<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
------------------
OR
() TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission File Number: 0-19065
Sandy Spring Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1532952
------------------------ ---------------------------------------
(State of incorporation) (I.R.S. Employer Identification Number)
17801 Georgia Avenue, Olney, Maryland 20832 301-774-6400
------------------------------------- --------- ------------------
(Address of principal office) (Zip Code) (Telephone Number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.
YES X NO
--- ---
The number of shares of common stock outstanding as of October 21, 1997
is 4,880,202 shares.
<PAGE>
SANDY SPRING BANCORP
INDEX
Page
- --------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at
September 30, 1997 and December 31, 1996.............................1
Consolidated Statements of Income for the
the Three and Nine Month Periods Ended
September 30, 1997 and 1996..........................................2
Consolidated Statements of Cash Flows for
the Nine Month Periods Ended September 30, 1997 and 1996.............3
Notes to Consolidated Financial Statements...........................5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................6
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................11
SIGNATURES.................................................................12
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Sandy Spring Bancorp and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 23,194 $ 32,899
Federal funds sold 5,707 23,278
Interest-bearing deposits with banks 944 861
Residential mortgage loans held for sale 8,264 7,985
Investments available-for-sale (at fair value) 320,529 234,423
Investments held-to-maturity -- fair value of $108,016 (1997) and
$123,067 (1996) 106,781 122,272
Other equity securities 9,440 5,111
Total Loans (net of unearned income) 552,389 523,166
Less: Allowance for credit losses (6,634) (6,391)
---------- ---------
Net loans 545,755 516,775
Premises and equipment 25,390 20,211
Accrued interest receivable 9,384 7,917
Other real estate owned 201 0
Other assets 11,457 6,863
---------- ---------
TOTAL ASSETS $1,067,046 $ 978,595
========== =========
LIABILITIES
Noninterest-bearing deposits $ 128,325 $ 117,052
Interest-bearing deposits 689,857 689,289
---------- ---------
Total deposits 818,182 806,341
Short-term borrowings 136,886 68,127
Long-term borrowings 4,598 4,820
Accrued interest and other liabilities 3,807 2,726
---------- ---------
TOTAL LIABILITIES 963,473 882,014
STOCKHOLDERS' EQUITY
Common stock -- par value $1.00; shares authorized 15,000,000; shares
issued and outstanding 4,888,164 (1997) and 4,902,113 (1996) 4,888 4,902
Surplus 32,859 33,474
Retained earnings 64,171 57,669
Net unrealized gain on investments available-for-sale 1,655 536
---------- ---------
TOTAL STOCKHOLDERS' EQUITY 103,573 96,581
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,067,046 $ 978,595
========== =========
</TABLE>
See Notes to Consolidated Financial Statements.
1
<PAGE>
Sandy Spring Bancorp and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 12,524 $ 11,627 $ 36,917 $ 34,508
Interest on loans held for sale 90 36 206 117
Interest on deposits with banks 19 81 61 180
Interest and dividends on securities:
Taxable 5,693 3,841 15,158 10,898
Nontaxable 828 831 2,450 2,525
Interest on federal funds sold 257 357 904 1,087
---------- --------- --------- ---------
TOTAL INTEREST INCOME 19,411 16,773 55,696 49,315
Interest expense:
Interest on deposits 7,297 6,973 21,509 20,878
Interest on short-term borrowings 1,702 523 3,652 1,372
Interest on long-term borrowings 84 84 244 239
---------- --------- --------- ---------
TOTAL INTEREST EXPENSE 9,083 7,580 25,405 22,489
---------- --------- --------- ---------
NET INTEREST INCOME 10,328 9,193 30,291 26,826
Provision for Credit Losses 300 -- 525 208
---------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES 10,028 9,193 29,766 26,618
Noninterest Income:
Securities gains (losses) 183 (16) 315 (66)
Service charges on deposit accounts 856 766 2,434 2,154
Gains on mortgage sales 319 145 843 588
Trust income 331 231 850 670
Other income 843 392 1,933 1,384
---------- --------- --------- ---------
TOTAL NONINTEREST INCOME 2,532 1,518 6,375 4,730
Noninterest Expenses:
Salaries and employee benefits 4,234 3,718 12,121 10,746
Occupancy expense of premises 598 525 1,683 1,559
Equipment expenses 550 582 1,601 1,633
Marketing 197 300 909 770
FDIC insurance expense 26 2 76 4
Outside data services 336 429 933 898
Other expenses 1,342 1,310 3,909 3,287
---------- --------- --------- ---------
TOTAL NONINTEREST EXPENSES 7,283 6,866 21,232 18,897
---------- --------- --------- ---------
Income Before Income Taxes 5,277 3,845 14,909 12,451
Income Tax Expense 1,763 1,372 5,072 4,199
---------- --------- --------- ---------
NET INCOME $ 3,514 $2,473 $ 9,837 $ 8,252
========== ========= ========= =========
PER SHARE DATA:
Net Income $ 0.71 $ 0.51 $ 2.00 $ 1.71
Dividends Declared 0.24 0.20 0.68 0.57
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE>
Sandy Spring Bancorp and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 9,837 $ 8,252
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,592 1,374
Provision for credit losses 525 208
Deferred income taxes (4) 152
Origination of loans held for sale (52,838) (40,134)
Proceeds from sales of loans held for sale 53,402 42,348
Gains on sales of loans held for sale (843) (653)
Securities (gains) losses (315) 66
Net change in:
Accrued interest receivable (1,467) (491)
Accrued income taxes 324 (550)
Other accrued expenses 757 (172)
Other -- net (5,573) 515
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,397 10,915
Cash Flows from Investing Activities:
Net (increase) decrease in interest-bearing deposits with banks (83) 204
Purchases of investments held-to-maturity (9,074) (24,967)
Purchases of other equity securities (4,685) (304)
Purchases of investments available-for-sale (263,813) (96,434)
Proceeds from sales of investments available-for-sale 58,393 14,798
Proceeds from maturities, calls and principal payments of investments 24,709 25,151
held-to-maturity
Proceeds from maturities, calls and principal payments of investments 121,476 40,027
available-for-sale
Proceeds from sales of loans 0 291
Proceeds from sales of other real estate owned 359 250
Net increase in loans receivable (29,755) (24,884)
Expenditures for premises and equipment (6,614) (1,311)
---------- ----------
NET CASH USED BY INVESTING ACTIVITIES (109,087) (67,179)
Cash Flows from Financing Activities:
Net increase (decrease) in demand and savings accounts 57 21,579
Net increase (decrease) in time and other deposits 11,784 15,714
Net increase (decrease) in short-term borrowings 68,559 9,463
Proceeds from long-term borrowings 0 1,800
Retirement of long-term borrowings (22) (23)
Common stock purchased and retired (1,948) 0
Proceeds from issuance of common stock 1,319 1,344
Dividends paid (3,335) (2,736)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 76,414 47,141
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (27,276) (9,123)
Cash and Cash Equivalents at Beginning of Year 56,177 60,435
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 28,901 $51,312
========== ==========
</TABLE>
3
<PAGE>
Cont'd
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Supplemental Disclosures:
<S> <C> <C>
Interest payments $ 24,237 $ 22,575
Income tax payments 5,111 4,297
Noncash Investing Activities:
Transfers from loans to other real estate owned 532 210
Reclassification of borrowings from long-term to short-term 200 2,100
Unrealized gain (loss) on investments available-for-sale
net of deferred tax effect of $705 in 1997 and $(499) in 1996 1,119 (793)
</TABLE>
*Cash and cash equivalents include amounts of "Cash and due from banks" and
"Federal funds sold" on the Consolidated Balance Sheets.
See Notes to Consolidated Financial Statements.
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The foregoing financial statements are unaudited; however, in the
opinion of Management, all adjustments (comprising only normal recurring
accruals) necessary for a fair presentation of the results of the interim
periods have been included. These statements should be read in conjunction with
the financial statements and accompanying notes included in Sandy Spring
Bancorp's 1996 Annual Report to Shareholders. The results shown in this interim
report are not necessarily indicative of results to be expected for the full
year 1997.
The accounting and reporting policies of Sandy Spring Bancorp (the
"Company") conform to generally accepted accounting principles and to general
practice within the banking industry. Certain reclassifications have been made
to amounts previously reported to conform with current classifications.
Consolidation has resulted in the elimination of all significant
intercompany accounts and transactions.
Financial data for periods prior to the merger with Annapolis
Bancshares, Inc. on August 29, 1996 has been retroactively restated under
pooling of interests accounting.
NOTE 2 - STOCKHOLDERS' EQUITY
On April 16, 1997, the Company announced that its Board of Directors
had authorized the repurchase of up to 5%, or 246,042 shares, of Bancorp's
outstanding common stock, par value $1.00 per share, in connection with shares
expected to be issued pursuant to Bancorp's dividend reinvestment, stock option,
and employee benefit plans and for other corporate purposes. The share
repurchases would be made on the open market and in privately negotiated
transactions, from time to time until March 31, 1999, or earlier termination of
the program by the Board. Through September 30, 1997, 52,381 shares have been
repurchased.
NOTE 3 - PER SHARE DATA
Net income per common share is based on the weighted average number of
shares outstanding which was, for the third quarter, 4,893,962 in 1997 and
4,878,888 in 1996 and, for the first nine months, 4,906,633 in 1997 and
4,860,422 in 1996.
5
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Consolidated basis, dollars in thousands except per share data)
This Management's Discussion and Analysis contains forward-looking
statements, including statements of goals, intentions and expectations,
regarding or based upon general economic conditions, interest rates,
developments in national and local markets, and other matters, and which, by
their nature, are subject to significant uncertainties. Because of these
uncertainties and the assumptions on which statements in this report are based,
the actual future results may differ materially from those indicated in this
report.
All financial information reflected in the following discussion for
periods prior to the merger with Annapolis Bancshares, Inc. on August 29, 1996
has been retroactively restated.
THE COMPANY
The Company is the registered bank holding company for Sandy Spring
National Bank of Maryland (the "Bank"), headquartered in Olney, Maryland. The
Bank operates twenty banking offices in Montgomery, Howard, Anne Arundel and
Prince George's Counties in Maryland. On April 16, 1997, the Company announced
that its Board of Directors had authorized the repurchase of up to 5%, or
246,042 shares, of its outstanding common stock, par value $1.00 per share, in
connection with shares expected to be issued under the Company's dividend
reinvestment, stock option, and employee benefit plans and for other corporate
purposes. The share repurchases are expected to be made primarily on the open
market from time to time until March 31, 1999, or earlier termination of the
repurchase program by the Board. Repurchases under the program will be made at
the discretion of management based upon market, business, legal, accounting and
other factors. The Company has established a strategy of independence, and
intends to establish or acquire additional offices or banking organizations as
appropriate opportunities may arise.
A. FINANCIAL CONDITION
The Company's total assets were $1,067,046 at September 30, 1997,
compared to $978,595 at December 31, 1996, increasing $88,451 or 9.0% during the
first nine months of 1997. Earning assets increased $86,958 or 9.5% to
$1,004,054 at September 30, 1997 from $917,096 at December 31, 1996.
Total loans rose 5.6% or $29,223 during the first nine months of 1997
to $552,389. The largest percentage increase occurred in construction loans, up
20.3% or $9,694, due to growth in residential construction loans. Mortgage loans
increased $14,472 or 3.8%, primarily reflecting a rise in 1-4 family residential
credits. Modest growth was achieved in the other loan categories, with
commercial loans up 4.0% or $2,750 and consumer loans showing a 7.5% or $2,314
rise.
The investment portfolio, consisting of available-for-sale,
held-to-maturity and other equity securities, is the other significant category
of earning assets. Most of the $74,944 or 20.7% increase in total investments
from December 31, 1996 to September 30, 1997 represents leveraging of the
balance sheet. Bancorp's derivative activities are limited to the sale of
covered call options associated with shares of common stocks in the Bank's
investment portfolio. The options are written against equities that have a
market value in excess of book value and therefore, the effect of any option
being exercised by the holder would be to record a realized gain. The bank
employs this practice in order to potentially enhance the yield on the
portfolio. Premiums received on the sale of covered call options are deferred
and included in noninterest income upon option expiration or included in the
computation of realized gains upon option exercise.
Total deposits were $818,182 at September 30, 1997, increasing $11,841
or 1.5% from $806,341 at December 31, 1996. Interest-bearing deposits were
essentially unchanged while noninterest-bearing demand deposits rose $11,273 or
9.6%. Growth in small business checking accounts was the primary cause of the
increase in noninterest-bearing demand deposits. Federal Home Loan Bank of
Atlanta advances in connection with a leverage program were largely responsible
for the $68,759 increase in short-term borrowings to $136,886 at September 30,
1997 from $68,127 at December 31, 1996.
6
<PAGE>
Liquidity and Interest Ratio Sensitivity
The Company's liquidity position, considering both internal and
external sources available, exceeded anticipated short and long term funding
needs at September 30, 1997.
In assessing liquidity, management considers operating requirements,
the seasonality of loan and deposit flows, investment, loan, borrowing and
deposit maturities, expected fundings of loans, deposit withdrawals, and the
market values of available-for-sale investments.
The Company employs simulation analysis in order to assess the degree
of interest rate risk inherent in its asset and liability portfolios. Such risk
is monitored in accordance with board of directors' policy limits by the Bank's
asset-liability committee. The limit established for the estimated twelve month
period impact of a 200 basis point change in interest rates on net interest
income is 15%, while the limit for the estimated change in the fair value of the
Company's capital is 25%. Simulation modeling measured from September 30, 1997
indicated impacts of 6% on net interest income and 18% on the fair value of
capital, both within the policy limits. The simulation model captures
optionality factors such as call features and interest rate caps and floors
imbedded in investment and loan portfolio contracts.
Capital Management
The Company recorded a total risk-based capital ratio of 17.49% at
September 30, 1997, compared to 17.56% at December 31, 1996; a tier 1 risk-based
capital ratio of 16.41%, compared to 16.44%; and a capital leverage ratio of
9.53%, compared to 10.38%. Capital adequacy, as measured by these ratios, was
well above regulatory requirements.
Stockholders' equity totaled $103,573 (including a net unrealized gain
of $1,655 on investments available-for-sale) at September 30, 1997, an increase
of 7.2% from $96,581 (including a net unrealized gain of $536) at December 31,
1996. Internal capital generation (net income less dividends) provided $6,502 in
additional equity during the first nine months of 1997, representing an
annualized rate (when considered as a percentage of average total stockholders'
equity) of 8.8% versus 8.7% for the year ended December 31, 1996. External
capital formation amounted to $1,319 for the nine months ended September 30,
1997, resulting from issuance of 29,097 shares under the Company's dividend
reinvestment plan and 9,358 shares from employee purchases through 401K benefit
plans. Share repurchases, begun in the second quarter of 1997, have resulted in
the retirement of 52,381 shares at an aggregate purchase price of $1,948 through
September 30, 1997.
Dividends for the first three quarters were $0.68 per share in 1997,
compared to $0.57 per share in 1996, for dividend payout ratios of 34.00% and
33.33%, respectively.
B. RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Net income for the first nine months of the year rose $1,585 or 19.2%
in 1997, to $9,837 ($2.00 per share) from the $8,252 ($1.71 per share) earned in
the first nine months of 1996. Excluding nonrecurring merger costs associated
with the acquisition of Annapolis Bancshares, Inc. and recorded in third quarter
1996, the increase was 11.5%. The annualized return on average assets for the
first nine months of the year was 1.29% in 1997 compared to 1.23% in 1996. The
annualized returns on average equity for the same nine month periods were 13.31%
and 12.35% in 1997 and 1996, respectively.
Net Interest Income
Net interest income for the first nine months of the year was $30,291
in 1997, an increase of 12.9% over $26,826 in 1996, reflecting a higher volume
of average earning assets.
For the first nine months, tax-equivalent interest income increased
$6,311 or 12.5% in 1997, compared to 1996. Average earning assets rose 12.1%
over the prior year period while the average yield earned on those assets
increased to 7.99% from 7.95%. Comparing the first nine months of 1997 versus
1996, average loans grew 6.7% to $537,148 (56.5% of average earning assets)
while the average yield on loans remained essentially constant. Commercial
mortgage, residential construction and commercial loans were responsible for
most of the rise in total loans. Average total securities increased 24.7% to
$386,437 (40.6% of average earning assets) and recorded a 19 basis point
increase in average yield.
7
<PAGE>
Interest expense for the first nine months increased $2,916 or 13.0%,
due to higher average interest-bearing liabilities.
Credit Risk Management
During the first nine months of the year, the provision for credit
losses was $525 in 1997, compared to $208 in 1996. Net charge-offs of $282 were
recorded for the nine month period ended September 30, 1997 while there were net
charge-offs of $261 for the same period a year earlier.
Nonperforming loans decreased by $2,169 and total nonperforming assets
decreased by $1,968, from December 31, 1996 to September 30, 1997. Expressed as
a percentage of total assets, nonperforming assets were 0.25% at September 30,
1997 and 0.48% at December 31, 1996. Because the loan portfolio includes a
significant number of loans with large individual balances, the unexpected
deterioration of one or a few such loans may cause a significant increase in
nonperforming loans and assets or in potential problem loans. This occurred at
September 30, 1997 in the potential problem loan category, where three loans
were responsible for $3,739 of the $4,290 increase from December 31, 1996. These
credits are well collateralized and are not believed to present significant risk
of loss. The total balance of impaired loans was $1,136 at September 30, 1997
and the reserve on those loans was $25 compared to $1,280 with a reserve of $127
at December 31, 1996.
The Company regularly analyzes the sufficiency of its allowance for
credit losses based upon a number of factors, including lending risks associated
with growth and entry into new markets, loss allocations for specific problem
credits, the level of the allowance to nonperforming loans, historical loss
experience, economic conditions, portfolio trends and credit concentrations, and
changes in the size and character of the loan portfolio. Management establishes
the allowance for credit losses in an amount that it determines, based upon
these factors, is sufficient to provide for losses inherent in the loan
portfolio. At September 30, 1997, the allowance for credit losses was 1.20% of
total loans versus 1.22% at December 31, 1996. Coverage of risk in the loan
portfolio may be evaluated using a ratio of the allowance for credit losses to
nonperforming loans. Significant variation in this coverage ratio may occur from
period to period because the amount of nonperforming loans depends largely upon
the condition of a small number of individual loans and borrowers relative to
the total loan portfolio. At September 30, 1997, the allowance for credit losses
represented 267% of nonperforming loans compared to 137% at December 31, 1996.
Management believes the allowance for credit losses at September 30, 1997 was
adequate.
Noninterest Income and Expenses
Noninterest income of $6,375 earned during the nine month period ended
September 30, 1997 represented a $1,645 or 34.8% increase over $4,730 achieved
over the same time frame in the prior year. The primary categories posting
increases were, in order of magnitude, nonrecurring securities gains, gains on
mortgage sales, return check charges, debit card fees and trust department fees.
For the nine months ended September 30, 1997, noninterest expenses
increased $2,335 or 12.4% to $21,232 from $18,897 in 1996. Excluding one-time
merger costs of $744 in third quarter 1996, the increase was $3,079 or 17.0%.
Categories (excluding merger expenses in 1996) that most significantly impacted
the change were "salaries and employee benefits", up $1,547 or 14.6%, and "other
expenses", up $952 or 32.2%. The increase in compensation expenses reflected a
larger staff and an expanded branch network. The rise in other expenses was
primarily attributable to higher communications costs and professional fees and
to increased amortization of intangibles relating to a purchase of deposits in
late 1996. Outside data services also grew significantly by $234 or 33.5%.
The ratio of net income to average full-time-equivalent (FTE) employees
was $25 for the nine month period ended September 30, 1997 and $24 for the same
period in 1996, despite a 12.8% rise in average FTE employees to 388 from 344.
Income Taxes
The effective tax rate through the first three quarters of the year
was 34.0% in 1997, compared to 33.7% in 1996.
8
<PAGE>
ANALYSIS OF CREDIT RISK
(Dollars in thousands)
Activity in the allowance for credit losses is shown below:
<TABLE>
<CAPTION>
9 Months Ended 12 Months Ended
September 30, 1997 December 31, 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, January 1 $ 6,391 $ 6,597
Provision for credit losses 525 308
Loan charge-offs:
Real estate-mortgage (60) (3)
Real estate-construction (79) 0
Consumer (80) (143)
Commercial (126) (469)
------------------------- --------------------------
Total charge-offs (345) (615)
Loan recoveries:
Real estate-mortgage 0 0
Real estate-construction 0 0
Consumer 29 37
Commercial 34 64
------------------------- --------------------------
Total recoveries 63 101
------------------------- --------------------------
Net charge-offs (282) (514)
------------------------- --------------------------
BALANCE, PERIOD END $ 6,634 $ 6,391
========================= ==========================
Net charge-offs to average loans
(annual basis) 0.07% 0.10%
Allowance to total loans 1.20% 1.22%
</TABLE>
Balance sheet risk inherent in the lending function is presented as follows at
the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Non-accrual loans $ 1,431 $ 1,291
Loans 90 days past due 1,035 3,337
Restructured loans 20 27
------------------------- --------------------------
Total Nonperforming Loans* 2,486 4,655
Other real estate owned 201 0
------------------------- --------------------------
TOTAL NONPERFORMING ASSETS $ 2,687 $ 4,655
========================= ==========================
Nonperforming assets to total assets 0.25% 0.48%
</TABLE>
- --------------------------------------------------------------------------------
* Those performing loans considered potential problem loans, as defined and
identified by management, amounted to approximately $7,730 at September 30,
1997, compared to $3,440 at December 31, 1996. Although these are loans where
known information about the borrowers' possible credit problems causes
management to have doubts as to their ability to comply with the present loan
repayment terms, most are well collateralized and are not believed to present
significant risk of loss.
9
<PAGE>
C. RESULTS OF OPERATIONS - THIRD QUARTER 1997 AND 1996
Third quarter earnings of $3,514 ($0.71 per share) in 1997 were $1,041
or 42.1% above results of $2,473 ($0.51 per share) shown for the same quarter of
1996. However, excluding non-recurring merger costs in 1996 of $570 on an
after-tax basis, earnings rose $471 or 15.5%.
Tax-equivalent net interest income rose 11.9% during the third quarter
of 1997 compared to the like three month period of 1996, showing the net effects
of a 14.6% increase in the average earning asset base and a 10 basis point
decline in net interest spread.
The provision for credit losses was $300 for the quarter ended
September 30, 1997. No provision for credit losses was believed necessary by
management for the third quarter of 1996. There were net charge-offs of $97 and
$234 in the respective quarters.
Noninterest income for the third quarter increased $1,014 or 66.8% in
1997 versus 1996 with the largest contributors being, in order of importance,
higher fees and commissions, nonrecurring securities gains, gains on mortgage
sales and service charges on deposit accounts. The increase in fees and
commissions primarily related to trust services, mutual funds, debit cards and
ATM surcharges.
Noninterest expenses rose 6.1%. However, excluding non-recurring merger
costs, the rise was 19.0%, attributable largely to the same factors as discussed
above for the nine month periods.
The third quarter effective tax rate was 33.4% in 1997 versus 35.7%
shown in 1996.
10
<PAGE>
PART II- OTHER INFORMATION
Item 6. EXHIBIT AND REPORTS ON FORM 8-K
(a) Exhibits. The following is a list of Exhibit filed as part of this Quarterly
Report on Form 10-Q:
<TABLE>
<CAPTION>
No. Exhibit
- --- -------
<S> <C>
*10(a) Amended and Restated Cash and Deferred Profit Sharing Plan, effective
as of July 1, 1997
*10(b) Form of Director Fee Deferral Agreement, August 26, 1997
*10(c) Supplemental Executive Retirement Agreement by and between Sandy Spring
National Bank of Maryland and Hunter R. Hollar
*10(d) Form of Supplemental Executive Retirement Agreement by and between
Sandy Spring National Bank of Maryland and each of James H. Langmead,
Lawrence T. Lewis, Stanley L. Merson, and Frank H. Small
*10(e) Employment Agreement by and among Sandy Spring Bancorp, Inc., Sandy
Spring National Bank of Maryland, and Hunter H. Hollar
*10(f) Employment Agreement by and among Sandy Spring Bancorp, Inc., Sandy
Spring National Bank of Maryland, and James H. Langmead
*10(g) Employment Agreement by and among Sandy Spring Bancorp, Inc., Sandy
Spring National Bank of Maryland, and Lawrence T. Lewis
*10(h) Employment Agreement by and among Sandy Spring Bancorp, Inc., Sandy
Spring National Bank of Maryland, and Stanley L. Merson
*10(i) Employment Agreement by and among Sandy Spring Bancorp, Inc., Sandy
Spring National Bank of Maryland, and Frank H. Small
27 Financial Data Schedule
</TABLE>
* Compensatory Plan, Contract or Arrangement.
(b) Reports on Form 8-K. None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this quarterly report to be signed on its behalf by
the undersigned, thereunto duly authorized.
SANDY SPRING BANCORP, INC.
(Registrant)
By: /s/ Hunter R. Hollar
---------------------
Hunter R. Hollar
President and Chief Executive Officer
Date: November 13, 1997
By: /s/ James H. Langmead
---------------------
James H. Langmead
Vice President and Treasurer
Date: November 13, 1997
12
<PAGE>
Exhibit 10 (a)
<PAGE>
SANDY SPRING BANCORP
CASH AND DEFERRED PROFIT SHARING PLAN
(July 1, 1997 Restatement)
<PAGE>
TABLE OF CONTENTS
PREAMBLE
ARTICLE I
DEFINITIONS
1.1 Plan Definitions ..................................2
1.2 Interpretation ....................................8
ARTICLE II
SERVICE
2.1 Definitions .......................................9
2.2 Crediting of Hours of Service ....................10
2.3 Crediting of Continuous Service ..................10
2.4 Eligibility Service ..............................10
2.5 Vesting Service ..................................10
ARTICLE III
ELIGIBILITY
3.1 Eligibility ......................................11
3.2 Transfers of Employment ..........................11
3.3 Reemployment .....................................11
3.4 Notification Concerning New Eligible Employees ...12
3.5 Effect and Duration ..............................12
ARTICLE IV
TAX-DEFERRED CONTRIBUTIONS
4.1 Tax-Deferred Contributions .......................13
4.2 Amount of Tax-Deferred Contributions .............13
4.3 Changes in Reduction Authorization ...............13
4.4 Suspension of Tax-Deferred Contributions .........14
4.5 Resumption of Tax-Deferred Contributions .........14
4.6 Delivery of Tax-Deferred Contributions ...........14
4.7 Vesting of Tax-Deferred Contributions ............15
(i)
<PAGE>
ARTICLE V
AFTER-TAX AND ROLLOVER CONTRIBUTIONS
5.1 No After-Tax Contributions .........................16
5.2 Rollover Contributions .............................16
5.3 Vesting of Rollover Contributions ..................16
ARTICLE VI
EMPLOYER CONTRIBUTIONS
6.1 Contribution Period ................................17
6.2 Profit-Sharing Contributions .......................17
6.3 Allocation of Profit-Sharing Contributions .........17
6.4 Qualified Nonelective Contributions ................17
6.5 Allocation of Qualified Nonelective
Contributions ......................................18
6.6 Verification of Amount of Employer
Contributions by the Sponsor .......................18
6.7 Payment of Employer Contributions ..................18
6.8 Eligibility to Participate in Allocation ...........18
6.9 Vesting of Employer Contributions ..................19
6.10 Election of Former Vesting Schedule ................19
ARTICLE VII
LIMITATIONS ON CONTRIBUTIONS
7.1 Definitions ........................................21
7.2 Code Section 402(g) Limit ..........................24
7.3 Distribution of Excess Deferrals ...................25
7.4 Limitation on Tax-Deferred Contributions
of Highly Compensated Employees ....................25
7.5 Distribution of Excess Tax-Deferred
Contributions ......................................27
7.6 Determination of Income or Loss ....................28
7.7 Code Section 415 Limitations on Crediting of
Contributions and Forfeitures ......................28
7.8 Coverage Under Other Qualified
Defined Contribution Plan ..........................29
7.9 Coverage Under Qualified Defined Benefit Plan ......30
7.10 Scope of Limitations ...............................30
(ii)
<PAGE>
ARTICLE VIII
TRUST FUNDS AND PARTICIPANT ACCOUNTS
8.1 General Fund .....................................31
8.2 Investment Funds .................................31
8.3 Loan Investment Fund .............................31
8.4 Income on Trust ..................................32
8.5 Participant Accounts .............................32
8.6 Sub-Accounts .....................................32
ARTICLE IX
LIFE INSURANCE CONTRACTS
9.1 No Life Insurance Contracts ......................33
ARTICLE X
DEPOSIT AND INVESTMENT OF CONTRIBUTIONS
10.1 Future Contribution Investment Elections .........34
10.2 Deposit of Contributions .........................34
10.3 Election to Transfer Between Funds ...............35
10.4 404(c) Plan ......................................35
ARTICLE XI
CREDITING AND VALUING PARTICIPANT ACCOUNTS
11.1 Crediting Participant Accounts ...................36
11.2 Valuing Participant Accounts .....................36
11.3 Plan Valuation Procedures ........................36
11.4 Finality of Determinations .......................37
11.5 Notification .....................................37
ARTICLE XII
LOANS
12.1 Application for Loan .............................38
12.2 Reduction of Account Upon Distribution ...........39
12.3 Requirements to Prevent a Taxable Distribution ...39
12.4 Administration of Loan Investment Fund ...........40
12.5 Default ..........................................40
12.6 Loans Granted Prior to Amendment .................41
(iii)
<PAGE>
ARTICLE XIII
WITHDRAWALS WHILE EMPLOYED
13.1 Withdrawals of Rollover Contributions ............42
13.2 Withdrawals of Employer Contributions ............42
13.3 Withdrawals of Tax-Deferred Contributions ........42
13.4 Limitations on Withdrawals Other than Hardship
Withdrawals ......................................43
13.5 Conditions and Limitations on
Hardship Withdrawals .............................43
13.6 Order of Withdrawal from a Participant's Sub-
Accounts .........................................45
ARTICLE XIV
TERMINATION OF EMPLOYMENT AND SETTLEMENT DATE
14.1 Termination of Employment and Settlement Date ....46
ARTICLE XV
DISTRIBUTIONS
15.1 Distributions to Participants ....................47
15.2 Distributions to Beneficiaries ...................47
15.3 Cash Outs and Participant Consent ................48
15.4 Required Commencement of Distribution ............48
15.5 Reemployment of a Participant ....................49
15.6 Restrictions on Alienation .......................50
15.7 Facility of Payment ..............................50
15.8 Inability to Locate Payee ........................50
15.9 Distribution Pursuant to Qualified Domestic
Relations Orders .................................51
ARTICLE XVI
FORM OF PAYMENT
16.1 Normal Form of Payment ...........................52
16.2 Optional Form of Payment .........................52
16.3 Change of Option Election ........................53
16.4 Direct Rollover ..................................53
16.5 Notice Regarding Forms of Payment ................54
16.6 Reemployment .....................................54
16.7 Distribution in the Form of Employer Stock .......55
(iv)
<PAGE>
16.8 Section 242(b)(2) Elections ........................55
ARTICLE XVII
BENEFICIARIES
17.1 Designation of Beneficiary .........................57
17.2 Spousal Consent Requirements .......................57
ARTICLE XVIII
ADMINISTRATION
18.1 Authority of the Sponsor ...........................59
18.2 Action of the Sponsor ..............................60
18.3 Claims Review Procedure ............................60
18.4 Qualified Domestic Relations Orders ................61
18.5 Indemnification ....................................62
18.6 Actions Binding ....................................62
ARTICLE XIX
AMENDMENT AND TERMINATION
19.1 Amendment ..........................................63
19.2 Limitation on Amendment ............................63
19.3 Termination ........................................63
19.4 Reorganization .....................................65
19.5 Withdrawal of an Employer ..........................66
ARTICLE XX
ADOPTION BY OTHER ENTITIES
20.1 Adoption by Related Companies ......................67
20.2 Effective Plan Provisions ..........................67
ARTICLE XXI
MISCELLANEOUS PROVISIONS
21.1 No Commitment as to Employment .....................68
21.2 Benefits ...........................................68
21.3 No Guarantees ......................................68
21.4 Expenses ...........................................68
21.5 Precedent ..........................................69
21.6 Duty to Furnish Information ........................69
(v)
<PAGE>
21.7 Withholding ........................................69
21.8 Merger, Consolidation, or
Transfer of Plan Assets ............................69
21.9 Back Pay Awards ....................................69
21.10 Condition on Employer Contributions ................70
21.11 Return of Contributions to an Employer .............70
21.12 Validity of Plan ...................................71
21.13 Trust Agreement ....................................71
21.14 Parties Bound ......................................71
21.15 Application of Certain Plan Provisions .............72
21.16 Leased Employees ...................................72
21.17 Transferred Funds ..................................73
ARTICLE XXII
TOP-HEAVY PROVISIONS
22.1 Definitions ........................................74
22.2 Applicability ......................................77
22.3 Minimum Employer Contribution ......................77
22.4 Adjustments to Section 415 Limitations .............78
22.5 Accelerated Vesting ................................79
ARTICLE XXIII
EFFECTIVE DATE
23.1 Effective Date of Amendment and Restatement ........80
(vi)
<PAGE>
PREAMBLE
The Sandy Spring Bancorp Cash and Deferred Profit Sharing Plan,
originally effective as of January 1, 1982, and heretofore known as the
Sandy Spring Bancorp Cash and Deferred Profit Sharing Plan and Trust,
is hereby amended and restated in its entirety. The Plan, as amended
and restated hereby, is intended to qualify as a profit-sharing plan
under Section 401(a) of the Code, and includes a cash or deferred
arrangement that is intended to qualify under Section 401(k) of the
Code. The Plan is maintained for the exclusive benefit of eligible
employees and their beneficiaries.
Notwithstanding any other provision of the Plan to the contrary, a
Participant's vested interest in his Participant Account under the Plan
on and after the effective date of this amendment and restatement shall
be not less than his vested interest in his account on the day
immediately preceding the effective date.
1
<PAGE>
ARTICLE I
DEFINITIONS
1.1 Plan Definitions
As used herein, the following words and phrases have the meanings
hereinafter set forth, unless a different meaning is plainly required
by the context:
The "Administrator" means the Sponsor unless the Sponsor designates
another person or persons to act as such.
An "After-Tax Contribution" means any after-tax employee contribution
made by a Participant as may be permitted under Article V.
The "Beneficiary" of a Participant means the person or persons entitled
under the provisions of the Plan to receive distribution hereunder in
the event the Participant dies before receiving distribution of his
entire interest under the Plan.
The "Code" means the Internal Revenue Code of 1986, as amended from
time to time. Reference to a section of the Code includes such section
and any comparable section or sections of any future legislation that
amends, supplements, or supersedes such section.
The "Compensation" of a Participant for any period means his regular or
base salary for services as an Employee, including amounts deferred
under Section 125, 402(e)(3), or 402(h)(1)(B) of the Code, but
excluding overtime, bonuses, and commissions.
In no event, however, shall the Compensation of a Participant taken
into account under the Plan for any Plan Year exceed (1) $200,000 for
Plan Years beginning prior to January 1, 1994, or (2) $150,000 for Plan
Years beginning on or after January 1, 1994 (subject to adjustment
annually as provided in Section 401(a)(17)(B) and Section 415(d) of the
Code; provided, however, that the dollar increase in effect on January
1 of any calendar year, if any, is effective for Plan Years beginning
in such calendar year). If the Compensation of a Participant is
determined over a period of time that contains fewer than 12
2
<PAGE>
calendar months, then the annual compensation limitation described
above shall be adjusted with respect to that Participant by multiplying
the annual compensation limitation in effect for the Plan Year by a
fraction the numerator of which is the number of full months in the
period and the denominator of which is 12; provided, however, that no
proration is required for a Participant who is covered under the Plan
for less than one full Plan Year if the formula for allocations is
based on Compensation for a period of at least 12 months. In
determining the Compensation, for purposes of applying the annual
compensation limitation described above, of a Participant who is a five
percent owner or among the ten Highly Compensated Employees receiving
the greatest Compensation for the Plan Year, the Compensation of the
Participant's spouse and of his lineal descendants who have not
attained age 19 as of the close of the Plan Year shall be included as
Compensation of the Participant for the Plan Year. If as a result of
applying the family aggregation rule described in the preceding
sentence the annual compensation limitation would be exceeded, the
limitation shall be prorated among the affected family members in
proportion to each member's Compensation as determined prior to
application of the family aggregation rules.
A "Contribution Period" means the period specified in Article VI for
which Employer Contributions shall be made.
An "Eligible Employee" means any Employee who has met the eligibility
requirements of Article III to have Tax-Deferred Contributions made to
the Plan on his behalf.
The "Eligibility Service" of an employee means the period or periods of
service credited to him under the provisions of Article II for purposes
of determining his eligibility to participate in the Plan as may be
required under Article III or Article VI.
An "Employee" means any common law employee of an Employer, except any
employee classified as an "on call" employee or a "10-month" employee.
An "Employer" means the Sponsor and any entity which has adopted the
Plan as may be provided under Article XX.
3
<PAGE>
An "Employer Contribution" means the amount, if any, that an Employer
contributes to the Plan as may be provided under Article VI or Article
XXII.
An "Enrollment Date" means the first day of each payroll period.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time. Reference to a section of ERISA includes
such section and any comparable section or sections of any future
legislation that amends, supplements, or supersedes such section.
The "General Fund" means a Trust Fund maintained by the Trustee as
required to hold and administer any assets of the Trust that are not
allocated among any separate Investment Funds as may be provided in the
Plan or the Trust Agreement. No General Fund shall be maintained if all
assets of the Trust are allocated among separate Investment Funds.
A "Highly Compensated Employee" means an Employee or former Employee
who is a highly compensated active employee or highly compensated
former employee as defined hereunder.
A "highly compensated active employee" includes any Employee who
performs services for an Employer during the determination year and who
(i) was a five percent owner at any time during the determination year
or the look back year, (ii) received compensation from an Employer
during the look back year in excess of $75,000 (subject to adjustment
annually at the same time and in the same manner as under Section
415(d) of the Code), (iii) was in the top paid group of employees' for
the look back year and received compensation from an Employer during
the look back year in excess of $50,000 (subject to adjustment annually
at the same time and in the same manner as under Section 415(d) of the
Code), (iv) was an officer of an Employer during the look back year and
received compensation during that year in excess of 50 percent of the
dollar limitation in effect for that year under Section 415(b)(1)(A) of
the Code or, if no officer received compensation in excess of that
amount for the look back year or the determination year, received the
greatest compensation for the look back year of any officer, or (v) was
one of the 100 employees paid the greatest compensation by an Employer
for the
4
<PAGE>
determination year land would be described in (ii), (iii), or (iv)
above if the term "determination year" were substituted for "look back
year".
A "highly compensated former employee" includes any Employee who
separated from service from an Employer and all Related Companies (or
is deemed to have separated from service from an Employer and all
Related Companies) prior to the determination year, performed no
services for an Employer during the determination year, and was a
highly compensated active employee for either the separation year or
any determination year ending on or after the date the Employee attains
age 55.
The determination of who is a Highly Compensated Employee hereunder,
including determinations as to the number and identity of employees in
the top paid group, the 100 employees receiving the greatest
compensation from an Employer, the number of employees treated as
officers, and the compensation considered, shall be made in accordance
with the provisions of Section 414(q) of the Code and regulations
issued thereunder. For purposes of this definition, the following terms
have the following meanings:
(a) The "determination year" means the Plan Year.
(b) The "look back year" means the 12-month period immediately
preceding the determination year.
An "Hour of Service" with respect to a person means each hour, if any,
that may be credited to him in accordance with the provisions of
Article II.
An "Investment Fund" means any separate investment Trust Fund
maintained by the Trustee as may be provided in the Plan or the Trust
Agreement or any separate investment fund maintained by the Trustee, to
the extent that there are Participant Sub-Accounts under such funds, to
which assets of the Trust may be allocated and separately invested.
The "Normal Retirement Date" of an employee means the date he attains
age 65.
5
<PAGE>
A "Participant" means any person who has a Separate Account in the
Trust.
A "Participant Account" means the account maintained by the Trustee in
the name of a Participant that reflects his interest in the Trust and
any Sub-Accounts maintained thereunder, as provided in Article VIII.
The "Plan" means Sandy Spring Bancorp Cash and Deferred Profit Sharing
Plan, as from time to time in effect.
A "Plan Year" means the 12-consecutive-month period ending December 31,
1982 and each 12-consecutive-month period thereafter.
A "Profit-Sharing Contribution" means any Employer Contribution made to
the Plan as provided in Article VI, other than Qualified Nonelective
Contributions.
A "Qualified Nonelective Contribution" means any Employer Contribution
made to the Plan as provided in Article VI that may be taken into
account to satisfy the limitations on contributions by Highly
Compensated Employees under Article VII.
A "Related Company" means any corporation or business, other than an
Employer, which would be aggregated with an Employer for a relevant
purpose under Section 414 of the Code.
A "Rollover Contribution" means any rollover contribution to the Plan
made by a Participant as may be permitted under Article V.
The "Settlement Date" of a Participant means the date on which a
Participant's interest under the Plan becomes distributable in
accordance with Article XV.
The "Sponsor" means Sandy Spring Bancorp, and any successor thereto.
A "Sub-Account" means any of the individual sub-accounts of a
Participant's Participant Account that is maintained as provided in
Article VIII.
6
<PAGE>
A "Tax-Deferred Contribution" means the amount contributed to the Plan
on a Participant's behalf by his Employer in accordance with his
reduction authorization executed pursuant to Article IV.
The "Trust" means the trust, custodial accounts, annuity contracts, or
insurance contracts maintained by the Trustee under the Trust
Agreement.
The "Trust Agreement" means the agreement entered into between the
Sponsor and the Trustee relating to the holding, investment, and
reinvestment of the assets of the Plan, together with all amendments
thereto and shall include any agreement establishing a custodial
account, an annuity contract, or an insurance contract (other than a
life, health or accident, property, casualty, or liability insurance
contract) for the investment of assets if the custodial account or
contract would, except for the fact that it is not a trust, constitute
a qualified trust under Section 401 of the Code.
The "Trustee" means the trustee or any successor trustee which at the
time shall be designated, qualified, and acting under the Trust
Agreement and shall include any insurance company that issues an
annuity or insurance contract pursuant to the Trust Agreement or any
person holding assets in a custodial account pursuant to the Trust
Agreement. The Sponsor may designate a person or persons other than the
Trustee to perform any responsibility of the Trustee under the Plan,
other than trustee responsibilities as defined in Section 405(c)(3) of
ERISA, and the Trustee shall not be liable for the performance of such
person in carrying out such responsibility except as otherwise provided
by ERISA. The term Trustee shall 'include any delegate of the Trustee
as may be provided in the Trust Agreement.
A "Trust Fund" means any fund maintained under the Trust by the
Trustee.
A "Valuation Date" means the date or dates designated by the Sponsor
and communicated in writing to the Trustee for the purpose of valuing
the General Fund and each Investment Fund and adjusting Participant
Accounts and Sub-Accounts hereunder, which dates need not be uniform
with respect to the General Fund, each Investment Fund, Participant
Account, or Sub-Account; provided,
7
<PAGE>
however, that the General Fund and each Investment Fund shall be valued
and each Participant Account and Sub-Account shall be adjusted no less
often than once annually.
The "Vesting Service" of an employee means the period or periods of
service credited to him under the provisions of Article II for purposes
of determining his vested interest in his Employer Contributions
Sub-Account, if Employer Contributions are provided for under either
Article VI or Article XXII.
