shall be liable for any action or
determination taken or granted in good faith with respect to this Plan nor
shall any member of the Board be liable for any agreement issued pursuant to
this Plan or any grants under it. Each member of the Board shall be
indemnified by the Corporation against any losses incurred in such
administration of the Plan, unless his action constitutes serious and willful
misconduct.
(f) The Plan shall be effective on October 1, 1998 but only if, prior to
such date, the Plan is approved by the Corporation's shareholders. The Plan
will be so approved if at an annual or special meeting of shareholders held
prior to such date a quorum is present and a majority of the votes are cast in
favor of its approval.
(g) The Board may amend, suspend or terminate the Plan or any portion
thereof at any time, provided that no amendment shall be made without
shareholder approval if such approval is necessary to comply with any
applicable tax laws or regulatory requirement.
(h) Options may not be granted under the Plan after the tenth
anniversary of the effective date of the Plan, but then outstanding Options
may extend beyond such date.
(i) To the extent that State laws shall not have been preempted by any
laws of the United States, the Plan shall be construed, regulated, interpreted
and administered according to the other laws of the Commonwealth of
Pennsylvania.
A-6
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Exhibit B
SHS BANCORP, INC.
MANAGEMENT RECOGNITION AND DEVELOPMENT PLAN
SECTION 1. PURPOSE AND ADOPTION OF THE PLAN
(a) PURPOSE. The purpose of the SHS Bancorp, Inc. Management
Recognition and Development Plan is to assist the Corporation and its
subsidiaries in attracting, retaining and motivating key management employees
and non-employee directors who will contribute to the Corporation's success.
The Plan is intended to recognize the contributions of key management
personnel to the success of the Corporation and its subsidiaries, to link the
benefits paid to eligible employees and directors who have substantial
responsibility for the successful operation, administration and management of
the Corporation with the enhancement of shareholder value and to provide
eligible employees and directors with an opportunity to acquire a greater
proprietary interest in the Corporation through the grant of restricted shares
of Stock which, in accordance with the terms and conditions set forth below,
will vest only if the employees meet the vesting criteria established by the
Board and this Plan.
(b) ADOPTION AND EFFECTIVE DATE. The Plan shall be effective on October
1,1998 but only if, prior to such date, the Plan is approved by the
Corporation's shareholders. The Plan will be so approved if at an annual or
special meeting of shareholders held prior to such date a quorum is present
and a majority of the votes are cast in favor of its approval.
SECTION 2. DEFINITIONS
For purposes of this Plan, the capitalized terms set forth below shall
have the following meanings:
AWARD AGREEMENT means a written agreement between the Corporation and a
Participant specifically setting forth the terms and conditions of an award of
Restricted Stock granted to a Participant pursuant to Section 5 of the Plan.
BOARD means the Board of Directors of the Corporation.
CHANGE IN CONTROL shall mean an event deemed to occur if and when (a) an
offeror other than the Corporation purchases shares of the common stock of the
Corporation pursuant to a tender or exchange offer for such shares, (b) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act) is or becomes the beneficial owner, directly or indirectly, of securities
of the Corporation representing twenty-five percent (25%) or more of the
combined voting power of the Corporation's then outstanding securities, (c)
the membership of the board of directors of the Corporation changes as the
result of a contested election, such that individuals who were directors at
the beginning of any twenty-four (24) month period (whether commencing before
or after the date of adoption of this Plan) do not constitute a majority of
the Board at the end of such period, or (d) shareholders of the Corporation
approve a merger, consolidation, sale or disposition of all or substantially
all of the Corporation's assets or a plan of partial or complete liquidation.
If any of the events enumerated in clauses (a) - (d) occur, the Board shall
determine the effective date of the change in control resulting therefrom.
CORPORATION means SHS Bancorp, Inc., a Pennsylvania corporation, and its
successors.
DATE OF GRANT means the date as of which an award of Restricted Stock is
granted in accordance with Section 5.
DIRECTOR means a member of the Board of Directors of the Corporation who
is not also an employee of the Corporation or its subsidiaries.
DISABILITY means any physical or mental injury or disease of a permanent
nature which renders a Participant incapable of meeting the requirements of
the employment or service performed by such Participant immediately prior
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to the commencement of such disability. The determination of whether a
Participant is disabled shall be made by the Board in its sole and absolute
discretion.
EFFECTIVE DATE means the date as of which the Plan shall become
effective, as determined in accordance with Section 1(b).
