SANDY SPRING BANK
EXECUTIVE INCENTIVE RETIREMENT
PLAN
(as amended)
Article I
Purpose
The purpose of
the Sandy Spring Bank Executive Incentive Retirement Plan is to
assist Sandy Spring Bank (the “Bank”) in retaining and
attracting officers of exceptional ability and to provide
supplemental executive retirement benefits in lieu of benefits
previously provided under the Sandy Spring Bank Supplemental
Executive Retirement Agreements entered into with certain executive
officers of the Bank.
Article II
Definitions
For the
purposes of this Plan, the following words and phrases shall have
the meanings indicated, unless the context clearly indicates
otherwise:
“Bank” means Sandy Spring Bank,
Olney, Maryland.
“Beneficiary” means the person,
persons or entity designated by the Participant to receive benefits
payable under the Plan.
“Board of
Directors” means the Board of Directors of the
Bank.
“Just
Cause” shall mean termination because of the
Participant’s personal dishonesty, willful misconduct, breach
of fiduciary duty involving personal profit, intentional failure to
perform stated duties, continuing material failure to perform
assigned duties, willful violation of any law, rule or regulation
(other than traffic violations or similar infractions) or a final
cease-and-desist order, or a material breach of any provision of an
employment agreement to which the Bank and the Participant are
parties.
“Change
in Control” means the earliest of:
(a) The
acquisition by any entity, person or group (other than the
acquisition by a tax-qualified retirement plan sponsored by Sandy
Spring Bancorp, Inc. (“Bancorp”) or the Bank) of
beneficial ownership, as that term is defined in Rule 13d-3 under
the Securities and Exchange Act of 1934, of more than 25% of the
outstanding capital stock of Bancorp or the Bank entitled to vote
for the election of directors (“Voting
Stock”);
(b) The
commencement by any entity, person, or group (other than Bancorp or
the Bank, a subsidiary of Bancorp or the Bank, or a tax-qualified
retirement plan sponsored by Bancorp or the Bank) of a tender offer
or an exchange offer for more than 20% of the outstanding Voting
Stock of Bancorp of the Bank;
(c) The
effective time of (i) a merger or consolidation of Bancorp or the
Bank with one or more other corporations as a result of which the
holders of the outstanding Voting Stock of Bancorp or the Bank
immediately prior to such merger exercise voting control over less
than 80% of the Voting Stock of the surviving or resulting
corporation, or (ii) a transfer of substantially all of the
property of the Bancorp or the Bank other than to an entity of
which Bancorp or the Bank owns at least 80% of the Voting Stock;
(d) Upon
the acquisition by any entity, person, or group of the control of
the election of a majority of the Bank’s or Bancorp’s
directors; or
(e) At
such time that, during any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board of Bancorp or Bank (the “Continuing Directors”)
cease for any reason to constitute at least two-thirds thereof,
provided that any individual whose election or nomination for
election as a member of the Board was approved by a vote of at
least two-thirds of the Continuing Directors then in office shall
be considered a Continuing Director.
“Declared Rate” the greater of
(i) five (5) percent or (ii) the prime rate as published in the
Wall Street Journal plus two (2) percentage
points. Notwithstanding anything in this Plan to the
contrary, the Declared Rate shall not exceed ten (10)
percent. The formula used to establish the Declared Rate
may be amended by a resolution of the Board of Directors on a
prospective basis.
“Deferral
Bonus” means an award pursuant to Section 3.2 of the
Plan.
“Deferred
Benefit Account” means the account maintained on the books of
the Bank for each Participant pursuant to Article IV. A
Participant’s Deferred Benefit Account shall be utilized
solely as a device for the measurement and determination of the
amounts to be paid to the Participant pursuant to this
Plan. A Participant’s Deferred Benefit Account
shall not constitute or be treated as a trust fund of any
kind.
“Designation of Form for Payment”
means the agreement filed by a Participant designating the manner
in which the Participant’s Deferred Benefit Account balance
shall be paid to the Participant or his beneficiary.
“Determination Date” means the date
on which the amount of a Participant’s Deferred Benefit
Account is determined as provided in Article IV
hereof. The last day of each Plan Year shall be the
Determination Date.
“Disability” means a physical or
mental condition which constitutes a disability within the meaning
of Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended.