1.2 Interpretation
Where required by the context, the noun, verb, adjective, and adverb
forms of each defined term shall include any of its other forms.
Wherever used herein, the masculine pronoun shall include the feminine,
the singular shall include the plural, and the plural shall include the
singular.
8
<PAGE>
ARTICLE II
SERVICE
2.1 Definitions
For purposes of this Article, the following terms have the following
meanings:
(a) The "continuous service" of an employee means the service
credited to him in accordance with the provisions of Section 2.3
of the Plan.
(b) The "employment commencement date" of an employee means the
date he first completes an Hour of Service.
(c) A "maternity/paternity absence" means a person's absence
from employment with an Employer or a Related Company
because of the person's pregnancy, the birth of the
person's child, the placement of a child with the person
in connection with the person's adoption of the child, or
the caring for the person's child immediately following
the child's birth or adoption. A person's absence from
employment will not be considered a maternity/paternity
absence unless the person furnishes the Administrator such
timely information as may reasonably be required to
establish that the absence was for one of the purposes
enumerated in this paragraph and to establish the number
of days of absence attributable to such purpose.
(d) The "reemployment commencement date" of an employee means the
first date following a severance date on which he again
completes an Hour of Service.
(e) The "severance date" of an employee means the earlier of
(i) the date on which he retires, dies, or his employment
with an Employer and all Related Companies is otherwise
terminated, or (ii) the first anniversary of the first
date of a period during which he is absent from work with
an Employer and all Related Companies for any other
reason; provided, however, that if he terminates
employment with or is absent from work with an Employer
9
<PAGE>
and all Related Companies on account of service with the armed
forces of the United States, he shall not incur a severance date
if he is eligible for reemployment rights under the Uniformed
Services Employment and Reemployment Rights Act of 1994 and he
returns to work with an employer or a Related Company within the
period during which he retains such reemployment rights.
2.2 Crediting of Hours of Service
A person shall be credited with an Hour of Service for each hour for
which he is paid, or entitled to payment, for the performance of duties
for an Employer or any Related Company.
2.3 Crediting of Continuous Service
A person shall be credited with continuous service for the aggregate of
the periods of time between his employment commencement date or any
reemployment commencement date and the severance date that next follows
such employment commencement date or reemployment commencement date;
provided, however, that an employee who has a reemployment commencement
date within the 12-consecutive-month period following the earlier of
the first date of his absence or his severance date shall be credited
with continuous service for the period between such severance date and
reemployment commencement date.
2.4 Eligibility Service
An employee shall be credited with Eligibility Service equal to his
continuous service.
2.5 Vesting Service
There shall be no Vesting Service credited under the Plan.
10
<PAGE>
ARTICLE III
ELIGIBILITY
3.1 Eligibility
Each Employee who was an Eligible Employee immediately prior to the
effective date of this amendment and restatement shall continue to be
an Eligible Employee. Each other Employee shall become an Eligible
Employee as of the Enrollment Date next following the date on which he
has both attained age 18 and completed three full calendar months of
Eligibility Service.
3.2 Transfers of Employment
If a person is transferred directly from employment with an Employer or
with a Related Company in a capacity other than as an Employee to
employment as an Employee, he shall become an Eligible Employee as of
the date he is so transferred if prior to an Enrollment Date preceding
such transfer date he has met the eligibility requirements of Section
3.1. Otherwise, the eligibility of a person who is so transferred to
elect to have Tax-Deferred Contributions made to the Plan on his behalf
shall be determined in accordance with Section 3.1.
3.3 Reemployment
If a person who terminated employment with an Employer and all Related
Companies is reemployed as an Employee and if he had been an Eligible
Employee prior to his termination of employment, he shall again become
an Eligible Employee on the date he is reemployed. otherwise, the
eligibility of a person who terminated employment with an Employer and
all Related Companies and who is reemployed by an Employer or a Related
Company to elect to have Tax-Deferred Contributions made to the Plan on
his behalf shall be determined in accordance with Section 3.1 or 3.2.
11
<PAGE>
3.4 Notification Concerning New Eligible Employees
Each Employer shall notify the Administrator as soon as practicable of
Employees becoming Eligible Employees as of any date.
3.5 Effect and Duration
Upon becoming an Eligible Employee, an Employee shall be entitled to
elect to have Tax-Deferred Contributions made to the Plan on his behalf
and shall be bound by all the terms and conditions of the Plan and the
Trust Agreement. A person shall continue as an Eligible Employee
eligible to have Tax-Deferred Contributions made to the Plan on his
behalf only so long as he continues employment as an Employee.
12
<PAGE>
ARTICLE IV
TAX-DEFERRED CONTRIBUTIONS
4.1 Tax-Deferred Contributions
Effective as of the date he becomes an Eligible Employee, or any
subsequent Enrollment Date, each Eligible Employee may elect in writing
in accordance with rules prescribed by the Administrator to have
Tax-Deferred Contributions made to the Plan on his behalf by his
Employer as hereinafter provided. An Eligible Employee's written
election shall include his authorization for his Employer to reduce his
Compensation and to make Tax-Deferred Contributions on his behalf and
his election as to the investment of his contributions in accordance
with Article X. Tax-Deferred Contributions on behalf of an Eligible
Employee shall commence with the first payment of Compensation made on
or after the date on which his election is effective.
4.2 Amount of Tax-Deferred Contributions
The amount of Tax-Deferred Contributions to be made to the Plan on
behalf of an Eligible Employee by his Employer shall be an integral
percentage of his Compensation of not less than one percent nor more
than 15 percent for non-Highly Compensated Employees and six percent
for Highly Compensated Employees. In the event an Eligible Employee
elects to have his Employer make Tax-Deferred Contributions on his
behalf, his Compensation shall be reduced for each payroll period by
the percentage he elects to have contributed on his behalf to the Plan
in accordance with the terms of his currently effective reduction
authorization.
4.3 Changes in Reduction Authorization
An Eligible Employee may change the percentage of his future
Compensation that his Employer contributes on his behalf as
Tax-Deferred Contributions at such time or times during the Plan Year
as the Administrator may prescribe by filing an amended reduction
authorization with his Employer such number of days prior to the date
such change is to become effective as the Administrator shall
prescribe. An Eligible Employee who changes his reduction authorization
shall be limited to selecting a
13
<PAGE>
percentage of his Compensation that is otherwise permitted hereunder.
Tax-Deferred Contributions shall be made on behalf of such Eligible
Employee by his Employer pursuant to his amended reduction
authorization filed in accordance with this Section commencing with
Compensation paid to the Eligible Employee on or after the date such
filing is effective, until otherwise altered or terminated in
accordance with the Plan.
4.4 Suspension of Tax-Deferred Contributions
An Eligible Employee on whose behalf Tax-Deferred Contributions are
being made may have such contributions suspended at any time by giving
such number of days advance written notice to his Employer as the
Administrator shall prescribe. Any such voluntary suspension shall take
effect commencing with Compensation paid to such Eligible Employee on
or after the expiration of the required notice period and shall remain
in effect until Tax-Deferred Contributions are resumed as hereinafter
set forth.
4.5 Resumption of Tax-Deferred Contributions
An Eligible Employee who has voluntarily suspended his Tax-Deferred
Contributions may have such contributions resumed at such time or times
during the Plan Year as the Administrator may prescribe, by filing a
new reduction authorization with his Employer such number of days prior
to the date as of which such contributions are to be resumed as the
Administrator shall prescribe.
4.6 Delivery of Tax-Deferred Contributions
As soon after the date an amount would otherwise be paid to an Employee
as it can reasonably be separated from Employer assets, each Employer
shall cause to be delivered to the Trustee in cash all Tax-Deferred
Contributions attributable to such amounts.
14
<PAGE>
4.7 Vesting of Tax-Deferred Contributions
A Participant's vested interest in his Tax-Deferred Contributions
Sub-Account shall be at all times 100 percent.
15
<PAGE>
ARTICLE V
AFTER-TAX AND ROLLOVER CONTRIBUTIONS
5.1 No After-Tax Contributions
There shall be no After-Tax Contributions made to the Plan.
5.2 Rollover Contributions
An Employee who was a participant in a plan qualified under Section 401
or 403 of the Code and who receives a cash distribution from such plan
that he elects either (i) to roll over immediately to a qualified
retirement plan or (ii) to roll over into a conduit IRA from which he
receives a later cash distribution, may elect to make a Rollover
Contribution to the Plan if he is entitled under Section 402(c),
Section 403(a)(4), or Section 408(d)(3)(A) of the Code to roll over
such distribution to another qualified retirement plan. The
Administrator may require an Employee to provide it with such
information as it deems necessary or desirable to show that he is
entitled to roll over such distribution to another qualified retirement
plan. An Employee shall make a Rollover Contribution to the Plan by
delivering, or causing to be delivered, to the Trustee the cash that
constitutes the Rollover Contribution amount within 60 days of receipt
of the distribution from the plan or from the conduit IRA in the manner
prescribed by the Administrator. If the Employee does not already have
an investment election on file with the Administrator, the Employee
shall also deliver to the Administrator his election as to the
investment of his contributions in accordance with Article X.
5.3 Vesting of Rollover Contributions
A Participant's vested interest in his Rollover Contributions
Sub-Account shall be at all times 100 percent.
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ARTICLE VI
EMPLOYER CONTRIBUTIONS
6.1 Contribution Period
The Contribution Period for Employer Contributions under the Plan shall
be each Plan Year.
6.2 Profit-Sharing Contributions
Each Employer may, in its discretion, make a Profit-Sharing
Contribution to the Plan for the Contribution Period in an amount
determined by the Employer.
6.3 Allocation of Profit-Sharing Contributions
Any Profit-Sharing Contribution made by an Employer for a Contribution
Period shall be allocated among its Employees during the Contribution
Period who are eligible to participate in the allocation of
Profit-Sharing Contributions for the Contribution Period, as determined
under this Article. The allocable share of each such Employee shall be
in the ratio which his Compensation from the Employer for the
Contribution Period bears to the aggregate of such Compensation for all
such Employees. Notwithstanding any other provision of the Plan to the
contrary, Compensation with respect to any period ending prior to the
date on which an Employee first became eligible to participate in the
allocation of Profit-Sharing Contributions shall be disregarded in
determining the amount of the Employee's allocable share.
6.4 Qualified Nonelective Contributions
Each Employer may, in its discretion, make a Qualified Nonelective
Contribution to the Plan for the Contribution Period in an amount
determined by the Sponsor.
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6.5 Allocation of Qualified Nonelective Contributions
Any Qualified Nonelective Contribution made for a Contribution Period
shall be allocated among the Employees who are eligible to participate
in the allocation of Qualified Nonelective Contributions for the
Contribution Period, as determined under this Article, other than any
such Employee who is a Highly Compensated Employee. The allocable share
of each such Employee shall be in the ratio which his Compensation from
the Employer for the Plan Year bears to the aggregate of such
Compensation for all such Employees. Notwithstanding any other
provision of the Plan to the contrary, Compensation with respect to any
period ending prior to the date on which an Employee first became
eligible to participate in the allocation of Qualified Nonelective
Contributions shall be disregarded in determining the amount of the
Employee's allocable share.
6.6 Verification of Amount of Employer Contributions by the
Sponsor
The Sponsor shall verify the amount of Employer Contributions to be
made by each Employer in accordance with the provisions of the Plan.
Notwithstanding any other provision of the Plan to the contrary, the
Sponsor shall determine the portion of the Employer Contribution to be
made by each Employer with respect to an Employee who transfers from
employment with one Employer as an Employee to employment with another
Employer as an Employee.
6.7 Payment of Employer Contributions
Employer Contributions made for a Contribution Period shall be paid in
cash to the Trustee within the period of time required under the Code
in order for the contribution to be deductible by the Employer in
determining its Federal income taxes for the Plan Year.
6.8 Eligibility to Participate in Allocation
Each Employee shall be eligible to participate in the allocation of
Employer Contributions beginning on the date he becomes, or again
becomes, an Eligible Employee in accordance with the provisions of
Article III. Notwithstanding the foregoing, no
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person shall be eligible to participate in the allocation of
Profit-Sharing Contributions for a Contribution Period unless he is
employed by an Employer or a Related Company on the last day of the
Contribution Period; provided, however, that if the Plan would not
otherwise meet the minimum coverage requirements of Section 410(b) of
the Code in any Plan Year, the group of Employees eligible to
participate in the allocation of Profit- Sharing Contributions shall be
expanded to include the minimum number of Employees who are not
employed by an Employer or a Related Company on the last day of the
Contribution Period that is necessary to meet the minimum coverage
requirements. The Employees who become eligible to participate under
the provisions of the immediately preceding clause shall be those
Employees who have completed the greatest number of Hours of Service
during the Contribution Period.
6.9 Vesting of Employer Contributions
A Participant's vested interest in his Employer Contributions
Sub-Account shall be at all times 100 percent.
6.10 Election of Former Vesting Schedule
If the Sponsor adopts an amendment to the Plan that directly or
indirectly affects the computation of a Participant's vested interest
in his Employer Contributions Sub-Account, any Participant with three
or more years of Vesting Service shall have a right to have his vested
interest in his Employer Contributions Sub-Account continue to be
determined under the vesting provisions in effect prior to the
amendment rather than under the new vesting provisions, unless the
vested interest of the Participant in his Employer Contributions
Sub-Account under the Plan as amended is not at any time less than such
vested interest determined without regard to the amendment. A
Participant shall exercise his right under this Section by giving
written notice of his exercise thereof to the Administrator within 60
days after the latest of (i) the date he receives notice of the
amendment from the Administrator, (ii) the effective date of the
amendment, or (iii) the date the amendment is adopted. Notwithstanding
the foregoing, a Participant's vested interest in his Employer
Contributions Sub-Account on the effective date of such an amendment
shall not be less than his
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vested interest in his Employer Contributions Sub-Account immediately
prior to the effective date of the amendment.
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ARTICLE VII
LIMITATIONS ON CONTRIBUTIONS
7.1 Definitions
For purposes of this Article, the following terms have the following
meanings:
(a) The "actual deferral percentage" with respect to an
Eligible Employee for a particular Plan Year means the
ratio of the Tax-Deferred Contributions made on his behalf
for the Plan Year to his test compensation for the Plan
Year, except that to the extent permitted by regulations
issued under Section 401(k) of the Code, the Sponsor may
elect to take into account in computing the numerator of
each Eligible Employee's actual deferral percentage the
qualified nonelective contributions made to the Plan on
his behalf for the Plan Year; provided, however, that
contributions made on a Participant's behalf for a Plan
Year shall be included in determining his actual deferral
percentage for such Plan Year only if the contributions
are made to the Plan prior to the end of the 12-month
period immediately following the Plan Year to which the
contributions relate. The determination and treatment of
the actual deferral percentage amounts for any Participant
shall satisfy such other requirements as may be prescribed
by the Secretary of the Treasury.
(b) The "annual addition" with respect to a Participant for a
limitation year means the sum of the Tax-Deferred
Contributions and Employer Contributions allocated to his
Participant Account for the limitation year (including any
excess contributions that are distributed pursuant to this
Article), the employer contributions, employee
contributions, and forfeitures allocated to his accounts
for the limitation year under any other qualified defined
contribution plan (whether or not terminated) maintained
by an Employer or a Related Company concurrently with the
Plan, and amounts described in Sections 415(l)(2) and
419A(d)(2) of the Code allocated to his account for the
limitation year; provided, however, that the annual
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addition for limitation years beginning prior to January 1, 1987
shall not be recalculated to treat all employee contributions as
annual additions.
(c) The "Code Section 402(g) limit" means the dollar limit imposed
by Section 402(g)(1) of the Code or established by the Secretary
of the Treasury pursuant to Section 402(g)(5) of the Code in
effect on January 1 of the calendar year in which an Eligible
Employee's taxable year begins.
(d) An "elective contribution" means any employer contribution
made to a plan maintained by an Employer or any Related
Company on behalf of a Participant in lieu of cash
compensation pursuant to his written election to defer
under a qualified CODA as defined in Section 401(k) of the
Code, any simplified employee pension cash or deferred
arrangement as described in Section 402(h)(1)(B) of the
Code, any eligible deferred compensation plan under
Section 457 of the Code, or any plan as described in
Section 501(c)(18) of the Code, and any contribution made
on behalf of the Participant by an Employer or a Related
Company for the purchase of an annuity contract under
Section 403(b) of the Code pursuant to a salary reduction
agreement.
(e) An "excess deferral" with respect to a Participant means that
portion of a Participant's Tax-Deferred Contributions that when
added to amounts deferred under other plans or arrangements
described in Sections 401(k), 408(k), or 403(b) of the Code,
would exceed the Code Section 402(g) limit and is includable in
the Participant's gross income under Section 402(g) of the Code.
(f) A "family member" of an Employee means the Employee's spouse,
his lineal ascendants, his lineal descendants, and the spouses
of such lineal ascendants and descendants.
(g) A "limitation year" means the Plan Year.
(h) A "qualified nonelective contribution" means any employer
contribution made on behalf of a Participant that the
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<PAGE>
Participant could not elect instead to receive in cash, that is
a qualified nonelective contribution as defined in Section
401(k) and Section 401(m) of the Code and regulations issued
thereunder, is nonforfeitable when made, and is distributable
only as permitted in regulations issued under Section 401(k) of
the Code.
The "test compensation" of an Eligible Employee for a Plan Year
means compensation as defined in Section 414(s) of the Code and
regulations issued thereunder, limited, however, to (1)
$200,000 for Plan Years beginning prior to January 1, 1994, or
(2) $150,000 for Plan Years beginning on or after January 1,
1994 (subject to adjustment annually as provided in Section
401(a)(17)(B) and Section 415(d) of the Code; provided,
however, that the dollar increase in effect on January 1 of any
calendar year, if any, is effective for Plan Years beginning in
such calendar year) and further limited solely to test
compensation of an Employee attributable to periods of time
when he is an Eligible Employee. If the test compensation of a
Participant is determined over a period of time that contains
fewer than 12 calendar months, then the annual compensation
limitation described above shall be adjusted with respect to
that Participant by multiplying the annual compensation
limitation in effect for the Plan Year by a fraction the
numerator of which is the number of full months in the period
and the denominator of which is 12; provided, however, that no
proration is required for a Participant who is covered
under the Plan for less than one full Plan Year if the formula
for allocations is based on Compensation for a period of at
least 12 months. In determining the test compensation, for
purposes of applying the annual compensation limitation
described above, of a Participant who is a five-percent owner or
among the ten Highly Compensated Employees receiving the
greatest test compensation for the limitation year, the test
compensation of the Participant's spouse and of his lineal
descendants who have not attained age 19 as of the close of the
limitation year shall be included as test compensation of the
Participant for the limitation year. If as a result of applying
the family aggregation rule
23
<PAGE>
described in the preceding sentence the annual compensation
limitation would be exceeded, the limitation shall be prorated
among the affected family members in proportion to each member's
test compensation as determined prior to application of the
family aggregation rules.
7.2 Code Section 402(g) Limit
In no event shall the amount of the Tax-Deferred Contributions made on
behalf of an Eligible Employee for his taxable year, when aggregated
with any elective contributions made on behalf of the Eligible Employee
under any other plan of an Employer or a Related Company for his
taxable year, exceed the Code Section 402(g) limit. In the event that
the Administrator determines that the reduction percentage elected by
an Eligible Employee will result in his exceeding the Code Section
402(g) limit, the Administrator may adjust the reduction authorization
of such Eligible Employee by reducing the percentage of his
Tax-Deferred Contributions to such smaller percentage that will result
in the Code Section 402(g) limit not being exceeded. If the
Administrator determines that the Tax-Deferred Contributions made on
behalf of an Eligible Employee would exceed the Code Section 402(g)
limit for his taxable year, the Tax-Deferred Contributions for such
Participant shall be automatically suspended for the remainder, if any,
of such taxable year.
If an Employer notifies the Administrator that the Code Section 402(g)
limit has nevertheless been exceeded by an Eligible Employee for his
taxable year, the Tax-Deferred Contributions that, when aggregated with
elective contributions made on behalf of the Eligible Employee under
any other plan of an Employer or a Related Company, would exceed the
Code Section 402(g) limit, plus any income and minus any losses
attributable thereto, shall be distributed to the Eligible Employee no
later than the April 15 immediately following such taxable year. Any
Tax-Deferred Contributions that are distributed to an Eligible Employee
in accordance with this Section shall not be taken into account in
computing the Eligible Employee's actual deferral percentage for the
Plan Year in which the Tax-Deferred Contributions were made, unless the
Eligible Employee is a Highly Compensated Employee.
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<PAGE>
7.3 Distribution of Excess Deferrals
Notwithstanding any other provision of the Plan to the contrary, if a
Participant notifies the Administrator in writing no later than the
March 1 following the close of the Participant's taxable year that
excess deferrals have been made on his behalf under the Plan for such
taxable year, the excess deferrals, plus any income and minus any
losses attributable thereto, shall be distributed to the Participant no
later than the April 15 immediately following such taxable year. Any
Tax-Deferred Contributions that are distributed to a Participant in
accordance with this Section shall nevertheless be taken into account
in computing the Participant's actual deferral percentage for the Plan
Year in which the Tax-Deferred Contributions were made.
7.4 Limitation on Tax-Deferred Contributions of Highly
Compensated Employees
Notwithstanding any other provision of the Plan to the contrary, the
Tax-Deferred Contributions made with respect to a Plan Year on behalf
of Eligible Employees who are Highly Compensated Employees may not
result in an average actual deferral percentage for such Eligible
Employees that exceeds the greater of:
(a) a percentage that is equal to 125 percent of the average
actual deferral percentage for all other Eligible
Employees; or
(b) a percentage that is not more than 200 percent of the average
actual deferral percentage for all other Eligible Employees and
that is not more than two percentage points higher than the
average actual deferral percentage for all other Eligible
Employees.
In order to assure that the limitation contained herein is not exceeded
with respect to a Plan Year, the Administrator is authorized to suspend
completely further Tax-Deferred Contributions on behalf of Highly
Compensated Employees for any remaining portion of a Plan Year or to
adjust the projected actual deferral percentages of Highly Compensated
Employees by reducing their percentage elections with respect to
Tax-Deferred Contributions for any remaining portion of a Plan Year to
such
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<PAGE>
smaller percentages that will result in the limitation set forth above
not being exceeded. In the event of any such suspension or reduction,
Highly Compensated Employees affected thereby shall be notified of the
reduction or suspension as soon as possible and shall be given an
opportunity to make a new Tax-Deferred Contribution election to be
effective the first day of the next following Plan Year. In the absence
of such an election, the election in effect immediately prior to the
suspension or adjustment described above shall be reinstated as of the
first day of the next following Plan Year.
For purposes of applying the limitation contained in this Section, the
Tax-Deferred Contributions, qualified nonelective contributions (to the
extent that such qualified nonelective contributions are taken into
account in computing actual deferral percentages), and test
compensation of any Eligible Employee who is a family member of another
Eligible Employee who is a five- percent owner or among the ten Highly
Compensated Employees receiving the greatest test compensation for the
Plan Year shall be aggregated with the Tax-Deferred Contributions,
qualified nonelective contributions, and test compensation of such
other Eligible Employee, and such family member shall not be considered
an Eligible Employee for purposes of determining the average actual
deferral percentage for all other Eligible Employees.
In determining the actual deferral percentage for any Eligible Employee
who is a Highly Compensated Employee for the Plan Year, elective
contributions and qualified nonelective contributions (to the extent
that qualified nonelective contributions are taken into account in
computing actual deferral percentages) made to his accounts under any
other plan of an Employer or a Related Company shall be treated as if
all such contributions were made to the Plan; provided, however that if
such a plan has a plan year different from the Plan Year, any such
contributions made to the Highly Compensated Employee's accounts under
the plan for the plan year ending with or within the same calendar year
as the Plan Year shall be treated as if such contributions were made to
the Plan. Notwithstanding the foregoing, such contributions shall not
be treated as if they were made to the Plan if regulations issued under
Section 401(k) of the Code do not permit such plan to be aggregated
with the Plan.
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<PAGE>
If one or more plans of an Employer or Related Company are aggregated
with the Plan for purposes of satisfying the requirements of Section
401(a)(4) or 410(b) of the Code, then actual deferral percentages under
the Plan shall be calculated as if the Plan and such one or more other
plans were a single plan. For Plan Years beginning after December 31,
1991, plans may be aggregated to satisfy Section 401(k) of the Code
only if they have the same plan year.
The Administrator shall maintain records sufficient to show that the
limitation contained in this Section was not exceeded with respect to
any Plan Year and the amount of the qualified nonelective contributions
taken into account in computing actual deferral percentages for any
Plan Year.
7.5 Distribution of Excess Tax-Deferred Contributions
Notwithstanding any other provision of the Plan to the contrary, in the
event that the limitation contained in Section 7.4 is exceeded in any
Plan Year, the Tax-Deferred Contributions made with respect to a Highly
Compensated Employee that exceed the maximum amount permitted to be
contributed to the Plan on his behalf under Section 7.4, plus any
income and minus any losses attributable thereto, shall be distributed
to the Highly Compensated Employee prior to the end of the next
succeeding Plan Year. If excess amounts are attributable to
Participants aggregated under the family aggregation rules described in
Section 7.4, the excess shall be allocated among family members in
proportion to the Tax-Deferred Contributions made with respect to each
family member. If such excess amounts are distributed more than 2 1/2
months after the last day of the Plan Year for which the excess
occurred, an excise tax may be imposed under Section 4979 of the Code
on the Employer maintaining the Plan with respect to such amounts.
The maximum amount permitted to be contributed to the Plan on a Highly
Compensated Employee's behalf under Section 7.4 shall be determined by
reducing Tax-Deferred Contributions made on behalf of Highly
Compensated Employees in order of their actual deferral percentages
beginning with the highest of such percentages. The determination of
the amount of excess Tax-Deferred Contributions shall be made after
application of Section 7.3, if applicable.
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<PAGE>
7.6 Determination of Income or Loss
The income or loss attributable to excess contributions that are
distributed pursuant to this Article shall be determined for the
preceding Plan Year under the method otherwise used for allocating
income or loss to Participant's Participant Accounts.
7.7 Code Section 415 Limitations on Crediting of
Contributions and Forfeitures
Notwithstanding-any other provision of the Plan to the contrary, the
annual addition with respect to a Participant for a limitation year
shall in no event exceed the lesser of (i) $30,000 (adjusted as provided
in Section 415(d) of the Code, with the first adjustment being made for
limitation years beginning on or after January 1, 1996) or (ii) 25
percent of the Participant's compensation, as defined in Section
415(c)(3) of the Code and regulations issued thereunder, for the
limitation year. If the annual addition to the Participant Account of a
Participant in any limitation year would otherwise exceed the amount
that may be applied for his benefit under the limitation contained in
this Section, the limitation shall be satisfied by reducing
contributions made on the Participant's behalf to the extent necessary
in the following order: first by reducing the Tax-Deferred Contributions
made on the Participant's behalf for the limitation year; next by
reducing Employer Contributions (other than qualified nonelective
contributions) otherwise allocable to the Participant's Participant
Account for the limitation year; and finally by reducing the qualified
nonelective contributions made on the Participant's behalf for the
limitation year.
The amount of any reduction of Tax-Deferred Contributions (plus any
income attributable thereto) shall be returned to the Participant. The
amount of any reduction of Employer Contributions shall be deemed a
forfeiture for the limitation year. Amounts deemed to be forfeitures
under this Section shall be held unallocated in a suspense account
established for the limitation year and shall be applied against the
Employer's contribution obligation for the next following limitation
year (and succeeding limitation years, as necessary). If a suspense
account is in existence at any time during a limitation year, all
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<PAGE>
amounts in the suspense account must be allocated to Participants'
Participant Accounts (subject to the limitations contained herein)
before any further Tax-Deferred Contributions or Employer Contributions
may be made to the Plan on behalf of Participants. No suspense account
established hereunder shall share in any increase or decrease in the
net worth of the Trust. For purposes of this Article, excesses shall
result only from the allocation of forfeitures, a reasonable error in
estimating a Participant's annual compensation (as defined in Section
415(c)(3) of the Code and regulations issued thereunder), a reasonable
error in determining the amount of Tax-Deferred Contributions that may
be made with respect to any Participant under the limits of Section 415
of the Code, or other limited facts and circumstances that justify the
availability of the provisions set forth above.
7.8 Coverage Under Other Qualified Defined Contribution Plan
If a Participant is covered by any other qualified defined contribution
plan (whether or not terminated) maintained by an Employer or a Related
Company concurrently with the Plan, and if the annual addition for the
limitation year would otherwise exceed the amount that may be applied
for the Participant's benefit under the limitation contained in Section
7.7, such excess shall be reduced first by returning the employee
contributions made by the Participant for the limitation year under all
of the defined contribution plans other than the Plan and the income
attributable thereto to the extent necessary. if the limitation
contained in Section 7.7 is still not satisfied after returning all of
the employee contributions made by the Participant under all such other
plans, the procedure set forth in Section 7.7 shall be invoked to
eliminate any such excess. if the limitation contained in Section 7.7
is still not satisfied after invocation of the procedure set forth in
Section 7.7, the portion of the employer contributions and of
forfeitures for the limitation year under all such other plans that has
been allocated to the Participant thereunder, but which exceeds the
limitation set forth in Section 7.7, shall be deemed a forfeiture for
the limitation year and shall be disposed of as provided in such other
plans; provided, however, that if the Participant is covered by a money
purchase pension plan, the forfeiture shall be effected first under any
other defined contribution plan that is
29
<PAGE>
not a money purchase pension plan and, if the limitation is still not
satisfied, then under such money purchase pension plan.
7.9 Coverage Under Qualified Defined Benefit Plan
If a Participant in the Plan is also covered by a qualified defined
benefit plan (whether or not terminated) maintained by an Employer or a
Related Company, in no event shall the sum of the defined benefit plan
fraction (as defined in Section 415(e)(2) of the Code) and the defined
contribution plan fraction (as defined in Section 415(e)(3) of the
Code) exceed 1.0 in any limitation year. If, before October 3, 1973,
the Participant was an active participant in a qualified defined
benefit plan maintained by an Employer or a Related Company and
otherwise satisfies the requirements of Section 2004(d)(2) of ERISA,
then for purposes of applying this Section, the defined benefit plan
fraction shall not exceed 1.0. If the Plan satisfied the applicable
requirements of Section 415 of the Code as in effect for all limitation
years beginning before January 1, 1987, an amount shall be subtracted
from the numerator of the defined contribution plan fraction (not
exceeding such numerator) as prescribed by the Secretary of the
Treasury so that the sum of the defined benefit plan fraction and the
defined contribution plan fraction computed under Section 415(e)(1) of
the Code, as revised by the Tax Reform Act of 1986, does not exceed 1.0
for such limitation year. In the event the special limitation contained
in this Section is exceeded, contributions and forfeitures allocated to
the Participant under the Plan and any other defined contribution plan
maintained by an Employer or a Related Company shall be disposed of in
the order and manner specified in Section 7.8 to the extent necessary
to meet such limitation.
7.10 Scope of Limitations
The limitations contained in Sections 7.7, 7.8, and 7.9 shall be
applicable only with respect to benefits provided pursuant to defined
contribution plans and defined benefit plans described in Section
415(k) of the Code.
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ARTICLE VIII
TRUST FUNDS AND PARTICIPANT ACCOUNTS
8.1 General Fund
The Trustee shall maintain a General Fund as required to hold and
administer any assets of the Trust that are not allocated among the
Investment Funds as provided in the Plan or the Trust Agreement. The
General Fund shall be held and administered as a separate common trust
fund. The interest of each Participant or Beneficiary under the Plan in
the General Fund shall be an undivided interest.
8.2 Investment Funds
The Sponsor shall determine the number and type of Investment Funds and
select the investments for such Investment Funds. The Sponsor shall
communicate the same and any changes therein in writing to the
Administrator and the Trustee. Each Investment Fund shall be held and
administered as a separate common trust fund. The interest of each
Participant or Beneficiary under the Plan in any Investment Fund shall
be an undivided interest.
The Sponsor may determine to offer one or more Investment Funds that
are invested in whole or in part in equity securities issued by an
Employer or a Related Company that are publicly traded and are
"qualifying employer securities" as defined in Section 407(d)(5) of
ERISA.
8.3 Loan Investment Fund
If a loan from the Plan to a Participant is approved in accordance with
the provisions of Article XII, the Sponsor shall direct the
establishment and maintenance of a loan Investment Fund in the
Participant's name. The assets of the loan Investment Fund shall be
held as a separate trust fund. A Participant's loan Investment Fund
shall be invested in the note reflecting the loan that is executed by
the Participant in accordance with the provisions of Article XII.
Notwithstanding any other provision of the Plan to the contrary, income
received with respect to a Participant's loan Investment Fund shall be
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<PAGE>
allocated and the loan Investment Fund shall be administered as
provided in Article XII.
8.4 Income on Trust
Any dividends, interest, distributions, or other income received by the
Trustee with respect to any Trust Fund maintained hereunder shall be
allocated by the Trustee to the Trust Fund for which the income was
received.
8.5 Participant Accounts
As of the first date a contribution is made by or on behalf of an
Employee, there shall be established a Participant Account in his name
reflecting his interest in the Trust. Each Participant Account shall be
maintained and administered for each Participant and Beneficiary in
accordance with the provisions of the Plan. The balance of each
Participant Account shall be the balance of the account after all
credits and charges thereto, for and as of such date, have been made as
provided herein.
8.6 Sub-Accounts
A Participant's Participant Account shall be divided into individual
Sub-Accounts reflecting the portion of the Participant's Participant
Account that is derived from Tax-Deferred Contributions, Rollover
Contributions, or Employer Contributions. Each Sub-Account shall reflect
separately contributions allocated to each Trust Fund maintained
hereunder and the earnings and losses attributable thereto. The Employer
Contributions Sub-Account shall reflect separately that portion of such
Sub-Account that is derived from Employer Contributions that may be
taken into account to satisfy the limitations on contributions for
Highly Compensated Employees contained in Article VII. Such other
Sub-Accounts may be established as are necessary or appropriate to
reflect a Participant's interest in the Trust.
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ARTICLE IX
LIFE INSURANCE CONTRACTS
9.1 No Life Insurance Contracts
There shall be no life insurance contracts purchased under the Plan.
33
<PAGE>
ARTICLE X
DEPOSIT AND INVESTMENT OF CONTRIBUTIONS
10.1 Future Contribution Investment Elections
Each Eligible Employee shall make an investment election in the manner
and form prescribed by the Administrator directing the manner in which
his Tax-Deferred Contributions, Rollover Contributions, and Employer
Contributions shall be invested. An Eligible Employee's investment
election shall specify the percentage, in the percentage increments
prescribed by the Administrator, of such contributions that shall be
allocated to one or more of the Investment Funds with the sum of such
percentages equaling 100 percent. The investment election by a
Participant shall remain in effect until his entire interest under the
Plan is distributed or forfeited in accordance with the provisions of
the Plan or until he files a change of investment election with the
Administrator, in such form as the Administrator shall prescribe. A
Participant's change of investment election may be made effective as of
the date or dates prescribed by the Administrator.
10.2 Deposit of Contributions
All Tax-Deferred Contributions, Rollover Contributions, and Employer
Contributions shall be deposited in the Trust and allocated among the
Investment Funds in accordance with the Participant's currently
effective investment election. If no investment election is on file
with the Administrator at the time contributions are to be deposited to
a Participant's Participant Account, the Participant shall be notified
and an investment election form shall be provided to him. Until such
Participant shall make an effective election under this Section, his
contributions shall be allocated among the Investment Funds as directed
by the Administrator.
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10.3 Election to Transfer Between Funds
A Participant may elect to transfer investments from any Investment Fund
to any other Investment Fund. The Participant's transfer election shall
specify either (i) a percentage, in the percentage increments prescribed
by the Administrator, of the amount eligible for transfer, which
percentage may not exceed 100 percent, or (ii) a dollar amount that is
to be transferred. Subject to any restrictions pertaining to a
particular Investment Fund, a Participant's transfer election may be
made effective as of the date or dates prescribed by the Administrator.
10.4 404(c) Plan
The Plan is intended to constitute a plan described in Section 404(c) of
ERISA and regulations issued thereunder. The fiduciaries of the Plan may
be relieved of liability for any losses that are the direct and
necessary result of investment instructions given by a Participant, his
Beneficiary, or an alternate payee under a qualified domestic relations
order.
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ARTICLE XI
CREDITING AND VALUING PARTICIPANT ACCOUNTS
11.1 Crediting Participant Accounts
All contributions made under the provisions of the Plan shall be
credited to Participant Accounts in the Trust Funds by the Trustee, in
accordance with procedures established in writing by the Administrator,
either when received or on the succeeding Valuation Date after
valuation of the Trust Fund has been completed for such Valuation Date
as provided in Section 11.2, as shall be determined by the
Administrator.
11.2 Valuing Participant Accounts
Participant Accounts in the Trust Funds shall be valued by the Trustee
on the Valuation Date, in accordance with procedures established in
writing by the Administrator, either in the manner adopted by the
Trustee and approved by the Administrator or in the manner set forth in
Section 11.3 as Plan valuation procedures, as determined by the
Administrator.
11.3 Plan Valuation Procedures
With respect to the Trust Funds, the Administrator may determine that
the following valuation procedures shall be applied. As of each
Valuation Date hereunder, the portion of any Participant Accounts in a
Trust Fund shall be adjusted to reflect any increase or decrease in the
value of the Trust Fund for the period of time occurring since the
immediately preceding Valuation Date for the Trust Fund (the "valuation
period") in the following manner:
(a) First, the value of the Trust Fund shall be determined by
valuing all of the assets of the Trust Fund at fair market
value.
(b) Next, the net increase or decrease in the value of the Trust
Fund attributable to net income and all profits and losses,
realized and unrealized, during the valuation period shall be
determined on the basis of the valuation
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under paragraph (a) taking into account appropriate adjustments
for contributions, loan payments, and transfers to and
distributions, withdrawals, loans, and transfers from such
Trust Fund during the valuation period.
(c) Finally, the net increase or decrease in the value of the
Trust Fund shall be allocated among Participant Accounts
in the Trust Fund in the ratio of the balance of the
portion of such Participant Account in the Trust Fund as
of the preceding Valuation Date less any distributions,
withdrawals, loans, and transfers from such Participant
Account balance in the Trust Fund since the Valuation Date
to the aggregate balances of the portions of all
Participant Accounts in the Trust Fund similarly adjusted,
and each Participant Account in the Trust Fund shall be
credited or charged with the amount of its allocated
share. Notwithstanding the foregoing, the Administrator
may adopt such accounting procedures as it considers
appropriate and equitable to establish a proportionate
crediting of net increase or decrease in the value of the
Trust Fund for contributions, loan payments, and transfers
to and distributions, withdrawals, loans, and transfers
from such Trust Fund made by or on behalf of a Participant
during the valuation period.
11.4 Finality of Determinations
The Trustee shall have exclusive responsibility for determining the
balance of each Participant Account maintained hereunder. The
Trustee's determinations thereof shall be conclusive upon all
interested parties.
11.5 Notification
Within a reasonable period of time after the end of each Plan Year,
the Administrator shall notify each Participant and Beneficiary of the
balances of his Participant Account and Sub-Accounts as of a Valuation
Date during the Plan Year.
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ARTICLE XII
LOANS
12.1 Application for Loan
A Participant who is a party in interest may make application to the
Administrator for a loan from his Participant Account, other than his
Employer Contributions Sub-Account. Loans shall be made to Participants
in accordance with written rules prescribed by the Administrator which
are hereby incorporated into and made a part of the Plan.
As collateral for any loan granted hereunder, the Participant shall
grant to the Plan a security interest in his vested interest under the
Plan equal to the amount of the loan; provided, however, that in no
event may the security interest exceed 50 percent of the Participant's
vested interest under the Plan determined as of the date as of which
the loan is originated in accordance with Plan provisions. In the case
of a Participant who is an active employee, the Participant also shall
enter into an agreement to repay the loan by payroll withholding. No
loan in excess of 50 percent of the Participant's vested interest in
his Tax-Deferred and Rollover Contributions Sub-Accounts under the Plan
shall be made from the Plan. Loans shall not be made available to
Highly Compensated Employees in an amount greater than the amount made
available to other employees.
A loan shall not be granted unless the Participant consents to the
charging of his Participant Account for unpaid principal and interest
amounts in the event the loan is declared to be in default. A
Participant's spouse must consent in writing to any loan hereunder. Any
spousal consent given pursuant to this Section must acknowledge the
effect of the loan and must be witnessed by a Plan representative or a
notary public. Such spousal consent shall be binding with respect to
the consenting spouse and any subsequent spouse with respect to the
loan. A new spousal consent shall be required if the Participant's
Participant Account is used for security in any renegotiation,
extension, renewal, or other revision of the loan.
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12.2 Reduction of Account Upon Distribution
Notwithstanding any other provision of the Plan, the amount of a
Participant's Participant Account that is distributable to the
Participant or his Beneficiary under Article XIII or XV shall be
reduced by the portion of his vested interest that is held by the Plan
as security for any loan outstanding to the Participant, provided that
the reduction is used to repay the loan. If distribution is made
because of the Participant's death prior to the commencement of
distribution of his Participant Account and less than 100 percent of
the Participant's vested interest in his Participant Account
(determined without regard to the preceding sentence) is payable to his
surviving spouse, then the balance of the Participant's vested interest
in his Participant Account shall be adjusted by reducing the vested
account balance by the amount of the security used to repay the loan,
as provided in the preceding sentence, prior to determining the amount
of the benefit payable to the surviving spouse.
12.3 Requirements to Prevent a Taxable Distribution
Notwithstanding any other provision of the Plan to the contrary, the
following terms and conditions shall apply to any loan made to a
Participant under this Article:
(a) The interest rate on any loan to a Participant shall be a
reasonable interest rate commensurate with current interest
rates charged for loans made under similar circumstances by
persons in the business of lending money.
(b) The amount of any loan to a Participant (when added to the
outstanding balance of all other loans to the Participant from
the Plan or any other plan maintained by an Employer or a
Related Company) shall not exceed the lesser of:
(i) $50,000, reduced by the excess, if any, of the highest
outstanding balance of any other loan to the
Participant from the Plan or any other plan maintained
by an Employer or a Related Company during the
preceding 12-month period over the outstanding balance
of such loans on the date a loan is made hereunder; or
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(ii) 50 percent of the vested portions of the Participant's
Participant Account and his vested interest under all
other plans maintained by an Employer or a Related
Company.
(c) The term of any loan to a Participant shall be no greater than
five years, except in the case of a loan used to acquire any
dwelling unit which within a reasonable period of time is to be
used (determined at the time the loan is made) as a principal
residence of the Participant.
(d) Except as otherwise permitted under Treasury regulations,
substantially level amortization shall be required over the
term of the loan with payments made not less frequently than
quarterly.
12.4 Administration of Loan Investment Fund
Upon approval of a loan to a Participant, the Administrator shall
direct the Trustee to transfer an amount equal to the loan amount from
the Investment Funds in which it is invested, as directed by the
Administrator, to the loan Investment Fund established in the
Participant's name. Any loan approved by the Administrator shall be
made to the Participant out of the Participant's loan Investment Fund.
All principal and interest paid by the Participant on a loan made
under this Article shall be deposited to his Participant Account and
shall be allocated upon receipt among the Investment Funds in
accordance with the Participant's currently effective investment
election. The balance of the Participant's loan Investment Fund shall
be 'decreased by the amount of principal payments and the loan
Investment Fund shall be terminated when the loan has been repaid in
full.
