EXHIBIT 99.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between STERLING
BANCSHARES, INC., a Texas corporation ("Company") and X. XXXXXX BRIDGWATER
("Executive"). Capitalized terms used herein without definition shall have the
respective meanings set forth in paragraph 7.1
WITNESSETH:
WHEREAS, Company is desirous of continuing Executive's employment as a
senior executive of Company and its wholly owned subsidiary, STERLING BANK, a
banking association chartered by the State of Texas (the "Bank"), on the terms
and conditions, and for the consideration, hereinafter set forth and Executive
is desirous of continuing his employment by Company on such terms and conditions
and for such consideration; and
WHEREAS, references herein to Executive's employment by Company shall
also mean his employment by Bank, and references herein to payments or benefits
of any nature to be made by Company to Executive shall mean that either Company
will make such payments or it will cause Bank to make such payments to
Executive.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and obligations contained herein, Company and Executive agree as
follows:
ARTICLE 1: EMPLOYMENT AND DUTIES
1.1 EMPLOYMENT; EFFECTIVE DATE. Company agrees to employ Executive and
Executive agrees to be employed by Company, beginning as of the Effective Date
(as hereinafter defined) and continuing for the period of time set forth in
Article 2 of this Agreement, subject to the terms and conditions of this
Agreement. For purposes of this Agreement, the "Effective Date" shall be January
1, 2002.
1.2 POSITION.
(a) From and after the Effective Date, Company shall employ
Executive in the capacity of Chief Executive Officer and President of
both the Company and of the Bank, or in such other positions as the
parties mutually may agree.
(b) At all times during the term of this Agreement, the
Company shall use commercially reasonable efforts to cause Executive to
be elected a director of the Company and the Bank and to serve on the
Executive Committee of the Bank. If elected, Executive agrees to serve
as a director of the Company, the Bank and any one or more of the
Company's subsidiaries and to serve on the Executive Committee of the
Bank.
1.3 DUTIES AND SERVICES. Executive agrees to serve in the capacities
referred to in paragraph 1.2 and to perform diligently and to the best of his
abilities the duties and services appertaining to such offices, as well as such
additional duties and services appropriate to such offices which the parties
mutually may agree upon from time to time. Executive's
employment shall also be subject to the policies maintained and established by
Company, as the same may be amended from time to time.
1.4 OTHER INTERESTS. Executive agrees, during the period of his
employment by Company, to devote his primary business time, energy and best
efforts to the business and affairs of Company and Bank and not to engage,
directly or indirectly, in any other business or businesses, whether or not
similar to that of Company, except with the consent of the Board of Directors of
Company (the "Board of Directors"). However, Executive shall have the right to
participate in the following activities so long as they do not conflict with the
business and affairs of Company or interfere with Executive's performance of his
duties hereunder: (i) engaging in and managing passive personal investments and
other business activities, and (ii) serving on civic, religious, educational
and/or charitable boards or committees.
ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT
2.1 TERM. Unless sooner terminated pursuant to other provisions hereof,
Company agrees to employ Executive for the period beginning on the Effective
Date and ending on December 31, 2006 (the "Employment Term").
2.2 COMPANY'S RIGHT TO TERMINATE. Notwithstanding the provisions of
paragraph 2.1, Company shall have the right to terminate Executive's employment
under this Agreement at any time for any of the following reasons:
(i) upon Executive's death;
(ii) upon Executive's becoming incapacitated by accident,
sickness or other circumstance which renders him mentally or physically
incapable of performing the duties and services required of him
hereunder on a full-time basis for a period of at least 180 consecutive
days, at which time the Executive would be entitled to benefits under
the Company's Long Term Disability Plan;
(iii) for cause, which for purposes of this Agreement shall
mean Executive (A) has engaged in gross negligence or willful
misconduct in the performance of the duties required of him hereunder,
(B) has been convicted of a misdemeanor involving moral turpitude or
convicted of a felony, (C) has willfully refused without proper legal
reason to perform the duties and responsibilities required of him
hereunder, (D) has materially breached any corporate policy or code of
conduct established by Company, or (E) has willfully engaged in conduct
that he knows or should know is materially injurious to Company or any
of its affiliates;
(iv) for Executive's material breach of any material provision
of this Agreement which, if correctable, remains uncorrected for 30
days following written notice to Executive by Company of such breach;
or
(v) for any other reason whatsoever, in the sole discretion of
the Board of Directors.