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
FAIR MARKET VALUE shall be determined as follows:
(a) If the stock is traded or quoted on the Nasdaq Stock Market or other
national securities exchange on any date, then the Fair Market Value shall be
the average of the highest and lowest selling price on such exchange on such
date or, if there were no sales on such date, then on the next prior business
day on which there was a sale.
(b) If the stock is not traded or quoted on the Nasdaq Stock Market or
other national securities exchange, then the Fair Market Value shall be a
value determined by the Board in good faith on such basis as it deems
appropriate.
PARTICIPANT means any person selected by the Board, pursuant to Section
3(b), to participate under the Plan.
PLAN means this SHS Bancorp, Inc. Management Recognition and Development
Plan, as the same may be amended from time to time.
RESTRICTED STOCK means shares of Stock awarded to a Participant subject
to restrictions as described in Section 5.
STOCK means the common stock, par value $0.01 per share, of the
Corporation.
SECTION 3. ADMINISTRATION AND PARTICIPATION
(a) ADMINISTRATION. The Plan shall be administered by the Board which
shall have exclusive and final authority and discretion in each determination,
interpretation or other action affecting the Plan and its Participants. The
Board shall have the sole and absolute authority and discretion to interpret
the Plan, to establish and modify administrative rules for the Plan, to
select, in accordance with Section 3(b), the persons who will be Participants
hereunder, to impose, in accordance with Section 5(a), such conditions and
restrictions as it determines appropriate and to take such other actions and
make such other determinations in connection with the Plan as it may deem
necessary or advisable.
(b) DESIGNATION OF PARTICIPANTS. Participants in the Plan shall be such
employees of the Corporation and its subsidiaries or Directors as the Board,
in its sole discretion, may designate. The Board shall consider such factors
as it deems pertinent in selecting Participants.
SECTION 4. STOCK ISSUABLE UNDER THE PLAN
(a) NUMBER OF SHARES OF STOCK ISSUABLE. Subject to adjustments as
provided in Section 6(c), the maximum number of shares of Stock available for
issuance under the Plan shall be 32,798. The Stock to be offered under the
Plan shall be authorized and unissued Stock, Stock which shall have been
reacquired by the Corporation and held in its treasury, or Stock held in a
trust established by the Corporation for the purpose of funding awards under
the Plan with shares acquired on the open market with funds contributed by the
Corporation or any subsidiary.
(b) SHARES SUBJECT TO TERMINATED AWARDS. Shares of Stock forfeited as
provided in Section 5(b) may again be issued under the Plan.
B-2
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SECTION 5. RESTRICTED STOCK
Subject to the terms of this Plan, the Board may grant to any Participant
an award of Restricted Stock in respect of such number of shares of Stock, and
subject to such terms and conditions relating to forfeitability and
restrictions on delivery and transfer (whether based on performance standards,
periods of service or otherwise), as the Board shall determine in its sole
discretion. The terms of all such Restricted Stock awards shall be set forth
in an Award Agreement between the Corporation and the Participant which shall
contain such provisions, not inconsistent with this Plan, as shall be
determined by the Board.
(a) ISSUANCE OF RESTRICTED STOCK. As soon as practicable after the Date
of Grant of Restricted Stock, the Corporation shall cause to be transferred on
the books of the Corporation shares of Stock, registered on behalf of the
Participant, evidencing such Restricted Stock, but subject to forfeiture to
the Corporation retroactive to the Date of Grant if an Award Agreement
delivered to the Participant by the Corporation with respect to the Restricted
Stock is not duly executed by the Participant and timely returned to the
Corporation. Unless the Board determines otherwise, until the lapse or
release of all restrictions applicable to an award of Restricted Stock, the
stock certificates representing such Restricted Stock shall be held in custody
by the Corporation or its designee. Notwithstanding the foregoing, the
Corporation may, in its sole discretion, establish a trust for the purpose of
holding Restricted Stock awarded pursuant to this Plan. In the event that a
trust is established, the Corporation may elect to hold any or all shares of
Stock subject to awards in the name of the trust for the benefit of the
Participant and subject to the forfeiture conditions applicable to the award.
(b) SHAREHOLDER RIGHTS. Beginning on the Date of Grant of the
Restricted Stock and subject to execution of the Award Agreement as provided
in Section 5(a), the Participant shall become a shareholder of the Corporation
with respect to all Stock subject to the Award Agreement and shall have all of
the rights of a shareholder, including, but not limited to, the right to vote
such Stock and the right to receive dividends and other distributions paid
with respect to such Stock; provided, however, that any Stock distributed as a
dividend or otherwise with respect to any Restricted Stock as to which the
restrictions have not yet lapsed shall be subject to the same restrictions as
such Restricted Stock and shall be held as prescribed in Section 5(a). Cash
dividends paid with respect to Restricted Stock may, at the Board's
discretion, be held by the Corporation in escrow until such time as the
Participant vests in such shares or distributed to the Participant during the
forfeiture period. The Corporation may credit a reasonable rate of interest
to such cash dividends prior to distribution.