12.5 Default
If a Participant fails to make or cause to be made, any payment
required under the terms of the loan within 90 days following the date
on which such payment shall become due or there is an outstanding
principal balance existing on a loan after the last scheduled
repayment date, the Administrator shall direct the Trustee to declare
the loan to be in default, and the entire unpaid balance of such loan,
together with accrued interest,
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shall be immediately due and payable. In any such event, if such
balance and interest thereon is not then paid, the Trustee shall charge
the Participant Account of the borrower with the amount of such balance
and interest as of the earliest date a distribution may be made from
the Plan to the borrower without adversely affecting the tax
qualification of the Plan or of the cash or deferred arrangement.
12.6 Loans Granted Prior to Amendment
Notwithstanding any other provision of this Article to the contrary,
any loan made under the provisions of the Plan as in effect prior to
this amendment and restatement shall remain outstanding until repaid in
accordance with its terms or the otherwise applicable Plan provisions.
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ARTICLE XIII
WITHDRAWALS WHILE EMPLOYED
13.1 Withdrawals of Rollover Contributions
A Participant who is employed by an Employer or a Related Company may,
at any time, elect, subject to the limitations and conditions
prescribed in this Article, to make a cash withdrawal from his Rollover
Contributions Sub-Account.
13.2 Withdrawals of Employer Contributions
A Participant who is employed by an Employer or a Related Company and
is determined by the Administrator to have incurred a hardship as
defined in this Article may elect, subject to the limitations and
conditions prescribed in this Article to make a cash withdrawal from
his vested interest in his Employer Contributions Sub-Account.
Notwithstanding the foregoing, in no event may a Participant withdraw
that portion of his Employer Contributions Sub-Account that is
attributable to Employer Contributions that may be taken into account
to satisfy the limitations on contributions for Highly Compensated
Employees contained in Article VII prior to the Participant's
attainment of age 59 1/2.
13.3 Withdrawals of Tax-Deferred Contributions
A Participant who is employed by an Employer or a Related Company and
who is determined by the Administrator to have incurred a hardship as
defined in this Article may elect, subject to the limitations and
conditions prescribed in this Article, to make a cash withdrawal from
his Tax-Deferred Contributions Sub-Account. The maximum amount that a
Participant may withdraw pursuant to this Section because of a hardship
is the balance of his Tax- Deferred Contributions Sub-Account,
exclusive of any earnings credited to such Sub-Account as of a date
that is after December 31, 1988.
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13.4 Limitations on Withdrawals Other than Hardship Withdrawals
Withdrawals made pursuant to this Article, other than hardship
withdrawals, shall be subject to the following conditions and
limitations:
A Participant must file a withdrawal application with the
Administrator such number of days prior to the date as of which
it is to be effective as the Administrator shall prescribe.
Withdrawals may be made effective as of the date or dates
prescribed by the Administrator.
A Participant who makes a withdrawal from his Rollover
Contributions Sub-Account may not make a further withdrawal of
Rollover Contributions under this Article during the remainder
of the Plan Year in which the withdrawal is effective.
13.5 Conditions and Limitations on Hardship Withdrawals
A Participant must file an application for a hardship withdrawal with
the Administrator such number of days prior to the date as of which it
is to be effective as the Administrator may prescribe. Hardship
withdrawals may be made effective as of the date or dates prescribed
by the Administrator; provided, however, that a Participant may make
no more than one hardship withdrawal during a Plan Year. The
Administrator shall grant a hardship withdrawal only if it determines
that the withdrawal is necessary to meet an immediate and heavy
financial need of the Participant. An immediate and heavy financial
need of the Participant means a financial need on account of:
(a) expenses previously incurred by or necessary to obtain for the
Participant, the Participant's spouse, or any dependent of the
Participant (as defined in Section 152 of the Code) medical
care described in Section 213(d) of the Code;
(b) costs directly related to the purchase (excluding mortgage
payments) of a principal residence for the Participant;
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(c) payment of tuition, related educational fees, and room and board
expenses for the next 12 months of post-secondary education for
the Participant, the Participant's spouse, or any dependent of
the Participant;
(d) the need to prevent the eviction of the Participant from
his principal residence or foreclosure on the mortgage of
the Participant's principal residence; or
(e) for hardship withdrawals of Employer Contributions only, any
other facts and circumstances that the Administrator determines
constitute an immediate and heavy financial need.
Furthermore, if the withdrawal is from the Participant's Tax- Deferred
Contribution Sub-Account, the withdrawal shall be deemed to be
necessary to satisfy an immediate and heavy financial need of a
Participant only if all of the following requirements are satisfied:
The withdrawal is not in excess of the amount of the immediate
and heavy financial need of the Participant.
The Participant has obtained all distributions, other than
hardship distributions, and all non-taxable loans currently
available under all plans maintained by an Employer or any
Related Company.
The Participant's Tax-Deferred Contributions and the
Participant's elective tax-deferred contributions and employee
after-tax contributions under all other tax-qualified plans
maintained by an Employer or any Related Company shall be
suspended for at least twelve months after his receipt of the
withdrawal.
The Participant shall not make Tax-Deferred Contributions or
elective tax-deferred contributions under any other
tax-qualified plan maintained by an Employer or any Related
Company for the Participant's taxable year immediately following
the taxable year of the withdrawal in excess of the applicable
limit under Section 402(g) of the Code for such next taxable
year less the amount of the
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Participant's Tax-Deferred Contributions and elective
tax-deferred contributions under any other plan maintained by
an Employer or any Related Company for the taxable year of the
withdrawal.
The amount of a hardship withdrawal may include any amounts necessary
to pay any Federal, state, or local income taxes or penalties
reasonably anticipated to result from the distribution. A Participant
shall not fail to be treated as an Eligible Employee for purposes of
applying the limitations contained in Article VII of the Plan merely
because his Tax-Deferred Contributions are suspended in accordance with
this Section.
13.6 Order of Withdrawal from a Participant's Sub-Accounts
Distribution of a withdrawal amount shall be made from a Participant's
Sub-Accounts, to the extent necessary, in the order prescribed by the
Administrator, which order shall be uniform with respect to all
Participants and non-discriminatory. If the Sub-Account from which a
Participant is receiving a withdrawal is invested in more than one
Investment Fund, the withdrawal shall be charged against the Investment
Funds as directed by the Administrator.
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ARTICLE XIV
TERMINATION OF EMPLOYMENT AND SETTLEMENT DATE
14.1 Termination of Employment and Settlement Date
A Participant's Settlement Date shall occur on the date he terminates
employment with an Employer and all Related Companies because of death,
disability, retirement, or other termination of employment. Written
notice of a Participant's Settlement Date shall be given by the
Administrator to the Trustee.
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ARTICLE XV
DISTRIBUTIONS
15.1 Distributions to Participants
A Participant whose Settlement Date occurs shall receive distribution
of his vested interest in his Participant Account in the form provided
under Article XVI beginning as soon as reasonably practicable
following his Settlement Date or the date his application for
distribution is filed with the Administrator, if later.
15.2 Distributions to Beneficiaries
If a Participant dies prior to the date distribution of his vested
interest in his Participant Account begins under this Article, his
Beneficiary shall receive distribution of the Participant's vested
interest in his Participant Account in the form provided under Article
XVI beginning as soon as reasonably practicable following the date the
Beneficiary's application for distribution is filed with the
Administrator. Unless distribution is to be made over the life or over
a period certain not greater than the life expectancy of the
Beneficiary, distribution of the Participant's entire vested interest
shall be made to the Beneficiary no later than the end of the fifth
calendar year beginning after the Participant's death. if distribution
is to be made over the life or over a period certain no greater than
the life expectancy of the Beneficiary, distribution shall commence no
later than:
(a) If the Beneficiary is not the Participant's spouse, the
end of the first calendar year beginning after the
Participant's death; or
(b) If the Beneficiary is the Participant's spouse, the later of
(i) the end of the first calendar year beginning after the
Participant's death or (ii) the end of the calendar year in
which the Participant would have attained age 70 1/2.
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If distribution is to be made to a Participant's spouse, it shall be
made available within a reasonable period of time after the
Participant's death that is no less favorable than the period of time
applicable to other distributions. If a Participant dies after the date
distribution of his vested interest in his Participant Account begins
under this Article, but before his entire vested interest in his
Participant Account is distributed, his Beneficiary shall receive
distribution of the remainder of the Participant's vested interest in
his Participant Account beginning as soon as reasonably practicable
following the Participant's date of death in a form that provides for
distribution at least as rapidly as under the form in which the
Participant was receiving distribution. Notwithstanding the provisions
of this Section, distribution may also be made to a Participant's
Beneficiary in accordance with a valid election made by the Participant
pursuant to Section 242(b)(2) of the Tax Equity and Fiscal
Responsibility Act of 1982.
15.3 Cash Outs and Participant Consent
Notwithstanding any other provision of the Plan to the contrary, if a
Participant's vested interest in his Participant Account does not
exceed $3,500, distribution of such vested interest shall be made to
the Participant in a single sum payment as soon as reasonably
practicable following his Settlement Date. If a Participant's vested
interest in his Participant Account exceeds $3,500, distribution shall
not commence to such Participant prior to his Normal Retirement Date
without the Participant's written consent. If at the time of a
distribution or deemed distribution to a Participant from his
Participant Account, the Participant's vested interest in his
Participant Account exceeded $3,500, then for purposes of this Section,
the Participant's vested interest in his Participant Account on any
subsequent date shall be deemed to exceed $3,500.
15.4 Required Commencement of Distribution
Notwithstanding any other provision of the Plan to the contrary,
distribution of a Participant's vested interest in his Participant
Account shall commence to the Participant no later than the earlier of:
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(a) unless the Participant elects a later date, 60 days after the
close of the Plan Year in which (i) the Participant's Normal
Retirement Date occurs, (ii) the 10th anniversary of the year in
which he commenced participation in the Plan occurs, or (iii) his
Settlement Date occurs, whichever is latest; or
(b) the April 1 following the close of the calendar year in
which he attains age 70 1/2, whether or not his Settlement
Date has occurred, except that if a Participant attained
age 70 1/2 prior to January 1, 1988, and was not a
five-percent owner (as defined in Section 416 of the Code)
at any time during the five-Plan-Year period ending within
the calendar year in which he attained age 70 1/2,
distribution of such Participant's vested interest in his
Participant Account shall commence no later than the April
1 following the close of the calendar year in which he
attains age 70 1/2 or retires, whichever is later.
Distributions required to commence under this Section shall be made in
the form provided under Article XVI and in accordance with Section
401(a)(9) of the Code and regulations issued thereunder, including the
minimum distribution incidental benefit requirements. Notwithstanding
the provisions of this Section, distribution may also be made to a
Participant in accordance with a valid election made by the Participant
pursuant to Section 242(b)(2) of the Tax Equity and Fiscal
Responsibility Act of 1982.
15.5 Reemployment of a Participant
If a Participant whose Settlement Date has occurred is reemployed by an
Employer or a Related Company, he shall lose his right to any
distribution or further distributions from the Trust arising from his
prior Settlement Date and his interest in the Trust shall thereafter be
treated in the same manner as that of any other Participant whose
Settlement Date has not occurred.
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15.6 Restrictions on Alienation
Except as provided in Section 401(a)(13) of the Code relating to
qualified domestic relations orders and Section 1.401(a)-13(b)(2) of
Treasury regulations relating to Federal tax levies and judgments, no
benefit under the Plan at any time shall be subject in any manner to
anticipation, alienation, assignment (either at law or in equity),
encumbrance, garnishment, levy, execution, or other legal or equitable
process; and no person shall have power in any manner to anticipate,
transfer, assign (either at law or in equity), alienate or subject to
attachment, garnishment, levy, execution, or other legal or equitable
process, or in any way encumber his benefits under the Plan, or any
part thereof, and any attempt to do so shall be void.
15.7 Facility of Payment
If the Administrator finds that any individual to whom an amount is
payable hereunder is incapable of attending to his financial affairs
because of any mental or physical condition, including the infirmities
of advanced age, such amount (unless prior claim therefor shall have
been made by a duly qualified guardian or other legal representative)
may, in the discretion of the Administrator, be paid to another person
for the use or benefit of the individual found incapable of attending
to his financial affairs or in satisfaction of legal obligations
incurred by or on behalf of such individual. The Trustee shall make
such payment only upon receipt of written instructions to such effect
from the Administrator. Any such payment shall be charged to the
Participant Account from which any such payment would otherwise have
been paid to the individual found incapable of attending to his
financial affairs and shall be a complete discharge of any liability
therefor under the Plan.
15.8 Inability to Locate Payee
If any benefit becomes payable to any person, or to the executor or
administrator of any deceased person, and if that person or his
executor or administrator does not present himself to the Administrator
within a reasonable period after the Administrator mails written notice
of his eligibility to receive a distribution hereunder to his last
known address and makes such other diligent
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effort to locate the person as the Administrator determines, that
benefit will be forfeited. However, if the payee later files a claim
for that benefit, the benefit will be restored.
15.9 Distribution Pursuant to Qualified Domestic Relations
Orders
Notwithstanding any other provision of the Plan to the contrary, if a
qualified domestic relations order so provides, distribution may be
made to an alternate payee pursuant to a qualified domestic relations
order, as defined in Section 414(p) of the Code, regardless of whether
the Participant's Settlement Date has occurred or whether the
Participant is otherwise entitled to receive a distribution under the
Plan.
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ARTICLE XVI
FORM OF PAYMENT
16.1 Normal Form of Payment
Unless the Participant, or his Beneficiary, if the Participant has
died, elects the optional form of payment, distribution shall be made
to the Participant, or his Beneficiary, as the case may be, in a single
sum payment.
16.2 Optional Form of Payment
A Participant, or his Beneficiary, as the case may be, may elect to
receive distribution of all or a portion of his Participant Account in
a series of installments over a period not exceeding the life
expectancy of the Participant, or the Participant's Beneficiary, if the
Participant has died, or a period not exceeding the joint life and last
survivor expectancy of the Participant and his Beneficiary. Each
installment shall be equal in amount except as necessary to adjust for
any changes in the value of the Participant's Participant Account,
unless the Participant elects a more rapid distribution schedule. The
determination of life expectancies shall be made on the basis of the
expected return multiples in Table V and VI of Section 1.72-9 of the
Treasury regulations and shall be calculated either once at the time
installment payments begin or annually for the Participant and/or his
Beneficiary, if his Beneficiary is his spouse, as determined by the
Participant at the time installment payments begin. Notwithstanding any
other provision of this Section to the contrary, a Participant may
elect to receive distribution of his Participant Account for periods
prior to the April 1 following the close of the calendar year in which
he attains age 70 1/2 in a series of installments made pursuant to any
formula elected by the Participant, without regard to the life
expectancies of the Participant and his Beneficiary.
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16.3 Change of Option Election
A Participant or Beneficiary who has elected the optional form of
payment may revoke or change his election at any time prior to the date
as of which his benefit commences by filing with the Administrator a
written election in the form prescribed by the Administrator.
16.4 Direct Rollover
Notwithstanding any other provision of the Plan to the contrary, in
lieu of receiving distribution in the form of payment provided under
this Article, a "qualified distributes" may elect in writing, in
accordance with rules prescribed by the Administrator, to have any
portion or all of a distribution made on or after January 1, 1993, that
is an "eligible rollover distribution" paid directly by the Plan to the
"eligible retirement plan" designated by the "qualified distributes";
provided, however, that this provision shall not apply if the total
distribution is less than $200 and that a "qualified distributes,, may
not elect this provision with respect to a portion of a distribution
that is less than $500. Any such payment by the Plan to another
"eligible retirement plan" shall be a direct rollover. For purposes of
this Section, the following terms have the following meanings:
(a) An "eligible retirement plan" means an individual
retirement account described in Section 408(a) of the
Code, an individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described
in Section 401(a) of the Code that accepts rollovers;
provided, however, that, in the case of a direct rollover
by a surviving spouse, an eligible retirement plan does
not include a qualified trust described in Section 401(a)
of the Code.
(b) An "eligible rollover distribution" means any distribution of
all or any portion of the balance of a Participant's Participant
Account; provided, however, that an eligible rollover
distribution does not include: any distribution that is one of a
series of substantially equal periodic
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payments made not less frequently than annually for the life or
life expectancy of the qualified distributes or the joint lives
or joint life expectancies of the qualified distributes and the
qualified distributee's designated beneficiary, or for a
specified period of ten years or more; and any distribution to
the extent such distribution is required under Section
401(a)(9) of the Code.
(c) A "qualified distributes" means a Participant, his surviving
spouse, or his spouse or former spouse who is an alternate
payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code.
16.5 Notice Regarding Forms of Payment
Within the 60 day period ending 30 days before the date as of which
distribution of a Participant's Participant Account commences, the
Administrator shall provide the Participant with a written explanation
of his right to defer distribution until his Normal Retirement Date,
or such later date as may be provided in the Plan, his right to make a
direct rollover, and the forms of payment available under the Plan.
Distribution of the Participant's Participant Account may commence
less than 30 days after such notice is provided to the Participant if
(i) the Administrator clearly informs the Participant of his right to
consider his election of whether or not to make a direct rollover or
to receive a distribution prior to his Normal Retirement Date and his
election of a form of payment for a period of at least 30 days
following his receipt of the notice and (ii) the Participant, after
receiving the notice, affirmatively elects an early distribution.
16.6 Reemployment
If a Participant is reemployed by an Employer or a Related Company
prior to receiving distribution of the entire balance of his vested
interest in his Participant Account, his prior election of a form of
payment hereunder shall become ineffective.
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16.7 Distribution in the Form of Employer Stock
Notwithstanding any other provision of the Plan to the contrary, a
Participant may elect to receive distribution of the fair market value
of his Participant Account in the form of Employer stock.
16.8 Section 242(b)(2) Elections
Notwithstanding any other provisions of this Article, distribution on
behalf of a Participant, including a five-percent owner, may be made
pursuant to an election under Section 242(b)(2) of the Tax Equity and
Fiscal Responsibility Act of 1982 and in accordance with all of the
following requirements:
(a) The distribution is one which would not have disqualified the
Trust under Section 401(a)(9) of the Code as in effect prior
to amendment by the Deficit Reduction Act of 1984.
(b) The distribution is in accordance with a method of
distribution elected by the Participant whose interest in the
Trust is being distributed or, if the Participant is deceased,
by a Beneficiary of such Participant.
(c) Such election was in writing, was signed by the
Participant or the Beneficiary, and was made before
January 1, 1984.
(d) The Participant had accrued a benefit under the Plan as of
December 31, 1983.
(e) The method of distribution elected by the Participant or the
Beneficiary specifies the time at which distribution will
commence, the period over which distribution will be made, and
in the case of any distribution upon the Participant's death,
the Beneficiaries of the Participant listed in order of
priority.
A distribution upon death shall not be made under this Section unless
the information in the election contains the required information
described above with respect to the distributions to be made upon the
death of the Participant. For any distribution
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which commences before January 1, 1984, but continues after December
31, 1983, the Participant or the Beneficiary to whom such distribution
is being made will be presumed to have designated the method of
distribution under which the distribution is being made, if this method
of distribution was specified in writing and the distribution satisfies
the requirements in paragraphs (a) and (e) of this Section. If an
election is revoked, any subsequent distribution will be in accordance
with the other provisions of the Plan. Any changes in the election will
be considered to be a revocation of the election. However, the mere
substitution or addition of another Beneficiary (one not designated as
a Beneficiary in the election), under the election will not be
considered to be a revocation of the election, so long as such
substitution or addition does not alter the period over which
distributions are to be made under the election directly, or indirectly
(for example, by altering the relevant measuring life).
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ARTICLE XVII
BENEFICIARIES
17.1 Designation of Beneficiary
A married Participant's Beneficiary shall be his spouse, unless the
Participant designates a person or persons other than his spouse as
Beneficiary with his spousal written consent; provided, however, that
such written spousal consent shall not be required if the Participant is
not married to such spouse on the date as of which distribution of the
Participant's Participant Account commences. A Participant may designate
a Beneficiary on the form prescribed by the Administrator. If no
Beneficiary has been designated pursuant to the provisions of this
Section, or if no Beneficiary survives the Participant and he has no
surviving spouse, then the Beneficiary under the Plan shall be the
Participant's surviving children in equal shares or, if none, the
Participant's surviving parents in equal shares or, if none, the
Participant's estate. If a Beneficiary dies after becoming entitled to
receive a distribution under the Plan but before distribution is made to
him in full, and if no other Beneficiary has been designated to receive
the balance of the distribution in that event, the estate of the
deceased Beneficiary shall be the Beneficiary as to the balance of the
distribution.
17.2 Spousal Consent Requirements
Any written spousal consent given pursuant to this Article must
acknowledge the effect of the action taken and must be witnessed by a
Plan-representative or a notary public. In addition, the spousal written
consent must either (i) specify any non-spouse Beneficiary designated by
the Participant and that such Beneficiary may not be changed without
written spousal consent or (ii) acknowledge that the spouse has the
right to limit consent to a specific Beneficiary, but permit the
Participant to change the designated Beneficiary without the spouse's
further consent. A Participant's spouse will be deemed to have given
written consent to the Participant's designation of Beneficiary if the
Participant establishes to the satisfaction of a Plan representative
that such consent cannot be obtained because the spouse cannot be
located or because of other circumstances set
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forth in Section 401(a)(11) of the Code and regulations issued
thereunder. Any written consent given or deemed to have been given by a
Participant's spouse hereunder shall be valid only with respect to the
spouse who signs the consent.
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ARTICLE XVIII
ADMINISTRATION
18.1 Authority of the Sponsor
The Sponsor, which shall be the administrator for purposes of ERISA
and the plan administrator for purposes of the Code, shall be
responsible for the administration of the Plan and, in addition to the
powers and authorities expressly conferred upon it in the Plan, shall
have all such powers and authorities as may be necessary to carry out
the provisions of the Plan, including the power and authority to
interpret and construe the provisions of the Plan, to make benefit
determinations, and to resolve any disputes which arise under the
Plan. The Sponsor may employ such attorneys, agents, and accountants
as it may deem necessary or advisable to assist in carrying out its
duties hereunder. The Sponsor shall be a "named fiduciary" as that
term is defined in Section 402(a)(2) of ERISA. The Sponsor may:
(a) allocate any of the powers, authority, or responsibilities for
the operation and administration of the Plan (other than
trustee responsibilities as defined in Section 405(c)(3) of
ERISA) among named fiduciaries; and
(b) designate a person or persons other than a named fiduciary
to carry out any of such powers, authority, or
responsibilities;
except that no allocation by the Sponsor of, or designation by the
Sponsor with respect to, any of such powers, authority, or
responsibilities to another named fiduciary or a person other than a
named fiduciary shall become effective unless such allocation or
designation shall first be accepted by such named fiduciary or other
person in a writing signed by it and delivered to the Sponsor.
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18.2 Action of the Sponsor
Any act authorized, permitted, or required to be taken under the Plan
by the Sponsor and which has not been delegated in accordance with
Section 18.1, may be taken by a majority of the members of the board of
directors of the Sponsor, either by vote at a meeting, or in writing
without a meeting, or by the employee or employees of the Sponsor
designated by the board of directors to carry out such acts on behalf
of the Sponsor. All notices, advice, directions, certifications,
approvals, and instructions required or authorized to be given by the
Sponsor as under the Plan shall be in writing and signed by either (i)
a majority of the members of the board of directors of the Sponsor or
by such member or members as may be designated by an instrument in
writing, signed by all the members thereof, as having authority to
execute such documents on its behalf, or (ii) the employee or employees
authorized to act for the Sponsor in accordance with the provisions of
this Section.
18.3 Claims Review Procedure
Whenever a claim for benefits under the Plan filed by any person
(herein referred to as the "Claimant") is denied, whether in whole or
in part, the Sponsor shall transmit a written notice of such decision
to the Claimant within 90 days of the date the claim was filed or, if
special circumstances require an extension, within 180 days of such
date, which notice shall be written in a manner calculated to be
understood by the Claimant and shall contain a statement of (i) the
specific reasons for the denial of the claim, (ii) specific reference
to pertinent Plan provisions on which the denial is based, and (iii) a
description of any additional material or information necessary for the
Claimant to perfect the claim and an explanation of why such
information is necessary. The notice shall also include a statement
advising the Claimant that, within 60 days of the date on which he
receives such notice, he may obtain review of such decision in
accordance with the procedures hereinafter set forth. Within such
60-day period, the Claimant or his authorized representative may
request that the claim denial be reviewed by filing with the Sponsor a
written request therefor, which request shall contain the following
information:
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(a) the date on which the Claimant's request was filed with the
Sponsor; provided, however, that the date on which the
Claimant's request for review was in fact filed with the Sponsor
shall control in the event that the date of the actual filing is
later than the date stated by the Claimant pursuant to this
paragraph;
(b) the specific portions of the denial of his claim which the
Claimant requests the Sponsor to review;
(c) a statement by the Claimant setting forth the basis upon which
he believes the Sponsor should reverse the previous denial of
his claim for benefits and accept his claim as made; and
(d) any written material (offered as exhibits) which the Claimant
desires the Sponsor to examine in its consideration of his
position as stated pursuant to paragraph (c) of this Section.
Within 60 days of the date determined pursuant to paragraph (a) of this
Section or, if special circumstances require an extension, within 120
days of such date, the Sponsor shall conduct a full and fair review of
the decision denying the Claimant's claim for benefits and shall render
its written decision on review to the Claimant. The Sponsor's decision
on review shall be written in a manner calculated to be understood by
the Claimant and shall specify the reasons and Plan provisions upon
which the Sponsor's decision was based.
18.4 Qualified Domestic Relations Orders
The Sponsor shall establish reasonable procedures to determine the
status of domestic relations orders and to administer distributions
under domestic relations orders which are deemed to be qualified
orders. Such procedures shall be in writing and shall comply with the
provisions of Section 414(p) of the Code and regulations issued
thereunder.
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18.5 Indemnification
In addition to whatever rights of indemnification the Trustee or the
members of the board of directors of the Sponsor or any employee or
employees of the Sponsor to whom any power, authority, or
responsibility is delegated pursuant to Section 18.2, may be entitled
under the articles of incorporation or regulations of the Sponsor,
under any provision of law, or under any other agreement, the Sponsor
shall satisfy any liability actually and reasonably incurred by any
such person or persons, including expenses, attorneys, fees, judgments,
fines, and amounts paid in settlement (other than amounts paid in
settlement not approved by the Sponsor), in connection with any
threatened, pending or completed action, suit, or proceeding which is
related to the exercising or failure to exercise by such person or
persons of any of the powers, authority, responsibilities, or
discretion as provided under the Plan, or reasonably believed by such
person or persons to be provided hereunder, and any action taken by
such person or persons in connection therewith, unless the same is
judicially determined to be the result of such person or persons, gross
negligence or willful misconduct.
18.6 Actions Binding
Subject to the provisions of Section 18.3, any action taken by the
Sponsor which is authorized, permitted, or required under the Plan
shall be final and binding upon the Employers, the Trustee, all persons
who have or who claim an interest under the Plan, and all third parties
dealing with the Employers or the Trustee.
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ARTICLE XIX
AMENDMENT AND TERMINATION
19.1 Amendment
Subject to the provisions of Section 19.2, the Sponsor may at any time
and from time to time, by action of its board of directors, or such
officers of the Sponsor as are authorized by its board of directors,
amend the Plan, either prospectively or retroactively. Any such
amendment shall be by written instrument executed by the Sponsor.
19.2 Limitation on Amendment
The Sponsor shall make no amendment to the Plan which shall decrease
the accrued benefit of any Participant or Beneficiary, except that
nothing contained herein shall restrict the right to amend the
provisions of the Plan relating to the administration of the Plan and
Trust. Moreover, no such amendment shall be made hereunder which shall
permit any part of the Trust to revert to an Employer or any Related
Company or be used or be diverted to purposes other than the exclusive
benefit of Participants and Beneficiaries.
19.3 Termination
The Sponsor reserves the right, by action of its board of
directors, to terminate the Plan as to all Employers at any time
(the effective date of such termination being hereinafter referred to
as the "termination date"). Upon any such termination of the Plan, the
following actions shall be taken for the benefit of Participants and
Beneficiaries:
(a) As of the termination date, each Investment Fund shall be
valued and all Participant Accounts and Sub-Accounts shall
be adjusted in the manner provided in Article XI, with any
unallocated contributions or forfeitures being allocated
as of the termination date in the manner otherwise
provided in the Plan. The termination date shall become a
Valuation Date for purposes of Article XI. In determining
the net worth of the Trust, there shall be included as a
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liability such amounts as shall be necessary to pay all expenses
in connection with the termination of the Trust and the
liquidation and distribution of the property of the Trust, as
well as other expenses, whether or not accrued, and shall
include as an asset all accrued income.
(b) All Participant Accounts shall then be disposed of to or
for the benefit of each Participant or Beneficiary in
accordance with the provisions of Article XV as if the
termination date were his Settlement Date; provided,
however, that notwithstanding the provisions of
Article XV, if the Plan does not offer an annuity option
and if neither his Employer nor a Related Company
establishes or maintains another defined contribution plan
(other than an employee stock ownership plan as defined in
Section 4975(e)(7) of the Code), the Participant's written
consent to the commencement of distribution shall not be
required regardless of the value of the vested portions of
his Participant Account.
(c) Notwithstanding the provisions of paragraph (b) of this
Section, no distribution shall be made to a Participant of
any portion of the balance of his Tax-Deferred Contributions
Sub-Account prior to his separation from service (other than a
distribution made in accordance with Article XIII or required in
accordance with Section 401(a)(9) of the Code) unless (I)
neither his Employer nor a Related Company establishes or
maintains another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7)
of the Code, a tax credit employee stock ownership plan as
defined in Section 409 of the Code, or a simplified employee
pension as defined in Section 408(k) of the Code) either at the
time the Plan is terminated or at any time during the period
ending 12 months after distribution of all assets from the Plan;
provided, however, that this provision shall not apply if fewer
than two percent of the Eligible Employees under the Plan were
eligible to participate at any time in such other defined
contribution plan during the 24-month period beginning 12 months
before the Plan termination, and (ii) the distribution the
Participant receives is a "lump sum distribution" as defined in
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Section 402(e)(4) of the Code, without regard to clauses (i),
(ii), (iii), and (iv) of sub-paragraph (A), sub-paragraph (B),
or sub-paragraph (H) thereof.
Notwithstanding anything to the contrary contained in the Plan, upon
any such Plan termination, the vested interest of each Participant and
Beneficiary in his Employer Contributions Sub-Account shall be 100
percent; and, if there is a partial termination of the Plan, the
vested interest of each Participant and Beneficiary who is affected by
the partial termination in his Employer Contributions Sub-Account
shall be 100 percent. For purposes of the preceding sentence only, the
Plan shall be deemed to terminate automatically if there shall be a
complete discontinuance of contributions hereunder by all Employers.
19.4 Reorganization
The merger, consolidation, or liquidation of any Employer with or into
any other Employer or a Related Company shall not constitute a
termination of the Plan as to such Employer. If an Employer disposes
of substantially all of the assets used by the Employer in a trade or
business or disposes of a subsidiary and in connection therewith one
or more Participants terminates employment but continues in employment
with the purchaser of the assets or with such subsidiary, no
distribution from the Plan shall be made to any such Participant prior
to his separation from service (other than a distribution made in
accordance with Article XIII or required in accordance with Section
401(a)(9) of the Code), except that a distribution shall be permitted
to be made in such a case, subject to the Participant's consent (to
the extent required by law), if (i) the distribution would constitute
a "lump sum distribution" as defined in section 402(e)(4) of the Code,
without regard to clauses (i), (ii), (iii), or (iv) of sub-paragraph
(A), sub-paragraph (B), or sub-paragraph (H) thereof, (ii) the
Employer continues to maintain the Plan after the disposition, (iii)
the purchaser does not maintain the Plan after the disposition, and
(iv) the distribution is made by the end of the second calendar year
after the calendar year in which the disposition occurred.
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19.5 Withdrawal of an Employer
An Employer other than the Sponsor may withdraw from the Plan at any
time upon notice in writing to the Administrator (the effective date of
such withdrawal being hereinafter referred to as the "withdrawal
date"), and shall thereupon cease to be an Employer for all purposes of
the Plan. An Employer shall be deemed automatically to withdraw from
the Plan in the event of its complete discontinuance of contributions,
or, subject to Section 19.4 and unless the Sponsor otherwise directs,
it ceases to be a Related Company of the Sponsor or any other Employer.
Upon the withdrawal of an Employer, the withdrawing Employer shall
determine whether a partial termination has occurred with respect to
its Employees. In the event that the withdrawing Employer determines a
partial termination has occurred, the action specified in Section 19.3
shall be taken as of the withdrawal date, as on a termination of the
Plan, but with respect only to Participants who are employed solely by
the withdrawing Employer, and who, upon such withdrawal, are neither
transferred to nor continued in employment with any other Employer or a
Related Company. The interest of any Participant employed by the
withdrawing Employer who is transferred to or continues in employment
with any other Employer or a Related Company, and the interest of any
Participant employed solely by an Employer or a Related Company other
than the withdrawing Employer, shall remain unaffected by such
withdrawal; no adjustment to his Participant Accounts shall be made by
reason of the withdrawal; and he shall continue as a Participant
hereunder subject to the remaining provisions of the Plan.
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ARTICLE XX
ADOPTION BY OTHER ENTITIES
20.1 Adoption by Related Companies
A Related Company that is not an Employer may, with the consent of the
Sponsor, adopt the Plan and become an Employer hereunder by causing an
appropriate written instrument evidencing such adoption to be executed
in accordance with the requirements of its organizational authority.
Any such instrument shall specify the effective date of the adoption.
20.2 Effective Plan Provisions
An Employer who adopts the Plan shall be bound by the provisions of the
Plan in effect at the time of the adoption and as subsequently in
effect because of any amendment to the Plan.
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ARTICLE XXI
MISCELLANEOUS PROVISIONS
21.1 No Commitment as to Employment
Nothing contained herein shall be construed as a commitment or
agreement upon the part of any person to continue his employment with
an Employer or Related Company, or as a commitment on the part of any
Employer or Related Company to continue the employment, compensation,
or benefits of any person for any period.
21.2 Benefits
Nothing in the Plan nor the Trust Agreement shall be construed to
confer any right or claim upon any person, firm, or corporation other
than the Employers, the Trustee, Participants, and Beneficiaries.
21.3 No Guarantees
The Employers, the Administrator, and the Trustee do not guarantee the
Trust from loss or depreciation, nor do they guarantee the payment of
any amount which may become due to any person hereunder.
21.4 Expenses
The expenses of administration of the Plan, including the expenses of
the Administrator and fees of the Trustee, shall be paid from the
Trust as a general charge thereon, unless the Sponsor elects to make
payment. Notwithstanding the foregoing, the Sponsor may direct that
administrative expenses that are allocable to the Participant Account
of a specific Participant shall be paid from that Participant Account
and the costs incident to the management of the assets of an
Investment Fund or to the purchase or sale of securities held in an
Investment Fund shall be paid by the Trustee from such Investment
Fund.
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21.5 Precedent
Except as otherwise specifically provided, no action taken in
accordance with the Plan shall be construed or relied upon as a
precedent for similar action under similar circumstances.
21.6 Duty to Furnish Information
The Employers, the Administrator, and the Trustee shall furnish to any
of the others any documents, reports, returns, statements, or other
information that the other reasonably deems necessary to perform its
duties hereunder or otherwise imposed by law.
21.7 Withholding
The Trustee shall withhold any tax which by any present or future law
is required to be withheld, and which the Administrator notifies the
Trustee in writing is to be so withheld, from any payment to any
Participant or Beneficiary hereunder.
21.8 Merger, Consolidation, or Transfer of Plan Assets
The Plan shall not be merged or consolidated with any other plan, nor
shall any of its assets or liabilities be transferred to another plan,
unless, immediately after such merger, consolidation, or transfer of
assets or liabilities, each Participant in the Plan would receive a
benefit under the Plan which is at least equal to the benefit he would
have received immediately prior to such merger, consolidation, or
transfer of assets or liabilities (assuming in each instance that the
Plan had then terminated).
21.9 Back Pay Awards
The provisions of this Section shall apply only to an Employee or
former Employee who becomes entitled to back pay by an award or
agreement of an Employer without regard to mitigation of damages. If a
person to whom this Section applies was or would have become an
Eligible Employee after such back pay award or agreement has been
effected, and if any such person who had not previously elected to make
Tax-Deferred Contributions pursuant to Section 4.1 shall within 30 days
of the date he receives notice
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of the provisions of this Section make an election to make Tax-Deferred
Contributions in accordance with such Section 4.1 (retroactive to any
Enrollment Date as of which he was or has become eligible to do so),
then such Participant may elect that any Tax-Deferred Contributions not
previously made on his behalf but which, after application of the
foregoing provisions of this Section, would have been made under the
provisions of Article IV, shall be made out of the proceeds of such
back pay award or agreement. In addition, if any such Employee or
former Employee would have been eligible to participate in the
allocation of Employer Contributions under the provisions of Article VI
for any prior Plan Year after such back pay award or agreement has been
effected, his Employer shall make an Employer Contribution equal to the
amount of the Employer Contribution which would have been allocated to
such Participant under the provisions of Article VI as in effect during
each such Plan Year. The amounts of such additional contributions shall
be credited to the Participant Account of such Participant. Any
additional contributions made by such Participant and by an Employer
pursuant to this Section shall be made in accordance with, and subject
to the limitations of the applicable provisions of Articles IV, VI, and
VII.
21.10 Condition on Employer Contributions
Notwithstanding anything to the contrary contained in the Plan or the
Trust Agreement, any contribution of an Employer hereunder is
conditioned upon the continued qualification of the Plan under Section
401(a) of the Code, the exempt status of the Trust under Section 501(a)
of the Code, and the deductibility of the contribution under Section
404 of the Code. Except as otherwise provided in this Section and
Section 21.11 however, in no event shall any portion of the property
of the Trust ever revert to or otherwise inure to the benefit of an
Employer or any Related Company.
21.11 Return of Contributions to an Employer
Notwithstanding any other provision of the Plan or the Trust Agreement
to the contrary, in the event any contribution of an Employer made
hereunder:
(a) is made under a mistake of fact, or
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(b) is disallowed as a deduction under Section 404 of the
Code,
such contribution may be returned to the Employer within one year after
the payment of the contribution or the disallowance of the deduction to
the extent disallowed, whichever is applicable. In the event the Plan
does not initially qualify under Section 401(a) of the Code, any
contribution of an Employer made hereunder may be returned to the
Employer within one year of the date of denial of the initial
qualification of the Plan, but only if an application for determination
was made within the period of time prescribed under Section
403(c)(2)(B) of ERISA.
21.12 Validity of Plan
The validity of the Plan shall be determined and the Plan shall be
construed and interpreted in accordance with the laws of the State or
Commonwealth in which the Trustee has its principal place of business
or, if the Trustee is an individual or group of individuals, the State
or Commonwealth in which the Sponsor has its principal place of
business, except as preempted by applicable Federal law. The invalidity
or illegality of any provision of the Plan shall not affect the
legality or validity of any other part thereof.
21.13 Trust Agreement
The Trust Agreement and the Trust maintained thereunder shall be deemed
to be a part of the Plan as if fully set forth herein and the
provisions of the Trust Agreement are hereby incorporated by reference
into the Plan.
21.14 Parties Bound
The Plan shall be binding upon the Employers, all Participants and
Beneficiaries hereunder, and, as the case may be, the heirs, executors,
administrators, successors, and assigns of each of them.
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21.15 Application of Certain Plan Provisions
A Participant's Beneficiary, if the Participant has died, or alternate
payee under a qualified domestic relations order shall be treated as a
Participant for purposes of directing investments as provided in
Article X. For purposes of the general administrative provisions and
limitations of the Plan, a Participant's Beneficiary or alternate payee
under a qualified domestic relations order shall be treated as any
other person entitled to receive benefits under the Plan. Upon any
termination of the Plan, any such Beneficiary or alternate payee under
a qualified domestic relations order who has an interest under the Plan
at the time of such termination, which does not cease by reason
thereof, shall be deemed to be a Participant for all purposes of the
Plan.
21.16 Leased Employees
Any leased employee, other than an excludable leased employee, shall be
treated as an employee of the Employer for which he performs services
for all purposes of the Plan with respect to the provisions of Sections
401(a)(3), (4), (7), and (16), and 408(k), 410, 411, 415, and 416 of
the Code; provided, however, that no leased employee shall accrue a
benefit hereunder based on service as a leased employee except as
otherwise specifically provided in the Plan. A "leased employee" means
any person who performs services for an Employer or a Related Company
(the "recipient") (other than an employee of the recipient) pursuant to
an agreement between the recipient and any other person (the "leasing
organization") on a substantially full-time basis for a period of at
least one year, provided that such services are of a type historically
performed, in the business field of the recipient, by employees. An
"excludable leased employee" means any leased employee of the recipient
who is covered by a money purchase pension plan maintained by the
leasing organization which provides for (i) a nonintegrated employer
contribution on behalf of each participant in the plan equal to at
least ten percent of compensation, (ii) full and immediate vesting, and
(iii) immediate participation by employees of the leasing organization
(other than employees who perform substantially all of their services
for the leasing organization or whose compensation from the leasing
organization in each plan year
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during the four-year period ending with the plan year is less than
$1,000); provided, however, that leased employees do not constitute
more than 20 percent of the recipient's nonhighly compensated work
force. For purposes of this Section, contributions or benefits provided
to a leased employee by the leasing organization that are attributable
to services performed for the recipient shall be treated as provided by
the recipient.
21.17 Transferred Funds
If funds from another qualified plan are transferred or merged into the
Plan, such funds shall be held and administered in accordance with any
restrictions applicable to them under such other plan to the extent
required by law and shall be accounted for separately to the extent
necessary to accomplish the foregoing.
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ARTICLE XXII
TOP-HEAVY PROVISIONS
22.1 Definitions
For purposes of this Article, the following terms shall have the
following meanings:
(a) The "compensation" of an employee means compensation as
defined in Section 415 of the Code and regulations issued
thereunder. In no event, however, shall the compensation
of a Participant taken into account under the Plan for any
Plan Year exceed (1) $200,000 for Plan Years beginning
prior to January 1, 1994, or (2) $150,000 for Plan Years
beginning on or after January 1, 1994 (subject to
adjustment annually as provided in Section 401(a)(17)(B)
and Section 415(d) of the Code; provided, however, that
the dollar increase in effect on January 1 of any calendar
year, if any, is effective for Plan Years beginning in
such calendar year). If the compensation of a Participant
is determined over a period of time that contains fewer
than 12 calendar months, then the annual compensation
limitation described above shall be adjusted with respect
to that Participant by multiplying the annual compensation
limitation in effect for the Plan Year by a fraction the
numerator of which is the number of full months in the
period and the denominator of which is 12; provided,
however, that no proration is required for a Participant
who is covered under the Plan for less than one full Plan Year
if the formula for allocations is based on Compensation for a
period of at least 12 months. In determining the compensation,
for purposes of applying the annual compensation limitation
described above, of a Participant who is a five-percent owner
or one of the ten Highly Compensated Employees receiving the
greatest compensation for the Plan Year, the compensation of
the Participant's spouse and of his lineal descendants who have
not attained age 19 as of the close of the Plan Year shall be
included as compensation of the Participant for the Plan Year.