2
2.3 EXECUTIVE'S RIGHT TO TERMINATE. Notwithstanding the provisions of
paragraph 2.1, Executive shall have the right to terminate his employment under
this Agreement at any time for any of the following reasons:
(i) a material breach by Company of any material provision of
this Agreement which, if correctable, remains uncorrected for 30 days
following written notice of such breach by Executive to Company; or
(ii) for any other reason whatsoever, in the sole discretion
of Executive.
2.4 NOTICE OF TERMINATION. If Company or Executive desires to terminate
Executive's employment hereunder at any time prior to expiration of the
Employment Term as provided in paragraph 2.1, it or he shall do so by giving
written notice to the other party that it or he has elected to terminate
Executive's employment hereunder and stating the effective date and reason for
such termination, provided that no such action shall alter or amend any other
provisions hereof or rights arising hereunder, including, without limitation,
the provisions of Articles 4 and 5 hereof.
ARTICLE 3: COMPENSATION AND BENEFITS
3.1 BASE SALARY. During the Employment Term, Executive shall receive an
annual base salary of $272,000 ($22,666.66 per month). Executive's annual base
salary shall be paid in equal installments in accordance with Company's standard
policy regarding payment of compensation to executives but no less frequently
than monthly. The Human Resources Program Committee of the Company (the "HR
Committee") shall review the Executive's Base Salary on an annual basis and may
recommend to the Board of Directors an increase in the Base Salary if it
determines, in its discretion, that an increase is appropriate. For purposes of
this Agreement, "Base Salary" shall mean the Executive's initial base salary
and, if increased, the increased base salary.
3.2 BONUSES. During the term of this Agreement, Executive shall be
entitled to receive quarterly bonuses in the same manner as such bonuses are
now, or may hereafter be, paid to other executive employees of the Company.
3.3 BONUS INCENTIVE PLAN.
(a) BONUS AWARDS. During the term of this Agreement, Executive
shall be entitled to receive, in addition to the Base Salary and
bonuses provided in paragraph 3.2 and subject to the terms and
conditions set forth herein, awards of additional options to purchase
shares of the Company Stock (the "Bonus Options") and grants of
additional shares of the Company Stock (the "Bonus Shares"). The bonus
awards will be based upon the performance objectives for the Company
and will be subject to the terms and conditions more specifically set
forth in this paragraph 3.3 and the Schedules attached hereto and
incorporated herein for all purposes; provided, however, that the Board
of Directors shall have the ability to take into consideration
extraordinary or non-recurring events in determining whether the
performance objectives as more particularly described in the attached
Schedules have been satisfied. Subject to the provisions of paragraph
3
3.3(b)(5), the maximum number of fully diluted shares of Company Stock
which may be awarded to Executive pursuant to this paragraph 3.3 is
150,000 shares.
(1) RETURN ON AVERAGE EQUITY. Executive shall be
awarded options to purchase up to 30,000 shares of Company
Stock in accordance with the terms and provisions of Schedule
3.3(i) attached hereto and incorporated herein for all
purposes.
(2) GROWTH IN EARNINGS PER SHARE. Executive shall be
awarded options to purchase up to 22,500 shares of Company
Stock in accordance with the terms and provisions of Schedule
3.3(ii) attached hereto and incorporated herein for all
purposes.