(c) RESTRICTION ON TRANSFERABILITY. None of the Restricted Stock may be
assigned, transferred (other than by will or the laws of descent and
distribution), pledged, sold or otherwise disposed of prior to lapse or
release of the restrictions applicable thereto.
(d) DELIVERY OF STOCK UPON RELEASE OF RESTRICTIONS. Upon expiration or
earlier termination of the forfeiture period without a forfeiture, and the
satisfaction of or release from any other conditions prescribed by the Board,
the restrictions applicable to the Restricted Stock shall lapse. As promptly
as administratively feasible thereafter, subject to the requirements of
Section 6(b), the Corporation shall deliver to the Participant or, in case of
the Participant's death, to the Participant's legal representatives, one or
more stock certificates for the appropriate number of shares of Stock, free of
all such restrictions, except for any restrictions that may be imposed by law.
(e) TERMS OF RESTRICTED STOCK; FORFEITURE OF RESTRICTED STOCK. All
Restricted Stock shall be forfeited and returned to the Corporation and all
rights of the Participant with respect to such Restricted Stock shall cease
and terminate in their entirety if during the forfeiture period the employment
(or, in the case of a Director, service) of the Participant with the
Corporation and/or its subsidiaries terminates for any reason. Subject to the
terms of the Plan, the Board, in its sole discretion, shall establish the
forfeiture period for each grant of Restricted Stock, and may provide for the
forfeiture period to lapse in installments. Notwithstanding the foregoing,
upon the termination of a Participant's employment (or, in the case of a
Director, service) by reason of death or Disability, all forfeiture
restrictions imposed on Restricted Stock shall immediately and fully lapse.
In addition, upon the effective date of a Change in Control, all forfeiture
restrictions imposed on outstanding Restricted Stock awards shall immediately
and fully lapse.
B-3
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SECTION 6. MISCELLANEOUS
(a) LIMITATIONS ON TRANSFER. The rights and interest of a Participant
under the Plan may not be assigned or transferred other than by will or the
laws of descent and distribution. During the lifetime of a Participant, only
the Participant personally may exercise rights under the Plan.
(b) TAXES. The Corporation shall be entitled to withhold (or secure
payment from the Participant in lieu of withholding) the amount of any
withholding or other tax required by law to be withheld or paid by the
Corporation with respect to any Stock issuable under this Plan, or with
respect to any income recognized upon the lapse of restrictions applicable to
Restricted Stock and the Corporation may defer issuance of Stock hereunder
until and unless indemnified to its satisfaction against any liability for any
such tax. The amount of such withholding or tax payment shall be determined
by the Board or its delegate and shall be payable by the Participant at such
time as the Board determines. To the extent authorized by the Board, such
withholding obligation may be satisfied by the payment of cash by the
Participant to the Corporation, the tendering of previously acquired shares of
Stock of the Participant or the withholding, at the appropriate time, of
shares of Stock otherwise issuable to the Participant, in a number sufficient,
based upon the Fair Market Value of such Stock, to satisfy such tax
withholding requirements. The Board shall be authorized, in its sole
discretion, to establish such rules and procedures relating to any such
withholding methods as it deems necessary or appropriate, including, without
limitation, rules and procedures relating to elections by Participants who are
subject to the provisions of Section 16 of the Exchange Act.
(c) ADJUSTMENTS TO REFLECT CAPITAL CHANGES. The amount and kind of
Stock available for issuance under the Plan and the limit on the number of
shares of Stock in respect of which awards may be made to any Participant in
any calendar year shall be appropriately adjusted to reflect any stock
dividend, stock split, combination or exchange of shares, merger,
consolidation or other change in capitalization with a similar substantive
effect upon the Plan. The Board shall have the power and sole discretion to
determine the nature and amount of the adjustment, if any, to be made pursuant
to this Section 6(c).
(d) NO RIGHT TO AWARD; NO RIGHT TO EMPLOYMENT. No employee or other
person shall have any claim of right to be permitted to participate or be
granted an award under this Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any employee any right to be retained
in the employ of the Corporation.
(e) GOVERNING LAW. The Plan and all determinations made and actions
taken pursuant to the Plan shall be governed by the laws of the Commonwealth
of Pennsylvania other than the conflict of laws provisions of such laws, and
shall be construed in accordance therewith.