If as a result of applying the family aggregation rule
described in the preceding sentence the
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annual compensation limitation would be exceeded, the limitation
shall be prorated among the affected family members in
proportion to each member's compensation as determined prior to
application of the family aggregation rules.
(b) The "determination date" with respect to any Plan Year means the
last day of the preceding Plan Year, except that the
determination date with respect to the first Plan Year of the
Plan, shall mean the last day of such Plan Year.
(c) A "key employee" means any Employee or former Employee who is a
key employee pursuant to the provisions of Section 416(i)(1) of
the Code and any Beneficiary of such Employee or former
Employee.
(d) A "non-key employee" means any Employee who is not a key
employee.
(e) A "permissive aggregation group" means those plans included in
each Employer's required aggregation group together with any
other plan or plans of the Employer, so long as the entire group
of plans would continue to meet the requirements of Sections
401(a)(4) and 410 of the Code.
(f) A "required aggregation group" means the group of tax-qualified
plans maintained by an Employer or a Related Company consisting
of each plan in which a key employee participates and each other
plan that enables a plan in which a key employee participates to
meet the requirements of Section 401(a)(4) or Section 410 of the
Code, including any plan that terminated within the five-year
period ending on the relevant determination date.
(g) A "super top-heavy group" with respect to a particular Plan Year
means a required or permissive aggregation group that, as of the
determination date, would qualify as a top-heavy group under the
definition in paragraph (i) of this Section with 1190 percent"
substituted for 1160 percent" each place where 1160 percent"
appears in the definition.
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(h) A "super top-heavy plan" with respect to a particular Plan Year
means a plan that, as of the determination date, would qualify
as a top-heavy plan under the definition in paragraph (j) of
this Section with 1190 percent" substituted for 1160 percent"
each place where 1160 percent" appears in the definition. A
plan is also a "super top-heavy plan" if it is part of a super
top-heavy group.
(i) A "top-heavy group" with respect to a particular Plan Year
means a required or permissive aggregation group if the
sum, as of the determination date, of the present value of
the cumulative accrued benefits for key employees under
all defined benefit plans included in such group and the
aggregate of the account balances of key employees under
all defined contribution plans included in such group
exceeds 60 percent of a similar sum determined for all
employees covered by the plans included in such group.
A "top-heavy plan" with respect to a particular Plan Year means
(i), in the case of a defined contribution plan (including any
simplified employee pension plan), a plan for which, as of the
determination date, the aggregate of the accounts (within the
meaning of Section 416(g) of the Code and the regulations and
rulings thereunder) of key employees exceeds 60 percent of the
aggregate of the accounts of all participants under the plan,
with the accounts valued as of the relevant valuation date and
increased for any distribution of an account balance made in
the five-year period ending on the determination date, (ii), in
the case of a defined benefit plan, a plan for which, as of the
determination date, the present value of the cumulative accrued
benefits payable under the plan (within the meaning of Section
416(g) of the Code and the regulations and rulings thereunder)
to key employees exceeds 60 percent of the present value of the
cumulative accrued benefits under the plan for all employees,
with the present value of accrued benefits to be determined
under the accrual method uniformly used under all plans
maintained by an Employer or, if no such method exists, under
the slowest accrual method permitted under the fractional
accrual rate of Section 411(b)(1)(C) of the Code and including
the present value of any part of any
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accrued benefits distributed in the five-year period ending on
the determination date, and (iii) any plan (including any
simplified employee pension plan) included in a required
aggregation group that is a top-heavy group. For purposes of
this paragraph, the accounts and accrued benefits of any
employee who has not performed services for an Employer or a
Related Company during the five-year period ending on the
determination date shall be disregarded. For purposes of this
paragraph, the present value of cumulative accrued benefits
under a defined benefit plan for purposes of top-heavy
determinations shall be calculated using the actuarial
assumptions otherwise employed under such plan, except that the
same actuarial assumptions shall be used for all plans within a
required or permissive aggregation group. A Participant's
interest in the Plan attributable to any Rollover
Contributions, except Rollover Contributions made from a plan
maintained by an Employer or a Related Company, shall not be
considered in determining whether the Plan is top-heavy.
Notwithstanding the foregoing, if a plan is included in a
required or permissive aggregation group that is not a
top-heavy group, such plan shall not be a top-heavy plan.
(k) The "valuation date" with respect to any determination date
means the most recent Valuation Date occurring within the
12-month period ending on the determination date.
22.2 Applicability
Notwithstanding any other provision of the Plan to the contrary, the
provisions of this Article shall be applicable during any Plan Year in
which the Plan is determined to be a top-heavy plan as hereinafter
defined.
22.3 Minimum Employer Contribution
If the Plan is determined to be a top-heavy plan, the Employer
Contributions allocated to the Participant Account of each non-key
employee who is an Eligible Employee and who is employed by an
Employer or a Related Company on the last day of such top-heavy Plan
Year shall be no less than the lesser of (i) three
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percent of his compensation or (ii) the largest percentage of
compensation that is allocated as an Employer Contribution and/or
Tax-Deferred Contribution for such Plan Year to the Participant Account
of any key employee; except that, in the event the Plan is part of a
required aggregation group, and the Plan enables a defined benefit plan
included in such group to meet the requirements of Section 401(a)(4) or
410 of the Code, the minimum allocation of Employer Contributions to
each such non-key employee shall be three percent of the compensation
of such non-key employee. In lieu of the minimum allocation described
in the preceding sentence, the Employer Contributions allocated to the
Participant Account of each non-key employee who is employed by an
Employer or a Related Company on the last day of a top-heavy Plan Year
and who is also covered under a top-heavy defined benefit plan
maintained by an Employer or a Related Company will be no less than
five percent of his compensation. Any minimum allocation to a non-key
employee required by this Section shall be made without regard to any
social security contribution made on behalf of the non-key employee,
his number of hours of service, his level of compensation, or whether
he declined to make elective or mandatory contributions.
22.4 Adjustments to Section 415 Limitations
If the Plan is determined to be a top-heavy plan and an Employer
maintains a defined benefit plan covering some or all of the Employees
that are covered by the Plan, the defined benefit plan fraction and the
defined contribution plan fraction, described in Article VII, shall be
determined as provided in Section 415 of the Code by substituting
111.011 for 111.2511 each place where 111.2511 appears, except that
such substitutions shall not be applied to the Plan if (i) the Plan is
not a super top-heavy plan, (ii) the Employer Contribution for such
top-heavy Plan Year for each non-key employee who is to receive a
minimum top-heavy benefit hereunder is not less than four percent of
such non-key employee's compensation, and (iii) the minimum annual
retirement benefit accrued by a non-key employee who participates under
one or more defined benefit plans of an Employer or a Related Company
for such top-heavy Plan Year is not less than the lesser of three
percent times years of service with an Employer or a Related Company or
thirty percent.
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22.5 Accelerated Vesting
If the Plan is determined to be a top-heavy plan, a Participant's
vested interest in his Employer Contributions Sub-Account shall be
determined no less rapidly than in accordance with the following
vesting schedule:
Years of Vesting Service Vested Interest
------------------------ ---------------
less than 3 0%
3 or more 1000%
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ARTICLE XXIII
EFFECTIVE DATE
23.1 Effective Date of Amendment and Restatement
This amendment and restatement is effective as of July 1, 1997.
* * *
EXECUTED AT Olney, Maryland
this 1st day of July 1997
SANDY SPRING BANCORP
By: /s/ Hunter R. Hollar
--------------------
Title: President
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Exhibit 10(b)
<PAGE>
DIRECTOR FEE DEFERRAL AGREEMENT
THIS AGREEMENT is made this day of , 199 by and between
Sandy Spring National Bank of Maryland (the "Bank"), and (the
"Director").
INTRODUCTION
To encourage the Director to remain a member of the Bank's Board of
Directors, the Bank is willing to provide the Director an opportunity to defer
receipt of Directors' fees and to accumulate interest on the fees so deferred as
provided in this Agreement. Amounts payable pursuant to this Agreement are
unfunded, and the Bank will pay benefits from its general assets. Deferred fees
and interest on them are subject to substantial restrictions and limitations.
AGREEMENT
The Director and the Bank agree as follows:
Article 1
Definitions
1.1 Definitions. Whenever used in this Agreement, the following words and
phrases shall have the meanings specified:
1.1.1 "Change in Control" means the transfer of 51% or more of
the Bank's outstanding voting common stock followed within
twenty-four months by termination of the Director's status as
a member of the Bank's Board of Directors.
1.1.2 "Code" means the Internal Revenue Code of 1986, as
amended. References to a code section shall be deemed to be
that section as it now exists and to any successor provision.
1.1.3 "Election Form" means the form attached as Exhibit I.
1.1.4 "Fees" means the total Directors fees payable to the
Director.
1.1.5 "Insurance Policy" means a single premium life insurance
policy which may be acquired by the Bank, in its sole
discretion, as the sole owner, on the life of the Director in
connection with this Agreement.
1.1.6 "Prime Rate" for a calendar year means the lowest Prime
Rate reported for the last business day before January 1 of
that year in the "Money Rates" column of the Wall Street
-----------
Journal, or, if such rate is not published or its definition
-------
of such rate in the Wall Street Journal is substantially
-------------------
changed, such reasonably equivalent rate that the Board of
Directors of the Bank in its good faith discretion shall
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establish.
1.1.7 "Termination of Service" means the Director's ceasing to
be a member of the Bank's Board of Directors (excluding
directors emeriti) for any reason whatsoever.
Article 2
Deferral Election
2.1 Initial Election. The Director shall make an initial deferral
election under this Agreement by filing with the Bank a signed Election Form
within 30 days after the date of this Agreement. The Election Form shall set
forth the amount of fees to be deferred and the form of benefit payment. The
Election Form shall be effective to defer only fees earned after the date the
Election Form is received by the Bank.
2.2 Election Changes
2.2.1 Generally. The Director may modify the amount of Fees to be
deferred by filing with the Bank a signed Election Form. The
Election shall set forth the amount of Fees to be deferred and the
form of benefit payment. The modified deferral or form of benefit
shall not be effective until the calendar year following the year
in which the subsequent Election Form is received by the Bank. The
Election Form shall be effective to defer only Fees earned after
the date the Election Form is received by the Bank.
2.2.2 Hardship. If an unforeseeable financial emergency arising
from the death of a family member, divorce, sickness, injury,
catastrophe or similar event outside the control of the Director
occurs, the Director, by written instruction to the Bank may cease
deferrals under this Agreement.
Article 3
Deferral Account
3.1 Establishing and Crediting. The Bank shall establish a Deferral
Account on its books for the Director, and shall credit to the Deferral Account
the following amounts:
3.1.1 Deferrals. The Fees deferred by the Director as of the time
the fees would have otherwise been paid to the Director.
3.1.2 Interest. On the first day of each month and immediately
prior to the payment of any benefits, interest on the account
balance since the preceding credit under this Section 3.1.2, if
any, at an annual rate, compounded monthly, equal to the Prime Rate
for the calendar year for the period or periods for which such
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accrual is recorded.
3.2 Statement of Accounts. The Bank shall provide to the Director,
within one-hundred and twenty days after each calendar year-end, a statement
setting forth the Deferral Account balance.
3.3 Accounting Device Only. The Deferral Account is solely a device for
measuring amounts to be paid under this Agreement. The Deferral Account is not a
trust fund of any kind. The Director is a general unsecured creditor of the Bank
for the payment of benefits. The benefits represent the mere Bank promise to pay
such benefits. The Director's rights are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by the Director's creditors.
ARTICLE 4
Lifetime Benefits
4.1 Normal Termination Benefit. Upon the Director's Termination of
Service, the Bank shall pay to the Director the benefit described in this
Section 4.1.
4.1.1 Amount of Benefit. The benefit under this Section 4.1 is the
Deferral Account balance at the Director's Termination of Service.
4.1.2 Payment of Benefit. The Bank shall pay the benefit to the
Director in the form elected by the Director on the Election Form.
The Bank shall continue to credit interest under Section 3.1.2 on
any unpaid balance of the benefit.
4.2 Change in Control Benefit. Upon a Change in Control while the
Director is in the active service of the Bank, the Bank shall pay to the
Director the benefit described in this Section 4.2 in lieu of any other benefit
under this Agreement.
4.2.1 Amount of Benefit. The benefit under this Section 4.2 is the
Deferral Account balance at the date of the Director's termination
of Service.
4.2.2 Payment of Benefit. The Bank shall pay the benefit to the
Director in a lump sum within ten calendar days after the
Director's Termination of Service.
4.3 Hardship Distribution. Upon the Bank's determination (following
petition by the Director) that the Director has suffered an unforeseeable
financial emergency as described in Section 2.2.2, the Bank shall distribute to
the Director all or a portion of the Deferral Account balance as determined by
the Bank, but in no event shall the distribution be greater than is necessary to
relieve the financial hardship as determined in by majority vote of the Board of
Directors of the Bank in its good faith discretion, with the Director
abstaining.
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Article 5
Death Benefits
5.1 Death During Active Service. If the Director dies while in
the active service of the Bank, the Bank shall pay to the Director's
beneficiary the benefit described in this Section 5.1.
5.1.1 Insurance Policy in Effect. If the Director dies while the
Insurance Policy is validly in effect, the benefit under Section
5.1 is the greater of (a) the applicable Projected Benefit for the
payment method in effect at death as shown on Exhibit II, or (b)
payout of the Deferral Account balance at the date of the
Director's death under the payment method in effect at death.
5.1.2 Insurance Policy Not in Effect. If the Director dies while
the Insurance Policy is not validly in effect, the benefit under
Section 5.1 is the Deferral Account balance at the date of the
Director's death.
5.1.3 Payment of Benefit. The Bank shall pay the benefit to the
beneficiary in the form elected by the Director on the Election
Form and in effect at death. The Bank shall continue to credit
interest under Section 3.1.2 on any unpaid balance of the benefit.
5.2 Death During Benefit Period. If the Director dies after benefit
payments have commenced under this Agreement but before receiving all such
payments, the Bank shall pay the remaining benefits to the Director's
beneficiary at the same time and in the same amounts they would have been paid
to the Director had the Director survived. The benefits under this Section 5.2
shall be paid in lieu of any benefits payable in the event of death during
active service pursuant to Section 5.1.
Article 6
Beneficiaries
6.1 Beneficiary Designations. The Director shall designate a
beneficiary by filing a written designation with the Bank. The Director may
revoke or modify the designation at any time by filing a new designation. Such
designation and modifications thereto may be made on a "Beneficiary Designation"
in the form shown on page 2 of Exhibit I that is properly completed and filed
with and accepted by the Bank. Designations will only be effective if signed by
the Director and accepted by the Bank during the Director's lifetime. The
Director's beneficiary designation shall be deemed automatically revoked if the
beneficiary predeceases the Director, or if the Director names a spouse as
beneficiary and the marriage is subsequently dissolved. If the Director dies
without a valid beneficiary designation, all payments shall be made to the
Director's surviving spouse, if any, and if none, to the Director's surviving
children and the descendants of any deceased child by right of representation,
and if no children or descendants survive, to the Director's estate.
4
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6.2 Facility of Payment. If a benefit is payable to a minor, to a
person declared incompetent, or to a person incapable of handling the
disposition of his or her property, the Bank may pay such benefit to the
guardian, legal representative or person having the care or custody of such
minor, incompetent person or incapable person. The Bank may require proof of
incompetency, minority or guardianship as it may deem appropriate prior to
distribution of the benefit. Such distribution shall completely discharge the
Bank from all liability with respect to such benefit.
Article 7
General Limitations
Notwithstanding any provision of this Agreement to the contrary, the
Bank shall not pay any benefit under this Agreement that is attributable to the
interest accrued on Director contributions:
7.1 Excess Parachute Payment. To the extent the benefit would be an
excess parachute payment under Section 280G of the Code.
7.2 Suicide. If the Director commits suicide within two years after the
date of this Agreement, or if the Director has made any material misstatement of
fact on any application for the Insurance Policy.
Article 8
Claims and Review Procedures
8.1 Claims Procedure. The Bank shall notify the Director's beneficiary
in writing, within ninety days of his or her written application for benefits,
of his or her eligibility or non-eligibility for benefits under the Agreement.
If the Bank determines that the beneficiary is not eligible for benefits or full
benefits, the notice shall set forth (1) the specific reasons for such denial,
(2) a specific reference to the provisions of the Agreement on which the denial
is based, (3) a description of any additional information or material necessary
for the claimant to perfect his or her claim, and a description of why it is
needed, and (4) an explanation of the Agreement's claims review procedure and
other appropriate information as to the steps to be taken if the beneficiary
wishes to have the claim reviewed. If the Bank determines that there are special
circumstances requiring additional time to make a decision, the Bank shall
notify the beneficiary of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to an additional
ninety-day period.
8.2 Review Procedure. If the beneficiary is determined by the Bank not
to be eligible for benefits, or if the beneficiary believes that he or she is
entitled to greater or different benefits, the beneficiary shall have the
opportunity to have such claim reviewed by the Bank by filing a petition for
review with the Bank within sixty days after receipt of the notice issued by the
Bank. Said petition shall state the specific reasons which the beneficiary
believes entitle him or her to benefits or to greater or different benefits.
Within sixty days after receipt by the Bank of the
5
<PAGE>
petition, the Bank shall afford the beneficiary (and counsel, if any) an
opportunity to present his or her position to the Bank orally or in writing, and
the beneficiary (or counsel) shall have the right to review the pertinent
documents. The Bank shall notify the beneficiary of its decision in writing
within the sixty-day period, stating specifically the basis of its decision,
written in a manner calculated to be understood by the beneficiary and the
specific provisions of the Agreement on which the decision is based. If, because
of the need for a hearing, the sixty-day period is not sufficient, the decision
may be deferred for up to another sixty-day period at the election of the Bank,
but notice of this deferral shall be given to the beneficiary.
Article 9
Amendments and Termination
The Bank may amend or terminate this Agreement at any time prior to the
Director's Termination of Service by written notice to the Director. In no event
shall this Agreement be terminated without payment to the Director of the
Deferral Account balance attributable to the Director's deferrals and interest
credited on such amounts.
Article 10
Miscellaneous
10.1 Binding Effect. This Agreement shall bind the Director and the
Bank, and their beneficiaries, survivors, executors, administrators and
transferees.
10.2 No Guaranty of Employment or Election. This Agreement is not a
contract for services. It does not give the Director the right to remain a
Director of the Bank, nor does it interfere with the shareholder's rights to
replace the Director. It also does not require the Director to remain a Director
nor interfere with the Director's right to terminate services at any time.
10.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
10.4 Tax Withholding. The Bank shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
10.5 Applicable Law. The Agreement and all rights hereunder shall
be governed by the laws of the State of Maryland, except to the extent preempted
by the laws of the United States of America.
10.6 Unfunded Arrangement. The Director and beneficiary are general
unsecured creditors of the Bank for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Bank to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. The Insurance Policy and any other insurance on the
Director's life
6
<PAGE>
in which the Bank has an interest is a general asset of the Bank to which
neither the Director nor any beneficiary has any preferred or secured claim of
any kind, and does not represent funding for the benefit under this Agreement.
Any representation or assertion contrary to this Section 10.6 is a material
breach of this Agreement by the representing or asserting party, which, if such
party is the Executive or, following his death, a beneficiary, shall immediately
result in the cessation of any and all payments and the elimination of any
liability hereunder for any payment not made prior to such assertion or
representation, and, if such party is the Bank, shall subject it to liability
for actual damages for such breach.
10.7 Successors. This Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Bank which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank.
IN WITNESS WHEREOF, the Director and a duly authorized Bank officer
have signed this Agreement.
DIRECTOR SANDY SPRING NATIONAL BANK
OF MARYLAND
By
- ------------------------------------ -------------------------------------
Title
----------------------------------
7
<PAGE>
Exhibit 10(c)
<PAGE>
SANDY SPRING NATIONAL BANK OF MARYLAND
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS AGREEMENT is made this 14th day of May, 1997 by and between Sandy
Spring National Bank of Maryland (the "Bank"), and Hunter R. Hollar (the
"Executive").
INTRODUCTION
To encourage the Executive to remain a senior officer of the Bank, the
Bank is willing to provide salary continuation benefits to the Executive. The
Bank will pay the benefits from its general assets.
AGREEMENT
The Executive and the Bank agree as follows:
Article 1
Definitions
1.1 Definitions. Whenever used in this Agreement, the following words
and phrases shall have the meanings specified:
1.1.1 "Accrued Benefit" means the amount of liability for benefits
to be paid under this Agreement recorded on the books of the Bank in
accordance with Generally Accepted Accounting Principles and without
reduction for any income tax benefit related thereto.
1.1.2 "Benefit Percentage" means 70%.
1.1.3 "Change in Control" means the earliest of:
a. The acquisition by any entity, person or group (other
than the acquisition by a tax-qualified retirement
plan sponsored by Sandy Spring Bancorp, Inc.
("Bancorp") or the Bank) of beneficial ownership, as
that term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, of more than 25% of
the outstanding capital stock of Bancorp or the Bank
entitled to vote for the election of directors
("Voting Stock");
b. The commencement by any entity, person, or group
(other than Bancorp or the Bank, a subsidiary of
Bancorp or the Bank, or a tax-qualified retirement
plan sponsored by Bancorp or the Bank) of
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a tender offer or an exchange offer for more than 20%
of the outstanding Voting Stock of Bancorp or the
Bank;
c. The effective time of (i) a merger or consolidation
of Bancorp or the Bank with one or more other
corporations as a result of which the holders of the
outstanding Voting Stock of Bancorp or the Bank
immediately prior to such merger exercise voting
control over less than 80% of the Voting Stock of the
surviving or resulting corporation, or (ii) a
transfer of substantially all of the property of
Bancorp or the Bank other than to an entity of which
Bancorp or the Bank owns at least 80% of the Voting
Stock;
d. Upon the acquisition by any entity, person, or group
of the control of the election of a majority of the
Bank's or Bancorp's directors;
e. At such time that, during any period of two
consecutive years, individuals who at the beginning
of such period constitute the Board of Bancorp or the
Bank (the "Continuing Directors") cease for any
reason to constitute at least two-thirds thereof,
provided that any individual whose election or
nomination for election as a member of the Board was
approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be
considered a Continuing Director.
1.1.4 "Code" means the Internal Revenue Code of 1986, as
amended. References to a Code section shall be deemed to be to that
section as it now exists and to any successor provisions.
1.1.5 "Disability" means a physical or mental infirmity that
impairs the Executive's ability to substantially perform his duties
under this Agreement and that results in the Executive's becoming
eligible for long-term disability benefits under a long-term disability
plan maintained for Bank employees (or, if the Bank has no such plan in
effect, that impairs the Executive's ability to substantially perform
his duties for a period of one-hundred and eighty consecutive days).
The board of directors of the Bank shall determine whether or not the
Executive is and continues to be permanently disabled for purposes of
this Agreement in good faith, based upon competent medical advice and
other factors that it reasonably believes to be relevant. As a
condition to any benefits, the Bank may require the Executive to submit
to such physical or mental evaluations and tests as the Bank's Board of
Directors deems appropriate.
1.1.6 "Early Retirement Date" means the date on which the
Executive has both (a) attained age sixty and (b) completed ten Years
of Service.
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1.1.7 "Final Average Pay" means the Executive's three-year
average cash compensation, determined by adding (a) the total base
salary paid to the Executive for the thirty-six months preceding the
date of termination (or other date specified in this Agreement) divided
by three, and (b) one-third of the total cash bonuses (including,
without limitation, bonuses awarded under the Bank's Stakeholder
Program and similar programs) awarded to the Executive during the three
calendar years preceding the date of termination (or other date
specified in this Agreement). Final Average Pay shall not be reduced
for any pay reduction contributions (x) to cash or deferred
arrangements under Section 401(k) of the Code, (y) to a cafeteria plan
under Section 125 of the Code, or (z) to a nonqualified deferred
compensation plan. Final Average Pay shall not be increased by any
reimbursed expenses, credits, or benefits under any plan of deferred
compensation to which the Bank contributes, or any additional cash
compensation or compensation payable in a form other than cash.
1.1.8 "Good Reason" means the occurrence of any of the
following without Executive's express written consent:
a. A material breach by Bancorp or the Bank
of their obligation under a binding
employment agreement with the Executive;
b. A material reduction in the Executives's
responsibilities or authority, or a
requirement that the Executive report to any
person or group other than the board of
directors of Bancorp and the Bank (or any
other effective reduction in reporting
responsibilities) in connection with his
employment with Bancorp or the Bank;
c. Assignment to the Executive of duties of
a nonexecutive nature or duties for which he
is not reasonably equipped by his skills and
experience;
d. Failure of the Executive to be elected or
reelected to the Board of Bancorp or the
Bank;
e. Any reduction in salary or material
reduction in benefits below the amounts to
which he was entitled prior to a Change in
Control;
f. Termination of incentive and benefit plans,
programs or arrangements, or reduction of
the Executive's participation to such an
extent as to materially reduce their
aggregate value below their aggregate value
immediately prior to a Change in Control.
g. A requirement that the Executive relocate
his principal business office or his
principal place of residence outside
Montgomery County, Maryland, or the
assignment to the Executive of duties that
would reasonably require such a relocation;
h. A requirement that the Executive spend
more than thirty normal working days away
from Montgomery County, Maryland during any
consecutive twelve-month period; or
i. Failure to provide office facilities,
secretarial services, and other
administrative services to Executive that
are substantially equivalent
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to the facilities and services provided to
the Executive immediately prior to the
Change in Control (excluding brief periods
during which office facilities may be
temporarily unavailable due to fire, natural
disaster, or other calamity).
Notwithstanding the foregoing a reduction or elimination of
the Executive's benefits under one or more benefit plans maintained by
Bancorp or the Bank as part of a good faith, overall reduction or
elimination of such plan or plans or benefits thereunder applicable to
all participants in a manner that does not discriminate against the
Executive (except as such discrimination may be necessary to comply
with law) shall not constitute an event of Good Reason or a material
breach of this Agreement, provided that benefits of the type or to the
general extent as those offered under such plans prior to such
reduction or elimination are not available to other officers of Bancorp
or the Bank or any company that controls either of them under a plan or
plans in or under which the Executive is not entitled to participate,
and receive benefits, on a fair and nondiscriminatory basis. This
provision shall not affect the rights of the Executive to enforce this
Agreement.
A termination with Good Reason means a Termination of
Employment by the Executive by written notice to the Bank, which notice
may be immediately effective, given within ninety days of the event of
Good Reason.
1.1.9 "Insurance Policy" means a single premium life insurance
policy which may be acquired by the Bank, in its sole discretion, as
sole owner, on the life of the Executive in connection with this
Agreement.
1.1.10 "Just Cause" means, as determined in good faith by the
Bank's board of directors, the Executive's:
a. Personal dishonesty;
b. Incompetence;
c. Willful misconduct;
d. Breach of fiduciary duty involving personal
profit;
e. Intentional failure to perform duties under
this Agreement;
f. Other, continuing material failure to
perform his duties after reasonable
notification (which shall be stated in writing
and given at least fifteen days prior to
termination) by the board of directors of the
Bank of such failure;
g. Willful violation of any law, rule or
regulation (other than traffic violations or
similar offenses) or final cease-and-desist
order; or
h. Material breach by the Executive of any
provision of this Agreement or an Employment
Agreement to which he and the Bank are parties.
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1.1.11 "Normal Retirement Date" means the date on which the
Executive has both (a) attained age sixty-five and (b) completed ten
Years of Service.
1.1.12 "Termination of Employment" means the Executive's
ceasing to be employed by the Bank for any reason whatsoever, voluntary
or involuntary, other than by reason of an approved leave of absence.
1.1.13 "Years of Service" means the total number of
twelve-month periods during which the Executive is employed on a
full-time basis by the Bank prior to and after the date of this
Agreement, inclusive of any approved leaves of absence.
Article 2
Lifetime Benefits
2.1 Normal Retirement Benefit. If the Executive terminates
employment on or after the Normal Retirement Date for reasons other than
death, the Bank shall pay the Executive the benefit described in this
Section 2.1.
2.1.1. Amount of Benefit. The benefit under this
Section 2.1 is one-twelfth of the Executive's Final Average Pay
multiplied by the Benefit Percentage, which product is reduced by:
2.1.1.1 Social Security Benefits. One-half of the
amount of monthly unreduced primary (not family) retirement
benefits under the United States Social Security Act that the
Executive would be eligible for if application were made as of
the Executive's sixty-fifth birthday, assuming that the
Executive had earnings at or above the maximum contribution
and benefit base under Section 230 of the United States Social
Security Act for his working career; and
2.1.1.2 Bank's Qualified Pension Plan Benefits. The
straight life, monthly payment, annuity benefit the Executive
would be entitled to receive under the Bank's qualified
pension plan as of the Executive's Termination of Employment.
2.1.1.3 Prior Employer's Pension Plan Benefits. The
straight life, monthly payment, annuity benefit the Executive
would be entitled to receive as of the Executive's Termination
of Employment because of employment by any and all other banks
or companies prior to the Executive's full time employment by
the Bank under any and all qualified, defined benefit pension
plans maintained by any and all such other banks or companies.
2.1.1.4 Bank's Qualified 401(k) and Profit Sharing
Plan. The straight life, maximum monthly payment, fifteen-year
annuity that may be
5
<PAGE>
purchased at the date of Termination from an issuer rated
superior by A.M. Best (or, in the Bank's discretion, with an
equivalent rating from another rating organization of similar
reputation) for cash equal to the value of the Executive's
account at the date of Termination under the Bank's Cash and
Deferred Profit Sharing Plan and Trust (or any successor plan)
attributable to Bank contributions, including the earnings
thereon.
2.1.2 Payment of Benefit. The Bank shall pay the benefit to
the Executive on the first day of each month commencing with the month
following the Termination of Employment and continuing until the later
of the Executive's death or the payment of one-hundred and seventy-nine
additional monthly payments.
2.2. Early Retirement Benefit. If the Executive terminates
employment on or after the Early Retirement Date but before the Normal
Retirement Date, and for reasons other than death or Disability, the Bank
shall pay to the Executive the benefit described in this Section 2.2.
2.2.1 Amount of Benefit. The benefit under this Section 2.2 is
the amount of the Accrued Benefit at the date of such early retirement
divided by one-hundred and eighty.
2.2.2 Payment of Benefit. The Bank shall pay the benefit to
the Executive on the first day of each month commencing with the month
following the Executive's Termination of Employment and continuing
until the later of the Executive's death or the payment of one-hundred
and seventy-nine additional monthly payments.
2.3 Disability Benefit. If the Executive's employment is
terminated for Disability prior to the Normal Retirement Date, the Bank
shall pay to the Executive the benefit described in this Section 2.3.
2.3.1 Amount of Benefit. The benefit under this Section 2.3 is
the amount of the Accrued Benefit at the date of such early retirement
divided by one-hundred and eighty.
2.3.2 Payment of Benefit. The Bank shall pay the benefit to
the Executive on the first day of each month commencing with the month
following the Executive's Termination of Employment and continuing
until the later of the Executive's death or the payment of one-hundred
and seventy-nine additional months.
2.4 Change in Control Benefits. If within the period beginning six
months prior to and ending two years after a Change in Control, (a) the
Bank shall terminate the Executive's employment without Just Cause, or (b)
the Executive shall terminate his employment with Good Reason, the Bank
shall pay to the Executive the benefit described in this Section 2.4 in
lieu of any other benefit under this Agreement.
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2.4.1 Amount of Benefit. The benefit under this Section 2.4
is the Normal Retirement Benefit described in Section 2.1 calculated as
if the date of Termination of Employment were the Executive's Normal
Retirement Date, or, if elected by the Executive pursuant to Section
2.4.2.1, the Early Retirement Benefit described in Section 2.4.1
calculated as if the date of Termination of Employment were the
Executive's Early Retirement Date.
2.4.2 Payment of Benefits.
2.4.2.1 Approved Change in Control. If the Change in
Control was approved in advance by a majority of the
Continuing Directors, the Bank shall pay the benefit to the
Executive on the first day of each month commencing with the
month following the day on which: (i) the Executive attains
age sixty-five, or, if the Executive so elects in writing
within ten days of Termination of Employment, (ii) the
Executive attains age sixty, and, in either case, continuing
until the later of the Executive's death or the payment of
one-hundred and seventy-nine additional monthly payments.
2.4.2.2 Unapproved Change in Control. If the Change
in Control was not approved in advance by a majority of the
Continuing Directors, the Bank shall pay the benefit to the
Executive on the first day of each month commencing with the
month following the Termination of Employment and continuing
until the later of the Executive's death or one-hundred and
seventy-nine (179) additional monthly payments.
2.5. Vested Benefits following Other Terminations. Subject to
Section 2.4, if (i) the Executive voluntarily terminates employment before
the Early Retirement Date for reasons other than Death or Disability, or
(ii) the Bank terminates the Executive's Employment without Just Cause, the
Bank shall pay to the Executive the benefits described in this section.
2.5.1 Amount of Benefit. The benefit under this Section 2.5
is the straight life, maximum monthly payment, fifteen-year annuity
beginning on the first day of the month following the date on which (i)
the Executive attains age sixty-five, or, if the Executive so elects in
writing within ten days of Termination of Employment, (ii) the
Executive attains age sixty, that may be purchased in the two months
following the date of Termination from an issuer rated superior by A.M.
Best (or, in the Bank's discretion, with an equivalent rating from
another rating organization of similar reputation) for cash equal to
the amount of the vested Accrued Benefit at the date of such
termination.
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2.5.2 Vested Accrued Benefit. For purposes of this
section 2.5, only, the Accrued Benefit shall vest in accordance with the
following schedule:
<TABLE>
<CAPTION>
Years of Percentage of Accrued
Service Benefit That Is Vested
----------- ----------------------
<S> <C>
less than 4 0%
4 20%
5 25%
6 30%
7 35%
8 40%
9 45%
10 50%
11 60%
12 70%
13 80%
14 90%
15 100%
</TABLE>
2.5.3 Payment of Benefit. The Bank shall pay the monthly
benefit (or cause such benefit to be paid) to the Executive, or his
beneficiary after the Executive's death, on the first day of each month
commencing with the month following the month in which the Executive
attains (i) age sixty-five, or if elected by the Executive pursuant to
section 2.5.2. (ii) age sixty. The Bank may, in its sole discretion,
purchase such an annuity for or transfer its ownership rights to the
Executive in settlement of this obligation, in which case all of the
Bank's obligations under this Agreement shall immediately terminate.
Article 3
Death Benefits
3.1 Death During Active Service. If the Executive dies while
in the active service of the Bank, the Bank shall pay to the Executive's
beneficiary the benefit described in this Section 3.1.
3.1.1 Insurance Policy in Effect. If the Executive dies
while the Insurance Policy is validly in effect, the benefit under
Section 3.1 is the greater of (i) the lifetime benefit that would have
been paid to the Executive under Section 2.1 calculated as if the date
of the Executive's death were the Normal Retirement Date, or (ii) the
straight life, maximum monthly payment, fifteen-year annuity, for
payments beginning the month following the Executive's death, that
could be purchased from an issuer rated superior by A.M. Best (or, in
the Bank's discretion, with an equivalent rating from another rating
organization of similar reputation) for cash equal to three times the
Executive's Final Average Pay.
3.1.2 Insurance Policy Not in Effect. If the Executive dies
while the Insurance Policy is not validly in effect, the benefit under
Section 3.1 is the Accrued Benefit at the date of the Executive's death
divided by one-hundred and eighty.
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3.1.3 Payment of Benefit. The Bank shall pay the benefit to
the Beneficiary on the first day of each month commencing with the
month following the Executive's death and continuing for one-hundred
and seventy-nine additional months.
Article 4
Beneficiaries
4.1 Beneficiary Designations. The Executive shall designate a
beneficiary by filing a written designation with the Bank. The Executive
may revoke or modify the designation at any time by filing a new
designation. However, designations will only be effective if signed by the
Executive and accepted by the Bank during the Executive's lifetime. The
Executive's beneficiary designation shall be deemed automatically revoked
if the beneficiary predeceases the Executive, or if the Executive names a
spouse as beneficiary and the marriage is subsequently dissolved. If the
Executive dies without a valid beneficiary designation, all payments shall
be made to the Executive's surviving spouse, if any, and if none, to the
Executive's surviving children and to the descendants of any deceased child
by right of representation, and if no children or descendants survive, to
the Executive's estate.
4.2 Facility of Payment. If a benefit is payable to a minor, to a
person declared incompetent, or to a person incapable of handling the
disposition of his or her property, the Bank may pay such benefit to the
guardian, legal representative, or person having the care or custody of
such minor, incompetent person, or incapable person. The Bank may require
proof of incompetency, minority, or guardianship as it may deem appropriate
prior to the distribution of the benefit. Such distribution shall
completely discharge the Bank from all liability with respect to such
benefit.
Article 5
General Limitations
Notwithstanding any provision of this Agreement to the contrary, the
Bank shall not pay any amount of any benefit under this Agreement:
5.1 Excess Parachute Payment. To the extent the amount of benefit
would be an excess parachute payment under Section 280G of the Code, with
consideration for any right of the Executive, under an employment agreement
with the Bank or otherwise, to waive benefits hereunder or other payments
in order to prevent an excess parachute payment.
5.2 Termination for Cause. If the Bank terminates the Executive's
employment for Just Cause.
5.3 Suicide. No benefits shall be payable if the Executive commits
suicide within two years after the date of this Agreement, or if the
Executive has made any material misstatement of fact on any application for
the Insurance Policy.
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Article 6
Claims and Review Procedures
6.1 Claims Procedures. The Bank shall notify the Executive's
beneficiary in writing, within ninety days of his or her written
application for benefits, of his or her eligibility or noneligibility for
benefits under the Agreement. If the Bank determines that the beneficiary
is not eligible for benefits or full benefits, the notice shall set forth
(a) the specific reasons for such denial, (b) a specific reference to the
provisions of the Agreement on which the denial is based, (c) a description
of any additional information or material necessary for the claimant to
perfect his or her claim, and a description of why it is needed, and (d) an
explanation of the Agreement's claims review procedure and other
appropriate information as to the steps to be taken if the beneficiary
wishes to have the claim reviewed. If the Bank determines that there are
special circumstances requiring additional time to make a decision
regarding eligibility for benefits, the Bank shall notify the beneficiary
of the special circumstances and the date by which a decision is expected
to be made, and may extend the time by which notice may be given of such
decision for up to an additional ninety-day period.
6.2 Review Procedure. If the beneficiary is determined by the Bank
not to be eligible for benefits, or if the beneficiary believes that he or
she is entitled to greater or different benefits, the beneficiary shall
have the opportunity to have such claim reviewed by the Bank by filing a
petition for review with the Bank within sixty days after receipt of the
notice issued by the Bank. Such petition shall state the specific reasons
that the beneficiary believes entitle him or her to benefits or to greater
or different benefits. Within sixty days after receipt by the Bank of the
petition, the Bank shall afford the beneficiary (and counsel, if any) an
opportunity to present his or her position to the Bank orally or in
writing, and the beneficiary (or counsel) shall have the right to review
the pertinent documents. The Bank shall notify the beneficiary of its
decision in writing within the sixty-day period, stating specifically the
basis of its decision, written in a manner calculated to be understood by
the beneficiary, and the specific provisions of the Agreement on which the
decision is based. If, because of the need for a hearing, the sixty-day
period is not sufficient, notice of such decision may be deferred for up to
another sixty-day period at the election of the Bank, but notice of this
deferral shall be given to the beneficiary.
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<PAGE>
Article 7
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement
signed by the Bank and the Executive.
Article 8
Miscellaneous
8.1 Binding Effect. This Agreement shall bind the Executive and
the Bank, and their beneficiaries, survivors, executors, administrators,
and transferees.
8.2 No Guaranty of Employment. This Agreement is not an employment
policy or contract. It does not give the Executive the right to remain an
employee of the Bank, nor does it interfere with the Bank's right to
discharge the Executive. It also does not require the Executive to remain
an employee nor interfere with the Executive's right to terminate
employment at any time.
8.3 Non-Transferability. Benefits under this Agreement cannot be
sold, transferred, assigned, pledged, attached, or encumbered in any
manner.
8.4 Tax Withholding. The Bank shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
8.5 Applicable Law. The Agreement and all rights hereunder shall
be governed by the laws of the State of Maryland, except to the extent
preempted by the laws of the United States of America.
8.6 Unfunded Arrangement. The Executive and beneficiary are
general unsecured creditors of the Bank for the payment of benefits under
this Agreement. The benefits represent the mere promise by the Bank to pay
such benefits. The rights to benefits are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors. The Insurance Policy and any other
insurance on the Executive's life in which the Bank has an interest is a
general asset of the Bank to which neither the Executive nor any
beneficiary has any preferred or secured claim of any kind, and does not
represent funding for the benefit under this Agreement. Any representation
or assertion contrary to this section 8.6 is a material breach of this
Agreement by the representing or asserting party, which, if such party is
the Executive or, following his death, a beneficiary, shall immediately
result in the cessation of any and all payments and the elimination of any
liability hereunder for any payment not made prior to such assertion or
representation, and, if such party is the Bank, shall subject it to
liability for actual damages for such breach.
8.7 Non-Competition Provisions. Regardless of anything herein to
the contrary, except in the case of a Termination of Employment by the Bank
without Just Cause, a Termination of
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<PAGE>
Employment by the Executive with Good Reason, or with the permission of the
Bank, during the two years immediately following the Executive's
Termination of Employment, the Executive shall not serve as an officer or
director or employee of any bank holding company, bank, savings
association, savings and loan holding company, or mortgage company (any of
which, a "Financial Institution") which Financial Institution offers
products or services competing with those offered by the Bank from offices
in any county in the State of Maryland or of any other State in which the
Bank or any of its affiliates has a branch, and shall not interfere with
the relationship of the Bank and any of its employees, agents, or
representatives. In the event of any breach by the Executive of this
Covenant Not to Compete, the Board of Directors of the Bank shall direct
that any unpaid balance of any payments to the Executive under this
Agreement be suspended, and shall thereupon notify the Executive of such
suspension, in writing. Thereupon, if the Board of Directors of the Bank
shall determine that such breach by the executive exists at any time after
a period of one month following notification of the such suspension, all
rights of the Executive and his beneficiary under this agreement, including
rights to any and all further payments hereunder, shall thereupon
terminate.
8.8 Successors. This Agreement shall inure to the benefit of and
be binding upon any corporate or other successor of the Bank which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Bank.
IN WITNESS WHEREOF, the Executive and a duly authorized Bank officer
have signed this Agreement.
EXECUTIVE SANDY SPRING NATIONAL BANK OF
MARYLAND
/s/ Hunter R. Hollar By:/s/ W. Drew Stabler
-------------------- -------------------
Title: Chairman of the Board
---------------------
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<PAGE>
Exhibit 10(d)
1
<PAGE>
SANDY SPRING NATIONAL BANK OF MARYLAND
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS AGREEMENT is made this 14th day of May, 1997 by and between Sandy
Spring National Bank of Maryland (the "Bank"), and (the "Executive").
INTRODUCTION
To encourage the Executive to remain a senior officer of the Bank, the
Bank is willing to provide salary continuation benefits to the Executive. The
Bank will pay the benefits from its general assets.
AGREEMENT
The Executive and the Bank agree as follows:
Article 1
Definitions
1.1 Definitions. Whenever used in this Agreement, the following
words and phrases shall have the meanings specified:
1.1.1 "Accrued Benefit" means the amount of liability for
benefits to be paid under this Agreement recorded on the books of the
Bank in accordance with Generally Accepted Accounting Principles and
without reduction for any income tax benefit related thereto.
1.1.2 "Benefit Percentage" means 65%.
