<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.__)
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
__________________________________________________________
SANDY SPRING BANCORP, INC.
17801 Georgia Avenue
OLNEY, MARYLAND 20832
(301) 774-6400
March 15, 1999
Dear Shareholder:
We invite you to attend the 1999 Annual Meeting of Shareholders of Sandy
Spring Bancorp, Inc. to be held at the Indian Spring Country Club, 13501 Layhill
Road, Silver Spring, Maryland on Wednesday, April 14, 1999 at 3:00 p.m.
The enclosed Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Annual Meeting. Also enclosed is the
Annual Report showing the results for 1998.
YOUR VOTE IS IMPORTANT. On behalf of the Board of Directors, we urge you to
----------------------
sign, date, and return the enclosed proxy as soon as possible, even if you
currently plan to attend the Annual Meeting. This will not prevent you from
voting in person, but will assure that your vote is counted if you are unable to
attend the Annual Meeting.
If you have any questions, please call Marjorie S. Holsinger, Corporate
Secretary, at (301) 774-6400.
Thank you for the cooperation and continuing support you have given this
institution.
Sincerely,
/S/ HUNTER R. HOLLAR
Hunter R. Hollar
President and Chief Executive Officer
__________________________________________________________
<PAGE>
SANDY SPRING BANCORP, INC.
17801 GEORGIA AVENUE
OLNEY, MARYLAND 20832
(301) 774-6400
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 14, 1999
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareholders (the
"Annual Meeting") of Sandy Spring Bancorp, Inc. ("Bancorp") will be held on
Wednesday, April 14, 1999, at 3:00 p.m. Eastern Time at the Indian Spring
Country Club, 13501 Layhill Road, Silver Spring, Maryland.
A Proxy and a Proxy Statement for the Annual Meeting and the 1998 Annual
Report to Shareholders are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
(1) The election of four directors of Bancorp;
(2) The approval of the Sandy Spring Bancorp 1999 Stock Option Plan; and
(3) Such other business as may properly come before the Annual Meeting or
any adjournments thereof.
NOTE: The Board of Directors is not aware of any other business to come
before the Annual Meeting.
The Board of Directors has fixed the close of business on March 4, 1999 as
the record date for determination of the shareholders entitled to vote at the
Annual Meeting. Only holders of record of Bancorp's Common Stock at the close of
business on that date will be entitled to notice of and to vote at the Annual
Meeting or any adjournments thereof.
In the event that there are not sufficient votes to conduct the election of
directors or to approve other business properly before the Annual Meeting, the
Annual Meeting may be adjourned in order to permit further solicitation of
proxies by Bancorp.
You are requested to fill in and sign the enclosed form of proxy, which is
solicited by the Board of Directors, and to mail it in the enclosed envelope.
The proxy will not be used if you attend and choose to vote in person at the
Annual Meeting.
By Order of the Board of Directors
/S/ MARJORIE S. HOLSINGER
Marjorie S. Holsinger
Corporate Secretary
Olney, Maryland
March 15, 1999
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU PLAN
TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE, AND COMPLETE
THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS
REQUIRED IF THIS ENVELOPE IS MAILED IN THE UNITED STATES.
<PAGE>
SANDY SPRING BANCORP, INC.
17801 GEORGIA AVENUE
OLNEY, MARYLAND 20832
(301) 774-6400
____________________
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 14, 1999
__________________
SOLICITATION, VOTING, AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Sandy Spring Bancorp, Inc. ("Bancorp"") to
be used at the 1999 Annual Meeting of Shareholders, to be held on Wednesday,
April 14, 1999, at 3:00 p.m. Eastern Time at the Indian Spring Country Club,
13501 Layhill Road, Silver Spring, Maryland. The accompanying Notice of Annual
Meeting and form of proxy and this Proxy Statement are being first mailed on or
about March 15, 1999 to shareholders of record as of the close of business on
March 4, 1999.
If the enclosed form of proxy is properly executed and returned to Bancorp
in time to be voted at the Annual Meeting, the shares represented by it will be
voted in accordance with the instructions marked on the form. EXECUTED BUT
UNMARKED PROXIES WILL BE VOTED FOR PROPOSAL 1 TO ELECT THE FOUR NOMINEES OF
BANCORP'S BOARD OF DIRECTORS AS DIRECTORS AND FOR PROPOSAL 2 TO APPROVE THE
SANDY SPRING 1999 STOCK OPTION PLAN. Proxies marked as abstentions and shares
held in street name that have been designated by brokers on proxies as not voted
will not be counted as votes cast, but will be counted for purposes of
determining a quorum at the Annual Meeting. Bancorp does not know of any other
matters that are to come before the Annual Meeting except for incidental,
procedural matters. If any other matters are properly brought before the Annual
Meeting, the persons named in the accompanying proxy will vote the shares
represented by each proxy on such matters as determined by a majority of the
Board of Directors.
The presence of a shareholder at the Annual Meeting will not automatically
revoke that shareholder's proxy. However, shareholders may revoke a proxy at
any time prior to its exercise by filing with the Corporate Secretary of
Bancorp, Marjorie S. Holsinger, a written notice of revocation; by delivering to
Bancorp a duly executed proxy bearing a later date; or by attending the Annual
Meeting and voting in person.
The cost of soliciting proxies will be borne by Bancorp. In addition to the
solicitation of proxies by mail, Bancorp also may solicit proxies personally or
by telephone or telegraph through its directors, officers and regular employees.
Bancorp also will request persons, firms, and corporations holding shares in
their names or in the name of nominees that are beneficially owned by others to
send proxy materials to and obtain proxies from those beneficial owners and will
reimburse the holders for their reasonable expenses in doing so.
The securities that can be voted at the Annual Meeting consist of shares of
common stock, par value $1.00 per share (the "Common Stock"), of Bancorp. Each
share entitles its owner to one vote on all matters. The close of business on
March 4, 1999 has been fixed by the Board of Directors as the record date for
determination of shareholders entitled to vote at the Annual Meeting; there were
approximately 2,400 record holders of the Common Stock as of that record date.
The number of shares outstanding on March 4, 1999 was 9,575,492. The presence,
in person or by proxy, of at least a majority of the total number of outstanding
shares of Common Stock is necessary to constitute a quorum at the Annual
Meeting.
A copy of the Annual Report to Shareholders for the year ended December 31,
1998 accompanies this Proxy Statement. BANCORP IS REQUIRED TO FILE AN ANNUAL
REPORT ON FORM 10-K FOR ITS YEAR ENDED DECEMBER 31, 1998 WITH THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"). SHAREHOLDERS MAY OBTAIN, FREE OF CHARGE, A COPY OF
THIS ANNUAL REPORT ON FORM 10-K BY WRITING MARJORIE S. HOLSINGER, CORPORATE
SECRETARY, AT SANDY SPRING BANCORP, INC., 17801 GEORGIA AVENUE, OLNEY, MARYLAND
20832.
1
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information as of March 4, 1999, with
respect to the shares of Common Stock beneficially owned by each director
continuing in office and nominee for director of Bancorp, by certain executive
officers of Bancorp and by all directors and executive officers of Bancorp as a
group. This information is based upon the most recent report of beneficial
ownership of securities filed with the Securities and Exchange Commission. To
the knowledge of management, no person beneficially owns more than 5% of the
outstanding shares of Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF BENEFICIAL COMMON STOCK
NAME OWNERSHIP(1)(2)(3) OUTSTANDING
---- ------------------ -----------
<S> <C> <C>
John Chirtea 18,520 *
Susan D. Goff 437 *
Solomon Graham 4,769 *
Gilbert L. Hardesty 2,000 *
Joyce R. Hawkins 34,552 *
Hunter R. Hollar 44,461 *
Thomas O. Keech 70,446 *
Charles F. Mess 5,916 *
Robert L. Mitchell 11,000 *
Robert L. Orndorff, Jr. 105,167 1.10%
David E. Rippeon 7,677 *
Lewis R. Schumann 57,756 *
W. Drew Stabler 34,877 *
James H. Langmead 10,795 *
Lawrence T. Lewis 23,864 *
Stanley L. Merson 26,337 *
Frank H. Small 10,522 *
All directors and executive officers
as a group (19 persons) 490,030 5.07%
</TABLE>
- -------------------
* Less than 1% of Bancorp's outstanding Common Stock.
(1) Under the rules of the SEC, an individual is considered to "beneficially
own" any share of Common Stock which he or she, directly or indirectly,
through any contract, arrangement, understanding, relationship, or
otherwise, has or shares: (1) voting power, which includes the power to
vote, or to direct the voting of, such security; and/or (2) investment
power, which includes the power to dispose, or to direct the disposition,
of such security. In addition, an individual is deemed to be the
beneficial owner of any share of Common Stock of which he or she has the
right to acquire voting or investment power within 60 days of March 4,
1999. Includes 85,832 shares of Common Stock subject to outstanding
options which are exercisable within 60 days of March 4, 1999, of which
Hunter R. Hollar, James H. Langmead, Lawrence T. Lewis, Stanley L. Merson,
and Frank H. Small ("Named Executive Officers") hold options to purchase
37,000 shares, 9,000 shares, 5,500 shares, 19,000 shares, and 6,000 shares
of Common Stock, respectively. Executive officers who are not Named
Executive Officers hold options for 9,332 shares. Also includes 481
shares, 880 shares, 624 shares, 2,716 shares, and 1,522 shares of Common
Stock owned by Mr. Hollar, Mr. Langmead, Mr. Lewis, Mr. Merson, and Mr.
Small, respectively, and 6,496 shares of Common Stock owned by executive
officers who are not Named Executive Officers, as participants in Bancorp's
Cash and Deferred Profit Sharing Plan.
(2) Includes shares owned directly by directors and executive officers of
Bancorp as well as shares held by their spouses and minor children and
trusts of which certain directors are trustees. Also includes 51,656
shares held by a trust for which Mr. Schumann is trustee, but in which he
has no pecuniary interest.
(3) Fractional shares resulting from participation in the dividend reinvestment
plan have been rounded to the nearest whole share.
2
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Board of Directors has set the total number of directors at thirteen,
in accordance with Bancorp's Articles of Incorporation and Bylaws. Bancorp's
Articles of Incorporation divide the directors into three classes, as nearly
equal in number as possible. In general, the term of office of only one class of
directors expires in each year, and their successors are elected for terms of
three years and until their successors are elected and qualified. At the Annual
Meeting a total of four director-nominees will be elected for three-year terms.
With respect to the election of directors, each shareholder of record on the
record date is entitled to one vote for each share of Common Stock held. A
plurality of all the votes cast at the Annual Meeting will be sufficient to
elect a nominee as a director.