(3) NONPERFORMING LOANS. Executive shall be awarded
options to purchase up to 22,500 shares of Company Stock in
accordance with the terms and provisions of Schedule 3.3(iii)
attached hereto and incorporated herein for all purposes.
(4) ANNUAL GROWTH STOCK AWARD. Executive shall be
awarded stock grants of up to 37,500 shares of Company Stock
in accordance with the terms and provisions of Schedule
3.3(iv) attached hereto and incorporated herein for all
purposes.
(5) TERM GROWTH STOCK AWARD. Executive shall be
awarded stock grants of up to 37,500 shares of Company Stock
in accordance with the terms and provisions of Schedule 3.3(v)
attached hereto and incorporated herein for all purposes.
(b) TERMS OF BONUS AWARDS. The Bonus Options and Bonus Shares,
and Executive's right to receive any award thereof pursuant to this
paragraph 3.3 and Schedules 3.3(i), (ii), (iii), (iv), and (v) shall,
in addition to the provisions set forth in the applicable Schedule, be
subject to the following terms and conditions:
(1) CONTINUED EMPLOYMENT. Except as expressly
provided in the Schedules attached hereto, Executive shall not
be entitled to receive any award for any Annual Period or the
5 Year Period under this paragraph 3.3 unless the Executive
has been continuously employed by the Company during such
Annual Period or 5 Year Period, as applicable. If Executive's
employment by Company is terminated following the expiration
of an Annual Period or 5 Year Period but before any award with
respect to such period is determined in accordance with the
applicable Schedule, Executive shall continue to be entitled
to receive any award earned for such Annual Period or 5 Year
Period.
(2) COMPANY STOCK INCENTIVE PLAN. The Bonus Options
and Bonus Shares awarded to Executive under this paragraph 3.3
and the applicable Schedules shall be granted pursuant to the
Company's 1994 Stock Incentive Plan, or any successor plan
adopted by the Company, as may be amended from time to time
(the "Company Incentive Plan"). Each option and
4
stock grant shall be reflected in a separate stock option
agreement or restricted stock purchase agreement, as
appropriate, which shall be subject to the Company Incentive
Plan.
(3) OPTIONS. The Bonus Options awarded to Executive
under this paragraph 3.3 and the applicable Schedules shall be
incentive stock options under the Company Incentive Plan and
shall have a ten (10) year term. Executive acknowledges that
no awards may be granted under the Company 1994 Stock
Incentive Plan after April 18, 2004, and that a successor
Company Incentive Plan must be adopted by the Company to
permit the Company to make additional awards of incentive
stock options after such date. If a successor Company
Incentive Plan is not adopted by the Company, the Bonus
Options, if any, to be granted by the Company after such date
shall instead be nonqualified stock options. Each Bonus Option
shall vest and become exercisable as to twenty percent (20%)
of the shares of Company Stock subject thereto on the
effective date of grant and, subject to Executive's continued
employment by the Company on each subsequent anniversary date,
shall thereafter become exercisable as to an additional twenty
percent (20%) of such shares on each subsequent anniversary
date of such Bonus Option, such that each Bonus Option shall
be exercisable as to all shares subject to such Bonus Option
on the fifth anniversary of the effective date of grant.
Notwithstanding the preceding, each Bonus Option shall fully
vest and become exercisable (1) if Executive's employment
hereunder shall be terminated by the Company for any reason
other than those encompassed by paragraphs 2.2(iii) or (iv),
or (2) upon a Change of Control (as herein defined). The
exercise price of each Bonus Option awarded to Executive under
this paragraph 3.3 shall be the average between the high and
low sales price per share of the Company Stock on the Nasdaq
National Market for the last trading day of Annual Period for
which such Bonus Option is awarded. In the event of a Change
of Control, the exercise price of all Bonus Options awarded to
Executive as a result of such Change of Control in accordance
with the provisions of the attached Schedules shall be the
"Fair Market Value" of the Company's Common Stock, as such
term is defined in the Company Incentive Plan, as of the date
such Bonus Options are granted.