1.1.3 "Change in Control" means the earliest of:
i. The acquisition by any entity, person or group
(other than the acquisition by a tax-qualified
retirement plan sponsored by Sandy Spring
Bancorp, Inc. ("Bancorp") or the Bank) of
beneficial ownership, as that term is defined
in Rule 13d-3 under the Securities Exchange Act
of 1934, of more than 25% of the outstanding
capital stock of Bancorp or the Bank entitled
to vote for the election of directors ("Voting
Stock");
j. The commencement by any entity, person, or
group (other than Bancorp or the Bank, a
subsidiary of Bancorp or the Bank, or a tax-
qualified retirement plan sponsored by Bancorp
or the Bank)
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<PAGE>
of a tender offer or an exchange offer for more
than 20% of the outstanding Voting Stock of
Bancorp or the Bank;
k. The effective time of (i) a merger or
consolidation of Bancorp or the Bank with one
or more other corporations as a result of which
the holders of the outstanding Voting Stock of
Bancorp or the Bank immediately prior to such
merger exercise voting control over less than
80% of the Voting Stock of the surviving or
resulting corporation, or (ii) a transfer of
substantially all of the property of Bancorp or
the Bank other than to an entity of which
Bancorp or the Bank owns at least 80% of the
Voting Stock;
l. Upon the acquisition by any entity, person, or
group of the control of the election of a
majority of the Bank's or Bancorp's directors;
m. At such time that, during any period of two
consecutive years, individuals who at the
beginning of such period constitute the Board
of Bancorp or the Bank (the "Continuing
Directors") cease for any reason to constitute
at least two-thirds thereof, provided that any
individual whose election or nomination for
election as a member of the Board was approved
by a vote of at least two-thirds of the
Continuing Directors then in office shall be
considered a Continuing Director.
1.1.4 "Code" means the Internal Revenue Code of 1986, as
amended. References to a Code section shall be deemed to be to that
section as it now exists and to any successor provisions.
1.1.5 "Disability" means a physical or mental infirmity that
impairs the Executive's ability to substantially perform his duties
under this Agreement and that results in the Executive's becoming
eligible for long-term disability benefits under a long-term disability
plan maintained for Bank employees (or, if the Bank has no such plan in
effect, that impairs the Executive's ability to substantially perform
his duties for a period of one-hundred and eighty consecutive days).
The board of directors of the Bank shall determine whether or not the
Executive is and continues to be permanently disabled for purposes of
this Agreement in good faith, based upon competent medical advice and
other factors that it reasonably believes to be relevant. As a
condition to any benefits, the Bank may require the Executive to submit
to such physical or mental evaluations and tests as the Bank's Board of
Directors deems appropriate.
1.1.6 "Early Retirement Date" means the date on which the
Executive has both (a) attained age sixty and (b) completed ten Years
of Service.
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<PAGE>
1.1.7 "Final Average Pay" means the Executive's three-year
average cash compensation, determined by adding (a) the total base
salary paid to the Executive for the thirty-six months preceding the
date of termination (or other date specified in this Agreement) divided
by three, and (b) one-third of the total cash bonuses (including,
without limitation, bonuses awarded under the Bank's Stakeholder
Program and similar programs) awarded to the Executive during the three
calendar years preceding the date of termination (or other date
specified in this Agreement). Final Average Pay shall not be reduced
for any pay reduction contributions (x) to cash or deferred
arrangements under Section 401(k) of the Code, (y) to a cafeteria plan
under Section 125 of the Code, or (z) to a nonqualified deferred
compensation plan. Final Average Pay shall not be increased by any
reimbursed expenses, credits, or benefits under any plan of deferred
compensation to which the Bank contributes, or any additional cash
compensation or compensation payable in a form other than cash.
1.1.8 "Good Reason" means the occurrence of any of the
following without Executive's express written consent:
a. A material breach by Bancorp or the Bank of their
obligation under a binding employment agreement
with the Executive;
b. A material reduction in the Executives's
responsibilities or authority, or a requirement
that the Executive report to any person or group
other than the board of directors of Bancorp and
the Bank (or any other effective reduction in
reporting responsibilities) in connection with his
employment with Bancorp or the Bank;
c. Assignment to the Executive of duties of a
nonexecutive nature or duties for which he is not
reasonably equipped by his skills and experience;
d. Any reduction in salary or material reduction in
benefits below the amounts to which he was
entitled prior to a Change in Control;
e. Termination of incentive and benefit plans,
programs or arrangements, or reduction of the
Executive's participation to such an extent as to
materially reduce their aggregate value below
their aggregate value immediately prior to a
Change in Control.
f. A requirement that the Executive relocate his
principal business office or his principal place
of residence outside Montgomery County, Maryland,
or the assignment to the Executive of duties that
would reasonably require such a relocation;
g. A requirement that the Executive spend more than
thirty normal working days away from Montgomery
County, Maryland during any consecutive twelve-
month period; or
h. Failure to provide office facilities, secretarial
services, and other administrative services to
Executive that are substantially equivalent to the
facilities and services provided to the Executive
immediately prior to the Change in Control
(excluding brief
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periods during which office facilities may be
temporarily unavailable due to fire, natural
disaster, or other calamity).
Notwithstanding the foregoing: (i) a reduction or elimination
of the Executive's benefits under one or more benefit plans maintained
by Bancorp or the Bank as part of a good faith, overall reduction or
elimination of such plan or plans or benefits thereunder applicable to
all participants in a manner that does not discriminate against the
Executive (except as such discrimination may be necessary to comply
with law) shall not constitute an event of Good Reason or a material
breach of this Agreement, provided that benefits of the type or to the
general extent as those offered under such plans prior to such
reduction or elimination are not available to other officers of Bancorp
or the Bank or any company that controls either of them under a plan or
plans in or under which the Executive is not entitled to participate,
and receive benefits, on a fair and nondiscriminatory basis; and (ii) a
requirement that the Executive report to and be subject to the
direction or supervision of a senior officer of Bancorp or the Bank
other than the President and Chief Executive shall not constitute an
event of Good Reason or a material breach of this Agreement. This
provision shall not affect the rights of the Executive to enforce this
Agreement.
A termination with Good Reason means a Termination of
Employment by the Executive by written notice to the Bank, which notice
may be immediately effective, given within ninety days of the event of
Good Reason.
1.1.9 "Insurance Policy" means a single premium life insurance
policy which may be acquired by the Bank, in its sole discretion, as
sole owner, on the life of the Executive in connection with this
Agreement.
1.1.10 "Just Cause" means, as determined in good faith by the
Bank's board of directors, the Executive's:
a. Personal dishonesty;
b. Incompetence;
c. Willful misconduct;
d. Breach of fiduciary duty involving personal
profit;
e. Intentional failure to perform duties under this
Agreement;
f. Other, continuing material failure to perform his
duties after reasonable notification (which shall
be stated in writing and given at least fifteen
days prior to termination) by the board of
directors of the Bank of such failure;
g. Willful violation of any law, rule or regulation
(other than traffic violations or similar
offenses) or final cease-and-desist order; or
h. Material breach by the Executive of any provision
of this Agreement or an Employment Agreement to
which he and the Bank are parties.
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<PAGE>
1.1.11 "Normal Retirement Date" means the date on which the
Executive has both (a) attained age sixty-five and (b) completed ten
Years of Service.
1.1.12 "Termination of Employment" means the Executive's
ceasing to be employed by the Bank for any reason whatsoever, voluntary
or involuntary, other than by reason of an approved leave of absence.
1.1.13 "Years of Service" means the total number of
twelve-month periods during which the Executive is employed on a
full-time basis by the Bank prior to and after the date of this
Agreement, inclusive of any approved leaves of absence.
Article 2
Lifetime Benefits
2.1 Normal Retirement Benefit. If the Executive terminates
employment on or after the Normal Retirement Date for reasons other than death,
the Bank shall pay the Executive the benefit described in this Section 2.1.
2.1.1. Amount of Benefit. The benefit under this Section 2.1
is one-twelfth of the Executive's Final Average Pay multiplied by the
Benefit Percentage, which product is reduced by:
2.1.1.1 Social Security Benefits. One-half of the
amount of monthly unreduced primary (not family) retirement
benefits under the United States Social Security Act that the
Executive would be eligible for if application were made as of
the Executive's sixty-fifth birthday, assuming that the
Executive had earnings at or above the maximum contribution
and benefit base under Section 230 of the United States Social
Security Act for his working career; and
2.1.1.2 Bank's Qualified Pension Plan Benefits. The
straight life, monthly payment, annuity benefit the Executive
would be entitled to receive under the Bank's qualified
pension plan as of the Executive's Termination of Employment.
2.1.1.3 Prior Employer's Pension Plan Benefits. The
straight life, monthly payment, annuity benefit the Executive
would be entitled to receive as of the Executive's Termination
of Employment because of employment by any and all other banks
or companies prior to the Executive's full time employment by
the Bank under any and all qualified, defined benefit pension
plans maintained by any and all such other banks or companies.
2.1.1.4 Bank's Qualified 401(k) and Profit Sharing
Plan. The straight life, maximum monthly payment, fifteen-year
annuity that may be purchased at the date of Termination from
an issuer rated superior by A.M. Best (or, in the Bank's
discretion, with an equivalent rating
5
<PAGE>
from another rating organization of similar reputation) for
cash equal to the value of the Executive's account at the date
of Termination under the Bank's Cash and Deferred Profit
Sharing Plan and Trust (or any successor plan) attributable to
Bank contributions, including the earnings thereon.
2.1.2 Payment of Benefit. The Bank shall pay the benefit to
the Executive on the first day of each month commencing with the month
following the Termination of Employment and continuing until the later
of the Executive's death or the payment of one-hundred and seventy-nine
additional monthly payments.
2.2. Early Retirement Benefit. If the Executive terminates
employment on or after the Early Retirement Date but before the Normal
Retirement Date, and for reasons other than death or Disability, the Bank shall
pay to the Executive the benefit described in this Section 2.2.
2.2.1 Amount of Benefit. The benefit under this Section 2.2 is
the amount of the Accrued Benefit at the date of such early retirement
divided by one-hundred and eighty.
2.2.2 Payment of Benefit. The Bank shall pay the benefit to
the Executive on the first day of each month commencing with the month
following the Executive's Termination of Employment and continuing
until the later of the Executive's death or the payment of one-hundred
and seventy-nine additional monthly payments.
2.3 Disability Benefit. If the Executive's employment is
terminated for Disability prior to the Normal Retirement Date, the Bank shall
pay to the Executive the benefit described in this Section 2.3.
2.3.1 Amount of Benefit. The benefit under this Section 2.3 is
the amount of the Accrued Benefit at the date of such early retirement
divided by one-hundred and eighty.
2.3.2 Payment of Benefit. The Bank shall pay the benefit to
the Executive on the first day of each month commencing with the month
following the Executive's Termination of Employment and continuing
until the later of the Executive's death or the payment of one-hundred
and seventy-nine additional months.
2.4 Change in Control Benefits. If within the period beginning six
months prior to and ending two years after a Change in Control, (a) the Bank
shall terminate the Executive's employment without Just Cause, or (b) the
Executive shall terminate his employment with Good Reason, the Bank shall pay to
the Executive the benefit described in this Section 2.4 in lieu of any other
benefit under this Agreement.
2.4.1 Amount of Benefit. The benefit under this Section 2.4 is
the Normal Retirement Benefit described in Section 2.1 calculated as if
the date of Termination of
6
<PAGE>
Employment were the Executive's Normal Retirement Date, or, if elected
by the Executive pursuant to Section 2.4.2.1, the Early Retirement
Benefit described in Section 2.4.1 calculated as if the date of
Termination of Employment were the Executive's Early Retirement Date.
2.4.2 Payment of Benefits.
2.4.2.1 Approved Change in Control. If the Change in
Control was approved in advance by a majority of the
Continuing Directors, the Bank shall pay the benefit to the
Executive on the first day of each month commencing with the
month following the day on which: (i) the Executive attains
age sixty-five, or, if the Executive so elects in writing
within ten days of Termination of Employment, (ii) the
Executive attains age sixty, and, in either case, continuing
until the later of the Executive's death or the payment of
one-hundred and seventy-nine additional monthly payments.
2.4.2.2 Unapproved Change in Control. If the Change
in Control was not approved in advance by a majority of the
Continuing Directors, the Bank shall pay the benefit to the
Executive on the first day of each month commencing with the
month following the Termination of Employment and continuing
until the later of the Executive's death or one-hundred and
seventy-nine (179) additional monthly payments.
2.5. Vested Benefits following Other Terminations. Subject to
Section 2.4, if (i) the Executive voluntarily terminates employment before the
Early Retirement Date for reasons other than Death or Disability, or (ii) the
Bank terminates the Executive's Employment without Just Cause, the Bank shall
pay to the Executive the benefits described in this section.
2.5.1 Amount of Benefit. The benefit under this Section 2.5
is the straight life, maximum monthly payment, fifteen-year annuity beginning on
the first day of the month following the date on which (i) the Executive attains
age sixty-five, or, if the Executive so elects in writing within ten days of
Termination of Employment, (ii) the Executive attains age sixty, that may be
purchased in the two months following the date of Termination from an issuer
rated superior by A.M. Best (or, in the Bank's discretion, with an equivalent
rating from another rating organization of similar reputation) for cash equal to
the amount of the vested Accrued Benefit at the date of such termination.
7
<PAGE>
2.5.2 Vested Accrued Benefit. For purposes of this section
2.5, only, the Accrued Benefit shall vest in accordance with the
following schedule:
<TABLE>
<CAPTION>
Years of Percentage of Accrued
Service Benefit That Is Vested
------- ----------------------
<S> <C>
less than 4 0%
4 20%
5 25%
6 30%
7 35%
8 40%
9 45%
10 50%
11 60%
12 70%
13 80%
14 90%
15 100%
</TABLE>
2.5.3 Payment of Benefit. The Bank shall pay the monthly
benefit (or cause such benefit to be paid) to the Executive, or his beneficiary
after the Executive's death, on the first day of each month commencing with the
month following the month in which the Executive attains (i) age sixty-five, or
if elected by the Executive pursuant to section 2.5.2. (ii) age sixty. The Bank
may, in its sole discretion, purchase such an annuity for or transfer its
ownership rights to the Executive in settlement of this obligation, in which
case all of the Bank's obligations under this Agreement shall immediately
terminate.
Article 3
Death Benefits
3.1 Death During Active Service. If the Executive dies while in
the active service of the Bank, the Bank shall pay to the Executive's
beneficiary the benefit described in this Section 3.1.
3.1.1 Insurance Policy in Effect. If the Executive dies while
the Insurance Policy is validly in effect, the benefit under Section
3.1 is the greater of (i) the lifetime benefit that would have been
paid to the Executive under Section 2.1 calculated as if the date of
the Executive's death were the Normal Retirement Date, or (ii) the
straight life, maximum monthly payment, fifteen-year annuity, for
payments beginning the month following the Executive's death, that
could be purchased from an issuer rated superior by A.M. Best (or, in
the Bank's discretion, with an equivalent rating from another rating
organization of similar reputation) for cash equal to three times the
Executive's Final Average Pay.
3.1.2 Insurance Policy Not in Effect. If the Executive dies
while the Insurance Policy is not validly in effect, the benefit under
Section 3.1 is the Accrued Benefit at the date of the Executive's death
divided by one-hundred and eighty.
8
<PAGE>
3.1.3 Payment of Benefit. The Bank shall pay the benefit to the
Beneficiary on the first day of each month commencing with the month
following the Executive's death and continuing for one-hundred and
seventy-nine additional months.
Article 4
Beneficiaries
4.1 Beneficiary Designations. The Executive shall designate a
beneficiary by filing a written designation with the Bank. The Executive may
revoke or modify the designation at any time by filing a new designation.
However, designations will only be effective if signed by the Executive and
accepted by the Bank during the Executive's lifetime. The Executive's
beneficiary designation shall be deemed automatically revoked if the beneficiary
predeceases the Executive, or if the Executive names a spouse as beneficiary and
the marriage is subsequently dissolved. If the Executive dies without a valid
beneficiary designation, all payments shall be made to the Executive's surviving
spouse, if any, and if none, to the Executive's surviving children and to the
descendants of any deceased child by right of representation, and if no children
or descendants survive, to the Executive's estate.
4.2 Facility of Payment. If a benefit is payable to a minor, to a
person declared incompetent, or to a person incapable of handling the
disposition of his or her property, the Bank may pay such benefit to the
guardian, legal representative, or person having the care or custody of such
minor, incompetent person, or incapable person. The Bank may require proof of
incompetency, minority, or guardianship as it may deem appropriate prior to the
distribution of the benefit. Such distribution shall completely discharge the
Bank from all liability with respect to such benefit.
Article 5
General Limitations
Notwithstanding any provision of this Agreement to the contrary, the
Bank shall not pay any amount of any benefit under this Agreement:
5.1 Excess Parachute Payment. To the extent the amount of benefit would
be an excess parachute payment under Section 280G of the Code, with
consideration for any right of the Executive, under an employment agreement with
the Bank or otherwise, to waive benefits hereunder or other payments in order to
prevent an excess parachute payment.
5.2 Termination for Cause. If the Bank terminates the Executive's
employment for Just Cause.
5.3 Suicide. No benefits shall be payable if the Executive commits
suicide within two years after the date of this Agreement, or if the Executive
has made any material misstatement of fact on any application for the Insurance
Policy.
9
<PAGE>
Article 6
Claims and Review Procedures
6.1 Claims Procedures. The Bank shall notify the Executive's
beneficiary in writing, within ninety days of his or her written application for
benefits, of his or her eligibility or noneligibility for benefits under the
Agreement. If the Bank determines that the beneficiary is not eligible for
benefits or full benefits, the notice shall set forth (a) the specific reasons
for such denial, (b) a specific reference to the provisions of the Agreement on
which the denial is based, (c) a description of any additional information or
material necessary for the claimant to perfect his or her claim, and a
description of why it is needed, and (d) an explanation of the Agreement's
claims review procedure and other appropriate information as to the steps to be
taken if the beneficiary wishes to have the claim reviewed. If the Bank
determines that there are special circumstances requiring additional time to
make a decision regarding eligibility for benefits, the Bank shall notify the
beneficiary of the special circumstances and the date by which a decision is
expected to be made, and may extend the time by which notice may be given of
such decision for up to an additional ninety-day period.
6.2 Review Procedure. If the beneficiary is determined by the Bank not
to be eligible for benefits, or if the beneficiary believes that he or she is
entitled to greater or different benefits, the beneficiary shall have the
opportunity to have such claim reviewed by the Bank by filing a petition for
review with the Bank within sixty days after receipt of the notice issued by the
Bank. Such petition shall state the specific reasons that the beneficiary
believes entitle him or her to benefits or to greater or different benefits.
Within sixty days after receipt by the Bank of the petition, the Bank shall
afford the beneficiary (and counsel, if any) an opportunity to present his or
her position to the Bank orally or in writing, and the beneficiary (or counsel)
shall have the right to review the pertinent documents. The Bank shall notify
the beneficiary of its decision in writing within the sixty-day period, stating
specifically the basis of its decision, written in a manner calculated to be
understood by the beneficiary, and the specific provisions of the Agreement on
which the decision is based. If, because of the need for a hearing, the
sixty-day period is not sufficient, notice of such decision may be deferred for
up to another sixty-day period at the election of the Bank, but notice of this
deferral shall be given to the beneficiary.
Article 7
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement
signed by the Bank and the Executive.
Article 8
Miscellaneous
8.1 Binding Effect. This Agreement shall bind the Executive and the
Bank, and their beneficiaries, survivors, executors, administrators, and
transferees.
10
<PAGE>
8.2 No Guaranty of Employment. This Agreement is not an employment
policy or contract. It does not give the Executive the right to remain an
employee of the Bank, nor does it interfere with the Bank's right to discharge
the Executive. It also does not require the Executive to remain an employee nor
interfere with the Executive's right to terminate employment at any time.
8.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached, or encumbered in any manner.
8.4 Tax Withholding. The Bank shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
8.5 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of the State of Maryland, except to the extent preempted by
the laws of the United States of America.
8.6 Unfunded Arrangement. The Executive and beneficiary are general
unsecured creditors of the Bank for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Bank to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. The Insurance Policy and any other insurance on the
Executive's life in which the Bank has an interest is a general asset of the
Bank to which neither the Executive nor any beneficiary has any preferred or
secured claim of any kind, and does not represent funding for the benefit under
this Agreement. Any representation or assertion contrary to this section 8.6 is
a material breach of this Agreement by the representing or asserting party,
which, if such party is the Executive or, following his death, a beneficiary,
shall immediately result in the cessation of any and all payments and the
elimination of any liability hereunder for any payment not made prior to such
assertion or representation, and, if such party is the Bank, shall subject it to
liability for actual damages for such breach.
8.7 Non-Competition Provisions. Regardless of anything herein to the
contrary, except in the case of a Termination of Employment by the Bank without
Just Cause, a Termination of Employment by the Executive with Good Reason, or
with the permission of the Bank, during the two years immediately following the
Executive's Termination of Employment, the Executive shall not serve as an
officer or director or employee of any bank holding company, bank, savings
association, savings and loan holding company, or mortgage company (any of
which, a "Financial Institution") which Financial Institution offers products or
services competing with those offered by the Bank from offices in any county in
the State of Maryland or of any other State in which the Bank or any of its
affiliates has a branch, and shall not interfere with the relationship of the
Bank and any of its employees, agents, or representatives. In the event of any
breach by the Executive of this Covenant Not to Compete, the Board of Directors
of the Bank shall direct that any unpaid balance of any payments to the
Executive under this Agreement be suspended, and shall thereupon notify the
Executive of such suspension, in writing. Thereupon, if the Board of Directors
of the Bank shall determine that such breach by the
11
<PAGE>
executive exists at any time after a period of one month following notification
of the such suspension, all rights of the Executive and his beneficiary under
this agreement, including rights to any and all further payments hereunder,
shall thereupon terminate.
8.8 Successors. This Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Bank which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank.
IN WITNESS WHEREOF, the Executive and a duly authorized Bank officer
have signed this Agreement.
EXECUTIVE SANDY SPRING NATIONAL BANK OF MARYLAND
By:
- ------------------------ -------------------------------------
Title:
---------------------------------
12
<PAGE>
Exhibit 10(e)
<PAGE>
EMPLOYMENT AGREEMENT
- -----------------------------------------------------------------------------
THIS AGREEMENT (the "Agreement"), made this 30th day of January 1997,
by and among Sandy Spring Bancorp, Inc., a registered bank holding company
("Bancorp"), Sandy Spring National Bank of Maryland, a national banking
association and wholly owned subsidiary of Bancorp with its main office in
Olney, Maryland (the "Bank"), and Hunter R. Hollar (the "Officer").
W I T N E S S E T H
WHEREAS, the Officer is employed as the President and Chief Executive
Officer of the Bank and Bancorp, subject to a certain Employment Agreement made
December 1, 1990 (as amended, the "1990 Agreement").
WHEREAS, as a result of the skill, knowledge, and experience of the
Officer, the Board of Directors ("Board") of the Bank desires to retain the
services of the Officer as the President and Chief Executive Officer of the
Bank, and the Board of Bancorp desires to retain the services of the Officer as
the President and Chief Executive Officer of Bancorp.
WHEREAS, the Officer desires to continue to serve as President and
Chief Executive Officer of Bancorp and the Bank.
WHEREAS, the Officer and the respective Boards of the Bank and Bancorp
desire to enter into a new Agreement setting forth the terms of conditions of
the continuing employment of the Officer and the related rights and obligations
of each of the parties.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed as follows:
1. Employment. The Officer is employed as the President and Chief
----------
Executive Officer of Bancorp and of the Bank, reporting directly to their
respective Boards. Subject to Board direction, the Officer shall have
responsibility for the general management and control of the business and
affairs of Bancorp, the Bank, and their respective subsidiaries, and shall
perform all duties and shall have all powers which are commonly incident to the
offices of President and Chief Executive Officer or which, consistent with those
offices, are delegated to him by the respective Board. The Officer's duties
include, but are not limited to:
a. Making recommendations to the Boards concerning the
strategies, capital structure, tactics, and general operations
of Bancorp and the Bank;
b. Managing the day-to-day operations of Bancorp and the Bank;
1
<PAGE>
c. Supervising other officers and employees of Bancorp and the
Bank;
d. Promoting Bancorp and the Bank and their services;
e. Managing the efforts of Bancorp and the Bank to comply with
applicable laws and regulations; and
f. Providing complete, timely, and accurate reports to the Boards
of Bancorp and the Bank regarding the material affairs and the
condition of Bancorp and the Bank, respectively.
2. Location and Facilities. The Officer will be furnished with the working
-----------------------
facilities and staff customary for executive officers with the title and duties
set forth in Section 1 and as are necessary for him to perform his duties. The
location of such facilities and staff shall be at the principal administrative
offices of Bancorp and the Bank, or at such other site or sites customary for
such offices.
3. Term; The 1990 Agreement.
------------------------
a. The term of this Agreement shall be (i) the initial term,
consisting of the period commencing on the date of this
Agreement (the "Effective Date") and ending immediately prior
to the third anniversary of the Effective Date, plus (ii) any
and all extensions of the initial term made pursuant to this
Section 3.
b. On each anniversary of the Effective Date prior to a
termination of the Agreement, the term under this Agreement
shall be extended for an additional one-year period beyond the
then effective expiration date without action by any party,
provided that neither Bancorp or the Bank, on the one hand,
nor the Officer, on the other, shall have given written notice
at least sixty (60) days prior to such anniversary date of its
or his desire that the term not be extended. The Boards of
Bancorp and the Bank will review the Officer's performance and
the advisability of extending the term of this Agreement at a
meeting or meetings at least ninety (90) days prior to each
anniversary date.
c. At the Effective Date, this Agreement shall supersede the 1990
Agreement, which shall be deemed terminated by agreement of
the parties immediately prior to the Effective Date.
4. Base Compensation.
-----------------
a. Bancorp and the Bank agree to pay the Officer during the term
of this Agreement a salary at the rate of $190,000 per annum,
payable in cash not less frequently than monthly, as may be
adjusted in accordance with this Section 4.
2
<PAGE>
b. The Human Resources Committee of the Bank (the "Committee")
shall perform an annual analysis of the Officer's performance
and of the compensation of chief executive officers of
independent financial institutions of comparable assets and
performance, and based thereon and on such other factors as it
deems pertinent, shall recommend to the Boards of Bancorp and
the Bank the salary rate to be paid beginning on the next
April 1 following such review. The Boards of Bancorp and the
Bank shall review annually the rate of the Officer's salary
based upon this recommendation of the Committee and other
factors they deem relevant, and may maintain, increase or
decrease his salary, provided that no such action shall (i)
reduce the rate of salary below $190,000, or (ii) reduce the
rate of salary paid to the Officer for any months prior to the
month in which notice of the reduction is provided in writing
to the Officer.
c. In the absence of action by the Board of both Bancorp and the
Bank, the Officer shall continue to receive salary at the
$190,000 per annum rate specified herein or, if another rate
has been established under the provisions of this Section 4,
the rate last properly established by action of the Board of
Bancorp or the Bank under the provisions of this Section 4.
5. Bonuses. Unless the Officer agrees otherwise, he shall be entitled to
-------
participate in discretionary bonuses that the Board may award from time to time
to senior management employees pursuant to bonus plans or otherwise. The Officer
also shall participate in any other fringe benefits which are or may become
available to senior management employees of Bancorp or the Bank, including for
example: any stock option or incentive compensation plans, club memberships, and
any other benefits that are commensurate with the responsibilities and functions
to be performed by the Officer under this Agreement. No other compensation
provided for in this Agreement shall be deemed a substitute for the Officer's
right to participate in such discretionary bonuses or fringe benefits.
6. Benefit Plans. The Officer shall be entitled to participate in such
-------------
life insurance, medical, dental, pension, profit sharing, and retirement plans
and other programs and arrangements as may be approved from time to time by
Bancorp or the Bank for the benefit of their respective employees. In addition,
the Officer shall be entitled to continued participation in the nonstatutory
supplemental retirement plan or arrangement ("SERP") in effect for the Officer
at the Effective Date or a similar plan or arrangement established for him that
provides benefits of the same character and that are at least as favorable (in
terms of vesting, payments in relation to salary or compensation, and otherwise)
to the Officer as the current SERP. The Officer also shall be entitled to
participate in the Executive Health Expense Reimbursement and Insurance Plans
(together, the "HERP") or a successor plan or plans that provide the same or
greater level of benefits as those provided to participants under the HERP as in
effect on the Effective Date.
7. Vacation and Leave.
------------------
3
<PAGE>
a. The Officer shall be entitled to five weeks (twenty-five
working days) of vacation with pay during each consecutive
twelve-month period commencing on January 1, 1997 and each January
1 thereafter during the term of this Agreement, to be taken at
reasonable times and in reasonable periods as the Officer and
Bancorp or the Bank shall mutually determine, and provided that no
vacation time shall interfere with the duties required to be
rendered by the Officer hereunder. Any vacation time not used
during a twelve-month period shall carry over and be useable during
the succeeding twelve-month period, but not thereafter. The Officer
shall not receive any additional compensation from Bancorp or the
Bank on account of his failure to take vacation.
b. In addition to paid vacations, the Officer shall be entitled,
without loss of pay, to absent himself voluntarily from the
performance of his employment for such additional periods of time
and for such valid and legitimate reasons as the Board of Bancorp
and the Bank may in their discretion determine. Further, the Board
of Bancorp or the Bank may grant to the Officer a leave or leaves
of absence, with or without pay, at such time or times and upon
such terms and conditions as such Boards in their discretion may
determine.
8. Expense Payments and Reimbursements. The Officer shall be reimbursed
-----------------------------------
for all reasonable out-of-pocket business expenses which he shall incur in
connection with his services under this Agreement upon substantiation of such
expenses in accordance with applicable policies of Bancorp or the Bank. The
Officer also shall be entitled to the following:
a. Use of an automobile of a make and model consistent with the
Officer's duties under this Agreement and reimbursement for the
Officer's expenses thereof related to the employment of Officer;
and
b. Reimbursement for membership dues at Manor Country Club.
9. Loyalty and Confidentiality.
---------------------------
a. During the term of this Agreement the Officer: (i) shall devote
all his time, attention, skill, and efforts to the faithful
performance of his duties hereunder; provided, however, that from
time to time, the Officer may serve on the boards of directors of,
and hold any other offices or positions in, companies or
organizations which will not present any conflict of interest with
Bancorp or the Bank or any of their subsidiaries or affiliates,
unfavorably affect the performance of Officer's duties pursuant to
this Agreement, or violate any applicable statute or regulation;
and (ii) shall not engage in any business or activity contrary to
the business affairs or interests of Bancorp or the Bank.
b. Nothing contained in this Agreement shall prevent or limit the
Officer's right to invest in the capital stock or other securities
of any business dissimilar from that
4
<PAGE>
of Bancorp and the Bank, or, solely as a passive, minority
investor, in any business.
c. The Officer agrees to maintain the confidentiality of any and all
information concerning the operation or financial status of Bancorp
and the Bank; the names or addresses of any of their borrowers,
depositors and other customers; any information concerning or
obtained from such customers; and any other information concerning
Bancorp or the Bank to which he may be exposed during the course of
his employment. The Officer further agrees that, unless required by
law or specifically permitted by Bancorp or the Bank in writing, he
will not disclose to any person or entity, either during or
subsequent to his employment, any of the above-mentioned
information which is not generally known to the public, nor shall
he employ such information in any way other than for the benefit of
Bancorp and the Bank.
10. Termination and Termination Pay. Subject to Section 11 of this
--------------------------------
Agreement, the Officer's employment under this Agreement may be terminated in
the following circumstances:
a. Death. The Officer's employment under this Agreement shall
-----
terminate upon his death during the term of this Agreement, in
which event the Officer's estate shall be entitled to receive the
compensation due to the Officer through the last day of the
calendar month in which his death occurred.
b. Retirement. This Agreement shall be terminated upon the normal
----------
or early retirement of the Officer under the retirement benefit
plan or plans in which he participates pursuant to Section 6 of
this Agreement.
c. Disability. Bancorp, the Bank, or the Officer may terminate the
----------
Officer's employment after having established the Officer's
Disability. For purposes of this Agreement, "Disability" means a
physical or mental infirmity that impairs the Officer's ability to
substantially perform his duties under this Agreement and that
results in the Officer's becoming eligible for long-term disability
benefits under Bancorp's or the Bank's long-term disability plan
(or, if Bancorp or the Bank has no such plan in effect, that
impairs the Officer's ability to substantially perform his duties
under this Agreement for a period of one-hundred-eighty consecutive
days). In the event of such Disability, the Officer's obligation to
perform services under this Agreement will terminate. In the event
of such termination, the Officer shall be entitled to receive the
following:
i. The compensation and benefits provided for under this
Agreement for any period during the term of this Agreement
and prior to the date of termination pursuant to this
Section 10.c. during which the Officer is unable to work
due to physical or mental infirmity (less any amounts
5
<PAGE>
which the Officer receives under any disability insurance
maintained by Bancorp or the Bank with respect to such
period);
ii. For the period beginning upon the date of termination
pursuant to this Section 10.c. and continuing for the
remaining term of this Agreement, (A) salary at the
highest rate paid pursuant to Section 4 of this Agreement
during the twelve months prior to the establishment of
such disability under this Section 10.c., reduced by any
payments received by the Officer during such period
following termination under a long term disability plan or
policy maintained by Bancorp or the Bank, and (B) benefits
pursuant to Section 6 of this Agreement.
The Boards of Bancorp and the Bank shall determine whether or not
the Officer is and continues to be permanently disabled for purposes of
this Agreement in good faith, based upon competent medical advice and
other factors that they reasonably believe to be relevant. As a
condition to any benefits, such Board may require the Officer to submit
to such physical or mental evaluations and tests as it deems reasonably
appropriate.
d. Just Cause.
----------
i. The Board of Bancorp or the Bank may, by written notice to
the Officer in the form and manner specified in this
paragraph, immediately terminate his employment with
Bancorp or the Bank, respectively, at any time, for Just
Cause. The Officer shall have no right to receive
compensation or other benefits for any period after
termination for Just Cause. Termination for "Just Cause"
shall mean termination because of, in the good faith
determination of Bancorp's or the Bank's Board, the
Officer's:
(1) Personal dishonesty;
(2) Incompetence;
(3) Willful misconduct;
(4) Breach of fiduciary duty involving personal
profit;
(5) Intentional failure to perform duties
under this Agreement;
(6) Other, continuing material failure to
perform his duties under this Agreement
after reasonable notification (which shall
be stated in writing and given at least
fifteen days prior to termination) by the
Board of Bancorp or the Bank of such
failure;
(7) Willful violation of any law, rule or regulation
(other than traffic violations or similar
offenses) or final cease-and-desist order; or
(8) Material breach by the Officer of any
provision of this Agreement.
ii. Notwithstanding the foregoing, the Officer shall not be
deemed to have been terminated for Just Cause by Bancorp
or the Bank unless there shall have been delivered to the
Officer a copy of a resolution duly adopted by
6
<PAGE>
the affirmative vote of not less than a majority of the
entire membership of the Board of Bancorp or the Bank at a
meeting of such Board called and held for the purpose
(after reasonable notice to the Officer and an opportunity
for the Officer to be heard before the Board), finding
that in the good faith opinion of such Board the Officer
was guilty of conduct described above and specifying the
particulars thereof.
e. Certain Regulatory Events.
-------------------------
i. If the Officer is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an order
issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit
Insurance Act ("FDIA") (12 U.S.C. (S)(S)1818(e)(4) and (g)(1)),
all obligations of the Bank under this Agreement shall terminate as
of the effective date of the order, but vested rights of the
parties shall not be affected.
ii. If the Bank is in default (as defined in Section 3(x)(1)
of FDIA), all obligations of the Bank under this Agreement shall
terminate as of the date of default, but vested rights of the
parties shall not be affected.
iii. If a notice served under Sections 8(e)(3) or (g)(1) of the
FDIA (12 U.S.C. (S)(S)1818(e)(3) and (g)(1)) suspends and/or
temporarily prohibits the Officer from participating in the conduct
of the Bank's affairs, the Bank's obligations under this Agreement
shall be suspended as of the date of such service, unless stayed by
appropriate proceedings. If the charges in the notice are
dismissed, the Bank may, in its discretion, (i) pay the Officer all
or part of the compensation withheld while its contract obligations
were suspended, and (ii) reinstate (in whole or in part) any of its
obligations which were suspended.
The occurrence of any of the events described in paragraphs i,
ii, and iii above may be considered by the Board of Bancorp or the Bank
in connection with a termination for Just Cause.
f. Voluntary Termination by Officer. In addition to his other rights
--------------------------------
to terminate under this Agreement, the Officer may voluntarily
terminate employment with the Bank and Bancorp during the term of this
Agreement upon at least sixty-days' prior written notice to each of
their Boards, in which case the Officer shall receive only his
compensation, vested rights and employee benefits up to the date of his
termination.
g. Without Just Cause or With Good Reason.
--------------------------------------
i. In addition to termination pursuant to Section 10.a.
through 10.f.: the Board of Bancorp or the Bank may, by written
notice to the Officer, immediately terminate his employment with
Bancorp or the Bank, respectively, at any time for a reason other
than Just Cause (a termination "Without Just Cause"); and the
7
<PAGE>
Officer may, by written notice to the Boards of Bancorp and the
Bank, immediately terminate this Agreement at any time within
ninety days following an event of "Good Reason" as defined below (a
termination "With Good Reason").
ii. Subject to Section 11 hereof, in the event of termination
under this Section 10.g., the Officer shall be entitled to receive
the salary for the remaining term of the Agreement, including any
renewals or extensions thereof, at the highest annual rate in
effect pursuant to Section 4 of this Agreement for any of the
twelve months immediately preceding the date of such termination,
plus annual cash bonuses for each year (prorated in the event of
partial years) remaining under such term at the amount received by
the Officer in the calendar year preceding the termination. The sum
due under this Section 10.g. shall be paid in one lump sum within
ten calendar days of such termination.
iii. "Good Reason" shall exist if, without Officer's express
written consent, Bancorp or the Bank materially breach any of its
respective obligations under this Agreement. Without limitation,
such a material breach shall be deemed to occur upon any of the
following:
(1) A material reduction in the Officers's
responsibilities or authority, or a requirement
that the Officer report to any person or group
other than the Boards of Bancorp and the Bank (or
any other effective reduction in reporting
responsibilities) in connection with his
employment with Bancorp or the Bank;
(2) Assignment to the Officer of duties of a
nonexecutive nature or duties for which he is not
reasonably equipped by his skills and experience;
(3) Failure of the Officer to be elected or reelected
to the Board of Bancorp or the Bank;
(4) A reduction in salary or benefits contrary to the
terms of this Agreement, or, following a Change
in Control as defined in Section 11 of this
Agreement, any reduction in salary or material
reduction in benefits below the amounts to which
he was entitled prior to the Change in Control;
(5) Termination of incentive and benefit plans,
programs or arrangements, or reduction of the
Officer's participation to such an extent as to
materially reduce their aggregate value below
their aggregate value as of the Effective Date.
(6) A requirement that the Officer relocate his
principal business office or his principal place
of residence outside Montgomery County, Maryland,
or the assignment to the Officer of duties that
would reasonably require such a relocation;
8
<PAGE>
(7) A requirement that the Officer spend more than
thirty normal working days away from Montgomery
County, Maryland during any consecutive twelve-
month period; or
(8) Failure to provide office facilities, secretarial
services, and other administrative services to
Officer which are substantially equivalent to the
facilities and services provided to the Officer
on the Effective Date (excluding brief periods
during which office facilities may be temporarily
unavailable due to fire, natural disaster, or
other calamity).
iv. Notwithstanding the foregoing, a reduction or elimination
of the Officer's benefits under one or more benefit plans
maintained by Bancorp or the Bank as part of a good faith,
overall reduction or elimination of such plan or plans or
benefits thereunder applicable to all participants in a
manner that does not discriminate against the Officer
(except as such discrimination may be necessary to comply
with law) shall not constitute an event of Good Reason or
a material breach of this Agreement, provided that
benefits of the type or to the general extent as those
offered under such plans prior to such reduction or
elimination are not available to other officers of Bancorp
or the Bank or any company that controls either of them
under a plan or plans in or under which the Officer is not
entitled to participate, and receive benefits, on a fair
and nondiscriminatory basis.
h. Continuing Covenant not to Compete or Interfere with
----------------------------------------------------
Relationships. Regardless of anything herein to the contrary,
-------------
following a termination (i) upon retirement pursuant to Section
10.b., (ii) due to Disability pursuant to Section 10.c., (iii) for
Just Cause pursuant to Section 10.d., or (iv) by the Officer
pursuant to Section 10.f.:
i. The Officer's obligations under Section 9.c. of this
Agreement will continue in effect; and
ii. During the remaining term of this Agreement (determined
immediately before such termination), the Officer shall
not serve as an officer or director or employee of any
bank holding company, bank, savings association, savings
and loan holding company, or mortgage company (any of
which, a "Financial Institution") which Financial
Institution offers products or services competing with
those offered by Bancorp or the Bank from offices in any
county in the State of Maryland or of any other State in
which the Bank, Bancorp or any of their subsidiaries has a
branch, and shall not interfere with the relationship of
Bancorp or the Bank and any of its employees, agents, or
representatives.