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
The following table sets forth the names of the Board of Directors' four
nominees for election as directors. Also shown is certain other information,
some of which has been obtained from Bancorp's records and some of which has
been supplied by the nominees and continuing directors, with respect to their
principal occupations during the past five years, their ages at December 31,
1998, the periods during which they have served as directors, and the positions
they currently hold with Bancorp. It is the intention of the persons named in
the proxy to vote the shares represented by each properly executed proxy for the
election as directors of the four nominees listed below for terms of three
years, unless otherwise directed by the shareholder. The Board of Directors
believes that each of the nominees will stand for election and will serve if
elected as director. If any person nominated by the Board of Directors fails to
stand for election or is unable to accept election, the proxies will be voted
for the election of such other person or persons as the Board of Directors may
recommend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED
BELOW AS A DIRECTOR OF BANCORP.
<TABLE>
<CAPTION>
MEMBER TERM
POSITION(S) HELD OF BOARD CURRENTLY
NAME AGE WITH BANCORP SINCE/(1)/ EXPIRES
- ---- --- ---------------- --------- ---------
<S> <C> <C> <C> <C>
DIRECTOR-NOMINEES FOR TERMS TO EXPIRE AT
THE 2002 ANNUAL MEETING
John Chirtea 61 Director 1990 1999
Joyce R. Hawkins 65 Director 1995 1999
Hunter R. Hollar 50 President, Chief 1990 1999
Executive Officer and
Director
Thomas O. Keech 65 Director 1995 1999
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
MEMBER TERM
POSITION(S) HELD OF BOARD CURRENTLY
NAME AGE WITH BANCORP SINCE (1) EXPIRES
- ---- --- ---------------- --------- ---------
<S> <C> <C> <C> <C>
CONTINUING DIRECTORS
Susan D. Goff 53 Director 1994 2000
Robert L. Mitchell 62 Director 1991 2000
Robert L. Orndorff, Jr. 42 Director 1991 2000
David E. Rippeon 49 Director 1997 2000
Solomon Graham 55 Director 1994 2001
Gilbert L. Hardesty 58 Director 1997 2001
Charles F. Mess 60 Director 1987 2001
Lewis R. Schumann 55 Director 1994 2001
W. Drew Stabler 61 Chairman of the 1986 2001
Board of Directors
</TABLE>
- -------------------
(1) The Boards of Directors of Bancorp and its principal subsidiary, Sandy
Spring National Bank (the "Bank"), are composed of the same persons.
Includes term of office as a director of the Bank prior to the formation of
Bancorp as the holding company for the Bank in January 1988.
The principal occupation(s) and business experience of each nominee and
director of Bancorp for the last five years are shown below.
DIRECTOR-NOMINEES:
JOHN CHIRTEA is a real estate consultant who is retired from LCOR, a
national real estate development company. In prior years, Mr. Chirtea was a
partner in the Linpro Co., the predecessor company of LCOR.
JOYCE R. HAWKINS is a realtor with Weichert Realtors.
HUNTER R. HOLLAR is President and Chief Executive Officer of Bancorp and
the Bank. From 1990 through 1993, Mr. Hollar served as President of Bancorp and
President and Chief Operating Officer of the Bank.
THOMAS O. KEECH retired as Vice President of Bancorp and Executive Vice
President of the Bank effective December 31, 1995. Mr. Keech previously served
as Vice President and Treasurer of Bancorp and Executive Vice President and
Chief Financial Officer of the Bank.
CONTINUING DIRECTORS:
SUSAN D. GOFF is President of M.D. IPA, Inc., a vice president of Optimum
Choice, Inc., and a senior vice president of their parent holding company, Mid-
Atlantic Medical Services, Inc., a health maintenance organization.
4
<PAGE>
ROBERT L. MITCHELL is President and Chief Executive Officer of C-I/Mitchell
and Best Company, which is engaged in homebuilding and real estate development.
ROBERT L. ORNDORFF, JR. is President of RLO Contractors, Inc., an excavating
contractor.
DAVID E. RIPPEON is President and Chief Executive Officer of Gaithersburg
Farmers Supply, Inc., a tractor and equipment dealership.
SOLOMON GRAHAM is founder, President, and Chief Executive Officer of Quality
Biological, Inc., a medical technology firm providing reagents to research
facilities.
GILBERT L. HARDESTY is a retired bank executive, having served as President of
Crestar Bank - Annapolis from June 1994 to June 1997 and as President of
Annapolis Federal Savings Bank from April 1986 to June 1994.
CHARLES F. MESS, M.D. is in the practice of general orthopedics.
LEWIS R. SCHUMANN is a partner in the law firm of Miller, Miller and Canby,
Chtd.
W. DREW STABLER is a partner in Pleasant Valley Farm, a crop and livestock
operation.
CORPORATE GOVERNANCE AND OTHER MATTERS
During 1998, each of Bancorp's and the Bank's Boards of Directors held 12
regular meetings.
The average attendance was 92% for meetings of Bancorp's and the Bank's Boards
of Directors. All incumbent directors attended 75% or more of the aggregate of
(a) the total number of meetings of the Boards of Directors and (b) the total
number of meetings held by all committees on which they served during the period
of their service during the year.
Bank directors who are not employed by the Bank receive an annual retainer of
$4,000 and fees of $400 ($500 for the Chairman) for attendance at each meeting
of the Board of Directors, $400 for each Executive Committee meeting, and $300
for other committee meetings. Bancorp directors who are not employed by Bancorp
do not receive any additional compensation except for fees of $400 ($500 in the
case of the Chairman) for attendance at each meeting of the Board of Directors
not held in conjunction with a meeting of the Bank's Board of Directors and
except for fees of $300 for each meeting of the Audit and Nominating Committees.
Directors of Sandy Spring Mortgage Corporation who are not employed by Bancorp
or any of its subsidiaries receive fees of $300 for each meeting of its Board.
Directors of the Bank are eligible to defer all or a portion of their fees
under Director Fee Deferral Agreements between the Bank and individual
directors. Amounts deferred accrue interest at the prime rate. Except in the
case of death or financial emergency, deferred fees and accrued interest are
payable only following termination of a director's service on the board. The
Director Fee Deferral Agreements also provide for benefits that may exceed
deferred fees and accrued interest in the event a party dies while a director of
the Bank, but only to the extent the Bank owns an insurance policy in effect on
the director's life at the time of death that pays a greater amount than the
total of deferred fees and accrued interest.
Bancorp's Board of Directors has standing Audit and Nominating Committees.
The Bank has a standing Human Resources Committee that performs the functions of
a compensation committee. The functions, composition, and number of meetings
for these committees in 1998 were as follows:
AUDIT COMMITTEE - The Audit Committee is composed of John Chirtea, Chairman,
Solomon Graham, Gilbert L. Hardesty, Joyce R. Hawkins, Thomas O. Keech, and
David E. Rippeon. The Audit Committee, whose members are neither officers nor
employees of Bancorp or the Bank, provides general oversight of the internal
audit function, reviews the findings of external audits and examinations,
evaluates the adequacy of the Bank's insurance coverage, reviews the activities
of the Bank's Compliance Council, reviews the annual report to shareholders and
Form 10-K on behalf of the Board and monitors internal controls for financial
reporting. During 1998, six meetings were held.
5
<PAGE>
NOMINATING COMMITTEE - The Nominating Committee is composed of W. Drew
Stabler, Chairman, Hunter R. Hollar, John Chirtea, Solomon Graham, and Charles
F. Mess. The Nominating Committee makes recommendations to the Board of
Directors with respect to nominees for election as directors. While the
Nominating Committee will consider nominees recommended by shareholders, it has
not actively solicited recommendations by Bancorp's shareholders for nominees
nor has it established any procedures for this purpose other than as set forth
in the Bylaws. See "Shareholder Proposals." During 1998, no meetings were
held.
HUMAN RESOURCES (COMPENSATION) COMMITTEE - The Human Resources Committee is
composed of Robert L. Orndorff, Jr., Chairman, John Chirtea, Susan D. Goff,
Charles F. Mess, Robert L. Mitchell, and W. Drew Stabler. The Human Resources
Committee recommends salaries and other compensation for executive officers,
conducts an annual review of the salary budget, considers other compensation
plans and makes recommendations to the Board, deals with matters of personnel
policy and, with the Stock Option Committee, administers the 1992 and 1982 Stock
Option Plans. During 1998, two meetings were held.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each of
the last three years awarded to or earned by (i) the Chief Executive Officer,
and (ii) each of the four other most highly compensated executive officers of
Bancorp whose salary and bonus earned in 1998 exceeded $100,000 (the "Named
Executive Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
--------------
Name and Principal Annual Compensation Stock Option All Other
-------------------
Position in 1998 Year Salary Bonus Grants (Shares)/(1)/ Compensation/(2)/
- ------------------ ---- -------- ------- -------------------- -----------------
<S> <C> <C> <C> <C> <C>
Hunter R. Hollar 1998 $224,750 $80,536 3,000 $4,960
President and Chief Executive 1997 203,885 31,658 6,000 6,896
Officer of Bancorp and the Bank 1996 185,223 33,381 3,000 9,959
James H. Langmead 1998 137,025 46,674 1,500 4,241
Vice President and Treasurer 1997 119,473 17,443 3,000 5,149
of Bancorp and Executive Vice 1996 107,692 19,423 1,500 5,795
President and Chief Financial
Officer of the Bank
Lawrence T. Lewis 1998 136,500 46,482 1,500 4,223
Executive Vice President 1997 118,000 17,227 3,000 5,086
of the Bank 1996 105,769 31,760(3) 3,000 3,838
Stanley L. Merson 1998 122,375 40,435 1,500 3,788
Senior Vice President 1997 111,254 16,244 3,000 4,795
of the Bank and 1996 97,115 17,491 1,500 5,218
President, Sandy Spring
Mortgage Corporation
Frank H. Small 1998 120,450 41,038 1,500 3,729
Executive Vice President 1997 105,342 15,380 3,000 3,027
of the Bank 1996 92,485 16,666 1,500 3,315
</TABLE>
(1) Share amounts adjusted to give retroactive effect to a 2-for-1 stock split
declared on January 28, 1998.
(2) Amounts shown in this column pertain to deferred compensation under
Bancorp's Cash and Deferred Profit Sharing Plan. The amount of indirect
compensation in the form of personal benefits received in 1998 by Messrs.
Hollar, Langmead, Lewis, Merson and Small did not exceed 10% of the annual
compensation paid to each such executive officer.
(3) Includes a $15,000 bonus paid to Mr. Lewis upon the commencement of his
employment.