(f) CAPTIONS. The captions (i.e., all Section and subsection headings)
used in the Plan are for convenience only, do not constitute a part of the
Plan, and shall not be deemed to limit, characterize or affect in any way any
provisions of the Plan, and all provisions of the Plan shall be construed as
if no captions had been used in the Plan.
(g) SEVERABILITY. Whenever possible, each provision in the Plan and
every Award Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of the Plan or any Award
Agreement shall be held to be prohibited by or invalid under applicable law,
then (x) such provision shall be deemed amended to accomplish the objectives
of the provision as originally written to the fullest extent permitted by law
and (y) all other provisions of the Plan and every Award Agreement shall
remain in full force and effect.
(h) LEGENDS. All certificates for Stock delivered under the Plan shall
be subject to such transfer restrictions set forth in the Plan and such other
restrictions as the Board may deem advisable under the rules, regulations and
other requirements of the Securities and Exchange Commission, any stock
exchange upon which the Stock is then listed and any applicable federal or
state securities law, and the Board may cause a legend or legends to be
endorsed on any such certificates making appropriate references to such
restrictions.
B-4
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(i) AMENDMENT AND TERMINATION.
(A) AMENDMENT. Subject to applicable law and regulations, the Board
shall have complete power and authority to amend the Plan at any time it is
deemed necessary or appropriate; provided, however, that no amendment shall be
made without shareholder approval if such approval is necessary for the
Corporation to comply with an applicable tax law or regulatory requirement.
No termination or amendment of the Plan may, without the consent of the
Participant to whom any award shall theretofore have been granted under the
Plan, adversely affect the right of such individual under such award.
(B) TERMINATION. The Board shall have the right and the power to
terminate the Plan at any time. Unless sooner terminated by action of the
Board, the Plan shall automatically terminate, without further action of the
Board or the Corporation's shareholders, on the tenth anniversary of the
Effective Date. No award shall be granted under the Plan after the
termination of the Plan, but the termination of the Plan shall not have any
other effect and any award outstanding at the time of the termination of the
Plan shall continue in effect in accordance with its terms as if the Plan has
not terminated.
* * *
B-5
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REVOCABLE PROXY
SHS BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
April 23, 1998
The undersigned hereby appoints the entire Board of Directors of SHS
Bancorp, Inc. (the "Company") with full powers of substitution to act as
attorneys and proxies for the undersigned, to vote all shares of Common Stock
of the Company which the undersigned is entitled to vote at the Annual Meeting
of Shareholders, to be held at One North Shore Center, Fourth Floor,
Pittsburgh, Pennsylvania, on Thursday, April 23, 1998, at 10:00 a.m., local
time, and at any and all adjournments thereof, as follows:
VOTE
FOR WITHHELD
--- --------
1. The election as directors of the nominees [ ] [ ]
listed below (except as marked to the
contrary below).
Guy Dille
INSTRUCTIONS: To withhold your vote
for any individual nominee, write the
nominee's name on the line below.
--------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
2. The adoption of the SHS [ ] [ ] [ ]
Bancorp, Inc. 1998
Stock Option Plan.
3. The adoption of the SHS [ ] [ ] [ ]
Bancorp, Inc. 1998 Management
Recognition and Development Plan.
4. In their discretion, upon such other matters
as may properly come before the meeting.
The Board of Directors recommends a vote "FOR" the listed propositions.
This proxy also provides voting instructions to the Trustees of the Spring
Hill Savings Bank, FSB Employee Stock Ownership Plan and 401(k) Profit Sharing
Plan for participants with shares allocated to their accounts.
This proxy will be voted as directed, but if no instructions are specified
this proxy will be voted for the propositions stated. If any other business
is presented at the Annual Meeting, this proxy will be voted by the Board of
Directors in its best judgment. At the present time, the Board of Directors
knows of no other business to be presented at the Annual Meeting. This proxy
also confers discretionary authority on the Board of Directors to vote with
respect to the election of any person as director where the nominees are
unable to serve or for good cause will not serve and matters incident to the
conduct of the Annual Meeting.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual Meeting
or at any adjournment thereof and after notification to the Secretary of the
Company at the Annual Meeting of the shareholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of the Notice of Annual Meeting of Shareholders, a
Proxy Statement dated March 20, 1998 and the 1997 Annual Report to
Shareholders.
Dated: , 1998
--------------------
- ---------------------------------- ------------------------------------
PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
- ---------------------------------- ------------------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
Please sign exactly as your name appears on the enclosed card. When signing
as attorney, executor, administrator, trustee or guardian, please give your
full title. If shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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