11. Termination in Connection with a Change in Control.
--------------------------------------------------
9
<PAGE>
a. For purposes of this Agreement, a "Change in Control" shall be
deemed to occur on the earliest of:
i. The acquisition by any entity, person or group (other
than the acquisition by a tax-qualified retirement
plan sponsored by Bancorp or the Bank) of beneficial
ownership, as that term is defined in Rule 13d-3
under the Securities Exchange Act of 1934, of more
than 25% of the outstanding capital stock of Bancorp
or the Bank entitled to vote for the election of
directors ("Voting Stock");
ii. The commencement by any entity, person, or group
(other than Bancorp or the Bank, a subsidiary of
Bancorp or the Bank, or a tax-qualified retirement
plan sponsored by Bancorp or the Bank) of a tender
offer or an exchange offer for more than 20% of the
outstanding Voting Stock of Bancorp or the Bank;
iii. The effective time of (a) a merger or consolidation
of Bancorp or the Bank with one or more other
corporations as a result of which the holders of the
outstanding Voting Stock of Bancorp or the Bank
immediately prior to such merger exercise voting
control over less than 80% of the Voting Stock of the
surviving or resulting corporation, or (b) a transfer
of substantially all of the property of Bancorp or
the Bank other than to an entity of which Bancorp or
the Bank owns at least 80% of the Voting Stock;
iv. Upon the acquisition by any entity, person, or
group of the control of the election of a majority
of the Bank's or Bancorp's directors,
v. At such time that, during any period of two
consecutive years, individuals who at the beginning
of such period constitute the Board of Bancorp or the
Bank (the "Continuing Directors") cease for any
reason to constitute at least two-thirds thereof,
provided that any individual whose election or
nomination for election as a member of the Board was
approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be
considered a Continuing Director.
b. Termination. If within the period beginning six months prior
-----------
to and ending two years after a Change in Control, (i) Bancorp
or the Bank shall terminate the Officer's employment Without
Just Cause, or (ii) the Officer shall voluntarily terminate
his employment With Good Reason, Bancorp or the Bank shall,
within ten calendar days of the termination of Officer's
employment, make a lump-sum cash payment to him equal to 2.99
times the sum of (x) his annual salary at the highest annual
rate in effect for any of the twelve months immediately
preceding
10
<PAGE>
the date of such termination, plus (y) the amount of other
compensation received by him during the calendar year
preceding the Change in Control. This cash payment is subject
to adjustment pursuant to Section 14 of this Agreement, and
shall be made in lieu of any payment also required under
section 10.g. of this Agreement because of a termination in
such period. The Officer's rights under Section 10.g. are not
otherwise affected by this Section 11. Also, in such event,
the Officer shall, for three calendar years following his
termination of employment, continue to participate in any
benefit plans of Bancorp and the Bank that provide health
(including medical and dental), life or disability insurance,
or similar coverage upon terms no less favorable than the most
favorable terms provided to senior officers of the Bank during
such period.
c. Funding of Trust upon Change in Control. In order to assure
---------------------------------------
payment to the Officer of amounts that may become payable by
Bancorp or the Bank pursuant to this Section, unless and to
the extent the Officer has previously provided a written
release of any claims under Section 11 of this Agreement, not
later than ten business days after a Change in Control,
Bancorp or the Bank shall (i) establish a valid trust under
the law of the State of Maryland with an independent trustee
that has or may be granted corporate trust powers under
Maryland law, (ii) deposit in such trust an amount equal to
2.99 times his "base amount" as defined in Section 280G(b)(3)
of the Code and regulations promulgated thereunder (Section
280G and related regulations hereinafter referred to as
Section 280G"), at the time of the Change of Control, and
(iii) provide the trustee of the trust with a written
direction to hold said amount and any investment return
thereon in a segregated account, and to pay such amounts as
demanded by the Officer from the trust upon written demand
from the Officer stating the amount of the payment demanded
from the trust and the basis for his rights to such payment
under Section 11 of this Agreement. Upon the earlier of the
final payment of all amounts demanded by the Officer under
this Section 11 or the date thirty-six months after the Change
in Control, the trustee of the trust shall pay to Bancorp or
the Bank, as applicable, the entire balance remaining in the
trust. Payments from the trust to the Officer shall be
considered payments made by Bancorp or the Bank for purposes
of this Agreement. Payment of such amounts to the Officer from
the trust, however, shall not relieve Bancorp or the Bank from
any obligation to pay amounts in excess of those paid from the
trust, or from any obligation to take actions or refrain from
taking actions otherwise required by this Agreement. Unless
and until a termination of or by the Officer as described in
Section 11.b.(i) or (ii), the Officer's rights under this
Agreement shall be those of a general, unsecured creditor, he
shall have no claim against the assets of the trust, and the
assets of the trust shall remain subject to the claims of
creditors of Bancorp or the Bank. Upon the termination of the
trust as specified herein, the Officer shall have no further
interest in the trust.
12. Indemnification and Liability Insurance.
---------------------------------------
11
<PAGE>
a. Indemnification. Bancorp and the Bank agree to indemnify the
----------------
Officer (and his heirs, executors, and administrators) to the
fullest extent permitted under applicable law and regulations
against any and all expenses and liabilities reasonably
incurred by him in connection with or arising out of any
action, suit, or proceeding in which he may be involved by
reason of his having been a director or officer of Bancorp or
the Bank or any of their subsidiaries (whether or not he
continues to be a director or officer at the time of incurring
any such expenses or liabilities) such expenses and
liabilities to include, but not be limited to, judgements,
court costs, and attorney's fees and the cost of reasonable
settlements, such settlements to be approved by the Board of
Bancorp or the Bank, if such action is brought against the
Officer in his capacity as an officer or director of Bancorp
or the Bank or any of their subsidiaries. Indemnification for
expense shall not extend to matters for which the Officer has
been terminated for Just Cause. Nothing contained herein shall
be deemed to provide indemnification prohibited by applicable
law or regulation. Notwithstanding anything herein to the
contrary, the obligations of this Section 12 shall survive the
term of this Agreement by a period of seven years.
b. Insurance. During the period in which indemnification of the
---------
Officer is required under this Section, Bancorp or the Bank
shall provide the Officer (and his heirs, executors, and
administrators) with coverage under a directors' and officers'
liability policy at the expense of Bancorp or the Bank, at
least equivalent to such coverage provided to directors and
senior officers of Bancorp or the Bank, whichever is more
favorable to the Officer.
13. Reimbursement of Officer's Expenses to Enforce this Agreement. Bancorp
-------------------------------------------------------------
or the Bank shall reimburse the Officer for all out-of-pocket expenses,
including, without limitation, reasonable attorney's fees, incurred by the
Officer in connection with successful enforcement by the Officer of the
obligations of Bancorp or the Bank to the Officer under this Agreement up to a
maximum of $30,000. Successful enforcement shall mean the grant of an award of
money or the requirement that Bancorp or the Bank take some action specified by
this Agreement (i) as a result of court order; or (ii) otherwise by Bancorp or
the Bank following an initial failure of Bancorp or the Bank to pay such money
or take such action promptly after written demand therefor from the Officer
stating the reason that such money or action was due under this Agreement at or
prior to the time of such demand.
14. Adjustment of Certain Payments and Benefits.
-------------------------------------------
a. In the event that payments pursuant to this Agreement
(including, without limitation, any payment under any plan,
program, or arrangement referred to in Section 5 or 6 hereof)
would result in the imposition of a penalty tax pursuant to
Section 280G, such payments shall be reduced to equal the
maximum amount which may be paid under Section 280G without
exceeding such limits. In the event any such reduction in
payments is necessary, the Officer may determine, in
12
<PAGE>
his sole discretion, which categories of payments (including,
without limitation, the value of benefits or of acceleration
of vesting or receipt of benefits or amounts) are to be
reduced or eliminated.
b. Payments made to the Officer pursuant to this Agreement or
otherwise, are subject to and conditioned upon their
compliance with Section 18(k) of the FDIA (12 U.S.C. (S) 1828
(k), relating to "golden parachute" and indemnification
payments and certain other benefits.
15. Injunctive Relief. If there is a breach or threatened breach of Section
-----------------
10.h. of this Agreement or the prohibitions upon disclosure contained in Section
9.c. of this Agreement, Bancorp or the Bank and the Officer agree that there is
no adequate remedy at law for such breach, and that Bancorp and the Bank each
shall be entitled to injunctive relief restraining the Officer from such breach
or threatened breach, but such relief shall not be the exclusive remedy
hereunder for such breach. The parties hereto likewise agree that the Officer
shall be entitled to injunctive relief to enforce the obligations of Bancorp and
the Bank under Section 11 of this Agreement.
16. Successors and Assigns.
----------------------
a. This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of Bancorp or the Bank
which shall acquire, directly or indirectly, by merger,
consolidation, purchase or otherwise, all or substantially all
of the assets or stock of Bancorp or the Bank.
b. Since the Bank and Bancorp are contracting for the unique and
personal skills of the Officer, the Officer shall be precluded
from assigning or delegating his rights or duties hereunder
without first obtaining the written consent of the Bank and
Bancorp.
17. No Mitigation. The Officer shall not be required to mitigate the
--------------
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Officer in any subsequent employment.
13
<PAGE>
18. Notices. All notices, requests, demands and other communications in
-------
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch United States Post Office, by registered or certified mail, postage
prepaid, addressed as follows, or to such other address as shall have been
designated in writing by the addressee:
a. If to Bancorp or the Bank:
Sandy Spring Bancorp, Inc.
Sandy Spring National Bank of Maryland
17801 Georgia Avenue
Olney, Maryland 20832
Attention: The Boards of Directors
Copy to: Corporate Secretary
b. If to the Officer:
Hunter R. Hollar
16935 Continental Court
Olney, Maryland 20832
19. Joint and Severally Liability; Payments by Bancorp and the Bank. To the
---------------------------------------------------------------
extent permitted by law, except as otherwise provided herein, Bancorp and the
Bank shall be jointly and severally liable for the payment of all amounts due
under this Agreement. Bancorp hereby agrees that it shall be jointly and
severally liable with the Bank for the payment of all amounts due under this
Agreement and shall guarantee the performance of the Bank's obligations
thereunder, provided that Bancorp shall not be required by this Agreement to pay
to the Officer a salary or any bonuses or any other cash payments, except in the
event that the Bank does not fulfill the obligations to the Officer hereunder
for such payments. Bancorp may, however, pay salary and bonuses as deemed
appropriate by its Board in the exercise of its discretion.
20. No Plan Created by this Agreement. The Officer, Bancorp and the Bank
---------------------------------
expressly declare and agree that this Agreement was negotiated among them and
that no provision or provisions of this Agreement are intended to, or shall be
deemed to, create any plan for purposes of the Employee Retirement Income
Security Act or any other law or regulation, and Bancorp, the Bank and the
Officer each expressly waives any right to assert the contrary. Any assertion in
any judicial or administrative filing, hearing, or process by or on behalf of
the Officer or Bancorp or the Bank that such a plan was so created by this
Agreement shall be deemed a material breach of this Agreement by the party
making such an assertion.
21. Amendments. No amendments or additions to this Agreement shall
----------
be binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
14
<PAGE>
22. Applicable Law. Except to the extent preempted by Federal law, the laws
--------------
of the State of Maryland shall govern this Agreement in all respects, whether as
to its validity, construction, capacity, performance or otherwise.
23. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
24. Headings. Headings contained herein are for convenience of reference
--------
only.
25. Entire Agreement. This Agreement, together with any understanding or
----------------
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof, other than written agreements with respect to specific plans, programs
or arrangements described in Sections 5 and 6.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
SANDY SPRING NATIONAL BANK OF MARYLAND
By: /s/ W. Drew Stabler
Title: Chairman of the Board
SANDY SPRING BANCORP, INC.
By: /s/ W. Drew Stabler
Title: Chairman of the Board
OFFICER
/s/ Hunter R. Hollar
Hunter R. Hollar
15
<PAGE>
Exhibit 10(f)
<PAGE>
EMPLOYMENT AGREEMENT
================================================================================
THIS AGREEMENT (the "Agreement"), made this 30th day of January 1997,
by and among Sandy Spring Bancorp, Inc., a registered bank holding company
("Bancorp"), Sandy Spring National Bank of Maryland, a national banking
association and wholly owned subsidiary of Bancorp with its main office in
Olney, Maryland (the "Bank"), and James H. Langmead (the "Officer").
W I T N E S S E T H
WHEREAS, the Officer is employed as the Senior Vice President and Chief
Financial Officer of the Bank and the Vice President and Treasurer of Bancorp.
WHEREAS, as a result of the skill, knowledge, and experience of the
Officer, the Board of Directors ("Board") of the Bank and the Board of Bancorp
each desires to retain the services of the Officer.
WHEREAS, the Officer desires to continue to serve as an officer of
Bancorp and the Bank.
WHEREAS, the Officer and the respective Boards of the Bank and Bancorp
desire to enter into an Agreement setting forth the terms of conditions of the
continuing employment of the Officer and the related rights and obligations of
each of the parties.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed as follows:
1. Employment. The Officer is employed as the Vice President and Treasurer
----------
of Bancorp and the Senior Vice President and Chief Financial Officer of the
Bank, reporting to the President and Chief Executive Officer. Subject to
direction of the President and Chief Executive Officer, the Officer shall have
responsibility for the financial affairs of Bancorp, the Bank, and their
respective subsidiaries, and shall perform all duties and shall have all powers
which are commonly incident to the offices of Chief Financial Officer or which,
consistent with those offices, are delegated to him by the President and Chief
Executive Officer. The officer shall serve as a member of the Senior Officer
Policy Committee and the Asset/Liability Committee of the Bank. The Officer's
duties include, but are not limited to:
a. Making recommendations to the President and Chief
Executive Officer concerning the financial
strategies, capital structure, and operations of
Bancorp and the Bank;
1
<PAGE>
b. Management oversight of the accounting, budgeting, planning
and financial reporting operations of the Bancorp and the
Bank, including supervision of the officers and
employees engaged in these functions;
c. Management oversight of the compliance, security,
purchasing, and facilities management functions of Bancorp
and the Bank, including supervision of the officers and
employees engaged in these functions;
d. Promoting Bancorp and the Bank and their services;
e. Managing the efforts of Bancorp and the Bank to comply
with applicable laws and regulations relating to financial
reporting, accounting, and capital structure of Bancorp and
the Bank; and
f. Providing complete, timely, and accurate reports to the
President and Chief Executive Officer of Bancorp and the Bank
regarding the financial condition, performance, and budget of
Bancorp and the Bank, respectively.
2. Location and Facilities. The Officer will be furnished with the working
-----------------------
facilities and staff customary for executive officers with the title and duties
set forth in Section 1 and as are necessary for him to perform his duties. The
location of such facilities and staff shall be at the principal administrative
offices of Bancorp and the Bank, or at such other site or sites customary for
such offices.
3. Term.
----
a. The term of this Agreement shall be (i) the initial term,
consisting of the period commencing on the date of this
Agreement (the "Effective Date") and ending immediately prior
to the second anniversary of the Effective Date, plus (ii) any
and all extensions of the initial term made pursuant to this
Section 3.
b. On each anniversary of the Effective Date prior to a
termination of the Agreement, the term under this Agreement
shall be extended for an additional one-year period beyond the
then effective expiration date without action by any party,
provided that neither Bancorp or the Bank, on the one hand,
nor the Officer, on the other, shall have given written notice
at least sixty (60) days prior to such anniversary date of its
or his desire that the term not be extended. The President and
Chief Executive Officer will review the Officer's performance
and the advisability of extending the term of this Agreement,
and the Boards of Bancorp and the Bank shall, based on such
review, determine whether or not to extend the term of this
Agreement at a meeting or meetings at least ninety (90) days
prior to each anniversary date.
2
<PAGE>
4. Base Compensation.
-----------------
a. Bancorp and the Bank agree to pay the Officer during the term
of this Agreement a salary at the rate of $110,000 per annum,
payable in cash not less frequently than monthly, as may be
adjusted in accordance with this Section 4.
b. The Human Resources Committee of the Bank (the "Committee")
with the advice of the President and Chief Executive Officer
shall perform an annual analysis of the Officer's performance
and of the compensation of officers performing similar
functions at independent financial institutions of comparable
assets and performance, and based upon this review, the
recommendation of the President and Chief Executive Officer,
and on such other factors as it deems pertinent, shall
recommend to the Boards of Bancorp and the Bank the salary
rate to be paid beginning on the next April 1 following such
review. The Boards of Bancorp and the Bank shall review
annually the rate of the Officer's salary based upon this
recommendation of the Committee and other factors they deem
relevant, and may maintain, increase or decrease his salary,
provided that no such action shall (i) reduce the rate of
salary below $110,000 or (ii) reduce the rate of salary paid
to the Officer for any months prior to the month in which
notice of the reduction is provided in writing to the Officer.
c. In the absence of action by the Board of both Bancorp and the
Bank, the Officer shall continue to receive salary at the
$110,000 per annum rate specified herein or, if another rate
has been established under the provisions of this Section 4,
the rate last properly established by action of the Board of
Bancorp or the Bank under the provisions of this Section 4.
5. Bonuses. Unless the Officer agrees otherwise, he shall be entitled to
-------
participate in discretionary bonuses that the Board may award from time to time
to senior management employees pursuant to bonus plans or otherwise. The Officer
also shall participate in any other fringe benefits which are or may become
available to senior management employees of Bancorp or the Bank, including for
example: any stock option or incentive compensation plans and any other benefits
that are commensurate with the responsibilities and functions to be performed by
the Officer under this Agreement. No other compensation provided for in this
Agreement shall be deemed a substitute for the Officer's right to participate in
such discretionary bonuses or fringe benefits.
6. Benefit Plans. The Officer shall be entitled to participate in such
-------------
life insurance, medical, dental, pension, profit sharing, and retirement plans
and other programs and arrangements as may be approved from time to time by
Bancorp or the Bank for the benefit of their respective employees. In addition,
the Officer shall be entitled to participate in a nonstatutory supplemental
retirement plan or arrangement ("SERP") established for the Officer and in the
Executive Health Expense Reimbursement and Insurance Plans (together, the
"HERP") or a successor plan or plans
3
<PAGE>
that provide the same or greater level of benefits as those provided to
participants under the HERP as in effect on the Effective Date. (The resolution
of the Board of the Bank approving this Agreement shall serve as a designation
of eligibility to participate in the HERP as of the Effective Time, if the
Officer had not previously been designated as eligible.)
7. Vacation and Leave.
------------------
a. The Officer shall be entitled to five weeks (twenty-five
working days) of vacation with pay during each consecutive
twelve-month period commencing on January 1, 1997 and each
January 1 thereafter during the term of this Agreement, to be
taken at reasonable times and in reasonable periods as the
Officer and Bancorp or the Bank shall mutually determine, and
provided that no vacation time shall interfere with the duties
required to be rendered by the Officer hereunder. Any vacation
time not used during a twelve-month period shall carry over
and be useable during the succeeding twelve-month period, but
not thereafter. The Officer shall not receive any additional
compensation from Bancorp or the Bank on account of his
failure to take vacation.
b. In addition to paid vacations, the Officer shall be entitled,
without loss of pay, to absent himself voluntarily from the
performance of his employment for such additional periods of
time and for such valid and legitimate reasons as the
President and Chief Executive Officer may in his discretion
determine. Further, the President and Chief Executive Officer
may grant to the Officer a leave or leaves of absence, with or
without pay, at such time or times and upon such terms and
conditions as the President and Chief Executive Officer in his
discretion may determine.
8. Expense Payments and Reimbursements. The Officer shall be reimbursed
-----------------------------------
for all reasonable out-of-pocket business expenses which he shall incur in
connection with his services under this Agreement upon substantiation of such
expenses in accordance with applicable policies of Bancorp or the Bank.
9. Loyalty and Confidentiality.
---------------------------
a. During the term of this Agreement the Officer: (i) shall
devote all his time, attention, skill, and efforts to the
faithful performance of his duties hereunder; provided,
however, that from time to time, the Officer may serve on the
boards of directors of, and hold any other offices or
positions in, companies or organizations which will not
present any conflict of interest with Bancorp or the Bank or
any of their subsidiaries or affiliates, unfavorably affect
the performance of Officer's duties pursuant to this
Agreement, or violate any applicable statute or regulation;
and (ii) shall not engage in any business or activity contrary
to the business affairs or interests of Bancorp or the Bank.
4
<PAGE>
b. Nothing contained in this Agreement shall prevent or limit the
Officer's right to invest in the capital stock or other
securities of any business dissimilar from that of Bancorp and
the Bank, or, solely as a passive, minority investor, in any
business.
c. The Officer agrees to maintain the confidentiality of any and
all information concerning the operation or financial status
of Bancorp and the Bank; the names or addresses of any of
their borrowers, depositors and other customers; any
information concerning or obtained from such customers; and
any other information concerning Bancorp or the Bank to which
he may be exposed during the course of his employment. The
Officer further agrees that, unless required by law or
specifically permitted by Bancorp or the Bank in writing, he
will not disclose to any person or entity, either during or
subsequent to his employment, any of the above-mentioned
information which is not generally known to the public, nor
shall he employ such information in any way other than for the
benefit of Bancorp and the Bank.
10. Termination and Termination Pay. Subject to Section 11 of this
-------------------------------
Agreement, the Officer's employment under this Agreement may be terminated in
the following circumstances:
a. Death. The Officer's employment under this Agreement shall
-----
terminate upon his death during the term of this Agreement, in
which event the Officer's estate shall be entitled to receive
the compensation due to the Officer through the last day of
the calendar month in which his death occurred.
b. Retirement. This Agreement shall be terminated upon the
----------
normal or early retirement of the Officer under the retirement
benefit plan or plans in which he participates pursuant to
Section 6 of this Agreement.
c. Disability. Bancorp, the Bank, or the Officer may terminate
----------
the Officer's employment after having established the
Officer's Disability. For purposes of this Agreement,
"Disability" means a physical or mental infirmity that impairs
the Officer's ability to substantially perform his duties
under this Agreement and that results in the Officer's
becoming eligible for long-term disability benefits under
Bancorp's or the Bank's long-term disability plan (or, if
Bancorp or the Bank has no such plan in effect, that impairs
the Officer's ability to substantially perform his duties
under this Agreement for a period of one-hundred-eighty
consecutive days). In the event of such Disability, the
Officer's obligation to perform services under this Agreement
will terminate. In the event of such termination, the Officer
shall be entitled to receive the following:
i. The compensation and benefits provided for under this
Agreement for any period during the term of this
Agreement and prior to the date of termination
pursuant to this Section 10.c. during which the
Officer is
5
<PAGE>
unable to work due to physical or mental infirmity
(less any amounts which the Officer receives under
any disability insurance maintained by Bancorp or the
Bank with respect to such period);
ii. For the period beginning upon the date of termination
pursuant to this Section 10.c. and continuing for the
remaining term of this Agreement, (A) salary at the
highest rate paid pursuant to Section 4 of this
Agreement during the twelve months prior to the
establishment of such disability under this Section
10.c., reduced by any payments received by the
Officer during such period following termination
under a long term disability plan or policy
maintained by Bancorp or the Bank, and (B) benefits
pursuant to Section 6 of this Agreement.
The Boards of Bancorp and the Bank shall determine whether or
not the Officer is and continues to be permanently disabled for
purposes of this Agreement in good faith, based upon competent medical
advice and other factors that they reasonably believe to be relevant.
As a condition to any benefits, such Board may require the Officer to
submit to such physical or mental evaluations and tests as it deems
reasonably appropriate.
d. Just Cause.
----------
i. The Board of Bancorp or the Bank may, by written
notice to the Officer in the form and manner
specified in this paragraph, immediately terminate
his employment with Bancorp or the Bank,
respectively, at any time, for Just Cause. The
Officer shall have no right to receive compensation
or other benefits for any period after termination
for Just Cause. Termination for "Just Cause" shall
mean termination because of, in the good faith
determination of Bancorp's or the Bank's Board, the
Officer's:
(1) Personal dishonesty;
(2) Incompetence;
(3) Willful misconduct;
(4) Breach of fiduciary duty involving personal
profit;
(5) Intentional failure to perform duties under
this Agreement;
(6) Other, continuing material failure to
perform his duties under this Agreement
after reasonable notification (which shall
be stated in writing and given at least
fifteen days prior to termination) by the
Board of Bancorp or the Bank of such
failure;
(7) Willful violation of any law, rule or
regulation (other than traffic violations or
similar offenses) or final cease-and-desist
order; or
(8) Material breach by the Officer of any
provision of this Agreement.
ii. Notwithstanding the foregoing, the Officer shall not
be deemed to have been terminated for Just Cause by
Bancorp or the Bank unless there shall have been
delivered to the Officer a copy of a resolution duly
adopted by
6
<PAGE>
the affirmative vote of not less than a majority of
the entire membership of the Board of Bancorp or the
Bank at a meeting of such Board called and held for
the purpose (after reasonable notice to the Officer
and an opportunity for the Officer to be heard before
the Board), finding that in the good faith opinion of
such Board the Officer was guilty of conduct
described above and specifying the particulars
thereof.
e. Certain Regulatory Events.
-------------------------
i. If the Officer is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an
order issued under Sections 8(e)(4) or 8(g)(1) of the Federal
Deposit Insurance Act ("FDIA") (12 U.S.C. (S)(S) 1818(e)(4)
and (g)(1)), all obligations of the Bank under this Agreement
shall terminate as of the effective date of the order, but
vested rights of the parties shall not be affected.
ii. If the Bank is in default (as defined in Section 3(x)(1)
of FDIA), all obligations of the Bank under this Agreement
shall terminate as of the date of default, but vested rights
of the parties shall not be affected.
iii. If a notice served under Sections 8(e)(3) or (g)(1) of
the FDIA (12 U.S.C. (S)(S) 1818(e)(3) and (g)(1)) suspends
and/or temporarily prohibits the Officer from participating in
the conduct of the Bank's affairs, the Bank's obligations
under this Agreement shall be suspended as of the date of such
service, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, the Bank may, in its
discretion, (i) pay the Officer all or part of the
compensation withheld while its contract obligations were
suspended, and (ii) reinstate (in whole or in part) any of its
obligations which were suspended.
The occurrence of any of the events described in paragraphs i,
ii, and iii above may be considered by the Board of Bancorp or the Bank
in connection with a termination for Just Cause.
f. Voluntary Termination by Officer. In addition to his other
--------------------------------
rights to terminate under this Agreement, the Officer may voluntarily terminate
employment with the Bank and Bancorp during the term of this Agreement upon at
least sixty days' prior written notice to each of them, in which case the
Officer shall receive only his compensation, vested rights and employee benefits
up to the date of his termination.
g. Without Just Cause or With Good Reason.
--------------------------------------
i. In addition to termination pursuant to Section 10.a.
through 10.f.: the Board of Bancorp or the Bank may, by
written notice to the Officer, immediately terminate his
employment with Bancorp or the Bank, respectively, at any time
for a reason other than Just Cause (a termination "Without
Just Cause"); and the
7
<PAGE>
Officer may, by written notice to the Boards of Bancorp and
the Bank, immediately terminate this Agreement at any time
within ninety days following an event of "Good Reason" as
defined below (a termination "With Good Reason").
ii. Subject to Section 11 hereof, in the event of termination
under this Section 10.g., the Officer shall be entitled to
receive the salary for the remaining term of the Agreement,
including any renewals or extensions thereof, at the highest
annual rate in effect pursuant to Section 4 of this Agreement
for any of the twelve months immediately preceding the date of
such termination, plus annual cash bonuses for each year
(prorated in the event of partial years) remaining under such
term at the amount received by the Officer in the calendar
year preceding the termination. The sum due under this Section
10.g. shall be paid in one lump sum within ten calendar days
of such termination.
iii. "Good Reason" shall exist if, without Officer's express
written consent, Bancorp or the Bank materially breach any of
its respective obligations under this Agreement. Without
limitation, such a material breach shall be deemed to occur
upon any of the following:
(1) A material reduction in the Officers's
responsibilities or authority in connection
with his employment with Bancorp or the
Bank;
(2) Assignment to the Officer of duties of a
nonexecutive nature or duties for which he
is not reasonably equipped by his skills and
experience;
(3) A reduction in salary or benefits contrary
to the terms of this Agreement, or,
following a Change in Control as defined in
Section 11 of this Agreement, any reduction
in salary or material reduction in benefits
below the amounts to which he was entitled
prior to the Change in Control;
(4) Termination of incentive and benefit plans,
programs, or arrangements, or reduction of
the Officer's participation to such an
extent as to materially reduce their
aggregate value below their aggregate value
as of the Effective Date;
(5) A requirement that the Officer relocate his
principal business office or his principal
place of residence outside Montgomery
County, Maryland, or the assignment to the
Officer of duties that would reasonably
require such a relocation;
(6) A requirement that the Officer spend more
than thirty normal working days away from
Montgomery County, Maryland during any
consecutive twelve-month period; or
(7) Failure to provide office facilities,
secretarial services, and other
administrative services to Officer which are
substantially equivalent to the facilities
and services provided to the Officer on the
8
<PAGE>
Effective Date (excluding brief periods
during which office facilities may be
temporarily unavailable due to fire, natural
disaster, or other calamity).
iv. Notwithstanding the foregoing: (A) a reduction or
elimination of the Officer's benefits under one or
more benefit plans maintained by Bancorp or the Bank
as part of a good faith, overall reduction or
elimination of such plan or plans or benefits
thereunder applicable to all participants in a manner
that does not discriminate against the Officer
(except as such discrimination may be necessary to
comply with law) shall not constitute an event of
Good Reason or a material breach of this Agreement,
provided that benefits of the type or to the general
extent as those offered under such plans prior to
such reduction or elimination are not available to
other officers of Bancorp or the Bank or any company
that controls either of them under a plan or plans in
or under which the Officer is not entitled to
participate, and receive benefits, on a fair and
nondiscriminatory basis; and (B) a requirement that
the Officer report to and be subject to the direction
or supervision of a senior officer of Bancorp or the
Bank other than the President and Chief Executive
Officer shall not constitute an event of Good Reason
or a material breach of this Agreement.
h. Continuing Covenant not to Compete or Interfere with
----------------------------------------------------
Relationships. Regardless of anything herein to the contrary,
-------------
following a termination (i) upon retirement pursuant to
Section 10.b., (ii) due to Disability pursuant to Section
10.c., (iii) for Just Cause pursuant to Section 10.d., or (iv)
by the Officer pursuant to Section 10.f.:
i. The Officer's obligations under Section 9.c. of this
Agreement will continue in effect; and
ii. During the remaining term of this Agreement
(determined immediately before such termination), the
Officer shall not serve as an officer or director or
employee of any bank holding company, bank, savings
association, savings and loan holding company, or
mortgage company (any of which, a "Financial
Institution") which Financial Institution offers
products or services competing with those offered by
Bancorp or the Bank from offices in any county in the
State of Maryland or of any other State in which the
Bank, Bancorp or any of their subsidiaries has a
branch, and shall not interfere with the relationship
of Bancorp or the Bank and any of its employees,
agents, or representatives.
11. Termination in Connection with a Change in Control.
--------------------------------------------------
9
<PAGE>
a. For purposes of this Agreement, a "Change in Control" shall be
deemed to occur on the earliest of:
i. The acquisition by any entity, person or group (other
than the acquisition by a tax-qualified retirement
plan sponsored by Bancorp or the Bank) of beneficial
ownership, as that term is defined in Rule 13d-3
under the Securities Exchange Act of 1934, of more
than 25% of the outstanding capital stock of Bancorp
or the Bank entitled to vote for the election of
directors ("Voting Stock");
ii. The commencement by any entity, person, or group
(other than Bancorp or the Bank, a subsidiary of
Bancorp or the Bank or a tax-qualified retirement
plan sponsored by Bancorp or the Bank) of a tender
offer or an exchange offer for more than 20% of the
outstanding Voting Stock of Bancorp or the Bank;
iii. The effective time of (a) a merger or consolidation
of Bancorp or the Bank with one or more other
corporations as a result of which the holders of the
outstanding Voting Stock of Bancorp or the Bank
immediately prior to such merger exercise voting
control over less than 80% of the Voting Stock of the
surviving or resulting corporation, or (b) a transfer
of substantially all of the property of Bancorp or
the Bank other than to an entity of which Bancorp or
the Bank owns at least 80% of the Voting Stock;
iv. Upon the acquisition by any entity, person, or group
of the control of the election of a majority of the
Bank's or Bancorp's directors,
v. At such time that, during any period of two
consecutive years, individuals who at the beginning
of such period constitute the Board of Bancorp or the
Bank (the "Continuing Directors") cease for any
reason to constitute at least two-thirds thereof,
provided that any individual whose election or
nomination for election as a member of the Board was
approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be
considered a Continuing Director.
b. Termination. If within the period beginning six months
-----------
prior to and ending two years after a Change in Control, (i)
Bancorp or the Bank shall terminate the Officer's employment
Without Just Cause, or (ii) the Officer shall voluntarily
terminate his employment With Good Reason, Bancorp or the Bank
shall, within ten calendar days of the termination of
Officer's employment, make a lump-sum cash payment to him
equal to 2.99 times the sum of (x) his annual salary at the
highest annual rate in effect for any of the twelve months
immediately preceding the date of such termination, plus (y)
the amount of other compensation received
10
<PAGE>
by him during the calendar year preceding the Change in
Control. This cash payment is subject to adjustment pursuant
to Section 14 of this Agreement, and shall be made in lieu of
any payment also required under section 10.g. of this
Agreement because of a termination in such period. The
officer's rights under Section 10.g. are not otherwise
affected by this Section 11. Also, in such event, the Officer
shall, for three calendar years following his termination of
employment, continue to participate in any benefit plans of
Bancorp and the Bank that provide health (including medical
and dental), life or disability insurance, or similar coverage
upon terms no less favorable than the most favorable terms
provided to senior officers of the Bank during such period.
c. Funding of Trust upon Change in Control. In order to assure
-----------------------------------------
payment to the Officer of amounts that may become payable by
Bancorp or the Bank pursuant to this Section, unless and to
the extent the Officer has previously provided a written
release of any claims under Section 11 of this Agreement, not
later than ten business days after a Change in Control,
Bancorp or the Bank shall (i) establish a valid trust under
the law of the State of Maryland with an independent trustee
that has or may be granted corporate trust powers under
Maryland law, (ii) deposit in such trust an amount equal to
2.99 times his "base amount" as defined in Section 280G(b)(3)
of the Code and regulations promulgated thereunder (Section
280G and related regulations hereinafter referred to as
Section 280G"), at the time of the Change of Control, and
(iii) provide the trustee of the trust with a written
direction to hold said amount and any investment return
thereon in a segregated account, and to pay such amounts as
demanded by the Officer from the trust upon written demand
from the Officer stating the amount of the payment demanded
from the trust and the basis for his rights to such payment
under Section 11 of this Agreement. Upon the earlier of the
final payment of all amounts demanded by the Officer under
this Section 11 or the date thirty-six months after the Change
in Control, the trustee of the trust shall pay to Bancorp or
the Bank, as applicable, the entire balance remaining in the
trust. Payments from the trust to the Officer shall be
considered payments made by Bancorp or the Bank for purposes
of this Agreement. Payment of such amounts to the Officer from
the trust, however, shall not relieve Bancorp or the Bank from
any obligation to pay amounts in excess of those paid from the
trust, or from any obligation to take actions or refrain from
taking actions otherwise required by this Agreement. Unless
and until a termination of or by the Officer as described in
Section 11.b.(i) or (ii), the Officer's rights under this
Agreement shall be those of a general, unsecured creditor, he
shall have no claim against the assets of the trust, and the
assets of the trust shall remain subject to the claims of
creditors of Bancorp or the Bank. Upon the termination of the
trust as specified herein, the Officer shall have no further
interest in the trust.
12. Indemnification and Liability Insurance.
---------------------------------------
11
<PAGE>
a. Indemnification. Bancorp and the Bank agree to indemnify
---------------
the Officer (and his heirs, executors, and administrators) to
the fullest extent permitted under applicable law and
regulations against any and all expenses and liabilities
reasonably incurred by him in connection with or arising out
of any action, suit, or proceeding in which he may be involved
by reason of his having been a director or officer of Bancorp
or the Bank or any of their subsidiaries (whether or not he
continues to be a director or officer at the time of incurring
any such expenses or liabilities) such expenses and
liabilities to include, but not be limited to, judgements,
court costs and attorney's fees and the cost of reasonable
settlements, such settlements to be approved by the Board of
Bancorp or the Bank, if such action is brought against the
Officer in his capacity as an officer or director of Bancorp
or the Bank or any of their subsidiaries. Indemnification for
expense shall not extend to matters for which the Officer has
been terminated for Just Cause. Nothing contained herein shall
be deemed to provide indemnification prohibited by applicable
law or regulation. Notwithstanding anything herein to the
contrary, the obligations of this Section 12 shall survive the
term of this Agreement by a period of seven years.
b. Insurance. During the period in which indemnification of
---------
the Officer is required under this Section, Bancorp or the
Bank shall provide the Officer (and his heirs, executors, and
administrators) with coverage under a directors' and officers'
liability policy at the expense of Bancorp or the Bank, at
least equivalent to such coverage provided to directors and
senior officers of Bancorp or the Bank, whichever is more
favorable to the Officer.
13. Reimbursement of Officer's Expenses to Enforce this Agreement. Bancorp
-------------------------------------------------------------
or the Bank shall reimburse the Officer for all out-of-pocket expenses,
including, without limitation, reasonable attorney's fees, incurred by
the Officer in connection with successful enforcement by the Officer of
the obligations of Bancorp or the Bank to the Officer under this
Agreement up to a maximum of $30,000. Successful enforcement shall mean
the grant of an award of money or the requirement that Bancorp or the
Bank take some action specified by this Agreement (i) as a result of
court order; or (ii) otherwise by Bancorp or the Bank following an
initial failure of Bancorp or the Bank to pay such money or take such
action promptly after written demand therefor from the Officer stating
the reason that such money or action was due under this Agreement at or
prior to the time of such demand.
14. Adjustment of Certain Payments and Benefits.
-------------------------------------------
a. In the event that payments pursuant to this Agreement
(including, without limitation, any payment under any plan,
program, or arrangement referred to in Section 5 or 6 hereof)
would result in the imposition of a penalty tax pursuant to
Section 280G, such payments shall be reduced to equal the
maximum amount which may be paid under Section 280G without
exceeding such limits. In the event any such reduction in
payments is necessary, the Officer may determine, in
12
<PAGE>
his sole discretion, which categories of payments (including,
without limitation, the value of benefits or of acceleration
of vesting or receipt of benefits or amounts) are to be
reduced or eliminated.
b. Payments made to the Officer pursuant to this Agreement or
otherwise, are subject to and conditioned upon their
compliance with Section 18(k) of the FDIA (12 U.S.C. (S) 1828
(k), relating to "golden parachute" and indemnification
payments and certain other benefits.
15. Injunctive Relief. If there is a breach or threatened breach of Section
-----------------
10.h. of this Agreement or the prohibitions upon disclosure contained in Section
9.c. of this Agreement, Bancorp or the Bank and the Officer agree that there is
no adequate remedy at law for such breach, and that Bancorp and the Bank each
shall be entitled to injunctive relief restraining the Officer from such breach
or threatened breach, but such relief shall not be the exclusive remedy
hereunder for such breach. The parties hereto likewise agree that the Officer
shall be entitled to injunctive relief to enforce the obligations of Bancorp and
the Bank under Section 11 of this Agreement.
16. Successors and Assigns.
----------------------
a. This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of Bancorp or the Bank
which shall acquire, directly or indirectly, by merger,
consolidation, purchase or otherwise, all or substantially all
of the assets or stock of Bancorp or the Bank.
b. Since the Bank and Bancorp are contracting for the unique and
personal skills of the Officer, the Officer shall be precluded
from assigning or delegating his rights or duties hereunder
without first obtaining the written consent of the Bank and
Bancorp.
17. No Mitigation. The Officer shall not be required to mitigate the
--------------
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Officer in any subsequent employment.
18. Notices. All notices, requests, demands and other communications in
-------
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch United States Post Office, by registered or certified mail, postage
prepaid, addressed as follows, or to such other address as shall have been
designated in writing by the addressee:
a. If to Bancorp or the Bank:
Sandy Spring Bancorp, Inc.
13
<PAGE>
Sandy Spring National Bank of Maryland
17801 Georgia Avenue
Olney, Maryland 20832
Attention: President and Chief Executive Officer
Copy to: Corporate Secretary
b. If to the Officer:
James H. Langmead
7112 Chardon Court
Clarksville, Maryland 21029
19. Joint and Severally Liability; Payments by Bancorp and the Bank. To the
---------------------------------------------------------------
extent permitted by law, except as otherwise provided herein, Bancorp and the
Bank shall be jointly and severally liable for the payment of all amounts due
under this Agreement. Bancorp hereby agrees that it shall be jointly and
severally liable with the Bank for the payment of all amounts due under this
Agreement and shall guarantee the performance of the Bank's obligations
thereunder, provided that Bancorp shall not be required by this Agreement to pay
to the Officer a salary or any bonuses or any other cash payments, except in the
event that the Bank does not fulfill the obligations to the Officer hereunder
for such payments. Bancorp may, however, pay salary and bonuses as deemed
appropriate by its Board in the exercise of its discretion.
20. No Plan Created by this Agreement. The Officer, Bancorp and the Bank
---------------------------------
expressly declare and agree that this Agreement was negotiated among them and
that no provision or provisions of this Agreement are intended to, or shall be
deemed to, create any plan for purposes of the Employee Retirement Income
Security Act or any other law or regulation, and Bancorp, the Bank and the
Officer each expressly waives any right to assert the contrary. Any assertion in
any judicial or administrative filing, hearing, or process by or on behalf of
the Officer or Bancorp or the Bank that such a plan was so created by this
Agreement shall be deemed a material breach of this Agreement by the party
making such an assertion.
21. Amendments. No amendments or additions to this Agreement shall
----------
be binding unless made in writing and signed by all of the parties, except
as herein otherwise specifically provided.
22. Applicable Law. Except to the extent preempted by Federal law, the
---------------
laws of the State of Maryland shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
23. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
24. Headings. Headings contained herein are for convenience of reference
--------
only.
14
<PAGE>
25. Entire Agreement. This Agreement, together with any understanding or
----------------
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof, other than written agreements with respect to specific plans, programs,
or arrangements described in Sections 5 and 6, and supersedes all prior
agreements other than with respect to such specific plans, programs, or
arrangements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
SANDY SPRING NATIONAL BANK OF MARYLAND
By: /s/ Hunter R. Hollar
Title: President and Chief Executive Officer
SANDY SPRING BANCORP, INC.
By: /s/ Hunter R. Hollar
Title: President and Chief Executive Officer
OFFICER
/s/ James H. Langmead
James H. Langmead
15
<PAGE>
Exhibit 10(g)
<PAGE>
EMPLOYMENT AGREEMENT
================================================================================
THIS AGREEMENT (the "Agreement"), made this 30th day of January 1997,
by and among Sandy Spring Bancorp, Inc., a registered bank holding company
("Bancorp"), Sandy Spring National Bank of Maryland, a national banking
association and wholly owned subsidiary of Bancorp with its main office in
Olney, Maryland (the "Bank"), and Lawrence T. Lewis (the "Officer").
W I T N E S S E T H
WHEREAS, the Officer is employed as the Senior Vice President of the
Bank.
WHEREAS, as a result of the skill, knowledge, and experience of the
Officer, the Board of Directors of the Bank (the "Board") desires to retain the
services of the Officer.
WHEREAS, the Officer desires to continue to serve as the Senior Vice
President of the Bank.
WHEREAS, the Officer and the Board and the Board of Directors of
Bancorp desire to enter into an Agreement setting forth the terms of conditions
of the continuing employment of the Officer and the related rights and
obligations of each of the parties.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed as follows:
1. Employment. The Officer is employed as the Senior Vice President of
----------
the Bank, reporting to the President and Chief Executive Officer. Subject to
direction of the President and Chief Executive Officer, the Officer shall
perform all duties and shall have all powers which are commonly incident to the
office of Senior Vice President or which, consistent with that office, are
delegated to him by the President and Chief Executive Officer. The officer shall
serve as a member of the Senior Officer Policy Committee and the Asset/
Liability Committee of the Bank, as Chairman of the Trust Investment Committee
and the Investment Committee of the Bank, and as an ex official member of the
Trust Committee of the Board. The Officer's duties include, but are not limited
to:
a. Making recommendations to the President and Chief Executive
Officer concerning the investment strategies, asset liability
position, and capital structure of Bancorp and the Bank and
related policies;
b. Managing the day-to-day investment functions of the Bank,
including supervision of the officers and employees engaged in
these functions;
1
<PAGE>
c. Management oversight of the Investment Division of the
Bank, including trust administration, asset management,
financial planning services, and retirement plan services;
d. Administrative oversight of the Audit Department (which
reports to the Board);
e. Promoting the Bank and its services;
f. Managing the efforts of Bancorp and the Bank to comply with
applicable laws and regulations relating to the investments of
the Bank; and
g. Providing complete, timely, and accurate reports to the
President and Chief Executive Officer of Bancorp and the Bank
regarding the Bank's investment portfolio and trust department
functions.
2. Location and Facilities. The Officer will be furnished with the working
-----------------------
facilities and staff customary for executive officers with the title and duties
set forth in Section 1 and as are necessary for him to perform his duties. The
location of such facilities and staff shall be at the principal administrative
offices of the Bank, or at such other site or sites customary for such offices.