6
<PAGE>
STOCK OPTION PLANS. Bancorp maintains stock option plans to attract, retain,
and motivate key officers of Bancorp and the Bank by providing them with a stake
in the success of Bancorp as measured by the value of its shares. The Board of
Directors also has adopted a new stock option plan, which is intended to replace
the plan adopted in 1992. (See Proposal 2, Approval of the Sandy Spring Bancorp
1999 Stock Option Plan, on page 14.) The following information has been adjusted
to give retroactive effect to a 2-for-1 stock split declared on January 28,
1998.
The 1992 Stock Option Plan (the "1992 Option Plan"), which was approved by the
shareholders at the 1992 Annual Meeting of Shareholders, authorizes the issuance
of up to 540,000 shares of Common Stock, subject to certain adjustments for
changes in Bancorp's capital structure. The 1992 Option Plan has a term of 10
years from its effective date (January 1, 1992) after which date no stock
options may be granted. As of March 4, 1999, options for 129,800 shares were
outstanding under the 1992 Option Plan. The 1992 Option Plan replaced a plan
adopted in 1982 (the "1982 Option Plan"), which was terminated except with
respect to options that were outstanding on the plan's termination date. As of
March 4, 1999, options for 12,000 shares were outstanding under the 1982 Option
Plan. The 1992 Option Plan and the 1982 Option Plan are referred to below as the
"Option Plans."
The Option Plans provide for the grant of "incentive options" as defined in
Section 422 of the Code. The 1992 Option Plan also provides for the grant of
"non-incentive options" to officers and other employees on terms and conditions
established by the Stock Option Committee, which administers the Option Plans.
The Stock Option Committee is comprised of all disinterested (outside) directors
(i.e., all directors other than Mr. Hollar).
Options have been granted under the Option Plans only to key employees of
Bancorp and its subsidiaries. Under the Option Plans, the maximum option term is
10 years from the date of grant. Options granted under the Option Plans prior
to 1996 were immediately exercisable upon grant. Options granted in 1996 and
1997 under the 1992 Plan were first exercisable as follows: one-third upon the
date of grant, one-third upon the first anniversary of the date of grant, and
one-third upon the second anniversary of the date of grant. The exercise price
of a stock option may not be less than 100% of the fair market value of the
Common Stock on the date of grant. The exercise price of stock options must be
paid for in full in cash or shares of Common Stock, or a combination of both.
The Stock Option Committee has the discretion when making a grant of stock
options under the 1992 Plan to impose restrictions on the shares to be purchased
in exercise of such options.
The Committee also has the authority to cancel stock options outstanding under
the 1992 Option Plan with the consent of the optionee and to grant new options
at a lower exercise price in the event that the fair market value of the Common
Stock at any time prior to the exercise of the outstanding stock options falls
below the exercise price of such option.
7
<PAGE>
OPTION GRANTS IN 1998
---------------------
The following table contains information concerning the grant of stock options
under the Option Plans to the Chief Executive Officer and each of the other
Named Executive Officers. The Option Plans do not provide for the grant of
stock appreciation rights.
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
-----------------------------------------------
% of Total Value at Assumed
Options Options Exercise Annual Rates of Stock
Granted Granted to or Price Appreciation
(Number Employees Base Price Expiration for Option Term
-----------------------
Name of Shares)(1) in Year ($ per Share)(2) Date 5% 10%
- ---- ------------- ---------- ----------------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Hunter R. Hollar 3,000 9.9% $30.50 12/16/2008 $57,544 $145,827
James H. Langmead 1,500 5.0 30.50 12/16/2008 28,772 72,914
Lawrence T. Lewis 1,500 5.0 30.50 12/16/2008 28,772 72,914
Stanley L. Merson 1,500 5.0 30.50 12/16/2008 28,772 72,914
Frank H. Small 1,500 5.0 30.50 12/16/2008 28,772 72,914
</TABLE>
_______________
(1) Options granted during 1998 that were exercisable as follows: one-third
upon the date of grant, one-third upon the first anniversary of the date of
grant, and one-third upon the second anniversary of the date of grant.
(2) In each case, the exercise price was equal to the fair market value of the
Common Stock on the date of grant.
AGGREGATED OPTION EXERCISES IN
1998 AND YEAR END OPTION VALUES
-------------------------------
The following table sets forth information concerning the exercise of options
by a Named Executive Officer during 1998 and the value of options held by the
Chief Executive Officer and the other Named Executive Officers at December 31,
1998.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised Options In-the-Money
at Year End Options
-------------------
at Year End/(1)/
---------------
Shares Acquired Exercisable/
on Exercise Unexercisable Exercisable/
Name (Number of Shares) Value Realized/(1)/ (Number of Shares) Unexercisable
- ---- ------------------- ------------------- ------------------ --------------------
<S> <C> <C> <C> <C>
Hunter R. Hollar - $ - 37,000 / 4,000 $616,605 / $10,220
James H. Langmead - - 9,000 / 2,000 107,955 / 5,110
Lawrence T. Lewis - - 5,500 / 2,000 48,868 / 5,110
Stanley L. Merson - - 19,000 / 2,000 314,165 / 5,110
Frank H. Small 3,000 58,500 6,000 / 2,000 54,330 / 5,110
</TABLE>
____________
(1) The difference between the fair market value of the underlying securities
at exercise or year-end and the exercise or base price.
8
<PAGE>
PENSION PLAN TABLE
------------------
The table below shows estimated annual benefits payable upon retirement to
persons in the specified remuneration and years-of-service categories if such
retirement had occurred on December 31, 1998. The benefits listed are provided
on a 10-year certain-and-life basis and are not subject to deduction for Social
Security or other offset amounts.
<TABLE>
<CAPTION>
Highest 5-Year Years of Credited Service at Retirement
---------------------------------------
Average Earnings 15 20 25 30 35 40 and above
- ---------------- ------- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
$25,000 $ 5,625 $ 7,500 $ 9,375 $11,250 $13,125 $15,000
75,000 16,875 22,500 28,125 33,750 39,275 45,000
125,000 28,125 37,500 46,875 56,250 65,625 75,000
150,000 33,750 45,000 56,250 67,500 78,750 90,000
160,000 and more 36,000 48,000 60,000 72,000 84,000 96,000
</TABLE>
Earnings covered by the Pension Plan are total wages, including elective pre-
tax contributions under Section 401(k) of the Internal Revenue Code, overtime
pay, bonuses, and other cash compensation, which for the named executives
correspond, in general, to the total of the amounts in the "Salary" and "Bonus"
columns in the Summary Compensation Table, up to a total of $160,000. Benefits
are computed on a monthly basis at the rate of 1.5% of highest five-year average
monthly earnings multiplied by years of service up to 40 years for eligible
persons retiring at age 65. Early retirement is also permitted by the Pension
Plan at age 55 after at least 10 years of service. As of February 26, 1999,
Bancorp's executive officers shown in the compensation table had accumulated the
following years of credited service toward retirement: Mr. Hollar - 8 years,
Mr. Langmead - 7 years, Mr. Lewis - 3 years, Mr. Merson - 16 years, and Mr.
Small - 8 years.
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENTS. The Bank, upon the
recommendation of the Human Resources Committee, has entered into individual
Supplemental Executive Retirement Agreements ("SERA's") with certain executives
of the Bank, including Mr. Hollar and each of the Named Executive Officers. The
SERAs are designed to provide certain post-retirement benefits to enable a
targeted level of covered retirement income to be met and to provide certain
pre-retirement death and disability benefits should the executive die or become
disabled prior to retirement age. The annual post-retirement deferred
compensation benefit is designed to replace between 65% and 70% of the
executive's projected final average pay at retirement date in conjunction with
the Bank's Pension Plan and Deferred Profit Sharing Plan, Social Security
retirement benefits, and any benefits payable to the executive under a prior
employer's pension plan. Normal retirement benefits are payable in equal
monthly payments over 15 years or until the death of the executive, whichever is
longer. Using a 70% income replacement target for Mr. Hollar, an annual amount
of $258,850 per year has been projected to be paid over a 15-year period at age
65. Executives who reach age sixty with ten years of service are eligible for
reduced benefits upon early retirement, payable over 15 years. Reduced benefits
also are available in the event of disability, voluntary termination, or
termination by the Bank without just cause. Benefits payable by reason of the
death of the executive are based upon accrued retirement benefits or, if
greater, the approximate value of payments received by the Bank under insurance
coverage obtained by the Bank on the executive's life, and are payable over 15
years.
Change-in-Control Benefits. If within six months prior to, or two years after,
a change-in-control, the Bank terminates the employment of an executive who is a
party to a SERA without just cause, or the executive voluntarily terminates
employment for good reason, the executive is eligible for normal retirement or
early retirement benefits, at his or her election. These benefits are payable
beginning at the retirement (or early retirement) age if the change in control
has been approved by a majority of the directors of the Bank who were directors
prior to the change in control, or otherwise beginning in the month following
the executive's termination.
9
<PAGE>
EMPLOYMENT AGREEMENTS. In December 1990, Bancorp and the Bank entered into
an Employment Agreement (the "1990 Agreement") with Hunter R. Hollar (the
"Executive"). The Agreement provided for automatic one-year extensions on each
January 1 after its initial term ended on December 31, 1993, provided that
neither Bancorp nor Mr. Hollar had given written notice at least 90 days prior
to a renewal date of intention not to renew the Agreement. The 1990 Agreement,
as renewed, was in effect until January 30, 1997, when the 1990 Agreement was
replaced with a new employment agreement (the "Agreement").
The Boards of Directors of Bancorp and the Bank believe that the Agreement
assures fair treatment of the Executive in relation to his career with Bancorp
by assuring him of some financial security. The Agreement also protects the
shareholders by encouraging the Executive to continue his attention to his
duties without distraction in a potential merger or takeover circumstance and by
helping to maintain the Executive's objectivity in considering any proposals to
acquire Bancorp.
The Agreement has an initial term of three years, and is subject to
automatic one-year extensions of such term on each January 30, provided that
neither Bancorp nor the Executive has given written notice at least 60 days
prior to the renewal date of intention not to renew. The Agreement provides for
the payment of cash and other benefits to the Executive, including a fixed
salary, reviewed annually and subject to increase or decrease at the Board of
Directors' discretion, provided that the salary may not be less than $190,000.
The Executive also is entitled to participate in bonus and fringe benefit,
incentive compensation, life insurance, medical, profit sharing and retirement
plans, and to continued participation in a supplemental retirement arrangement.