(4) STOCK GRANTS. The Bonus Shares awarded to
Executive under this paragraph 3.3 shall be "Restricted
Stock," within the terms of the Company Incentive Plan, and
shall be subject to restrictions on transfer and vesting
requirements. The Bonus Shares included in each award shall be
twenty percent (20%) vested as of the effective date of grant
and, subject to Executive's continued employment by the
Company on each subsequent anniversary date of such award,
shall thereafter vest, and the forfeiture provisions shall
lapse, as to an additional twenty percent (20%) of the Bonus
Shares included in such award on each subsequent anniversary
date, such that each grant of Bonus Shares shall be fully
vested on the fifth anniversary of the effective date of
grant. Notwithstanding the preceding, the Bonus Shares awarded
under this paragraph 3.3 shall fully vest, and the forfeiture
provisions shall fully lapse, (1) if Executive's employment
hereunder shall be terminated by the Company for any
5
reason other than those encompassed by paragraphs 2.2(iii) or
(iv), or (2) upon a Change in Control.
(5) ADJUSTMENTS. The aggregate number of shares of
Company Stock which may be awarded hereunder to Executive
shall be appropriately adjusted for any increase or decrease
in the number of outstanding shares of Company Stock resulting
from a stock split or other subdivision or consolidation of
shares of Company Stock or for other capital adjustments or
payments of stock dividends or distributions or other similar
increases or decreases in the outstanding shares of Company
Stock without receipt of consideration by the Company.
3.4 LIFE INSURANCE. During the term of this Agreement, Executive shall
be entitled to life insurance benefits in the same manner as such life insurance
benefits are now, or may hereafter be, available to other executive employees of
the Company.
3.5 OTHER PERQUISITES. During his employment hereunder, Executive shall
be afforded the following benefits as incidents of his employment:
(a) BUSINESS AND ENTERTAINMENT EXPENSES. Subject to Company's
standard policies and procedures with respect to expense reimbursement
as applied to its executive employees generally, Company shall
reimburse Executive for, or pay on behalf of Executive, reasonable and
appropriate expenses incurred by Executive for business related
purposes, including dues and fees to industry and professional
organizations and costs of entertainment and business development.
(b) OTHER COMPANY BENEFITS. Executive and, to the extent
applicable, Executive's spouse, dependents and beneficiaries, shall be
allowed to participate in all benefits, plans and programs, including
improvements or modifications of the same, which are now, or may
hereafter be, available to other executive employees of Company. Such
benefits, plans and programs may include, without limitation, pension
benefit plans, health insurance or health care plan, disability
insurance, supplemental retirement plans, vacation and sick leave
benefits, and the like. Company shall not, however, by reason of this
paragraph be obligated to institute, maintain, or refrain from
changing, amending, or discontinuing, any such benefit plan or program,
so long as such changes are similarly applicable to executive employees
generally.