3. Term.
----
a. The term of this Agreement shall be (i) the initial term,
consisting of the period commencing on the date of this
Agreement (the "Effective Date") and ending immediately prior
to the second anniversary of the Effective Date, plus (ii) any
and all extensions of the initial term made pursuant to this
Section 3.
b. On each anniversary of the Effective Date prior to a
termination of the Agreement, the term under this Agreement
shall be extended for an additional one-year period beyond the
then effective expiration date without action by any party,
provided that neither the Bank nor the Officer shall have
given written notice at least sixty (60) days prior to such
anniversary date of its or his desire that the term not be
extended. The President and Chief Executive Officer will
review the Officer's performance and the advisability of
extending the term of this Agreement, and the Board shall,
based on such review, determine whether or not to extend the
term of this Agreement at a meeting or meetings at least
ninety (90) days prior to each anniversary date.
4. Base Compensation.
-----------------
a. The Bank agrees to pay the Officer during the term of this
Agreement a salary at the rate of $110,000 per annum, payable
in cash not less frequently than monthly, as may be adjusted
in accordance with this Section 4.
2
<PAGE>
b. The Human Resources Committee of the Bank (the
"Committee") with the advice of the President and Chief
Executive Officer shall perform an annual analysis of the
Officer's performance and of the compensation of officers
performing similar functions at independent financial
institutions of comparable assets and performance, and based
upon this review, the recommendation of the President and
Chief Executive Officer, and on such other factors as it deems
pertinent, shall recommend to the Board the salary rate to be
paid beginning on the next April 1 following such review. The
Board shall review annually the rate of the Officer's salary
based upon this recommendation of the Committee and other
factors they deem relevant, and may maintain, increase or
decrease his salary, provided that no such action shall (i)
reduce the rate of salary below $110,000 or (ii) reduce the
rate of salary paid to the Officer for any months prior to the
month in which notice of the reduction is provided in writing
to the Officer.
c. In the absence of action by the Board, the Officer shall
continue to receive salary at the $110,000 per annum rate
specified herein or, if another rate has been established
under the provisions of this Section 4, the rate last properly
established by action of the Board under the provisions of
this Section 4.
5. Bonuses. Unless the Officer agrees otherwise, he shall be entitled to
-------
participate in discretionary bonuses that the Board may award from time to time
to senior management employees pursuant to bonus plans or otherwise. The Officer
also shall participate in any other fringe benefits which are or may become
available to senior management employees of the Bank, including for example: any
stock option or incentive compensation plans and any other benefits that are
commensurate with the responsibilities and functions to be performed by the
Officer under this Agreement. No other compensation provided for in this
Agreement shall be deemed a substitute for the Officer's right to participate in
such discretionary bonuses or fringe benefits.
6. Benefit Plans. The Officer shall be entitled to participate in such
-------------
life insurance, medical, dental, pension, profit sharing, and retirement plans
and other programs and arrangements as may be approved from time to time by
Bancorp or the Bank for the benefit of the employees of the Bank. In addition,
the Officer shall be entitled to participate in a nonstatutory supplemental
retirement plan or arrangement ("SERP") established for the Officer and in the
Executive Health Expense Reimbursement and Insurance Plans (together, the
"HERP") or a successor plan or plans that provide the same or greater level of
benefits as those provided to participants under the HERP as in effect on the
Effective Date. (The resolution of the Board of the Bank approving this
Agreement shall serve as a designation of eligibility to participate in the HERP
as of the Effective Time, if the Officer had not previously been designated as
eligible.)
7. Vacation and Leave.
------------------
a. The Officer shall be entitled to five weeks (twenty-five
working days) of vacation with pay during each consecutive
twelve-month period commencing on January 1, 1997 and each
January 1 thereafter during the term of this Agreement, to be
3
<PAGE>
taken at reasonable times and in reasonable periods as the
Officer and the Bank shall mutually determine, and provided
that no vacation time shall interfere with the duties required
to be rendered by the Officer hereunder. Any vacation time not
used during a twelve-month period shall carry over and be
useable during the succeeding twelve-month period, but not
thereafter. The Officer shall not receive any additional
compensation from the Bank on account of his failure to take
vacation.
b. In addition to paid vacations, the Officer shall be entitled,
without loss of pay, to absent himself voluntarily from the
performance of his employment for such additional periods of
time and for such valid and legitimate reasons as the
President and Chief Executive Officer may in his discretion
determine. Further, the President and Chief Executive Officer
may grant to the Officer a leave or leaves of absence, with or
without pay, at such time or times and upon such terms and
conditions as the President and Chief Executive Officer in his
discretion may determine.
8. Expense Payments and Reimbursements. The Officer shall be reimbursed
-----------------------------------
for all reasonable out-of-pocket business expenses which he shall incur in
connection with his services under this Agreement upon substantiation of such
expenses in accordance with applicable policies of the Bank.
9. Loyalty and Confidentiality.
---------------------------
a. During the term of this Agreement the Officer: (i) shall
devote all his time, attention, skill, and efforts to the
faithful performance of his duties hereunder; provided,
however, that from time to time, the Officer may serve on the
boards of directors of, and hold any other offices or
positions in, companies or organizations which will not
present any conflict of interest with Bancorp or the Bank or
any of their subsidiaries or affiliates, unfavorably affect
the performance of Officer's duties pursuant to this
Agreement, or violate any applicable statute or regulation;
and (ii) shall not engage in any business or activity contrary
to the business affairs or interests of Bancorp or the Bank.
b. Nothing contained in this Agreement shall prevent or limit the
Officer's right to invest in the capital stock or other
securities of any business dissimilar from that of Bancorp and
the Bank, or, solely as a passive, minority investor, in any
business.
c. The Officer agrees to maintain the confidentiality of any and
all information concerning the operation or financial status
of Bancorp and the Bank; the names or addresses of any of
their borrowers, depositors and other customers; any
information concerning or obtained from such customers; and
any other information concerning Bancorp or the Bank to which
he may be exposed during
4
<PAGE>
the course of his employment. The Officer further agrees that,
unless required by law or specifically permitted by Bancorp or
the Bank in writing, he will not disclose to any person or
entity, either during or subsequent to his employment, any of
the above-mentioned information which is not generally known
to the public, nor shall he employ such information in any way
other than for the benefit of Bancorp and the Bank.
10. Termination and Termination Pay. Subject to Section 11 of this
-------------------------------
Agreement, the Officer's employment under this Agreement may be terminated in
the following circumstances:
a. Death. The Officer's employment under this Agreement shall
-----
terminate upon his death during the term of this Agreement, in
which event the Officer's estate shall be entitled to receive
the compensation due to the Officer through the last day of
the calendar month in which his death occurred.
b. Retirement. This Agreement shall be terminated upon the
----------
normal or early retirement of the Officer under the retirement
benefit plan or plans in which he participates pursuant to
Section 6 of this Agreement.
c. Disability. The Bank or the Officer may terminate the
----------
Officer's employment after having established the Officer's
Disability. For purposes of this Agreement, "Disability" means
a physical or mental infirmity that impairs the Officer's
ability to substantially perform his duties under this
Agreement and that results in the Officer's becoming eligible
for long-term disability benefits under Bancorp's or the
Bank's long-term disability plan (or, if Bancorp or the Bank
has no such plan in effect, that impairs the Officer's ability
to substantially perform his duties under this Agreement for a
period of one-hundred-eighty consecutive days). In the event
of such Disability, the Officer's obligation to perform
services under this Agreement will terminate. In the event of
such termination, the Officer shall be entitled to receive the
following:
i. The compensation and benefits provided for under this
Agreement for any period during the term of this
Agreement and prior to the date of termination
pursuant to this Section 10.c. during which the
Officer is unable to work due to physical or mental
infirmity (less any amounts which the Officer
receives under any disability insurance maintained by
Bancorp or the Bank with respect to such period);
ii. For the period beginning upon the date of termination
pursuant to this Section 10.c. and continuing for the
remaining term of this Agreement, (A) salary at the
highest rate paid pursuant to Section 4 of this
Agreement during the twelve months prior to the
establishment of such disability under this Section
10.c., reduced by any payments received by the
Officer during such period following termination
under a long term disability plan
5
<PAGE>
or policy maintained by Bancorp or the Bank, and (B)
benefits pursuant to Section 6 of this Agreement.
The Board shall determine whether or not the Officer is and
continues to be permanently disabled for purposes of this Agreement in
good faith, based upon competent medical advice and other factors that
it reasonably believes to be relevant. As a condition to any benefits,
such Board may require the Officer to submit to such physical or mental
evaluations and tests as it deems reasonably appropriate.
d. Just Cause.
----------
i. The Board may, by written notice to the Officer
in the form and manner specified in this paragraph,
immediately terminate his employment with the Bank at
any time for Just Cause. The Officer shall have no
right to receive compensation or other benefits for
any period after termination for Just Cause.
Termination for "Just Cause" shall mean termination
because of, in the good faith determination of the
Board, the Officer's:
(1) Personal dishonesty;
(2) Incompetence;
(3) Willful misconduct;
(4) Breach of fiduciary duty involving
personal profit;
(5) Intentional failure to perform duties
under this Agreement;
(6) Other, continuing material failure to
perform his duties under this Agreement
after reasonable notification (which shall
be stated in writing and given at least
fifteen days prior to termination) by the
Board of such failure;
(7) Willful violation of any law, rule
or regulation (other than traffic
violations or similar offenses) or final
cease-and-desist order; or
(8) Material breach by the Officer of any
provision of this Agreement.
ii. Notwithstanding the foregoing, the Officer shall
not be deemed to have been terminated for Just Cause
unless there shall have been delivered to the Officer
a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the
entire membership of the Board at a meeting called
and held for the purpose (after reasonable notice to
the Officer and an opportunity for the Officer to be
heard before the Board), finding that in the good
faith opinion of the Board the Officer was guilty of
conduct described above and specifying the
particulars thereof.
e. Certain Regulatory Events.
-------------------------
i. If the Officer is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an
order issued under Sections 8(e)(4) or 8(g)(1) of the Federal
Deposit Insurance Act ("FDIA") (12 U.S.C. (S)(S) 1818(e)(4)
6
<PAGE>
and (g)(1)), all obligations of the Bank under this Agreement
shall terminate as of the effective date of the order, but
vested rights of the parties shall not be affected.
ii. If the Bank is in default (as defined in Section 3(x)(1)
of FDIA), all obligations of the Bank under this Agreement
shall terminate as of the date of default, but vested rights
of the parties shall not be affected.
iii. If a notice served under Sections 8(e)(3) or (g)(1) of
the FDIA (12 U.S.C. (S)(S) 1818(e)(3) and (g)(1)) suspends
and/or temporarily prohibits the Officer from participating in
the conduct of the Bank's affairs, the Bank's obligations
under this Agreement shall be suspended as of the date of such
service, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, the Bank may, in its
discretion, (i) pay the Officer all or part of the
compensation withheld while its contract obligations were
suspended, and (ii) reinstate (in whole or in part) any of its
obligations which were suspended.
The occurrence of any of the events described in paragraphs i,
ii, and iii above may be considered by the Board in connection with a
termination for Just Cause.
f. Voluntary Termination by Officer. In addition to his other
--------------------------------
rights to terminate under this Agreement, the Officer may voluntarily
terminate employment with the Bank during the term of this Agreement
upon at least sixty days' prior written notice to the Bank, in which
case the Officer shall receive only his compensation, vested rights and
employee benefits up to the date of his termination.
g. Without Just Cause or With Good Reason.
--------------------------------------
i. In addition to termination pursuant to Section 10.a.
through 10.f.: the Board may, by written notice to the
Officer, immediately terminate his employment with the Bank at
any time for a reason other than Just Cause (a termination
"Without Just Cause"); and the Officer may, by written notice
to the Board, immediately terminate this Agreement at any time
within ninety days following an event of "Good Reason" as
defined below (a termination "With Good Reason").
ii. Subject to Section 11 hereof, in the event of termination
under this Section 10.g., the Officer shall be entitled to
receive the salary for the remaining term of the Agreement,
including any renewals or extensions thereof, at the highest
annual rate in effect pursuant to Section 4 of this Agreement
for any of the twelve months immediately preceding the date of
such termination, plus annual cash bonuses for each year
(prorated in the event of partial years) remaining under such
term at the amount received by the Officer in the calendar
year preceding the termination. The sum due under this Section
10.g. shall be paid in one lump sum within ten calendar days
of such termination.
7
<PAGE>
iii. "Good Reason" shall exist if, without Officer's express
written consent, Bancorp or the Bank materially breach any of
its respective obligations under this Agreement. Without
limitation, such a material breach shall be deemed to occur
upon any of the following:
(1) A material reduction in the Officers's
responsibilities or authority in connection with
his employment with the Bank;
(2) Assignment to the Officer of duties of a
nonexecutive nature or duties for which he is not
reasonably equipped by his skills and experience;
(3) A reduction in salary or benefits contrary to the
terms of this Agreement, or, following a Change in
Control as defined in Section 11 of this
Agreement, any reduction in salary or material
reduction in benefits below the amounts to which
he was entitled prior to the Change in Control;
(4) Termination of incentive and benefit plans,
programs, or arrangements, or reduction of the
Officer's participation to such an extent as to
materially reduce their aggregate value below
their aggregate value as of the Effective Date;
(5) A requirement that the Officer relocate his
principal business office or his principal place
of residence outside Montgomery County, Maryland,
or the assignment to the Officer of duties that
would reasonably require such a relocation;
(6) A requirement that the Officer spend more than
thirty normal working days away from Montgomery
County, Maryland during any consecutive
twelve-month period; or
(7) Failure to provide office facilities, secretarial
services, and other administrative services to
Officer which are substantially equivalent to the
facilities and services provided to the Officer on
the Effective Date (excluding brief periods during
which office facilities may be temporarily
unavailable due to fire, natural disaster, or
other calamity).
iv. Notwithstanding the foregoing: (A) a reduction or
elimination of the Officer's benefits under one or more
benefit plans maintained by Bancorp or the Bank as part
of a good faith, overall reduction or elimination of
such plan or plans or benefits thereunder applicable to
all participants in a manner that does not discriminate
against the Officer (except as such discrimination may
be necessary to comply with law) shall not constitute an
event of Good Reason or a material breach of this
Agreement, provided that benefits of the type or to the
general extent as those offered under such plans prior
to such reduction or elimination are not available to
other officers of Bancorp or the Bank or any company
that controls either of them under a plan or plans in or
under which the Officer is not entitled to
8
<PAGE>
participate, and receive benefits, on a fair and
nondiscriminatory basis; and (B) a requirement that
the Officer report to and be subject to the direction
or supervision of a senior officer of Bancorp or the
Bank other than the President and Chief Executive
Officer shall not constitute an event of Good Reason
or a material breach of this Agreement.
h. Continuing Covenant not to Compete or Interfere with
----------------------------------------------------
Relationships. Regardless of anything herein to the contrary,
-------------
following a termination (i) upon retirement pursuant to
Section 10.b., (ii) due to Disability pursuant to Section
10.c., (iii) for Just Cause pursuant to Section 10.d., or (iv)
by the Officer pursuant to Section 10.f.:
i. The Officer's obligations under Section 9.c. of this
Agreement will continue in effect; and
ii. During the remaining term of this Agreement
(determined immediately before such termination), the
Officer shall not serve as an officer or director or
employee of any bank holding company, bank, savings
association, savings and loan holding company, or
mortgage company (any of which, a "Financial
Institution"), which Financial Institution offers
products or services competing with those offered by
Bancorp or the Bank from offices in any county in the
State of Maryland or of any other State in which the
Bank, Bancorp or any of their subsidiaries has a
branch, and shall not interfere with the relationship
of Bancorp or the Bank and any of its employees,
agents, or representatives.
11. Termination in Connection with a Change in Control.
--------------------------------------------------
a. For purposes of this Agreement, a "Change in Control" shall be
deemed to occur on the earliest of:
i. The acquisition by any entity, person or group (other
than the acquisition by a tax-qualified retirement
plan sponsored by Bancorp or the Bank) of beneficial
ownership, as that term is defined in Rule 13d-3
under the Securities Exchange Act of 1934, of more
than 25% of the outstanding capital stock of Bancorp
or the Bank entitled to vote for the election of
directors ("Voting Stock");
ii. The commencement by any entity, person, or group
(other than Bancorp or the Bank, a subsidiary of
Bancorp or the Bank or a tax-qualified retirement
plan sponsored by Bancorp or the Bank) of a tender
offer or an exchange offer for more than 20% of the
outstanding Voting Stock of Bancorp or the Bank;
9
<PAGE>
iii. The effective time of (a) a merger or consolidation
of Bancorp or the Bank with one or more other
corporations as a result of which the holders of the
outstanding Voting Stock of Bancorp or the Bank
immediately prior to such merger exercise voting
control over less than 80% of the Voting Stock of the
surviving or resulting corporation, or (b) a transfer
of substantially all of the property of Bancorp or
the Bank other than to an entity of which Bancorp or
the Bank owns at least 80% of the Voting Stock;
iv. Upon the acquisition by any entity, person, or group
of the control of the election of a majority of the
Bank's or Bancorp's directors,
v. At such time that, during any period of two
consecutive years, individuals who at the beginning
of such period constitute the Board of Bancorp or the
Bank (the "Continuing Directors") cease for any
reason to constitute at least two-thirds thereof,
provided that any individual whose election or
nomination for election as a member of the Board was
approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be
considered a Continuing Director.
b. Termination. If within the period beginning six months prior
-----------
to and ending two years after a Change in Control, (i) the
Bank shall terminate the Officer's employment Without Just
Cause, or (ii) the Officer shall voluntarily terminate his
employment With Good Reason, the Bank shall, within ten
calendar days of the termination of Officer's employment, make
a lump-sum cash payment to him equal to 2.99 times the sum of
(x) his annual salary at the highest annual rate in effect for
any of the twelve months immediately preceding the date of
such termination, plus (y) the amount of other compensation
received by him during the calendar year preceding the Change
in Control. This cash payment is subject to adjustment
pursuant to Section 14 of this Agreement, and shall be made in
lieu of any payment also required under section 10.g. of this
Agreement because of a termination in such period. The
Officer's rights under Section 10.g. are not otherwise
affected by this Section 11. Also, in such event, the Officer
shall, for three calendar years following his termination of
employment, continue to participate in any benefit plans of
Bancorp and the Bank that provide health (including medical
and dental), life or disability insurance, or similar coverage
upon terms no less favorable than the most favorable terms
provided to senior officers of the Bank during such period.
c. Funding of Trust upon Change in Control. In order to assure
---------------------------------------
payment to the Officer of amounts that may become payable by
Bancorp or the Bank pursuant to this Section, unless and to
the extent the Officer has previously provided a written
release of any claims under Section 11 of this Agreement, not
later than ten business days after a Change in Control,
Bancorp or the Bank shall (i) establish
10
<PAGE>
a valid trust under the law of the State of Maryland with an
independent trustee that has or may be granted corporate trust
powers under Maryland law, (ii) deposit in such trust an
amount equal to 2.99 times his "base amount" as defined in
Section 280G(b)(3) of the Code and regulations promulgated
thereunder (Section 280G and related regulations hereinafter
referred to as Section 280G"), at the time of the Change of
Control, and (iii) provide the trustee of the trust with a
written direction to hold said amount and any investment
return thereon in a segregated account, and to pay such
amounts as demanded by the Officer from the trust upon written
demand from the Officer stating the amount of the payment
demanded from the trust and the basis for his rights to such
payment under Section 11 of this Agreement. Upon the earlier
of the final payment of all amounts demanded by the Officer
under this Section 11 or the date thirty-six months after the
Change in Control, the trustee of the trust shall pay to
Bancorp or the Bank, as applicable, the entire balance
remaining in the trust. Payments from the trust to the Officer
shall be considered payments made by Bancorp or the Bank for
purposes of this Agreement. Payment of such amounts to the
Officer from the trust, however, shall not relieve Bancorp or
the Bank from any obligation to pay amounts in excess of those
paid from the trust, or from any obligation to take actions or
refrain from taking actions otherwise required by this
Agreement. Unless and until a termination of or by the Officer
as described in Section 11.b.(i) or (ii), the Officer's rights
under this Agreement shall be those of a general, unsecured
creditor, he shall have no claim against the assets of the
trust, and the assets of the trust shall remain subject to the
claims of creditors of Bancorp or the Bank. Upon the
termination of the trust as specified herein, the Officer
shall have no further interest in the trust.
12. Indemnification and Liability Insurance.
---------------------------------------
a. Indemnification. Bancorp and the Bank agree to indemnify the
----------------
Officer (and his heirs, executors, and administrators) to the
fullest extent permitted under applicable law and regulations
against any and all expenses and liabilities reasonably
incurred by him in connection with or arising out of any
action, suit, or proceeding in which he may be involved by
reason of his having been a director or officer of the Bank or
any of their subsidiaries (whether or not he continues to be a
director or officer at the time of incurring any such expenses
or liabilities) such expenses and liabilities to include, but
not be limited to, judgements, court costs and attorney's fees
and the cost of reasonable settlements, such settlements to be
approved by the Board of Bancorp or the Bank, if such action
is brought against the Officer in his capacity as an officer
or director of Bancorp or the Bank or any of their
subsidiaries. Indemnification for expense shall not extend to
matters for which the Officer has been terminated for Just
Cause. Nothing contained herein shall be deemed to provide
indemnification prohibited by applicable law or regulation.
Notwithstanding anything herein to the contrary,
11
<PAGE>
the obligations of this Section 12 shall survive the term of
this Agreement by a period of seven years.
b. Insurance. During the period in which indemnification of
---------
the Officer is required under this Section, Bancorp or the
Bank shall provide the Officer (and his heirs, executors, and
administrators) with coverage under a directors' and officers'
liability policy at the expense of Bancorp or the Bank, at
least equivalent to such coverage provided to directors and
senior officers of Bancorp or the Bank, whichever is more
favorable to the Officer.
13. Reimbursement of Officer's Expenses to Enforce this Agreement.
-------------------------------------------------------------
Bancorp or the Bank shall reimburse the Officer for all out-of-pocket expenses,
including, without limitation, reasonable attorney's fees, incurred by the
Officer in connection with successful enforcement by the Officer of the
obligations of Bancorp or the Bank to the Officer under this Agreement up to a
maximum of $30,000. Successful enforcement shall mean the grant of an award of
money or the requirement that Bancorp or the Bank take some action specified by
this Agreement (i) as a result of court order; or (ii) otherwise by Bancorp or
the Bank following an initial failure of Bancorp or the Bank to pay such money
or take such action promptly after written demand therefor from the Officer
stating the reason that such money or action was due under this Agreement at or
prior to the time of such demand.
14. Adjustment of Certain Payments and Benefits.
-------------------------------------------
a. In the event that payments pursuant to this Agreement
(including, without limitation, any payment under any plan,
program, or arrangement referred to in Section 5 or 6 hereof)
would result in the imposition of a penalty tax pursuant to
Section 280G, such payments shall be reduced to equal the
maximum amount which may be paid under Section 280G without
exceeding such limits. In the event any such reduction in
payments is necessary, the Officer may determine, in his sole
discretion, which categories of payments (including, without
limitation, the value of benefits or of acceleration of
vesting or receipt of benefits or amounts) are to be reduced
or eliminated.
b. Payments made to the Officer pursuant to this Agreement or
otherwise, are subject to and conditioned upon their
compliance with Section 18(k) of the FDIA (12 U.S.C. (S) 1828
(k), relating to "golden parachute" and indemnification
payments and certain other benefits.
15. Injunctive Relief. If there is a breach or threatened breach of
-----------------
Section 10.h. of this Agreement or the prohibitions upon disclosure contained in
Section 9.c. of this Agreement, Bancorp or the Bank and the Officer agree that
there is no adequate remedy at law for such breach, and that Bancorp and the
Bank each shall be entitled to
12
<PAGE>
injunctive relief restraining the Officer from such breach or threatened breach,
but such relief shall not be the exclusive remedy hereunder for such breach. The
parties hereto likewise agree that the Officer shall be entitled to injunctive
relief to enforce the obligations of Bancorp and the Bank under Section 11 of
this Agreement.
16. Successors and Assigns.
----------------------
a. This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of Bancorp or the Bank
which shall acquire, directly or indirectly, by merger,
consolidation, purchase or otherwise, all or substantially all
of the assets or stock of Bancorp or the Bank.
b. Since the Bank and Bancorp are contracting for the unique and
personal skills of the Officer, the Officer shall be precluded
from assigning or delegating his rights or duties hereunder
without first obtaining the written consent of the Bank and
Bancorp.
17. No Mitigation. The Officer shall not be required to mitigate the
-------------
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Officer in any subsequent employment.
18. Notices. All notices, requests, demands and other communications in
-------
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch United States Post Office, by registered or certified mail, postage
prepaid, addressed as follows, or to such other address as shall have been
designated in writing by the addressee:
a. If to Bancorp or the Bank:
Sandy Spring Bancorp, Inc.
Sandy Spring National Bank of Maryland
17801 Georgia Avenue
Olney, Maryland 20832
Attention: President and Chief Executive Officer
Copy to: Corporate Secretary
b. If to the Officer:
Lawrence T. Lewis
4040 Roxmill Court
Glenwood, Maryland 21738
13
<PAGE>
19. Joint and Severally Liability; Payments by Bancorp and the Bank. To the
---------------------------------------------------------------
extent permitted by law, except as otherwise provided herein, Bancorp and the
Bank shall be jointly and severally liable for the payment of all amounts due
under this Agreement. Bancorp hereby agrees that it shall be jointly and
severally liable with the Bank for the payment of all amounts due under this
Agreement and shall guarantee the performance of the Bank's obligations
thereunder, provided that Bancorp shall not be required by this Agreement to pay
to the Officer a salary or any bonuses or any other cash payments, except in the
event that the Bank does not fulfill the obligations to the Officer hereunder
for such payments. Bancorp may, however, pay salary and bonuses as deemed
appropriate by its Board in the exercise of its discretion.
20. No Plan Created by this Agreement. The Officer, Bancorp and the Bank
---------------------------------
expressly declare and agree that this Agreement was negotiated among them and
that no provision or provisions of this Agreement are intended to, or shall be
deemed to, create any plan for purposes of the Employee Retirement Income
Security Act or any other law or regulation, and Bancorp, the Bank and the
Officer each expressly waives any right to assert the contrary. Any assertion in
any judicial or administrative filing, hearing, or process by or on behalf of
the Officer or Bancorp or the Bank that such a plan was so created by this
Agreement shall be deemed a material breach of this Agreement by the party
making such an assertion.
21. Amendments. No amendments or additions to this Agreement shall
----------
be binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
22. Applicable Law. Except to the extent preempted by Federal law,
--------------
the laws of the State of Maryland shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
23. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
24. Headings. Headings contained herein are for convenience of reference
--------
only.
25. Entire Agreement. This Agreement, together with any understanding or
----------------
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof, other than written agreements with respect to specific plans, programs,
or arrangements described in Sections 5 and 6, and supersedes all prior
agreements other than with respect to such specific plans, programs, or
arrangements.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
SANDY SPRING NATIONAL BANK OF MARYLAND
By: /s/ Hunter R. Hollar
Title: President and Chief Executive Officer
SANDY SPRING BANCORP, INC.
By: /s/ Hunter R. Hollar
Title: President and Chief Executive Officer
OFFICER
/s/ Lawrence T. Lewis
Lawrence T. Lewis
15
<PAGE>
Exhibit 10(h)
<PAGE>
EMPLOYMENT AGREEMENT
================================================================================
THIS AGREEMENT (the "Agreement"), made this 30th day of January 1997,
by and among Sandy Spring Bancorp, Inc., a registered bank holding company
("Bancorp"), Sandy Spring National Bank of Maryland, a national banking
association and wholly owned subsidiary of Bancorp with its main office in
Olney, Maryland (the "Bank"), and Stanley L. Merson (the "Officer").
W I T N E S S E T H
WHEREAS, the Officer is employed as the Senior Vice President of the
Bank.
WHEREAS, as a result of the skill, knowledge, and experience of the
Officer, the Board of Directors of the Bank (the "Board") desires to retain the
services of the Officer.
WHEREAS, the Officer desires to continue to serve as the Senior Vice
President of the Bank.
WHEREAS, the Officer and the Board and the Board of Directors of
Bancorp desire to enter into an Agreement setting forth the terms of conditions
of the continuing employment of the Officer and the related rights and
obligations of each of the parties.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed as follows:
1. Employment. The Officer is employed as the Senior Vice President of the
----------
Bank, reporting to the President and Chief Executive Officer. Subject to
direction of the President and Chief Executive Officer, the Officer shall
perform all duties and shall have all powers which are commonly incident to the
office of Senior Vice President or which, consistent with that office, are
delegated to him by the President and Chief Executive Officer. The officer shall
serve as a member of the Senior Officer Policy Committee and the Asset/Liability
Committee, and as Chairman of the Senior Loan Committee of the Bank. The
Officer's duties include, but are not limited to:
a. Making recommendations to the President and Chief Executive
Officer concerning commercial and mortgage lending and related
loan quality assurance strategies, policies, needs, and
tactics of Bancorp and the Bank;
b. Management oversight of the day-to-day commercial lending
functions of the Bank, including supervision of the officers
and employees engaged in these functions;
1
<PAGE>
c. Serving as President of Sandy Spring Mortgage Corporation
("SSMC") and management oversight of the residential mortgage
functions of SSMC and the Bank, including supervision of the
officers and employees engaged in these functions;
d. Promoting the Bank and its services;
e. Managing the efforts of the Bank to comply with applicable
laws and regulations relating to commercial and mortgage
lending; and
f. Providing complete, timely, and accurate reports to the
President and Chief Executive Officer of Bancorp and the Bank
regarding the commercial and mortgage loan portfolio and
related lending functions.
2. Location and Facilities. The Officer will be furnished with the working
-----------------------
facilities and staff customary for executive officers with the title and duties
set forth in Section 1 and as are necessary for him to perform his duties. The
location of such facilities and staff shall be at the principal administrative
offices of the Bank, or at such other site or sites customary for such offices.
3. Term.
----
a. The term of this Agreement shall be (i) the initial term,
consisting of the period commencing on the date of this
Agreement (the "Effective Date") and ending immediately prior
to the second anniversary of the Effective Date, plus (ii) any
and all extensions of the initial term made pursuant to this
Section 3.
b. On each anniversary of the Effective Date prior to a
termination of the Agreement, the term under this Agreement
shall be extended for an additional one-year period beyond the
then effective expiration date without action by any party,
provided that neither the Bank nor the Officer shall have
given written notice at least sixty (60) days prior to such
anniversary date of its or his desire that the term not be
extended. The President and Chief Executive Officer will
review the Officer's performance and the advisability of
extending the term of this Agreement, and the Board shall,
based on such review, determine whether or not to extend the
term of this Agreement at a meeting or meetings at least
ninety (90) days prior to each anniversary date.
4. Base Compensation.
------------------
a. The Bank agrees to pay the Officer during the term of this
Agreement a salary at the rate of $100,000 per annum, payable
in cash not less frequently than monthly, as may be adjusted
in accordance with this Section 4.
2
<PAGE>
b. The Human Resources Committee of the Bank (the "Committee")
with the advice of the President and Chief Executive Officer
shall perform an annual analysis of the Officer's performance
and of the compensation of officers performing similar
functions at independent financial institutions of comparable
assets and performance, and based upon this review, the
recommendation of the President and Chief Executive Officer,
and on such other factors as it deems pertinent, shall
recommend to the Board the salary rate to be paid beginning on
the next April 1 following such review. The Board shall review
annually the rate of the Officer's salary based upon this
recommendation of the Committee and other factors they deem
relevant, and may maintain, increase or decrease his salary,
provided that no such action shall (i) reduce the rate of
salary below $100,000 or (ii) reduce the rate of salary paid
to the Officer for any months prior to the month in which
notice of the reduction is provided in writing to the Officer.
c. In the absence of action by the Board, the Officer shall
continue to receive salary at the $100,000 per annum rate
specified herein or, if another rate has been established
under the provisions of this Section 4, the rate last properly
established by action of the Board under the provisions of
this Section 4.
5. Bonuses. Unless the Officer agrees otherwise, he shall be entitled to
-------
participate in discretionary bonuses that the Board may award from time to time
to senior management employees pursuant to bonus plans or otherwise. The Officer
also shall participate in any other fringe benefits which are or may become
available to senior management employees of the Bank, including for example: any
stock option or incentive compensation plans and any other benefits that are
commensurate with the responsibilities and functions to be performed by the
Officer under this Agreement. No other compensation provided for in this
Agreement shall be deemed a substitute for the Officer's right to participate in
such discretionary bonuses or fringe benefits.
6. Benefit Plans. The Officer shall be entitled to participate in such
-------------
life insurance, medical, dental, pension, profit sharing, and retirement plans
and other programs and arrangements as may be approved from time to time by
Bancorp or the Bank for the benefit of the employees of the Bank. In addition,
the Officer shall be entitled to participate in a nonstatutory supplemental
retirement plan or arrangement ("SERP") established for the Officer and in the
Executive Health Expense Reimbursement and Insurance Plans (together, the
"HERP") or a successor plan or plans that provide the same or greater level of
benefits as those provided to participants under the HERP as in effect on the
Effective Date. (The resolution of the Board of the Bank approving this
Agreement shall serve as a designation of eligibility to participate in the HERP
as of the Effective Time, if the Officer had not previously been designated as
eligible.)
7. Vacation and Leave.
------------------
a. The Officer shall be entitled to five weeks (twenty-five
working days) of vacation with pay during each consecutive
twelve-month period commencing on January 1, 1997 and each
January 1 thereafter during the term of this Agreement, to be
3
<PAGE>
taken at reasonable times and in reasonable periods as the
Officer and the Bank shall mutually determine, and provided
that no vacation time shall interfere with the duties required
to be rendered by the Officer hereunder. Any vacation time not
used during a twelve-month period shall carry over and be
useable during the succeeding twelve-month period, but not
thereafter. The Officer shall not receive any additional
compensation from the Bank on account of his failure to take
vacation.
b. In addition to paid vacations, the Officer shall be entitled,
without loss of pay, to absent himself voluntarily from the
performance of his employment for such additional periods of
time and for such valid and legitimate reasons as the
President and Chief Executive Officer may in his discretion
determine. Further, the President and Chief Executive Officer
may grant to the Officer a leave or leaves of absence, with or
without pay, at such time or times and upon such terms and
conditions as the President and Chief Executive Officer in his
discretion may determine.
8. Expense Payments and Reimbursements. The Officer shall be reimbursed
-----------------------------------
for all reasonable out-of-pocket business expenses which he shall incur in
connection with his services under this Agreement upon substantiation of such
expenses in accordance with applicable policies of the Bank.
9. Loyalty and Confidentiality.
---------------------------
a. During the term of this Agreement the Officer: (i) shall
devote all his time, attention, skill, and efforts to the
faithful performance of his duties hereunder; provided,
however, that from time to time, the Officer may serve on the
boards of directors of, and hold any other offices or
positions in, companies or organizations which will not
present any conflict of interest with Bancorp or the Bank or
any of their subsidiaries or affiliates, unfavorably affect
the performance of Officer's duties pursuant to this
Agreement, or violate any applicable statute or regulation;
and (ii) shall not engage in any business or activity contrary
to the business affairs or interests of Bancorp or the Bank.
b. Nothing contained in this Agreement shall prevent or limit the
Officer's right to invest in the capital stock or other
securities of any business dissimilar from that of Bancorp and
the Bank, or, solely as a passive, minority investor, in any
business.
c. The Officer agrees to maintain the confidentiality of any and
all information concerning the operation or financial status
of Bancorp and the Bank; the names or addresses of any of
their borrowers, depositors and other customers; any
information concerning or obtained from such customers; and
any other information concerning Bancorp or the Bank to which
he may be exposed during
4
<PAGE>
the course of his employment. The Officer further agrees that,
unless required by law or specifically permitted by Bancorp or
the Bank in writing, he will not disclose to any person or
entity, either during or subsequent to his employment, any of
the above-mentioned information which is not generally known
to the public, nor shall he employ such information in any way
other than for the benefit of Bancorp and the Bank.
10. Termination and Termination Pay. Subject to Section 11 of this
----------------------------------
Agreement, the Officer's employment under this Agreement may be terminated
in the following circumstances:
a. Death. The Officer's employment under this Agreement shall
-----
terminate upon his death during the term of this Agreement, in
which event the Officer's estate shall be entitled to receive
the compensation due to the Officer through the last day of
the calendar month in which his death occurred.
b. Retirement. This Agreement shall be terminated upon the
----------
normal or early retirement of the Officer under the retirement
benefit plan or plans in which he participates pursuant to
Section 6 of this Agreement.
c. Disability. The Bank or the Officer may terminate the
----------
Officer's employment after having established the Officer's
Disability. For purposes of this Agreement, "Disability" means
a physical or mental infirmity that impairs the Officer's
ability to substantially perform his duties under this
Agreement and that results in the Officer's becoming eligible
for long-term disability benefits under Bancorp's or the
Bank's long-term disability plan (or, if Bancorp or the Bank
has no such plan in effect, that impairs the Officer's ability
to substantially perform his duties under this Agreement for a
period of one-hundred-eighty consecutive days). In the event
of such Disability, the Officer's obligation to perform
services under this Agreement will terminate. In the event of
such termination, the Officer shall be entitled to receive the
following:
i. The compensation and benefits provided for under this
Agreement for any period during the term of this
Agreement and prior to the date of termination
pursuant to this Section 10.c. during which the
Officer is unable to work due to physical or mental
infirmity (less any amounts which the Officer
receives under any disability insurance maintained by
Bancorp or the Bank with respect to such period);
ii. For the period beginning upon the date of termination
pursuant to this Section 10.c. and continuing for the
remaining term of this Agreement, (A) salary at the
highest rate paid pursuant to Section 4 of this
Agreement during the twelve months prior to the
establishment of such disability under this Section
10.c., reduced by any payments received by the
Officer during such period following termination
under a long term disability plan
5
<PAGE>
or policy maintained by Bancorp or the Bank, and (B)
benefits pursuant to Section 6 of this Agreement.
The Board shall determine whether or not the Officer is and
continues to be permanently disabled for purposes of this Agreement in
good faith, based upon competent medical advice and other factors that
it reasonably believes to be relevant. As a condition to any benefits,
such Board may require the Officer to submit to such physical or mental
evaluations and tests as it deems reasonably appropriate.
d. Just Cause.
----------
i. The Board may, by written notice to the Officer in
the form and manner specified in this paragraph,
immediately terminate his employment with the Bank at
any time for Just Cause. The Officer shall have no
right to receive compensation or other benefits for
any period after termination for Just Cause.
Termination for "Just Cause" shall mean termination
because of, in the good faith determination of the
Board, the Officer's:
(1) Personal dishonesty;
(2) Incompetence;
(3) Willful misconduct;
(4) Breach of fiduciary duty involving personal
profit;
(5) Intentional failure to perform duties under
this Agreement;
(6) Other, continuing material failure to
perform his duties under this Agreement
after reasonable notification (which shall
be stated in writing and given at least
fifteen days prior to termination) by the
Board of such failure;
(7) Willful violation of any law, rule or
regulation (other than traffic violations or
similar offenses) or final cease-and-desist
order; or
(8) Material breach by the Officer of any
provision of this Agreement.
ii. Notwithstanding the foregoing, the Officer shall not
be deemed to have been terminated for Just Cause
unless there shall have been delivered to the Officer
a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the
entire membership of the Board at a meeting called
and held for the purpose (after reasonable notice to
the Officer and an opportunity for the Officer to be
heard before the Board), finding that in the good
faith opinion of the Board the Officer was guilty of
conduct described above and specifying the
particulars thereof.
e. Certain Regulatory Events.
-------------------------
i. If the Officer is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an
order issued under Sections 8(e)(4)
6
<PAGE>
or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA")
(12 U.S.C. (S)(S) 1818(e)(4) and (g)(1)), all obligations of
the Bank under this Agreement shall terminate as of the
effective date of the order, but vested rights of the parties
shall not be affected.
ii. If the Bank is in default (as defined in Section 3(x)(1)
of FDIA), all obligations of the Bank under this Agreement
shall terminate as of the date of default, but vested rights
of the parties shall not be affected.
iii. If a notice served under Sections 8(e)(3) or (g)(1) of
the FDIA (12 U.S.C. (S)(S) 1818(e)(3) and (g)(1)) suspends
and/or temporarily prohibits the Officer from participating in
the conduct of the Bank's affairs, the Bank's obligations
under this Agreement shall be suspended as of the date of such
service, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, the Bank may, in its
discretion, (i) pay the Officer all or part of the
compensation withheld while its contract obligations were
suspended, and (ii) reinstate (in whole or in part) any of its
obligations which were suspended.
The occurrence of any of the events described in paragraphs i,
ii, and iii above may be considered by the Board in connection with a
termination for Just Cause.
f. Voluntary Termination by Officer. In addition to his other
--------------------------------
rights to terminate under this Agreement, the Officer may voluntarily
terminate employment with the Bank during the term of this Agreement
upon at least sixty days' prior written notice to the Bank, in which
case the Officer shall receive only his compensation, vested rights and
employee benefits up to the date of his termination.
g. Without Just Cause or With Good Reason.
--------------------------------------
i. In addition to termination pursuant to Section 10.a.
through 10.f.: the Board may, by written notice to the
Officer, immediately terminate his employment with the Bank at
any time for a reason other than Just Cause (a termination
"Without Just Cause"); and the Officer may, by written notice
to the Board, immediately terminate this Agreement at any time
within ninety days following an event of "Good Reason" as
defined below (a termination "With Good Reason").
ii. Subject to Section 11 hereof, in the event of
termination under this Section 10.g., the Officer shall be
entitled to receive the salary for the remaining term of the
Agreement, including any renewals or extensions thereof, at
the highest annual rate in effect pursuant to Section 4 of
this Agreement for any of the twelve months immediately
preceding the date of such termination, plus annual cash
bonuses for each year (prorated in the event of partial years)
remaining under such term at the amount received by the
Officer in the calendar year preceding the termination. The
sum due under this Section 10.g. shall be paid in one lump sum
within ten calendar days of such termination.
7
<PAGE>
iii. "Good Reason" shall exist if, without Officer's
express written consent, Bancorp or the Bank materially breach
any of its respective obligations under this Agreement.