The Executive is entitled to reimbursement of reasonable business expenses, the
use of an automobile (with reimbursement for expenses), and membership dues at a
country club located in the Olney, Maryland area. With minor exceptions, the
Agreement terminates, and there are no additional payments due under it, upon
termination based upon death, retirement, or just cause (as defined) by Bancorp,
or upon voluntary termination by the Executive without good reason (as defined).
Upon termination for disability, the Executive is entitled to receive his salary
through the term of the Agreement, reduced by payments under any disability plan
maintained by Bancorp, plus regular employee benefits. Upon termination of the
Executive without just cause by Bancorp, or with good reason by the Executive,
the Executive is entitled to salary and bonuses for the remaining term of the
Agreement, payable in a lump sum based upon prior year compensation levels. The
Executive is prohibited from conflicts of interest, and must maintain the
confidentiality of nonpublic information regarding Bancorp and its customers.
The Executive also is bound by a covenant not to compete and not to interfere
with other employees of Bancorp if the Executive is terminated for just cause,
disability, or retirement or resigns without good reason.
Change in Control Benefits. In the event of a change-in-control of Bancorp,
the Executive is entitled to payment of certain benefits. If within six months
prior to, or two years after, a change-in-control, Bancorp terminates the
Executive's employment without good cause, or the Executive voluntarily
terminates employment for good reason (as defined in the Agreement), then
Bancorp, or its successor, is required to make a lump-sum cash payment to the
Executive equal to 2.99 times the sum of the Executive's annual salary at the
highest rate in effect during the preceding twelve months and bonuses for the
preceding calendar year. The Executive also is entitled to continued
participation for a three-year period in certain Bancorp-sponsored health and
welfare plans. These payments and benefits, are limited, however, so as not to
exceed the amount allowable as a deduction under Section 280G of the Internal
Revenue Code. As of December 31, 1998, if a change-in-control had occurred and
the Executive had terminated employment with good reason or had been terminated
from employment without just cause, then $598,963 would have been payable to the
Executive under the change-in-control provisions of the Agreement, after
application of the limitations of Section 280G of the Code. Bancorp does not
believe that payment of this amount would have a material adverse affect on the
financial or operating condition of Bancorp or the Bank.
Agreements with Other Named Executive Officers. The other Named Executive
Officers also entered into employment agreements with Bancorp. The material
terms and conditions of each of these agreements are similar to those of the
Current Agreement entered by Mr. Hollar, except that (a) each of them is for an
initial term of two years, subject to annual renewal, and (b) the compensation
and duties, and provisions relating to them, are different in each agreement.
Under the agreements, the other Named Executive Officers are not entitled to
club memberships or use of an automobile. The agreements call for the employment
of Mr. Langmead, Mr. Lewis, Mr. Merson, and Mr. Small at Bancorp, the Bank
10
<PAGE>
and, with respect to Mr. Merson, Sandy Spring Mortgage Corporation, at minimum
base salaries of $110,000, $110,000, $100,000, and $95,000, respectively.
REPORT OF THE HUMAN RESOURCES COMMITTEE
As members of the Human Resources Committee, it is our duty to review
compensation policies applicable to executive officers; to consider the
relationship of corporate performance to that compensation; to recommend salary
and bonus levels and stock option grants for executive officers for
consideration by the Boards of Directors of Bancorp and the Bank or their
committees, as appropriate; and to administer various incentive plans of Bancorp
and the Bank.
Under the compensation policy of Bancorp, which is endorsed by the Human
Resources Committee, compensation is paid based on both the executive officers'
performance and the performance of the entire company. In assessing the
performance of Bancorp and the Bank for purposes of compensation decisions, the
Human Resources Committee considers a number of factors, including profits of
Bancorp and the Bank during the past year relative to their profit plans,
changes in the value of Bancorp's stock, reports of federal regulatory
examinations of Bancorp and the Bank, growth, business plans for future periods,
and regulatory capital levels. The Human Resources Committee assesses individual
executive performance based upon the executive's responsibilities and the
Committee's determination of the executive's contributions to the performance of
Bancorp and the accomplishment of Bancorp's strategic goals. In assessing
performance for purposes of establishing base salaries, the members of the
Committee do not make use of a mechanical formula, but instead weigh the factors
described above as they deem appropriate in the circumstances. The 1998 salary
levels of Bancorp's executive officers were established consistent with this
compensation policy.
Mr. Hollar became Chief Executive Officer of Bancorp and the Bank effective
January 1, 1994. During 1998, the level of Mr. Hollar's annual salary was
subject to the terms of an employment agreement with Bancorp and the Bank dated
January 30, 1997. Under this agreement, Mr. Hollar's annual salary is reviewed
annually and is subject to increase at the discretion of the Board of Directors.
The Committee conducted a review of executive officer base compensation in
March 1998. Changes in base compensation for 1998 were effective on April 1. In
its review, the Committee determined that the performance of Mr. Hollar was
excellent, based upon the 1997 financial performance of Bancorp, including the
growth in assets, income, and capitalization during 1997; the financial
performance trends for 1997 and the preceding four years, which include growth
in assets, net operating income, and stockholders equity in each year; the
results of confidential regulatory examinations; Bancorp's planned levels of
financial performance for 1998; Mr. Hollar's continued involvement in community
affairs in the communities served by Bancorp; and a general level of
satisfaction with the management of Bancorp and its subsidiaries. As a result of
this review, which included a comparison of Mr. Hollar's compensation with
compensation paid to officers of comparable institutions, Mr. Hollar's salary
was increased by $21,000 to $230,000.
Executive officers of Bancorp and the Bank have been granted incentive
stock options under Bancorp's Stock Option Plans. The purposes of the Stock
Option Plans are to attract, retain, and motivate key officers of Bancorp and
the Bank by providing them with a stake in the success of Bancorp as measured by
the value of its shares. Options are granted at exercise prices equal to the
fair market value of the shares on the dates of grant. The Stock Option
Committee, which consists of the disinterested directors of Bancorp, has general
responsibility for granting stock options to key employees and administering the
plans. The Human Resources Committee recommends to the Stock Option Committee
the recipients and the amounts and other terms of options to be granted. During
1998, incentive stock options for 30,300 shares were granted at an exercise
price of $30.50 per share, including options for 3,000 shares granted to Mr.
Hollar and 1,500 shares each granted to Mr. Langmead, Mr. Lewis, Mr. Merson, and
Mr. Small.
The Human Resources Committee recommends to the Board of Directors the
amount to be contributed each year to the Bank's Cash and Deferred Profit
Sharing Plan. Under this Plan, each participant receives an allocation based
upon the participant's compensation for the year. Each executive officer of
Bancorp participates in the Plan. In 1995, the Human Resources Committee adopted
a formula to establish the amount of aggregate contribution to the profit
sharing plan. This formula uses measures of loan and deposit growth,
profitability, asset quality, and productivity ratios compared with those
11
<PAGE>
measures for the prior year and target levels established for the Bank. For
1998, the Human Resources Committee recommended, and the Board of Directors of
the Bank approved, an aggregate contribution of approximately $412,169 or 3.1%
of annual compensation of eligible participants, which was based upon the
results of the formula.
The Bank also awards quarterly cash bonuses to participants, including
executive officers, based upon the performance of the Bank or business units,
and annual bonuses for executive officers based solely on Bank performance, in
each case using the formula described above. Performance bonuses of $80,536,
$46,674, $46,482, $40,435, and $41,038 were awarded to Mr. Hollar, Mr. Langmead,
Mr. Lewis, Mr. Merson, and Mr. Small, respectively, in 1998.
No member of the Human Resources Committee is a former or current officer
or employee of Bancorp or the Bank.
March 4, 1999 HUMAN RESOURCES COMMITTEE
Robert L. Orndorff, Jr., Chairman
John Chirtea
Susan D. Goff
Charles F. Mess
Robert L. Mitchell
W. Drew Stabler
12
<PAGE>
STOCK PERFORMANCE COMPARISONS
The following graph and table show the cumulative total return on the
Common Stock of Bancorp over the last five years, compared with the cumulative
total return of two broad stock market indexes, the Standard and Poor's 500
Index ("S&P 500") and the Nasdaq Stock Market Index (U.S. Companies), and two
narrower indexes, the SNL $1-$5 Billion Bank Index and the Nasdaq Bank Stock
Index. The cumulative total return on the stock or the index equals the total
increase in value since December 31, 1993, assuming reinvestment of all
dividends paid into the stock or the index. The graph and table were prepared
assuming that $100 was invested on December 31, 1993 in the Common Stock and the
securities included in the indexes.
[STOCK PERFORMANCE CHART APPEARS HERE]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Bancorp $100.0 $127.7 $177.0 $165.4 $264.6 $325.2
S&P 500 Index 100.0 101.3 139.4 171.3 228.4 293.7
SNL $1-$5 Billion Banks 100.0 105.3 141.6 183.5 306.1 305.4
Nasdaq Stock Market Index (U.S. Companies) 100.0 97.8 138.3 170.0 208.6 293.2
Nasdaq Bank Stock Index 100.0 99.6 148.4 195.9 328.0 324.9
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Bancorp believes that comparisons to the Standard and Poor's 500 Index, or
S&P 500, and the SNL $1-$5 Billion Bank index, are more meaningful than
comparisons to the Nasdaq Stock Market Index (U.S. Companies) and the Nasdaq
Bank Stock Index, because of their composition. The Company also believes that
more complete and useful information is available for the S&P 500 and the SNL
$1-$5 Billion Bank Index than for these Nasdaq indices. Bancorp does not plan
to provide comparisons to the Nasdaq indexes in the future.
TRANSACTIONS AND RELATIONSHIPS WITH MANAGEMENT
Bancorp and the Bank have had in the past, and expect to have in the
future, banking transactions with directors and executive officers in the
ordinary course of business on substantially the same terms, including interest
rates and collateral on loans, as those prevailing at the same time for
comparable transactions with other persons. In the opinion of management, these
transactions do not and will not involve more than the normal risk of
collectibility or present other unfavorable features.
Director Lewis R. Schumann is a partner in the law firm of Miller, Miller
and Canby, Chtd., which Bancorp and the Bank have retained during 1998 and
expect to retain during the current year as corporate counsel. The law firm
provides legal services on matters such as routine litigation, personnel
policies and practices, customer account forms and issues, and Bank properties.
APPROVAL OF THE SANDY SPRING BANCORP
1999 STOCK OPTION PLAN
(PROPOSAL 2)
The Board of Directors has adopted the Sandy Spring Bancorp 1999 Stock
Option Plan (the "Option Plan"), subject to approval by Bancorp's stockholders.
Following is summary of the Option Plan. The Option Plan is attached as Exhibit
A and should be consulted for additional information.