ARTICLE 4: CONFIDENTIAL INFORMATION
4.1 In the Executive's position with the Company and the Bank, the
Company has previously (i) disclosed to Executive, and placed Executive in a
position to have access to or develop, trade secrets or confidential information
of the Company or its affiliates, (ii) entrusted Executive with business
opportunities of the Company or its affiliates, and/or (iii) placed Executive in
a position to develop goodwill on behalf of Company or its affiliates. Executive
acknowledges that in his position with the Company and the Bank, the Company
shall continue to (i) disclose to Executive, or place Executive in a position to
have access to or develop, additional and subsequent trade secrets or
confidential information of Company or its affiliates,
6
(ii) entrust Executive with future business opportunities of Company or its
affiliates, and/or (iii) place Executive in a position to develop business
goodwill on behalf of Company or its affiliates. Executive recognizes and
acknowledges that Executive has had, and will continue to have, access to
certain information of Company and that such information is confidential and
constitutes valuable, special and unique property of Company. Executive shall
not at any time, either during or subsequent to the term of employment with
Company, disclose to others, use, copy or permit to be copied, except in
pursuance of Executive's duties for and on behalf of Company, its affiliates and
their respective successors, assigns or nominees, any Confidential Information
of Company (regardless of whether developed by Executive) without the prior
written consent of Company. In the event Executive becomes legally compelled (by
oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand, regulatory demand or other similar
process) to disclose any Confidential Information, the Executive will provide
the Company with prompt written notice so that the Company may seek a protective
order or other appropriate remedy and/or waive compliance with the provisions of
this Article 4. In the event that a protective order or other remedy is not
obtained, or the Company waives compliance with the provisions of this Article
4, the Executive will furnish only that portion of the Confidential Information
which is legally required and exercise reasonable best efforts to obtain
assurances that confidential treatment will be accorded the Confidential
Information. The term "Confidential Information" means any secret or
confidential information or know-how and shall include, but shall not be limited
to, the plans, customers, costs, prices, uses, corporate opportunities,
research, financial data, evaluations, prospects, and applications of products
and services, results of investigations or studies owned or used by Company, and
all apparatus, products, processes, compositions, samples, formulas, computer
programs, computer hardware designs, computer firmware designs, and servicing,
marketing or manufacturing methods and techniques at any time used, developed,
investigated, made or sold by Company, before or during the term of employment
with Company, that are not readily available to the public or that are
maintained as confidential by Company. Executive shall maintain in confidence
any Confidential Information of third parties received as a result of
Executive's employment with Company in accordance with Company's obligations to
such third parties and the policies established by Company.
ARTICLE 5: NON-COMPETITION OBLIGATIONS
5.1 IN GENERAL. As part of the consideration for the compensation and
benefits to be paid to Executive hereunder; to protect the Confidential
Information of Company and its affiliates that has been and will in the future
be disclosed or entrusted to Executive, the business goodwill of Company and its
affiliates that has been and will in the future be developed in Executive, and
the business opportunities that have been and will in the future be disclosed or
entrusted to Executive by Company and its affiliates; and as an additional
incentive for Company to enter into this Agreement, Company and Executive agree
to the non-competition obligations hereunder. Executive shall not, directly or
indirectly for Executive or for others, in any geographic area or market where
Company, Bank or any of its banking affiliates are conducting any banking
business as of the date of the termination of the employment relationship or
have during the previous twelve months conducted such banking business:
(i) engage in any business competitive with the banking
business conducted by Company, Bank, or its banking affiliates;
7
(ii) render advice or services to, or otherwise assist, any
other person, association, or entity who is engaged, directly or
indirectly, in any banking business competitive with the banking
business conducted by Company, Bank, or its banking affiliates with
respect to such competitive business;
(iii) own, manage, operate, control, invest or acquire an
equity interest in any entity engaged in or conducting any banking
business competitive with the banking business conducted by the
Company, Bank or its banking affiliates;
(iv) request or induce any customer, depositor or borrower of
the Company, Bank or any of its banking affiliates, or any other person
which has a business relationship with the Company, Bank or any of its
banking affiliates to curtail, cancel or otherwise discontinue its
business or relationship with the Company, Bank or any of its banking
affiliates; or
(v) induce any employee of Company or any of its affiliates to
terminate his or her employment with Company or such affiliates, or
hire or assist in the hiring of any such employee by any person,
association, or entity not affiliated with Company.
These non-competition obligations shall apply during the period that Executive
is employed by Company and shall extend two years after termination of the
employment relationship if such termination is by Company pursuant to paragraph
2.2(iii) or (iv) or by Executive pursuant to paragraph 2.3(ii). These
non-compete obligations shall extend for one year after the end of Executive's
employment by Company if terminated in any manner other than pursuant to
paragraph 2.2(iii) or (iv) or by Executive pursuant to paragraph 2.3(ii).