Without limitation, such a material breach shall be deemed to
occur upon any of the following:
(1) A material reduction in the Officer's
responsibilities or authority in connection
with his employment with the Bank;
(2) Assignment to the Officer of duties of a
nonexecutive nature or duties for which he
is not reasonably equipped by his skills and
experience;
(3) A reduction in salary or benefits contrary
to the terms of this Agreement, or,
following a Change in Control as defined in
Section 11 of this Agreement, any reduction
in salary or material reduction in benefits
below the amounts to which he was entitled
prior to the Change in Control;
(4) Termination of incentive and benefit plans,
programs, or arrangements, or reduction of
the Officer's participation to such an
extent as to materially reduce their
aggregate value below their aggregate value
as of the Effective Date;
(5) A requirement that the Officer relocate his
principal business office or his principal
place of residence outside Montgomery
County, Maryland, or the assignment to the
Officer of duties that would reasonably
require such a relocation;
(6) A requirement that the Officer spend more
than thirty normal working days away from
Montgomery County, Maryland during any
consecutive twelve-month period; or
(7) Failure to provide office facilities,
secretarial services, and other
administrative services to Officer which are
substantially equivalent to the facilities
and services provided to the Officer on the
Effective Date (excluding brief periods
during which office facilities may be
temporarily unavailable due to fire, natural
disaster, or other calamity).
iv. Notwithstanding the foregoing: (A) a reduction or
elimination of the Officer's benefits under one or
more benefit plans maintained by Bancorp or the Bank
as part of a good faith, overall reduction or
elimination of such plan or plans or benefits
thereunder applicable to all participants in a manner
that does not discriminate against the Officer
(except as such discrimination may be necessary to
comply with law) shall not constitute an event of
Good Reason or a material breach of this Agreement,
provided that benefits of the type or to the general
extent as those offered under such plans prior to
such reduction or elimination are not available to
other officers of Bancorp or the Bank or any company
that controls either of
8
<PAGE>
them under a plan or plans in or under which the
Officer is not entitled to participate, and receive
benefits, on a fair and nondiscriminatory basis; and
(B) a requirement that the Officer report to and be
subject to the direction or supervision of a senior
officer of Bancorp or the Bank other than the
President and Chief Executive Officer shall not
constitute an event of Good Reason or a material
breach of this Agreement.
h. Continuing Covenant not to Compete or Interfere with
----------------------------------------------------
Relationships. Regardless of anything herein to the contrary,
-------------
following a termination (i) upon retirement pursuant to
Section 10.b., (ii) due to Disability pursuant to Section
10.c., (iii) for Just Cause pursuant to Section 10.d., or (iv)
by the Officer pursuant to Section 10.f.:
i. The Officer's obligations under Section 9.c. of this
Agreement will continue in effect; and
ii. During the remaining term of this Agreement
(determined immediately before such termination), the
Officer shall not serve as an officer or director or
employee of any bank holding company, bank, savings
association, savings and loan holding company, or
mortgage company (any of which, a "Financial
Institution"), which Financial Institution offers
products or services competing with those offered by
Bancorp or the Bank from offices in any county in the
State of Maryland or of any other State in which the
Bank, Bancorp or any of their subsidiaries has a
branch, and shall not interfere with the relationship
of Bancorp or the Bank and any of its employees,
agents, or representatives.
11. Termination in Connection with a Change in Control.
--------------------------------------------------
a. For purposes of this Agreement, a "Change in Control" shall be
deemed to occur on the earliest of:
i. The acquisition by any entity, person or group (other
than the acquisition by a tax-qualified retirement
plan sponsored by Bancorp or the Bank) of beneficial
ownership, as that term is defined in Rule 13d-3
under the Securities Exchange Act of 1934, of more
than 25% of the outstanding capital stock of Bancorp
or the Bank entitled to vote for the election of
directors ("Voting Stock");
ii. The commencement by any entity, person, or group
(other than Bancorp or the Bank, a subsidiary of
Bancorp or the Bank or a tax-qualified retirement
plan sponsored by Bancorp or the Bank) of a tender
offer or an exchange offer for more than 20% of the
outstanding Voting Stock of Bancorp or the Bank;
9
<PAGE>
iii. The effective time of (a) a merger or consolidation
of Bancorp or the Bank with one or more other
corporations as a result of which the holders of the
outstanding Voting Stock of Bancorp or the Bank
immediately prior to such merger exercise voting
control over less than 80% of the Voting Stock of the
surviving or resulting corporation, or (b) a transfer
of substantially all of the property of Bancorp or
the Bank other than to an entity of which Bancorp or
the Bank owns at least 80% of the Voting Stock;
iv. Upon the acquisition by any entity, person, or group
of the control of the election of a majority of the
Bank's or Bancorp's directors,
v. At such time that, during any period of two
consecutive years, individuals who at the beginning
of such period constitute the Board of Bancorp or the
Bank (the "Continuing Directors") cease for any
reason to constitute at least two-thirds thereof,
provided that any individual whose election or
nomination for election as a member of the Board was
approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be
considered a Continuing Director.
b. Termination. If within the period beginning six months
-----------
prior to and ending two years after a Change in Control, (i)
the Bank shall terminate the Officer's employment Without Just
Cause, or (ii) the Officer shall voluntarily terminate his
employment With Good Reason, the Bank shall, within ten
calendar days of the termination of Officer's employment, make
a lump-sum cash payment to him equal to 2.99 times the sum of
(x) his annual salary at the highest annual rate in effect for
any of the twelve months immediately preceding the date of
such termination, plus (y) the amount of other compensation
received by him during the calendar year preceding the Change
in Control. This cash payment is subject to adjustment
pursuant to Section 14 of this Agreement, and shall be made in
lieu of any payment also required under section 10.g. of this
Agreement because of a termination in such period. The
Officer's rights under Section 10.g. are not otherwise
affected by this Section 11. Also, in such event, the Officer
shall, for three calendar years following his termination of
employment, continue to participate in any benefit plans of
Bancorp and the Bank that provide health (including medical
and dental), life or disability insurance, or similar coverage
upon terms no less favorable than the most favorable terms
provided to senior officers of the Bank during such period.
c. Funding of Trust upon Change in Control. In order to assure
---------------------------------------
payment to the Officer of amounts that may become payable by
Bancorp or the Bank pursuant to this Section, unless and to
the extent the Officer has previously provided a written
release of any claims under Section 11 of this Agreement, not
later than ten
10
<PAGE>
business days after a Change in Control, Bancorp or the Bank
shall (i) establish a valid trust under the law of the State
of Maryland with an independent trustee that has or may be
granted corporate trust powers under Maryland law, (ii)
deposit in such trust an amount equal to 2.99 times his "base
amount" as defined in Section 280G(b)(3) of the Code and
regulations promulgated thereunder (Section 280G and related
regulations hereinafter referred to as Section 280G"), at the
time of the Change of Control, and (iii) provide the trustee
of the trust with a written direction to hold said amount and
any investment return thereon in a segregated account, and to
pay such amounts as demanded by the Officer from the trust
upon written demand from the Officer stating the amount of the
payment demanded from the trust and the basis for his rights
to such payment under Section 11 of this Agreement. Upon the
earlier of the final payment of all amounts demanded by the
Officer under this Section 11 or the date thirty-six months
after the Change in Control, the trustee of the trust shall
pay to Bancorp or the Bank, as applicable, the entire balance
remaining in the trust. Payments from the trust to the Officer
shall be considered payments made by Bancorp or the Bank for
purposes of this Agreement. Payment of such amounts to the
Officer from the trust, however, shall not relieve Bancorp or
the Bank from any obligation to pay amounts in excess of those
paid from the trust, or from any obligation to take actions or
refrain from taking actions otherwise required by this
Agreement. Unless and until a termination of or by the Officer
as described in Section 11.b.(i) or (ii), the Officer's rights
under this Agreement shall be those of a general, unsecured
creditor, he shall have no claim against the assets of the
trust, and the assets of the trust shall remain subject to the
claims of creditors of Bancorp or the Bank. Upon the
termination of the trust as specified herein, the Officer
shall have no further interest in the trust.
12. Indemnification and Liability Insurance.
---------------------------------------
a. Indemnification. Bancorp and the Bank agree to indemnify the
---------------
Officer (and his heirs, executors, and administrators) to the
fullest extent permitted under applicable law and regulations
against any and all expenses and liabilities reasonably
incurred by him in connection with or arising out of any
action, suit, or proceeding in which he may be involved by
reason of his having been a director or officer of the Bank or
any of their subsidiaries (whether or not he continues to be a
director or officer at the time of incurring any such expenses
or liabilities) such expenses and liabilities to include, but
not be limited to, judgments, court costs and attorney's fees
and the cost of reasonable settlements, such settlements to be
approved by the Board of Bancorp or the Bank, if such action
is brought against the Officer in his capacity as an officer
or director of Bancorp or the Bank or any of their
subsidiaries. Indemnification for expense shall not extend to
matters for which the Officer has been terminated for Just
Cause. Nothing contained herein shall be deemed to provide
indemnification prohibited by applicable law or regulation.
Notwithstanding anything herein to the contrary,
11
<PAGE>
the obligations of this Section 12 shall survive the term of
this Agreement by a period of seven years.
b. Insurance. During the period in which indemnification of
---------
the Officer is required under this Section, Bancorp or the
Bank shall provide the Officer (and his heirs, executors, and
administrators) with coverage under a directors' and officers'
liability policy at the expense of Bancorp or the Bank, at
least equivalent to such coverage provided to directors and
senior officers of Bancorp or the Bank, whichever is more
favorable to the Officer.
13. Reimbursement of Officer's Expenses to Enforce this Agreement. Bancorp
-------------------------------------------------------------
or the Bank shall reimburse the Officer for all out-of-pocket expenses,
including, without limitation, reasonable attorney's fees, incurred by the
Officer in connection with successful enforcement by the Officer of the
obligations of Bancorp or the Bank to the Officer under this Agreement up to a
maximum of $30,000. Successful enforcement shall mean the grant of an award of
money or the requirement that Bancorp or the Bank take some action specified by
this Agreement (i) as a result of court order; or (ii) otherwise by Bancorp or
the Bank following an initial failure of Bancorp or the Bank to pay such money
or take such action promptly after written demand therefor from the Officer
stating the reason that such money or action was due under this Agreement at or
prior to the time of such demand.
14. Adjustment of Certain Payments and Benefits.
-------------------------------------------
a. In the event that payments pursuant to this Agreement
(including, without limitation, any payment under any plan,
program, or arrangement referred to in Section 5 or 6 hereof)
would result in the imposition of a penalty tax pursuant to
Section 280G, such payments shall be reduced to equal the
maximum amount which may be paid under Section 280G without
exceeding such limits. In the event any such reduction in
payments is necessary, the Officer may determine, in his sole
discretion, which categories of payments (including, without
limitation, the value of benefits or of acceleration of
vesting or receipt of benefits or amounts) are to be reduced
or eliminated.
b. Payments made to the Officer pursuant to this Agreement or
otherwise, are subject to and conditioned upon their
compliance with Section 18(k) of the FDIA (12 U.S.C. (S) 1828
(k), relating to "golden parachute" and indemnification
payments and certain other benefits.
15. Injunctive Relief. If there is a breach or threatened breach of Section
-----------------
10.h. of this Agreement or the prohibitions upon disclosure contained in Section
9.c. of this Agreement, Bancorp or the Bank and the Officer agree that there is
no adequate remedy at law for such breach, and that Bancorp and the Bank each
shall be entitled to
12
<PAGE>
injunctive relief restraining the Officer from such breach or threatened breach,
but such relief shall not be the exclusive remedy hereunder for such breach. The
parties hereto likewise agree that the Officer shall be entitled to injunctive
relief to enforce the obligations of Bancorp and the Bank under Section 11 of
this Agreement.
16. Successors and Assigns.
----------------------
a. This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of Bancorp or the Bank
which shall acquire, directly or indirectly, by merger,
consolidation, purchase or otherwise, all or substantially all
of the assets or stock of Bancorp or the Bank.
b. Since the Bank and Bancorp are contracting for the unique and
personal skills of the Officer, the Officer shall be precluded
from assigning or delegating his rights or duties hereunder
without first obtaining the written consent of the Bank and
Bancorp.
17. No Mitigation. The Officer shall not be required to mitigate the
--------------
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Officer in any subsequent employment.
18. Notices. All notices, requests, demands and other communications in
-------
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch United States Post Office, by registered or certified mail, postage
prepaid, addressed as follows, or to such other address as shall have been
designated in writing by the addressee:
a. If to Bancorp or the Bank:
Sandy Spring Bancorp, Inc.
Sandy Spring National Bank of Maryland
17801 Georgia Avenue
Olney, Maryland 20832
Attention: President and Chief Executive Officer
Copy to: Corporate Secretary
b. If to the Officer:
Stanley L. Merson
8324 Sweet Cherry Lane
Laurel, Maryland 20723
19. Joint and Severally Liability; Payments by Bancorp and the Bank. To the
---------------------------------------------------------------
extent permitted by law, except as otherwise provided herein, Bancorp and the
Bank shall be jointly and severally liable for the payment of all amounts due
under this Agreement. Bancorp hereby agrees that it
13
<PAGE>
shall be jointly and severally liable with the Bank for the payment of all
amounts due under this Agreement and shall guarantee the performance of the
Bank's obligations thereunder, provided that Bancorp shall not be required by
this Agreement to pay to the Officer a salary or any bonuses or any other cash
payments, except in the event that the Bank does not fulfill the obligations to
the Officer hereunder for such payments. Bancorp may, however, pay salary and
bonuses as deemed appropriate by its Board in the exercise of its discretion.
20. No Plan Created by this Agreement. The Officer, Bancorp and the Bank
---------------------------------
expressly declare and agree that this Agreement was negotiated among them and
that no provision or provisions of this Agreement are intended to, or shall be
deemed to, create any plan for purposes of the Employee Retirement Income
Security Act or any other law or regulation, and Bancorp, the Bank and the
Officer each expressly waives any right to assert the contrary. Any assertion in
any judicial or administrative filing, hearing, or process by or on behalf of
the Officer or Bancorp or the Bank that such a plan was so created by this
Agreement shall be deemed a material breach of this Agreement by the party
making such an assertion.
21. Amendments. No amendments or additions to this Agreement shall
----------
be binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
22. Applicable Law. Except to the extent preempted by Federal law,
---------------
the laws of the State of Maryland shall govern this Agreement in all
respects, whether as to its validity, construction, capacity, performance
or otherwise.
23. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
24. Headings. Headings contained herein are for convenience of reference
--------
only.
25. Entire Agreement. This Agreement, together with any understanding or
----------------
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof, other than written agreements with respect to specific plans, programs,
or arrangements described in Sections 5 and 6, and supersedes all prior
agreements other than with respect to such specific plans, programs, or
arrangements.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
SANDY SPRING NATIONAL BANK OF MARYLAND
By: /s/ Hunter R. Hollar
Title: President and Chief Executive Officer
SANDY SPRING BANCORP, INC.
By: /s/ Hunter R. Hollar
Title: President and Chief Executive Officer
OFFICER
/s/ Stanley L. Merson
Stanley L. Merson
15
<PAGE>
Exhibit 10(i)
<PAGE>
EMPLOYMENT AGREEMENT
================================================================================
THIS AGREEMENT (the "Agreement"), made this 30th day of January 1997,
by and among Sandy Spring Bancorp, Inc., a registered bank holding company
("Bancorp"), Sandy Spring National Bank of Maryland, a national banking
association and wholly owned subsidiary of Bancorp with its main office in
Olney, Maryland (the "Bank"), and Frank H. Small (the "Officer").
W I T N E S S E T H
WHEREAS, the Officer is employed as the Senior Vice President of the
Bank.
WHEREAS, as a result of the skill, knowledge, and experience of the
Officer, the Board of Directors of the Bank (the "Board") desires to retain the
services of the Officer.
WHEREAS, the Officer desires to continue to serve as the Senior Vice
President of the Bank.
WHEREAS, the Officer and the Board and the Board of Directors of
Bancorp desire to enter into an Agreement setting forth the terms of conditions
of the continuing employment of the Officer and the related rights and
obligations of each of the parties.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed as follows:
1. Employment. The Officer is employed as the Senior Vice President of the
----------
Bank, reporting to the President and Chief Executive Officer. Subject to
direction of the President and Chief Executive Officer, the Officer shall
perform all duties and shall have all powers which are commonly incident to the
office of Senior Vice President or which, consistent with that office, are
delegated to him by the President and Chief Executive Officer. The officer shall
serve as a member of the Senior Officer Policy Committee, Senior Loan Committee,
and Asset/Liability Committee of the Bank. The Officer's duties include, but are
not limited to:
a. Making recommendations to the President and Chief Executive
Officer concerning the consumer banking and branching
strategies, policies, and tactics of the Bank;
b. Management oversight of the branching and retail banking
functions of the Bank, including supervision of the officers
and employees engaged in these functions;
c. Management oversight of the Marketing functions of the Bank,
including supervision of the officers and employees engaged in
these functions;
1
<PAGE>
d. Management oversight of the Operations and Communications
functions of the Bank, including supervision of the officers
and employees engaged in these functions;
e. Promoting the Bank and its services;
f. Managing the efforts of the Bank to comply with applicable
laws and regulations relating to the branching and retail
banking; and
g. Providing complete, timely, and accurate reports to the
President and Chief Executive Officer of Bancorp and the Bank
regarding the Bank's retail banking and branching functions.
2. Location and Facilities. The Officer will be furnished with the working
-----------------------
facilities and staff customary for executive officers with the title and duties
set forth in Section 1 and as are necessary for him to perform his duties. The
location of such facilities and staff shall be at the principal administrative
offices of the Bank, or at such other site or sites customary for such offices.
3. Term.
----
a. The term of this Agreement shall be (i) the initial term,
consisting of the period commencing on the date of this
Agreement (the "Effective Date") and ending immediately prior
to the second anniversary of the Effective Date, plus (ii) any
and all extensions of the initial term made pursuant to this
Section 3.
b. On each anniversary of the Effective Date prior to a
termination of the Agreement, the term under this Agreement
shall be extended for an additional one-year period beyond the
then effective expiration date without action by any party,
provided that neither the Bank nor the Officer shall have
given written notice at least sixty (60) days prior to such
anniversary date of its or his desire that the term not be
extended. The President and Chief Executive Officer will
review the Officer's performance and the advisability of
extending the term of this Agreement, and the Board shall,
based on such review, determine whether or not to extend the
term of this Agreement at a meeting or meetings at least
ninety (90) days prior to each anniversary date.
4. Base Compensation.
-----------------
a. The Bank agrees to pay the Officer during the term of this
Agreement a salary at the rate of $95,000 per annum, payable
in cash not less frequently than monthly, as may be adjusted
in accordance with this Section 4.
2
<PAGE>
b. The Human Resources Committee of the Bank (the "Committee")
with the advice of the President and Chief Executive Officer
shall perform an annual analysis of the Officer's performance
and of the compensation of officers performing similar
functions at independent financial institutions of comparable
assets and performance, and based upon this review, the
recommendation of the President and Chief Executive Officer,
and on such other factors as it deems pertinent, shall
recommend to the Board the salary rate to be paid beginning on
the next April 1 following such review. The Board shall review
annually the rate of the Officer's salary based upon this
recommendation of the Committee and other factors they deem
relevant, and may maintain, increase or decrease his salary,
provided that no such action shall (i) reduce the rate of
salary below $95,000 or (ii) reduce the rate of salary paid to
the Officer for any months prior to the month in which notice
of the reduction is provided in writing to the Officer.
c. In the absence of action by the Board, the Officer shall
continue to receive salary at the $95,000 per annum rate
specified herein or, if another rate has been established
under the provisions of this Section 4, the rate last properly
established by action of the Board under the provisions of
this Section 4.
5. Bonuses. Unless the Officer agrees otherwise, he shall be entitled to
-------
participate in discretionary bonuses that the Board may award from time to time
to senior management employees pursuant to bonus plans or otherwise. The Officer
also shall participate in any other fringe benefits which are or may become
available to senior management employees of the Bank, including for example: any
stock option or incentive compensation plans and any other benefits that are
commensurate with the responsibilities and functions to be performed by the
Officer under this Agreement. No other compensation provided for in this
Agreement shall be deemed a substitute for the Officer's right to participate in
such discretionary bonuses or fringe benefits.
6. Benefit Plans. The Officer shall be entitled to participate in such
-------------
life insurance, medical, dental, pension, profit sharing, and retirement plans
and other programs and arrangements as may be approved from time to time by
Bancorp or the Bank for the benefit of the employees of the Bank. In addition,
the Officer shall be entitled to participate in a nonstatutory supplemental
retirement plan or arrangement ("SERP") established for the Officer and in the
Executive Health Expense Reimbursement and Insurance Plans (together, the
"HERP") or a successor plan or plans that provide the same or greater level of
benefits as those provided to participants under the HERP as in effect on the
Effective Date. (The resolution of the Board of the Bank approving this
Agreement shall serve as a designation of eligibility to participate in the HERP
as of the Effective Time, if the Officer had not previously been designated as
eligible.)
7. Vacation and Leave.
------------------
a. The Officer shall be entitled to five weeks (twenty-five
working days) of vacation with pay during each consecutive
twelve-month period commencing on January 1, 1997 and each
January 1 thereafter during the term of this Agreement, to be
3
<PAGE>
taken at reasonable times and in reasonable periods as the
Officer and the Bank shall mutually determine, and provided
that no vacation time shall interfere with the duties required
to be rendered by the Officer hereunder. Any vacation time not
used during a twelve-month period shall carry over and be
useable during the succeeding twelve-month period, but not
thereafter. The Officer shall not receive any additional
compensation from the Bank on account of his failure to take
vacation.
b. In addition to paid vacations, the Officer shall be entitled,
without loss of pay, to absent himself voluntarily from the
performance of his employment for such additional periods of
time and for such valid and legitimate reasons as the
President and Chief Executive Officer may in his discretion
determine. Further, the President and Chief Executive Officer
may grant to the Officer a leave or leaves of absence, with or
without pay, at such time or times and upon such terms and
conditions as the President and Chief Executive Officer in his
discretion may determine.
8. Expense Payments and Reimbursements. The Officer shall be reimbursed
-----------------------------------
for all reasonable out-of-pocket business expenses which he shall incur in
connection with his services under this Agreement upon substantiation of such
expenses in accordance with applicable policies of the Bank.
9. Loyalty and Confidentiality.
---------------------------
a. During the term of this Agreement the Officer: (i) shall
devote all his time, attention, skill, and efforts to the
faithful performance of his duties hereunder; provided,
however, that from time to time, the Officer may serve on the
boards of directors of, and hold any other offices or
positions in, companies or organizations which will not
present any conflict of interest with Bancorp or the Bank or
any of their subsidiaries or affiliates, unfavorably affect
the performance of Officer's duties pursuant to this
Agreement, or violate any applicable statute or regulation;
and (ii) shall not engage in any business or activity contrary
to the business affairs or interests of Bancorp or the Bank.
b. Nothing contained in this Agreement shall prevent or limit the
Officer's right to invest in the capital stock or other
securities of any business dissimilar from that of Bancorp and
the Bank, or, solely as a passive, minority investor, in any
business.
c. The Officer agrees to maintain the confidentiality of any and
all information concerning the operation or financial status
of Bancorp and the Bank; the names or addresses of any of
their borrowers, depositors and other customers; any
information concerning or obtained from such customers; and
any other information concerning Bancorp or the Bank to which
he may be exposed during
4
<PAGE>
the course of his employment. The Officer further agrees that,
unless required by law or specifically permitted by Bancorp or
the Bank in writing, he will not disclose to any person or
entity, either during or subsequent to his employment, any of
the above-mentioned information which is not generally known
to the public, nor shall he employ such information in any way
other than for the benefit of Bancorp and the Bank.
10. Termination and Termination Pay. Subject to Section 11 of this
-------------------------------
Agreement, the Officer's employment under this Agreement may be terminated in
the following circumstances:
a. Death. The Officer's employment under this Agreement shall
-----
terminate upon his death during the term of this Agreement, in
which event the Officer's estate shall be entitled to receive
the compensation due to the Officer through the last day of
the calendar month in which his death occurred.
b. Retirement. This Agreement shall be terminated upon the
----------
normal or early retirement of the Officer under the retirement
benefit plan or plans in which he participates pursuant to
Section 6 of this Agreement.
c. Disability. The Bank or the Officer may terminate the
----------
Officer's employment after having established the Officer's
Disability. For purposes of this Agreement, "Disability" means
a physical or mental infirmity that impairs the Officer's
ability to substantially perform his duties under this
Agreement and that results in the Officer's becoming eligible
for long-term disability benefits under Bancorp's or the
Bank's long-term disability plan (or, if Bancorp or the Bank
has no such plan in effect, that impairs the Officer's ability
to substantially perform his duties under this Agreement for a
period of one-hundred-eighty consecutive days). In the event
of such Disability, the Officer's obligation to perform
services under this Agreement will terminate. In the event of
such termination, the Officer shall be entitled to receive the
following:
i. The compensation and benefits provided for under this
Agreement for any period during the term of this
Agreement and prior to the date of termination
pursuant to this Section 10.c. during which the
Officer is unable to work due to physical or mental
infirmity (less any amounts which the Officer
receives under any disability insurance maintained by
Bancorp or the Bank with respect to such period);
ii. For the period beginning upon the date of termination
pursuant to this Section 10.c. and continuing for the
remaining term of this Agreement, (A) salary at the
highest rate paid pursuant to Section 4 of this
Agreement during the twelve months prior to the
establishment of such disability under this Section
10.c., reduced by any payments received by the
Officer during such period following termination
under a long term disability plan
5
<PAGE>
or policy maintained by Bancorp or the Bank, and (B)
benefits pursuant to Section 6 of this Agreement.
The Board shall determine whether or not the Officer is and
continues to be permanently disabled for purposes of this Agreement in
good faith, based upon competent medical advice and other factors that
it reasonably believes to be relevant. As a condition to any benefits,
such Board may require the Officer to submit to such physical or mental
evaluations and tests as it deems reasonably appropriate.
d. Just Cause.
----------
i. The Board may, by written notice to the Officer in
the form and manner specified in this paragraph,
immediately terminate his employment with the Bank at
any time for Just Cause. The Officer shall have no
right to receive compensation or other benefits for
any period after termination for Just Cause.
Termination for "Just Cause" shall mean termination
because of, in the good faith determination of the
Board, the Officer's:
(1) Personal dishonesty;
(2) Incompetence;
(3) Willful misconduct;
(4) Breach of fiduciary duty involving personal
profit;
(5) Intentional failure to perform duties under
this Agreement;
(6) Other, continuing material failure to
perform his duties under this Agreement
after reasonable notification (which shall
be stated in writing and given at least
fifteen days prior to termination) by the
Board of such failure;
(7) Willful violation of any law, rule or
regulation (other than traffic violations or
similar offenses) or final cease-and-desist
order; or
(8) Material breach by the Officer of any
provision of this Agreement.
ii. Notwithstanding the foregoing, the Officer shall not
be deemed to have been terminated for Just Cause
unless there shall have been delivered to the Officer
a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the
entire membership of the Board at a meeting called
and held for the purpose (after reasonable notice to
the Officer and an opportunity for the Officer to be
heard before the Board), finding that in the good
faith opinion of the Board the Officer was guilty of
conduct described above and specifying the
particulars thereof.
e. Certain Regulatory Events.
-------------------------
i. If the Officer is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an
order issued under Sections 8(e)(4) or 8(g)(1) of the Federal
Deposit Insurance Act ("FDIA") (12 U.S.C. (S)(S) 1818(e)(4)
6
<PAGE>
and (g)(1)), all obligations of the Bank under this Agreement
shall terminate as of the effective date of the order, but
vested rights of the parties shall not be affected.
ii. If the Bank is in default (as defined in Section 3(x)(1)
of FDIA), all obligations of the Bank under this Agreement
shall terminate as of the date of default, but vested rights
of the parties shall not be affected.
iii. If a notice served under Sections 8(e)(3) or (g)(1) of
the FDIA (12 U.S.C. (S)(S) 1818(e)(3) and (g)(1)) suspends
and/or temporarily prohibits the Officer from participating in
the conduct of the Bank's affairs, the Bank's obligations
under this Agreement shall be suspended as of the date of such
service, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, the Bank may, in its
discretion, (i) pay the Officer all or part of the
compensation withheld while its contract obligations were
suspended, and (ii) reinstate (in whole or in part) any of its
obligations which were suspended.
The occurrence of any of the events described in paragraphs i,
ii, and iii above may be considered by the Board in connection with a
termination for Just Cause.
f. Voluntary Termination by Officer. In addition to his other
--------------------------------
rights to terminate under this Agreement, the Officer may voluntarily
terminate employment with the Bank during the term of this Agreement
upon at least sixty days' prior written notice to the Bank, in which
case the Officer shall receive only his compensation, vested rights and
employee benefits up to the date of his termination.
g. Without Just Cause or With Good Reason.
--------------------------------------
i. In addition to termination pursuant to Section 10.a.
through 10.f.: the Board may, by written notice to the
Officer, immediately terminate his employment with the Bank at
any time for a reason other than Just Cause (a termination
"Without Just Cause"); and the Officer may, by written notice
to the Board, immediately terminate this Agreement at any time
within ninety days following an event of "Good Reason" as
defined below (a termination "With Good Reason"). ii. Subject
to Section 11 hereof, in the event of termination under this
Section 10.g., the Officer shall be entitled to receive the
salary for the remaining term of the Agreement, including any
renewals or extensions thereof, at the highest annual rate in
effect pursuant to Section 4 of this Agreement for any of the
twelve months immediately preceding the date of such
termination, plus annual cash bonuses for each year (prorated
in the event of partial years) remaining under such term at
the amount received by the Officer in the calendar year
preceding the termination. The sum due under this Section
10.g. shall be paid in one lump sum within ten calendar days
of such termination.
7
<PAGE>
iii. "Good Reason" shall exist if, without Officer's express
written consent, Bancorp or the Bank materially breach any of
its respective obligations under this Agreement. Without
limitation, such a material breach shall be deemed to occur
upon any of the following:
(1) A material reduction in the Officer's
responsibilities or authority in connection
with his employment with the Bank;
(2) Assignment to the Officer of duties of a
nonexecutive nature or duties for which he
is not reasonably equipped by his skills and
experience;
(3) A reduction in salary or benefits contrary
to the terms of this Agreement, or,
following a Change in Control as defined in
Section 11 of this Agreement, any reduction
in salary or material reduction in benefits
below the amounts to which he was entitled
prior to the Change in Control;
(4) Termination of incentive and benefit plans,
programs, or arrangements, or reduction of
the Officer's participation to such an
extent as to materially reduce their
aggregate value below their aggregate value
as of the Effective Date;
(5) A requirement that the Officer relocate his
principal business office or his principal
place of residence outside Montgomery
County, Maryland, or the assignment to the
Officer of duties that would reasonably
require such a relocation;
(6) A requirement that the Officer spend more
than thirty normal working days away from
Montgomery County, Maryland during any
consecutive twelve-month period; or
(7) Failure to provide office facilities,
secretarial services, and other
administrative services to Officer which are
substantially equivalent to the facilities
and services provided to the Officer on the
Effective Date (excluding brief periods
during which office facilities may be
temporarily unavailable due to fire, natural
disaster, or other calamity).
iv. Notwithstanding the foregoing: (A) a reduction or
elimination of the Officer's benefits under one or
more benefit plans maintained by Bancorp or the Bank
as part of a good faith, overall reduction or
elimination of such plan or plans or benefits
thereunder applicable to all participants in a manner
that does not discriminate against the Officer
(except as such discrimination may be necessary to
comply with law) shall not constitute an event of
Good Reason or a material breach of this Agreement,
provided that benefits of the type or to the general
extent as those offered under such plans prior to
such reduction or elimination are not available to
other officers of Bancorp or the Bank or any company
that controls either of
8
<PAGE>
them under a plan or plans in or under which the
Officer is not entitled to participate, and receive
benefits, on a fair and nondiscriminatory basis; and
(B) a requirement that the Officer report to and be
subject to the direction or supervision of a senior
officer of Bancorp or the Bank other than the
President and Chief Executive Officer shall not
constitute an event of Good Reason or a material
breach of this Agreement.
h. Continuing Covenant not to Compete or Interfere with
----------------------------------------------------
Relationships. Regardless of anything herein to the contrary,
-------------
following a termination (i) upon retirement pursuant to
Section 10.b., (ii) due to Disability pursuant to Section
10.c., (iii) for Just Cause pursuant to Section 10.d., or (iv)
by the Officer pursuant to Section 10.f.:
i. The Officer's obligations under Section 9.c. of this
Agreement will continue in effect; and
ii. During the remaining term of this Agreement
(determined immediately before such termination), the
Officer shall not serve as an officer or director or
employee of any bank holding company, bank, savings
association, savings and loan holding company, or
mortgage company (any of which, a "Financial
Institution"), which Financial Institution offers
products or services competing with those offered by
Bancorp or the Bank from offices in any county in the
State of Maryland or of any other State in which the
Bank, Bancorp or any of their subsidiaries has a
branch, and shall not interfere with the relationship
of Bancorp or the Bank and any of its employees,
agents, or representatives.
11. Termination in Connection with a Change in Control.
--------------------------------------------------
a. For purposes of this Agreement, a "Change in Control" shall be
deemed to occur on the earliest of:
i. The acquisition by any entity, person or group (other
than the acquisition by a tax-qualified retirement
plan sponsored by Bancorp or the Bank) of beneficial
ownership, as that term is defined in Rule 13d-3
under the Securities Exchange Act of 1934, of more
than 25% of the outstanding capital stock of Bancorp
or the Bank entitled to vote for the election of
directors ("Voting Stock");
ii. The commencement by any entity, person, or group
(other than Bancorp or the Bank, a subsidiary of
Bancorp or the Bank or a tax-qualified retirement
plan sponsored by Bancorp or the Bank) of a tender
offer or an exchange offer for more than 20% of the
outstanding Voting Stock of Bancorp or the Bank;
9
<PAGE>
iii. The effective time of (a) a merger or consolidation
of Bancorp or the Bank with one or more other
corporations as a result of which the holders of the
outstanding Voting Stock of Bancorp or the Bank
immediately prior to such merger exercise voting
control over less than 80% of the Voting Stock of the
surviving or resulting corporation, or (b) a transfer
of substantially all of the property of Bancorp or
the Bank other than to an entity of which Bancorp or
the Bank owns at least 80% of the Voting Stock;
iv. Upon the acquisition by any entity, person, or group
of the control of the election of a majority of the
Bank's or Bancorp's directors,
v. At such time that, during any period of two
consecutive years, individuals who at the beginning
of such period constitute the Board of Bancorp or the
Bank (the "Continuing Directors") cease for any
reason to constitute at least two-thirds thereof,
provided that any individual whose election or
nomination for election as a member of the Board was
approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be
considered a Continuing Director.
b. Termination. If within the period beginning six months
-----------
prior to and ending two years after a Change in Control, (i)
the Bank shall terminate the Officer's employment Without Just
Cause, or (ii) the Officer shall voluntarily terminate his
employment With Good Reason, the Bank shall, within ten
calendar days of the termination of Officer's employment, make
a lump-sum cash payment to him equal to 2.99 times the sum of
(x) his annual salary at the highest annual rate in effect for
any of the twelve months immediately preceding the date of
such termination, plus (y) the amount of other compensation
received by him during the calendar year preceding the Change
in Control. This cash payment is subject to adjustment
pursuant to Section 14 of this Agreement, and shall be made in
lieu of any payment also required under section 10.g. of this
Agreement because of a termination in such period. The
Officer's rights under Section 10.g. are not otherwise
affected by this Section 11. Also, in such event, the Officer
shall, for three calendar years following his termination of
employment, continue to participate in any benefit plans of
Bancorp and the Bank that provide health (including medical
and dental), life or disability insurance, or similar coverage
upon terms no less favorable than the most favorable terms
provided to senior officers of the Bank during such period.
c. Funding of Trust upon Change in Control. In order to
---------------------------------------
assure payment to the Officer of amounts that may become
payable by Bancorp or the Bank pursuant to this Section,
unless and to the extent the Officer has previously provided a
written release of any claims under Section 11 of this
Agreement, not later than ten
10
<PAGE>
business days after a Change in Control, Bancorp or the Bank
shall (i) establish a valid trust under the law of the State
of Maryland with an independent trustee that has or may be
granted corporate trust powers under Maryland law, (ii)
deposit in such trust an amount equal to 2.99 times his "base
amount" as defined in Section 280G(b)(3) of the Code and
regulations promulgated thereunder (Section 280G and related
regulations hereinafter referred to as Section 280G"), at the
time of the Change of Control, and (iii) provide the trustee
of the trust with a written direction to hold said amount and
any investment return thereon in a segregated account, and to
pay such amounts as demanded by the Officer from the trust
upon written demand from the Officer stating the amount of the
payment demanded from the trust and the basis for his rights
to such payment under Section 11 of this Agreement. Upon the
earlier of the final payment of all amounts demanded by the
Officer under this Section 11 or the date thirty-six months
after the Change in Control, the trustee of the trust shall
pay to Bancorp or the Bank, as applicable, the entire balance
remaining in the trust. Payments from the trust to the Officer
shall be considered payments made by Bancorp or the Bank for
purposes of this Agreement. Payment of such amounts to the
Officer from the trust, however, shall not relieve Bancorp or
the Bank from any obligation to pay amounts in excess of those
paid from the trust, or from any obligation to take actions or
refrain from taking actions otherwise required by this
Agreement. Unless and until a termination of or by the Officer
as described in Section 11.b.(i) or (ii), the Officer's rights
under this Agreement shall be those of a general, unsecured
creditor, he shall have no claim against the assets of the
trust, and the assets of the trust shall remain subject to the
claims of creditors of Bancorp or the Bank. Upon the
termination of the trust as specified herein, the Officer
shall have no further interest in the trust.
12. Indemnification and Liability Insurance.
---------------------------------------
a. Indemnification. Bancorp and the Bank agree to indemnify
---------------
the Officer (and his heirs, executors, and administrators) to
the fullest extent permitted under applicable law and
regulations against any and all expenses and liabilities
reasonably incurred by him in connection with or arising out
of any action, suit, or proceeding in which he may be involved
by reason of his having been a director or officer of the Bank
or any of their subsidiaries (whether or not he continues to
be a director or officer at the time of incurring any such
expenses or liabilities) such expenses and liabilities to
include, but not be limited to, judgments, court costs and
attorney's fees and the cost of reasonable settlements, such
settlements to be approved by the Board of Bancorp or the
Bank, if such action is brought against the Officer in his
capacity as an officer or director of Bancorp or the Bank or
any of their subsidiaries. Indemnification for expense shall
not extend to matters for which the Officer has been
terminated for Just Cause. Nothing contained herein shall be
deemed to provide indemnification prohibited by applicable law
or regulation. Notwithstanding anything herein to the
contrary,
11
<PAGE>
the obligations of this Section 12 shall survive the
term of this Agreement by a period of seven years.
b. Insurance. During the period in which indemnification of the
---------
Officer is required under this Section, Bancorp or the Bank
shall provide the Officer (and his heirs, executors, and
administrators) with coverage under a directors' and officers'
liability policy at the expense of Bancorp or the Bank, at
least equivalent to such coverage provided to directors and
senior officers of Bancorp or the Bank, whichever is more
favorable to the Officer.
13. Reimbursement of Officer's Expenses to Enforce this Agreement. Bancorp
-------------------------------------------------------------
or the Bank shall reimburse the Officer for all out-of-pocket expenses,
including, without limitation, reasonable attorney's fees, incurred by the
Officer in connection with successful enforcement by the Officer of the
obligations of Bancorp or the Bank to the Officer under this Agreement up to a
maximum of $30,000. Successful enforcement shall mean the grant of an award of
money or the requirement that Bancorp or the Bank take some action specified by
this Agreement (i) as a result of court order; or (ii) otherwise by Bancorp or
the Bank following an initial failure of Bancorp or the Bank to pay such money
or take such action promptly after written demand therefor from the Officer
stating the reason that such money or action was due under this Agreement at or
prior to the time of such demand.
14. Adjustment of Certain Payments and Benefits.
-------------------------------------------
a. In the event that payments pursuant to this Agreement
(including, without limitation, any payment under any plan,
program, or arrangement referred to in Section 5 or 6 hereof)
would result in the imposition of a penalty tax pursuant to
Section 280G, such payments shall be reduced to equal the
maximum amount which may be paid under Section 280G without
exceeding such limits. In the event any such reduction in
payments is necessary, the Officer may determine, in his sole
discretion, which categories of payments (including, without
limitation, the value of benefits or of acceleration of
vesting or receipt of benefits or amounts) are to be reduced
or eliminated.
b. Payments made to the Officer pursuant to this Agreement or
otherwise, are subject to and conditioned upon their
compliance with Section 18(k) of the FDIA (12 U.S.C. (S) 1828
(k), relating to "golden parachute" and indemnification
payments and certain other benefits.
15. Injunctive Relief. If there is a breach or threatened breach of Section
-----------------
10.h. of this Agreement or the prohibitions upon disclosure contained in Section
9.c. of this Agreement, Bancorp or the Bank and the Officer agree that there is
no adequate remedy at law for such breach, and that Bancorp and the Bank each
shall be entitled to injunctive relief restraining the Officer from such breach
or threatened breach, but such relief shall not be the exclusive remedy
hereunder for such breach. The parties hereto likewise agree that the Officer
shall be entitled to
12
<PAGE>
injunctive relief to enforce the obligations of Bancorp and the Bank under
Section 11 of this Agreement.
16. Successors and Assigns.
----------------------
a. This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of Bancorp or the Bank
which shall acquire, directly or indirectly, by merger,
consolidation, purchase or otherwise, all or substantially all
of the assets or stock of Bancorp or the Bank.
b. Since the Bank and Bancorp are contracting for the unique and
personal skills of the Officer, the Officer shall be precluded
from assigning or delegating his rights or duties hereunder
without first obtaining the written consent of the Bank and
Bancorp.
17. No Mitigation. The Officer shall not be required to mitigate the
--------------
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Officer in any subsequent employment.
18. Notices. All notices, requests, demands and other communications in
-------
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch United States Post Office, by registered or certified mail, postage
prepaid, addressed as follows, or to such other address as shall have been
designated in writing by the addressee:
a. If to Bancorp or the Bank:
Sandy Spring Bancorp, Inc.
Sandy Spring National Bank of Maryland
17801 Georgia Avenue
Olney, Maryland 20832
Attention: President and Chief Executive Officer
Copy to: Corporate Secretary
b. If to the Officer:
Frank H. Small
269 Southdale Court
Dunkirk, Maryland 20754
19. Joint and Severally Liability; Payments by Bancorp and the Bank. To the
---------------------------------------------------------------
extent permitted by law, except as otherwise provided herein, Bancorp and the
Bank shall be jointly and severally liable for the payment of all amounts due
under this Agreement. Bancorp hereby agrees that it
13
<PAGE>
shall be jointly and severally liable with the Bank for the payment of all
amounts due under this Agreement and shall guarantee the performance of the
Bank's obligations thereunder, provided that Bancorp shall not be required by
this Agreement to pay to the Officer a salary or any bonuses or any other cash
payments, except in the event that the Bank does not fulfill the obligations to
the Officer hereunder for such payments. Bancorp may, however, pay salary and
bonuses as deemed appropriate by its Board in the exercise of its discretion.
20. No Plan Created by this Agreement. The Officer, Bancorp and the Bank
---------------------------------
expressly declare and agree that this Agreement was negotiated among them and
that no provision or provisions of this Agreement are intended to, or shall be
deemed to, create any plan for purposes of the Employee Retirement Income
Security Act or any other law or regulation, and Bancorp, the Bank and the
Officer each expressly waives any right to assert the contrary. Any assertion in
any judicial or administrative filing, hearing, or process by or on behalf of
the Officer or Bancorp or the Bank that such a plan was so created by this
Agreement shall be deemed a material breach of this Agreement by the party
making such an assertion.
21. Amendments. No amendments or additions to this Agreement shall be
----------
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
22. Applicable Law. Except to the extent preempted by Federal law, the
--------------
laws of the State of Maryland shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
23. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
24. Headings. Headings contained herein are for convenience of reference
--------
only.
25. Entire Agreement. This Agreement, together with any understanding or
----------------
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof, other than written agreements with respect to specific plans, programs,
or arrangements described in Sections 5 and 6, and supersedes all prior
agreements other than with respect to such specific plans, programs, or
arrangements.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
SANDY SPRING NATIONAL BANK OF MARYLAND
By: /s/ Hunter H. Hollar
Title: President and Chief Executive Officer
SANDY SPRING BANCORP, INC.
By: /s/ Hunter H. Hollar
Title: President and Chief Executive Officer
OFFICER
/s/ Frank H. Small
Frank H. Small
15
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