PURPOSE OF THE OPTION PLAN
The purpose of the Option Plan is to advance the interests of Bancorp by
providing directors and selected key employees of the Bank, Bancorp, and their
affiliates with the opportunity to acquire shares of Bancorp's common stock. By
encouraging stock ownership, Bancorp seeks to attract, retain, and motivate the
best available personnel for positions of substantial responsibility; to provide
additional incentive to directors and key employees of Bancorp, the Bank, and
their affiliates to promote the success of the business as measured by the value
of its shares; and generally to increase the commonality of interests among
directors, key employees, and other shareholders.
The Option Plan is intended to replace the Sandy Spring Bancorp 1992 Stock
Option Plan (the "1992 Option Plan") upon this Option Plan's approval by
shareholders of Bancorp. Options issued under the 1992 Option Plan will continue
in effect and will be subject to the requirements of the 1992 Option Plan, but
no new options will be granted under the 1992 Option Plan after this Option Plan
is approved by shareholders. The 1992 Option Plan does not provide for grants of
options to directors of Bancorp, the Bank, or their affiliates.
DESCRIPTION OF THE OPTION PLAN
ADMINISTRATION. The Option Plan is administered by a committee (the
"Committee") of at least three directors appointed by the Board of Directors.
The Committee has the authority to select participants and to grant Options, to
determine the form and content of Options granted under the Option Plan, and
otherwise to administer and interpret the Option Plan. Decisions of the
Committee are final and conclusive. Members of the Committee will be
indemnified to the full extent permissible under Bancorp's Articles of
Incorporation and Bylaws in connection with any claims or other actions relating
to any action taken under the Option Plan. At the date of this Proxy Statement,
the Committee consists of all outside directors, that is, all directors other
than Mr. Hollar.
14
<PAGE>
ELIGIBLE PERSONS; TYPES OF OPTIONS. The Committee may grant stock options
("Options") under the Option Plan to directors and key employees designated by
the Committee. Bancorp and its subsidiaries have not yet designated the
employees who are eligible to participate in the Option Plan but estimates that
there will be fewer than twenty such employees. All of Bancorp's seven executive
officers and all twelve outside directors will be eligible to participate in the
Option Plan. The Committee has not determined the number, exercise price, or
other terms of Options that will be granted under the Option Plan.
Options may be either incentive stock options ("ISOs") as defined in
Section 422 of the Internal Revenue Code (the "Code"), or options that are not
ISOs ("Non-ISOs"). Directors who are not employees are not eligible to receive
ISOs.
FINANCIAL EFFECTS OF OPTIONS. Bancorp will receive no monetary
consideration for the granting of Options under the Option Plan. It will receive
no monetary consideration other than the option price for shares of Common Stock
issued to optionees upon the exercise of their Options. Under current accounting
standards, recognition of compensation expense is not required when stock
options are granted at the fair market value of the common stock on the date the
option is granted. Stock options are considered, however, in the calculation of
diluted earnings per share of Bancorp.
SHARES AVAILABLE FOR GRANTS. The Option Plan reserves 400,000 authorized
but unissued shares of Common Stock for issuance upon the exercise of Options.
In the event of any merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, split-up, combination of shares or similar
event in which the number or kind of shares is changed without receipt or
payment of consideration by Bancorp, the Committee will adjust both the number
and kind of shares of stock as to which Options may be Optioned under the Option
Plan, the affected terms of all outstanding Options, and the aggregate number of
shares of Common Stock remaining available for grant under the Option Plan. If
Options expire, become unexercisable, or are forfeited for any reason without
having been exercised, the shares of Common Stock subject to such Options will
be available for the grant of additional Options under the Option Plan, unless
the Option Plan has been terminated.
DURATION OF THE OPTION PLAN AND GRANTS. The Option Plan has a term of 10
years from February 24, 1999, its effective date, after which date no Options
may be granted under the Option Plan. The maximum term for an Option is 10
years from the date of grant, except that the maximum term of an ISO may not
exceed five years if the optionee owns more than 10% of the Common Stock on the
date of grant. The expiration of the Option Plan, or a termination of the
Option Plan by the Committee, will not affect any Option then outstanding.
OPTIONS. The exercise price of Options may not be less than 100% of the
fair market value of the Common Stock on the date of grant. In the case of an
optionee who owns more than 10% of the outstanding Common Stock on the date of
grant, the option price may not be less than 110% of fair market value of the
shares. As required by federal tax laws, to the extent that the aggregate fair
market value (determined when an ISO is granted) of the Common Stock with
respect to which ISOs are exercisable by an optionee for the first time during
any calendar year (under all Option Plans of Bancorp and of any subsidiary)
exceeds $100,000, the Options will be treated as Non-ISOs, and not as ISOs. In
the event that the fair market value per share of the Common Stock falls below
the exercise price of previously granted Options, the Committee will have the
authority, with the consent of the optionee, to cancel outstanding Options and
to issue new Options with an exercise price equal to the then current fair
market price per share of the Common Stock.
EXERCISE OF OPTIONS. The exercise of Options will be subject to terms and
conditions established by the Committee in written agreements between the
Committee and the optionees. An ISO will cease to be exercisable upon (i) an
employee's termination of employment for "just cause" (as defined in the Option
Plan), (ii) the date three months after an employee terminates service for a
reason other than just cause, death, or disability, or (iii) the date one year
after an employee terminates service due to disability, or two years after
termination of such service due to his death. Unless the written agreement
provides otherwise, an unexpired Non-ISO will cease to be exercisable upon (i)
an employee's termination of employment for "just cause" (as defined in the
Option Plan) or removal from the Board or the Bank's Board, (ii) the date three
months after an employee terminates service for a reason other than just cause,
death, or disability, or (iii) the date one year after an employee terminates
service due to disability, or two years after termination of such service due to
his death. All unexpired Options become immediately exercisable upon the
optionee's death or permanent and total
15
<PAGE>
disability. In no event, however, will any Option be exercisable after its
expiration date. Options may not be exercised for fractional shares of Common
Stock or prior to the optionee's satisfaction of any income tax withholding
requirements.
A participant may exercise Options only by written notice of intent to
exercise the Option with respect to a specified number of shares of Common
Stock, and payment to Bancorp in cash, in Common Stock, or a combination of
cash and Common Stock, of the amount of the exercise price for the number of
shares for which the Option is being exercised. Common Stock used to pay the
exercise price for Options will be valued at its market value at the date of
exercise.
CHANGE IN CONTROL. All Options become immediately exercisable and fully
vested upon a change in control or receipt of an offer to effect a change in
control. At that time, the Committee may grant the optionee the right to receive
a cash payment in an amount equal to the excess of the market value of the
shares subject to such Option over the exercise price of the Option, except that
in no event may an Option be exchanged for cash within the six-month period
following the date of its grant. If there is a liquidation or dissolution of
Bancorp, (ii) a merger or consolidation in which Bancorp is not the surviving
entity; or (iii) the sale or disposition of all or substantially all of
Bancorp's assets, then the all outstanding Options must be surrendered in return
for options for shares of the acquiring company, shares of the acquiring company
with a market value equal to the excess of the market value of the shares
subject to option on the date of the transaction over the exercise price of the
option, or cash equal to the excess of the market value of the shares subject to
option on the date of the transaction over the exercise price of the option, as
determined by the Committee.
A change in control under the Option Plan means any one of the following
events: (1) the acquisition of ownership or control of 25% or more of any class
of voting securities of Bancorp or the Bank; (2) the exercise of a controlling
influence over the management or policies of the Bank or Bancorp by any person
or by persons acting as a group within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, or (3) the failure of Continuing Directors to
constitute at least two-thirds of the Board of Directors of Bancorp or the Bank
during any period of two consecutive years. A change in control does not include
acquisition of ownership or control of voting securities of Bancorp by an
employee benefit Option Plan sponsored by Bancorp or the Bank; acquisition of
voting securities by Bancorp through share repurchase or otherwise; or
acquisition by an exchange of voting securities with a successor to Bancorp in a
reorganization, such as a re-incorporation, that does not have the purpose or
effect of significantly changing voting power or control. Continuing directors
are those individuals who were directors at the Effective Date of the Option
Plan and those other individuals whose election or nomination for election as a
director was approved by a vote of at least two-thirds of the continuing
directors then in office. An offer to effect a change in control means any offer
to buy or acquire, solicitation of an offer to sell, tender offer for, or
request of invitation for tenders of, 25% or more of any class of voting
securities of Bancorp for value. The decision of the Committee as to whether a
change in control has occurred or an offer to effect a change in control has
been received is conclusive and binding.
Although these provisions are included in the Option Plan primarily for the
protection of an employee-optionee in the event of a change in control of
Bancorp, they may also be regarded as having a takeover defensive effect, which
may reduce Bancorp's vulnerability to hostile takeover attempts and certain
other transactions which have not been negotiated with and approved by the Board
of Directors.
NONTRANSFERABILITY. ISOs may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent and distribution, or pursuant to the terms of a qualified domestic
relations order. Non-ISO's may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent and distribution, pursuant to the terms of a qualified domestic
relations order, or, in the sole discretion of the Committee, in connection with
a transfer for estate or retirement planning purposes to a trust established for
such purposes.
CONDITIONS ON ISSUANCE OR SALE OF SHARES. The Committee has the authority
to impose restrictions on shares issued under the Option Plan that it deems
appropriate or desirable, including the authority to impose a right of first
refusal
16
<PAGE>
or to establish repurchase rights or both of these restrictions. The Committee
may not issue shares unless the issuance complies with applicable securities
laws, and to that end may require that an optionee or grantee make certain
representations or warranties. In addition, no shares that have been acquired
upon exercise of an Option may be sold or otherwise disposed of (except by gift
or upon death) before the end of a six-month period that begins on the date the
Option was granted.
AMENDMENT AND TERMINATION OF THE OPTION PLAN. The Board of Directors may
from time to time amend the terms of the Option Plan and, with respect to any
shares at the time not subject to Options, suspend or terminate the Option Plan.
Shareholder approval is required for an amendment that would increase the number
of shares subject to the Option Plan or that would extend the term of the Option
Plan. No amendment, suspension or termination of the Option Plan will, without
the consent of any affected holders of an Option, alter or impair any rights or
obligations under the Option.
FEDERAL INCOME TAX CONSEQUENCES
ISOS. An employee recognizes no taxable income upon the grant of ISOs. If
the optionee holds the option shares for at least two years from the date the
ISO is granted and one year from the date the ISO is exercised, any gain
realized on the sale of the shares received upon exercise of such ISO is taxed
as long-term capital gain. However, the difference between the fair market
value of the stock at the date of exercise and the exercise price of the ISO
will be treated as an item of tax preference in the year of exercise for
purposes of the alternative minimum tax. If the employee disposes of the shares
before the expiration of either of the special holding periods, the disposition
is a "disqualifying disposition." In this event, the employee will be required,
at the time of the disposition of the stock, to treat the lesser of the gain
realized or the difference between the exercise price and the fair market value
of the stock at the date of exercise as ordinary income and the excess, if any,
as capital gain.