“Participant” means any officer of
the Bank who is designated as a Participant by the Board of
Directors.
“Plan
Year” means a twelve month period commencing January 1st and
ending the following December 31st. The first Plan Year
shall commence on January 1, 2008 and end on December 31,
2008.
“Separation from Service” means a
termination of a Participant’s services (whether as an
employee or as an independent contractor) to the
Bank. Whether a Separation from Service has occurred
shall be determined in accordance with the requirements of Section
409A of the Code based on whether the facts and circumstances
indicate that the Bank and the Participant reasonably anticipated
that no further services would be performed after a certain date or
that the level of bona fide services the Participant would perform
after such date (whether as an employee or as an independent
contractor) would permanently decrease to no more than twenty
percent (20%) of the average level of bona fide services performed
(whether as an employee or an independent contractor) over the
immediately preceding thirty-six (36) month period.
Article III
Participation and
Benefits
Section 3.1
Participation .
Participation
in the Plan shall be limited to those officers of the Bank
designated as Participants by resolution of the Board of
Directors. The Board of Directors may, upon designation
of an officer as a Participant, establish such terms and conditions
of participation as it deems appropriate, including, but not
limited to, the rate at which Deferral Bonus Awards shall vest with
respect to such Participant. The initial Participants,
and the period over which Deferred Benefit Accounts of such initial
Participants shall vest, are identified in Appendix A to this
Plan. The Board of Directors may terminate an
officer’s status as a Participant on a prospective basis,
provided, however, that such termination shall not affect a
Participant’s previously accrued benefits.
Section 3.2
Amount of Deferral Bonus .
For every Plan
Year, a guaranteed minimum Deferral Bonus equal to 3% of a
Participant’s base salary paid during the Plan Year shall be
credited to the Participant’s Deferred Benefit
Account. For any Plan Year, a Participant’s
increased Deferral Bonus, if any, shall be determined by reference
to the attainment of criteria established by the Board of Directors
on an annual basis. Such criteria shall relate to the
financial performance of the Bank and shall be subject to
adjustment for extraordinary items to the extent deemed appropriate
by the Board of Directors. For any Plan Year after the
initial Plan Year, the Board of Directors shall, by resolution,
establish such criteria not later than March 31 of such
year. For the initial Plan Year, the criteria and
related awards for the initial Participants are set forth in
Appendix B of this Plan. A Deferral Bonus may be
expressed as a percentage of the Participant’s cash
compensation or as otherwise determined by the Board of
Directors. The Deferral Bonus shall be credited to a
Participant’s Deferred Benefit Account as of the last day of
the Plan Year to which the award relates.
Section 3.3
Accelerated Vesting of Deferral Bonus Awards
.
Unless
otherwise determined by the Board of Directors at the time an
officer is designated as a Participant, a Participant’s
Deferral Bonus Awards shall automatically vest upon (i) the
Participant’s death or Disability or (ii) upon the occurrence
of a Change in Control.
Article IV
Deferred Benefit
Account
Section 4.1
Determination of Account .
Each
Participant’s Deferred Benefit Account as of each
Determination Date shall consist of the balance of the
Participant’s Deferred Benefit Account as of the immediately
preceding Determination Date plus the Participant’s Deferral
Bonus, if any, awarded since the immediately preceding
Determination Date. The Deferred Benefit Account of each
Participant shall be reduced by the amount of all distributions, if
any, made from such Deferred Benefit Account since the preceding
Determination Date. The Bank shall initially credit the
Deferred Benefit Account of each Participant listed on Appendix A
to this Plan with an amount equal to the “Accrued
Benefit” under his Supplemental Executive Retirement
Agreement, as amended, as of December 31, 2007 (as that term is
defined in the Supplemental Executive Retirement
Agreement).
Section 4.2
Crediting of Account .
As of each
Determination Date, the Participant’s Deferred Benefit
Account shall be increased by the amount of interest earned since
the preceding Determination Date. Interest shall be
based upon the Declared Rate, which shall be adjusted annually on
the first business day of the Plan Year to apply during such Plan
Year. Interest shall be based upon the average daily
balance of the Participant’s Deferred Benefit Account since
the last preceding Determination Date, but after