Bancorp will not be entitled to any deduction for federal income tax
purposes as the result of the grant or exercise of an ISO, regardless of whether
or not the exercise of the ISO results in liability under the alternative
minimum tax. However, if the employee has ordinary income taxable as
compensation as a result of a disqualifying disposition, Bancorp will be
entitled to deduct an equivalent amount.
NON-ISOS. In the case of a Non-ISO, an optionee will recognize ordinary
income upon the exercise of the Non-ISO in an amount equal to the difference
between the fair market value of the shares on the date of exercise and the
option price (or, if the optionee is subject to certain restrictions imposed by
the federal securities laws, upon the lapse of those restrictions unless the
optionee makes a special tax election within 30 days after the date of exercise
to have the general rule apply). Upon a subsequent disposition of such shares,
any amount received by the optionee in excess of the fair market value of the
shares as of the exercise will be taxed as capital gain. Bancorp will be
entitled to a deduction for federal income tax purposes at the same time and in
the same amount as the ordinary income recognized by the optionee in connection
with the exercise of a Non-ISO.
As of the date of the Annual Meeting, no Options have been granted to any
person under the Option Plan and the amounts to be received by Mr. Hollar, all
current executive officers as a group, all directors as a group, and all
employees, including all current officers who are not executive officers, as a
group cannot be determined at this time.
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the Option Plan is desirable,
cost effective, and produces incentives that will benefit Bancorp and its
stockholders. The Board of Directors is seeking stockholder approval of the
Option Plan in order to satisfy the requirements of the Code for favorable tax
treatment of incentive stock options, to exempt certain option transactions from
the short-swing trading rules of the Securities and Exchange Commission, and to
satisfy the rules of the National Association of Securities Dealers, Inc. for
continued listing of the Common Stock on the Nasdaq National Market.
Approval of the Option Plan requires the favorable vote of a majority of
the votes represented at the Annual
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Meeting (assuming a quorum of a majority of the outstanding shares of Common
Stock is present). THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
THE OPTION PLAN.
SHAREHOLDER PROPOSALS
From time to time, individual shareholders may wish to submit proposals
that they believe should be voted upon by the shareholders. The Securities and
Exchange Commission has adopted regulations that govern the inclusion of such
proposals in Bancorp's annual proxy materials. Shareholder proposals intended to
be presented at the 1999 Annual Meeting of Shareholders may be eligible for
inclusion in Bancorp's proxy materials for that Annual Meeting if they received
by Bancorp at its executive offices not later than November 20, 1999.
In addition, Bancorp's Bylaws require that to be properly brought before an
annual meeting, shareholder proposals for new business must be delivered to or
mailed and received by Bancorp not less than thirty nor more than ninety days
prior to the date of the meeting; provided, however, that if less than forty-
five days notice of the date of the meeting is given to shareholders, such
notice by a shareholder must be received not later than the fifteenth day
following the date on which notice of the date of the meeting was mailed to
shareholders or two days before the date of the meeting, whichever is earlier.
Each such notice given by a shareholder must set forth certain information
specified in the Bylaws concerning the shareholder and the business proposed to
be brought before the meeting.
Shareholders also may nominate candidates for director, provided that such
nominations are made in writing and received by Bancorp at its executive offices
not later than December 20, 1999. The nomination should be sent to the attention
of Bancorp's Corporate Secretary and must include, concerning the director
nominee, the following information: full name, age, date of birth, educational
background and business experience, including positions held for at least the
preceding five years, home and office addresses and telephone numbers, and a
signed representation to timely provide all information requested by Bancorp for
preparation of its disclosures regarding the solicitation of proxies for
election of directors. The name of each such candidate for director must be
placed in nomination at the Annual Meeting by a shareholder present in person.
The nominee must also be present in person at the Annual Meeting. A vote for a
person who has not been duly nominated pursuant to these requirements will be
deemed to be void.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Bancorp's
executive officers and directors, and persons who own more than ten percent of a
registered class of Bancorp's equity securities, to file reports of ownership
and changes in ownership on Forms 3, 4, and 5 with the Securities and Exchange
Commission. Executive officers, directors and greater than ten percent
stockholders are required by applicable regulations to furnish Bancorp with
copies of all Forms 3, 4, and 5 they file.
Based solely on Bancorp's review of the copies of such forms it has
received and written representations from certain reporting persons, Bancorp
believes that all its executive officers and directors complied with all filing
requirements applicable to them with respect to transactions during 1998.
INDEPENDENT AUDITORS
The Board of Directors anticipates the selection of Stegman & Company,
certified public accountants, to audit the books and accounts of Bancorp for the
year ending December 31, 1999. Stegman & Company has served as independent
auditors for Bancorp and its subsidiary and predecessor, Sandy Spring National
Bank of Maryland, without interruption for many years. Stegman & Company has
advised Bancorp that neither the accounting firm nor any of its members or
associates has any direct financial interest in or any connection with Bancorp
and its subsidiaries other than as independent public auditors. A
representative of Stegman & Company will be present at the Annual Meeting, will
have the opportunity to make a statement, and will also be available to respond
to appropriate questions.
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ACTION WITH RESPECT TO REPORTS
Action taken at the Annual Meeting to approve the minutes of the 1998
Annual Meeting of Shareholders does not constitute approval or disapproval of
any of the matters referred to in those minutes.
By order of the Board of Directors
/s/ MARJORIE S. HOLSINGER
Marjorie S. Holsinger
Corporate Secretary
Dated: March 15, 1999
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EXHIBIT A
SANDY SPRING BANCORP
1999 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Sandy Spring Bancorp 1999 Stock Option Plan (the
"Plan") is to advance the interests of Sandy Spring Bancorp, Inc. ("Bancorp") by
providing directors and selected key employees of the Bank, Bancorp, and their
affiliates with the opportunity to acquire shares of Bancorp's common stock. By
encouraging stock ownership, Bancorp seeks to attract, retain and motivate the
best available personnel for positions of substantial responsibility; to provide
additional incentive to directors and key employees of Bancorp, the Bank and
their affiliates to promote the success of the business as measured by the value
of its shares; and generally to increase the commonality of interests among
directors, key employees, and other shareholders.
The Plan is intended to replace the Sandy Spring Bancorp 1992 Stock Option
Plan (the "1992 Plan") upon this Plan's approval by shareholders of Bancorp.
Options issued under the 1992 Plan will continue in effect and will be subject
to the requirements of the 1992 Plan, but no new options will be granted under
the 1992 plan after this Plan is approved by shareholders.
The Plan is not intended as an agreement or promise of employment. Neither
the Plan, nor any Option granted pursuant to the Plan, confers on any person any
right to continue in the employ of Bancorp. The right of Bancorp, the Bank, or
any of their affiliates to terminate the employment of an Employee is not
limited by the Plan or by any Option granted pursuant to the Plan unless such
right is specifically described by the terms of any such Option.
2. DEFINITIONS.
(a) "Affiliate" means any "parent corporation" or "subsidiary
corporation" of Bancorp as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
(b) "Agreement" means a written agreement entered into in accordance with
Paragraph 5(c).
(c) "Bank" means the Sandy Spring National Bank of Maryland.
(d) "Board" means the Board of Directors of Bancorp.
(e) "Change in Control" means any one of the following events occurring
after the Effective Date: (1) the acquisition of ownership of, power to
vote, or control of 25% or more of any class of voting securities of
Bancorp or the Bank; (2) the exercise of a controlling influence over the
management or policies of the Bank or Bancorp by any person or by persons
acting as a "group" (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934), or (3) the failure of Continuing Directors to
constitute at least two-thirds of the Board of Directors of Bancorp or the
Bank (the "Company Board") during any period of two consecutive years. A
"change in control" does not include acquisition of ownership of, control
of or power to vote voting securities of Bancorp by an employee benefit
plan sponsored by Bancorp or the Bank; acquisition of voting securities by
Bancorp through share repurchase or otherwise; or acquisition by an
exchange of voting securities with a successor to Bancorp in a
reorganization, such as a re-incorporation, that does not have the purpose
or effect of significantly changing voting power or control. For purposes
of this definition, only, "Continuing Directors" includes only those
individuals who were members of Bancorp Board at the Effective Date and
those other individuals whose election or nomination for election as a
member of Bancorp Board was approved by a vote of at least two-thirds of
the Continuing Directors then in office, and "person" refers to an
individual or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization
or any other form of entity. The decision of the Committee as to whether a
Change in Control has occurred shall be conclusive and binding.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
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(g) "Committee" means the Stock Option Committee appointed by the Board in
accordance with Paragraph 5(a) hereof.
(h) "Common Stock" means the common stock, par value $1.00 per share, of
Bancorp.
(i) "Company" means Sandy Spring Bancorp, Inc., a Maryland corporation.
(J) "Continuous Service" means the absence of any interruption or
termination of employment by Bancorp or any present or future Affiliate.
Employment shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by Bancorp or in the
case of transfers between locations of Bancorp or among Bancorp, the Bank,
or any other Affiliate.
(k) "Director" means any member of the Board of Directors of Bancorp.
(l) "Effective Date" means the date specified in Paragraph 14 hereof.
(m) "Employee" means any person employed by Bancorp or by the Bank or any
other present or future Affiliate.
(n) "Exercise Price" means the price per Optioned Share at which an Option
may be exercised.
(o) "ISO" means an option to purchase Common Stock that meets the
requirements set forth in the Plan, and which is intended to be and is
identified as an "incentive stock option" within the meaning of Section 422
of the Code.
(p) "Market Value" means the fair market value of the Common Stock, as
determined under Paragraph 7(b) hereof.
(q) "Non-Employee Director" means any member of the Board who, at the time
discretion under the Plan is exercised, is a "Non-Employee Director" within
the meaning of Rule 16b-3.
(r) "Non-ISO" means an option to purchase Common Stock that meets the
requirements set forth in the Plan but which is not intended to be, and is
not identified as, an ISO.
(s) "Offer to Effect a Change in Control" means any offer to buy or
acquire, solicitation of an offer to sell, tender offer for, or request of
invitation for tenders of, 25% or more of any class of voting securities of
Bancorp for value. The decision of the Committee as to whether an Offer to
Effect a Change in Control has been made shall be conclusive and binding.
(t) "Option" means an option to purchase Shares, granted by the Committee
pursuant to this Plan, whether the option is an ISO or a Non-ISO.
(u) "Optioned Shares" means Shares subject to an Option granted pursuant
to this Plan.
(v) "Optionee" means any person who receives an Option pursuant to this
Plan.
(w) "Outstanding Shares" means the total shares of Common Stock which have
been issued and which (a) are not held as treasury shares, and (b) have not
been cancelled or retired by Bancorp.
(x) "Parent" shall mean any present or future corporation that would be a
"parent corporation" as defined in Subsections 424(e) and (g) of the Code.
(y) "Plan" means the Sandy Spring Bancorp 1999 Stock Option Plan.
(z) "Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended (the "Act").
(aa) "Share" shall mean a share of Common Stock.
(bb) "Subsidiary" shall mean any present or future corporation which would
be a "subsidiary corporation" as defined in Subsections 424(f) and (g) of
the Code.
(cc) "Transaction" means (i) the liquidation or dissolution of Bancorp,
(ii) a merger or consolidation in which Bancorp is not the surviving
entity; or (iii) the sale or disposition of all or substantially all of
Bancorp's assets.
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3. TERM OF THE PLAN AND OPTIONS.
(a) Term of the Plan. The Plan shall continue in effect for a term of ten
years from the Effective Date unless sooner terminated pursuant to Paragraph 17.
No Option may be granted under the Plan after ten years from the Effective Date.
(b) Term of Options. The Committee shall establish the term of each
Option granted under the Plan. No Option may have a term that exceeds 10 years.
No ISO granted to an Employee who owns Shares representing more than 10% of the
outstanding shares of Common Stock at the time an ISO is granted may have a term
that exceeds five years.
4. SHARES SUBJECT TO THE PLAN.
(a) Except as otherwise required by Paragraph 11, the aggregate number of
Shares deliverable upon the exercise of Options pursuant to the Plan shall not
exceed 400,000 Shares. Such Shares may either be authorized but unissued Shares
or Shares held in treasury to the extent allowed by Maryland law.
(b) If Options should expire, become unexercisable, or be forfeited for
any reason without having been exercised in full, the Optioned Shares shall,
unless the Plan shall have been terminated, be available for the grant of
additional Options under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Composition of Committee. The Plan shall be administered by the
Committee, which shall consist of not less than three (3) Directors appointed by
the Board. Members of the Committee may be Employee Directors or Non-Employee
Directors, and shall serve at the pleasure of the Board. In the absence at any
time of a duly appointed Committee, the Plan shall be administered by the Board.
(b) Powers of the Committee. Except as limited by the express provisions
of the Plan or by resolutions adopted by the Board, the Committee shall have
sole and complete authority and discretion (i) to select Optionees and grant
Options, (ii) to determine the form and content of Options to be issued in the
form of Agreements under the Plan, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan, and (v)
to make other determinations necessary or advisable for the administration of
the Plan. The Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. A majority
of the entire Committee shall constitute a quorum and the action of a majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the Committee without a meeting, shall be
deemed the action of the Committee.
(c) Agreement. Each Option shall be evidenced by a written agreement
containing such provisions as may be approved by the Committee. Each such
Agreement shall constitute a binding contract between Bancorp and the Optionee,
and every Optionee, upon acceptance of such Agreement, shall be bound by the
terms and restrictions of the Plan and of such Agreement. The terms of each
such Agreement shall be in accordance with the Plan, but each Agreement may
include such additional provisions and restrictions determined by the Committee,
in its discretion, provided that such additional provisions and restrictions are
not inconsistent with the terms of the Plan. In particular, the Committee shall
set forth in each Agreement (i) the Exercise Price of an Option, (ii) the number
of Shares subject to, and the expiration date of, the Option, (iii) the manner,
time and rate (cumulative or otherwise) of exercise or vesting of such Option,
and (iv) the restrictions, if any, to be placed upon such Option, or upon Shares
which may be issued upon exercise of such Option. The Chairman of the Committee
and such other officers as shall be designated by the Committee are hereby
authorized to execute Agreements on behalf of Bancorp and to cause them to be
delivered to the recipients of Options.
(d) Effect of the Committee's Decisions. All decisions, determinations,
and interpretations of the Committee shall be final and conclusive on all
persons affected thereby.
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(e) Indemnification. In addition to such other rights of indemnification
as they may have, the members of the Committee shall be indemnified by Bancorp
in connection with any claim, action, suit or proceeding relating to any action
taken or failure to act under or in connection with the Plan or any Option,
granted hereunder to the full extent provided for under Bancorp's Articles of
Incorporation or Bylaws with respect to the indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. The Committee, in its sole discretion, may grant ISO's
or Non-ISOs to Employees of Bancorp or its Affiliates and may grant Non-ISOs to
Directors or directors of Affiliates.
(b) Special Rules for ISOs. The aggregate Market Value, as of the date
the Option is granted, of the Shares with respect to which ISOs are exercisable
for the first time by an Employee during any calendar year (under all incentive
stock option plans, as defined in Section 422 of the Code, of Bancorp or any
present or future "parent" or "Subsidiary" of Bancorp) shall not exceed
$100,000. Notwithstanding the prior provisions of this paragraph, the Committee
may grant Options in excess of the foregoing limitations, in which case such
Options granted in excess of such limitation shall be Options which are Non-
ISOs.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price as to any
particular Option granted under the Plan shall not be less than the Market Value
of the Optioned Shares on the date of grant. In the case of an Employee who owns
Shares representing more than 10% of Bancorp's Outstanding Shares of Common
Stock at the time an ISO is granted, the Exercise Price shall not be less than
110% of the Market Value of the Optioned Shares at the time the ISO is granted.
(b) Standards for Determining Exercise Price. If the Common Stock is
listed on a national securities exchange (including the NASDAQ National Market)
on the date in question, then the Market Value per Share shall be not less than
the average of the highest and lowest selling price on such exchange on such
date, or if there were no sales on such date, then the Exercise Price shall be
not less than the mean between the bid and asked prices on such date. If the
Common Stock is traded otherwise than on a national securities exchange on the
date in question, then the Market Value per Share shall be not less than the
mean between the bid and asked price on such date, or, if there is no bid and
asked price on such date, then on the next prior business day on which there was
a bid and asked price. If no such bid and asked price is available, then the
Market Value per Share shall be its fair market value as determined by the
Committee, in its sole and absolute discretion.
(c) Reissuance of Options. Notwithstanding anything herein to the
contrary, the Committee shall have the authority to cancel outstanding Options
with the consent of the Optionee and to grant new Options at a lower Option
Price equal to the then fair market value per share of Common Stock in the event
that the fair market value per share of Common Stock at any time prior to the
date of exercise of outstanding Options falls below the Option Price of such
Options.
8. EXERCISE OF OPTIONS.
(a) Generally. Any Option shall be exercisable at such times and under
such conditions as shall be permissible under the terms of the Plan and of the
Agreement. An Option may not be exercised for a fractional Share.
(b) Procedure for Exercise. An Optionee may exercise Options, subject to
provisions relative to its termination and limitations on its exercise, only by
(1) written notice of intent to exercise the Option with respect to a specified
number of Shares, and (2) payment to Bancorp (contemporaneously with delivery of
such notice) in cash, in Common Stock, or a combination of cash and Common
Stock, of the amount of the Exercise Price for the number of Shares with respect
to which the Option is then being exercised. Each such notice (and payment
where required) shall be delivered, or mailed by prepaid registered or certified
mail, addressed to the Treasurer of Bancorp at Bancorp's executive offices.
Common Stock utilized in full or partial payment of the Exercise Price for
Options shall be valued at its Market Value at the date of exercise.
(c) Notwithstanding the provisions of any Option that provides for its
exercise in installments as
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designated by the Committee, such Option shall become immediately exercisable
upon the Optionee's death or Permanent and Total Disability.
(d) Period of Exercisability-ISOs. An ISO may be exercised by an Optionee
only while the Optionee is an Employee and has maintained Continuous Service
from the date of the grant of the ISO, or within three months after termination
of such Continuous Service (but not later than the date on which the Option
would otherwise expire), except if the Employee's Continuous Service terminates
by reason of -
(1) "Just Cause" which for purposes hereof shall have the meaning set
forth in any unexpired employment or severance agreement between the
Optionee and Bancorp or any Affiliate (and, in the absence of any such
agreement, means termination because of the Employee's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease-and-desist
order), then the Optionee's rights to exercise such ISO shall expire
on the date of such termination;
(2) Death, then an ISO of the deceased Optionee may be exercised
within two years from the date of his death (but not later than the
date on which the Option would otherwise expire) by the personal
representatives of his estate or person or persons to whom his rights
under such ISO shall have passed by will or by laws of descent and
distribution;
(3) Permanent and Total Disability (as such term is defined in
Section 22(e)(3) of the Code), then an ISO may be exercised within one
year from the date of such Permanent and Total Disability, but not
later than the date on which the ISO would otherwise expire.
(e) Period of Exercisability-Non-ISOs. Except to the extent otherwise
provided in the terms of an Agreement, a Non-ISO may be exercised by an Optionee
only while such Optionee is an Employee, a Director, or a director of an
Affiliate, or within three months after termination of such service (but not
later than the date on with the Option would otherwise expire), except if the
Optionee's service terminates by reason of -
(1) "Just Cause" which for purposes hereof shall have the meaning set
forth in any unexpired employment or severance agreement between the
Optionee and Bancorp or any Affiliate (and, in the absence of any such
agreement, means termination because of the Optionee's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease-and-desist
order), then the Optionee's rights to exercise such Non-ISO shall
expire on the date of such termination; or
(2) Removal from the Board or the Bank Board pursuant to the
respective Articles of Incorporation, then the Optionee's rights to
exercise such Non-ISO shall expire on the date of such removal.
(3) Death, then a Non-ISO of the deceased Optionee may be exercised
within two years from the date of his death (but not later than the
date on which the Option would otherwise expire) by the personal
representatives of his estate or person or persons to whom his rights
under such Non-ISO shall have passed by will or by laws of descent and
distribution or otherwise shall have transferred pursuant to this
Plan;
(4) Permanent and Total Disability (as such term is defined in
Section 22(e)(3) of the Code), then a Non-ISO may be exercised within
one year from the date of such Permanent and Total Disability, but not
later than the date on which the ISO would otherwise expire.
(f) Effect of the Committee's Decisions. The Committee's determination
whether an Optionee's Continuous Service or service as a Director or director of
an Affiliate has ceased, and the effective date thereof shall be final and
conclusive on all persons affected thereby.
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9. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common Stock shall not be
issued with respect to any Option unless the issuance and delivery of such
Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and the
requirements of any stock exchange upon which the Shares may then be listed.
The Plan is intended to comply with Rule 16b-3, and any provision of the Plan
than the Committee determines in its sole and absolute discretion to be
inconsistent with said Rule shall, to the extent of such inconsistency, be
inoperative and null and void, and shall not affect the validity of the
remaining provisions of the Plan.
(b) Special Circumstances. The inability of Bancorp to obtain approval
from any regulatory body or authority deemed by Bancorp's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder shall relieve
Bancorp of any liability with respect to the non-issuance or sale of such
Shares. As a condition to the exercise of an Option, Bancorp may require the
person exercising the Option to make such representations and warranties as the
Committee determines may be necessary to assure the availability of an exemption
from the registration requirements of federal or state securities law.
(c) Committee Discretion. The Committee shall have the discretionary
authority to impose in Agreements such restrictions on Shares as it may deem
appropriate or desirable, including but not limited to the authority to impose a
right of first refusal or to establish repurchase rights or both of these
restrictions.
10. RESTRICTIONS ON SALE OF SHARES
(a) Six-Month Restriction. Shares of Common Stock that have been acquired
upon exercise of an Option may not be sold or otherwise disposed of before the
end of a six-month period beginning on the date the Option was granted. This
restriction is in addition to any other restriction imposed by this Plan or by
the Committee pursuant to this Plan.
(b) Exceptions. The six-month restriction imposed by subparagraph (a)
shall not apply to dispositions by bona fide gifts or to transfers by will or
the laws of descent or distribution.
11. EFFECT OF CHANGES IN CONTROL AND CHANGES IN COMMON STOCK SUBJECT TO THE
PLAN.
(a) Effects of Change in Control.
(1) Notwithstanding the provisions of any Option that provides for
its exercise or vesting in installments, all Options shall be
immediately exercisable and fully vested upon a Change in Control or
the receipt of an Offer to Effect a Change in Control.
(2) At the time of a Change in Control or receipt of an Offer to
Effect a Change in Control, the Optionee shall, at the sole and
absolute discretion of the Committee, be entitled to receive a cash
payment in an amount equal to the excess of the Market Value of the
Shares subject to such Option over the Exercise Price of such Option,
provided that in no event may an Option be cancelled in exchange for
cash within the six-month period following the date of its grant. For
purposes of calculating this payment, the Market Value shall be the
Market Value at the date of the Change in Control or the highest
Market Value in the five trading days after public announcement of an
Offer to Effect a Change in Control, as determined by the Committee.
(3) In the event there is a Transaction, all outstanding Options
shall be surrendered. With respect to each Option so surrendered, the
Committee shall in its sole and absolute discretion determine whether
the holder of each Option so surrendered shall receive--
(A) For each Share then subject to an outstanding Option, an
Option for the number and kind of shares into which each
Outstanding Share (other than Shares held by dissenting
shareholders) is changed or exchanged, together with an
appropriate adjustment to the Exercise Price; or
(B) The number and kind of shares into which each Outstanding
Share (other than Shares held by dissenting shareholders) is
changed or exchanged in the Transaction that are equal in market
value to the excess of the Market Value on the date of the
Transaction of
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the Shares subject to the Option, over the Exercise Price of the
Option; or
(C) A cash payment (from Bancorp or the successor corporation),
in an amount equal to the excess of the Market Value on the date
of the Transaction of the Shares subject to the Option, over the
Exercise Price of the Option.
(4) The decision of the Committee as to whether a Change in Control
has occurred, or an Offer to Effect a Change in Control has been made
shall be conclusive and binding.
(b) Recapitalizations, Stock Splits, Etc. The number and kind of shares
reserved for issuance under the Plan, and the number and kind of shares subject
to outstanding Options and the Exercise Price thereof, shall be proportionately
adjusted for any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of Bancorp which results
from a merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, split-up, combination of shares, or similar
event in which the number or kind of shares is changed without the receipt or
payment of consideration by Bancorp.
(c) Special Rule for ISOs. Any adjustment made pursuant to subparagraphs
(a)(3)(A) or (b) of this Paragraph shall be made in such a manner as not to
constitute a modification, within the meaning of Section 424(h) of the Code, of
outstanding ISOs.
(d) Conditions and Restrictions on New, Additional, or Different Shares or
Securities. If, by reason of any adjustment made pursuant to this Paragraph, an
Optionee becomes entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and restrictions which were
applicable to the Shares pursuant to the Option before the adjustment was made.
(e) Other Issuances. Except as expressly provided in this Paragraph, the
issuance by Bancorp or an Affiliate of shares of stock of any class, or of
securities convertible into Shares or stock of another class, for cash or
property or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect, and no adjustment
shall be made with respect to, the number, class, or Exercise Price of Shares
then subject to Options or reserved for issuance under the Plan.
12. NON-TRANSFERABILITY OF OPTIONS.
(a) ISOs may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution, or pursuant to the terms of a "qualified domestic relations order"
(within the meaning of Section 414(p) of the Code and the regulations and
rulings thereunder).
(b) Non-ISO's may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent and distribution, pursuant to the terms of a "qualified domestic
relations order" (within the meaning of Section 414(p) of the Code and the
regulations and rulings thereunder), or, in the sole discretion of the
Committee, in connection with a transfer for estate or retirement planning
purposes to a trust established for such purposes.
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the later of the date on which the Committee makes the
determination of granting such Option and the Effective Date. Notice of the
determination shall be given to each Optionee to whom an Option is so granted
within a reasonable time after the date of such grant.
14. EFFECTIVE DATE. The Plan shall be effective as of ,
1999. Option grants may be made before approval of the Plan by the shareholders
of Bancorp, if the exercise of Options is conditioned upon shareholder approval
of the Plan.
15. APPROVAL BY SHAREHOLDERS. The Plan shall be approved by shareholders of
Bancorp within twelve (12) months before or after the Effective Date.
16. MODIFICATION OF OPTIONS. At any time, and from time to time, the Board may
authorize the Committee to direct execution of an instrument providing for the
modification of any outstanding Option, provided no such modification shall
confer on the holder of said Option any right or benefit which could not be
conferred on the Optionee by the grant of a new Option at such time, or impair
the Option without the consent of the holder of the Option.
A-7
<PAGE>
17. AMENDMENT AND TERMINATION OF THE PLAN. The Board may from time to time
amend the terms of the Plan and, with respect to any Shares at the time not
subject to Options, suspend or terminate the Plan; provided that shareholder
approval shall be required to increase the number of Shares subject to the Plan
provided in Paragraph 4 or to extend the term of the Plan. No amendment,
suspension, or termination of the Plan shall, without the consent of any
affected holders of an Option, alter or impair any rights or obligations under
any Option theretofore granted.
18. RESERVATION OF SHARES. During the term of the Plan, Bancorp will reserve
and keep available a number of Shares sufficient to satisfy the requirements of
the Plan.
19. WITHHOLDING TAX. Bancorp's obligation to deliver Shares upon exercise of
Options (or such earlier time that the Optionee makes an election under Section
83(b) of the Code) shall be subject to the Optionee's satisfaction of all
applicable federal, state, and local income and employment tax withholding
obligations. The Committee, in its discretion, may permit the Optionee to
satisfy the obligation, in whole or in part, by irrevocably electing to have
Bancorp withhold Shares, or to deliver to Bancorp Shares that the Optionee
already owns, having a value equal to the amount required to be withheld. The
value of Shares to be withheld, or delivered to Bancorp, shall be based on the
Market Value of the Shares on the date the amount of tax to be withheld is to be
determined. As an alternative, Bancorp may retain, or sell without notice, a
number of such Shares sufficient to cover the amount required to be withheld.
20. NO EMPLOYMENT OR OTHER RIGHTS. In no event shall eligibility to be granted
an Option or the grant of an Option create or be deemed to create any legal or
equitable right of a Director, Employee, director of any Affiliate, or any other
party to continue service with Bancorp, the Bank, or any other Affiliate. No
person shall have a right to be granted an Option or, having received an Option,
the right to be granted an additional Option.
21. GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the laws of the State of Maryland, except to the extent that federal law
shall be deemed to apply.
22. SUCCESSORS AND ASSIGNS. The Plan shall be binding upon Bancorp's
successors and assigns.
* * * *
A-8
<PAGE>
REVOCABLE PROXY
SANDY SPRING BANCORP, INC.
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ANNUAL MEETING OF SHAREHOLDERS
APRIL 14, 1999
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The undersigned hereby constitutes and appoints Susan D. Goff and Gilbert
L. Hardesty and each of them the proxies of the undersigned, with full power of
substitution, to attend the annual meeting of shareholders (the "Annual
Meeting") of Sandy Spring Bancorp, Inc. ("Bancorp") to be held at the Indian
Spring Country Club, 13501 Layhill Road, Silver Spring, Maryland on Wednesday,
April 14, 1999 at 3:00 p.m. Eastern Time, or at any adjournment thereof, and to
vote all the shares of stock of Bancorp which the undersigned may be entitled to
vote, upon the following matters:
FOR WITHHOLD
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1. The election as directors of all nominees
listed below (except as marked to the
contrary below). ____ ____
John Chirtea
Joyce R. Hawkins
Hunter R. Hollar
Thomas O. Keech
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
PRINT THE NOMINEE'S NAME ON THE LINE BELOW.
___________________________
2. To approve the Sandy Spring Bancorp 1999 FOR AGAINST ABSTAIN
Stock Option Plan
___ _______ _______
3. The transaction of such other business as may properly come before the
Annual Meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL DIRECTOR
NOMINEES AS SHOWN IN ITEM I.
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THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS MARKED HEREIN. IF
NO INSTRUCTIONS TO THE CONTRARY ARE MARKED HEREIN, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF DIRECTORS, FOR APPROVAL OF THE SANDY SPRING BANCORP 1999 STOCK
OPTION PLAN, AND AS DETERMINED BY A MAJORITY OF THE BOARD OF DIRECTORS AS TO
OTHER MATTERS.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder hereby acknowledges receipt of a copy of the
accompanying Notice of Annual Meeting of Shareholders and Proxy Statement and
hereby revokes any proxy or proxies previously given. This proxy may be revoked
at any time prior to its exercise.
__________________________________________
Signature Date
__________________________________________
Signature Date
__________________________________________
Signature Date
<PAGE>
Please sign exactly as your name appears above. When signing as attorney,
executor, administrator, trustee or guardian, etc., please give your full title.
If the shareholder is a corporation, please provide the full name of the
corporation and the name and title of the signing, duly appointed officer. If
shares are held jointly, each holder should sign.
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PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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