Notwithstanding the foregoing, nothing contained in this Agreement shall
prohibit Executive from acquiring or holding any issue of stock or securities of
any entity that has securities registered under Section 12 of the Securities
Exchange Act of 1934 and either listed on a national securities exchange or
quoted on the automated quotation system of the National Association of
Securities Dealers, Inc. so long as (i) Executive is not deemed to be an
"affiliate" of such entity as such term as used in paragraphs (c) and (d) of
Rule 145 under the Securities Act of 1933 and (ii) Executive and members of his
immediate family do not own or hold more than three percent (3%) of any voting
securities of any such entity.
5.2 ENFORCEMENT AND REMEDIES. Executive understands that the
restrictions set forth in paragraph 5.1 may limit Executive's ability to engage
in certain businesses anywhere in the world during the period provided for
above, but acknowledges that Executive will receive sufficiently high
remuneration and other benefits under this Agreement to justify such
restriction. Executive acknowledges that money damages would not be sufficient
remedy for any breach of this Article 5 by Executive, and Company shall be
entitled to enforce the provisions of this Article by terminating all
compensation and all benefits hereunder (other than all accrued and unpaid Base
Salary through the date such action is taken by the Company) and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach. Such remedies shall not be deemed the exclusive remedies for a breach of
this Article 5, but shall be in addition to all remedies available at law or in
equity to Company, including without limitation,
8
the recovery of damages from Executive and Executive's agents involved in such
breach and remedies available to Company pursuant to other agreements with
Executive.
5.3 REFORMATION. It is expressly understood and agreed that Company and
Executive consider the restrictions contained in this Article to be reasonable
and necessary to protect the proprietary information of Company. Nevertheless,
if any of the aforesaid restrictions are found by a court having jurisdiction to
be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such court so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
ARTICLE 6: EFFECT OF TERMINATION ON COMPENSATION
6.1 BY EXPIRATION. If Executive's employment hereunder shall terminate
upon expiration of the Employment Term provided in paragraph 2.1 hereof, then
all compensation and all benefits to Executive hereunder shall terminate
contemporaneously with termination of his employment except to the extent (i)
any Bonus Options or Bonus Shares earned by Executive during the Employment Term
pursuant to paragraph 3.3 and the Schedules attached hereto have not been
determined and/or delivered to Executive as of the expiration of the Employment
Term, the Company shall remain obligated to deliver any such Bonus Options
and/or Bonus Shares in accordance with the terms and provisions hereof, and (ii)
benefits continue pursuant to the specific terms of any plan or program.
6.2 BY COMPANY.
(a) If Executive's employment hereunder shall be terminated by
Company prior to expiration of the Employment Term provided in
paragraph 2.1, then, upon such termination, all compensation and
benefits to Executive hereunder shall, except as otherwise provided
herein, terminate contemporaneously with the termination by Company of
such employment (except to the extent benefits continue pursuant to the
specific terms of any plan or program); provided, however, that if such
termination shall be for any reason other than those encompassed by
paragraphs 2.2(i), (ii), (iii), or (iv), then Company shall (i) pay
Executive the Termination Payments and (ii) provide Executive with
Continuation Benefits.
(b) For purposes of this Agreement and the attached Schedules,
the following terms shall have the meanings indicated below:
(1) "Termination Payments" shall mean and include the
following:
(i) Continuation of Executive's Base Salary
as in effect on the effective date of termination for
the remainder of the Employment Term provided in
paragraph 2.1 or until Executive's death, if earlier,
such Base Salary to be paid at regularly scheduled
times in accordance with the Company's payroll
practice for its executives.
(ii) To the extent the applicable
performance criteria under paragraph 3.3 and the
applicable Schedule is satisfied, a pro rata payment
9
and delivery of the Bonus Options and Bonus Shares
earned by Executive in accordance with the terms and
conditions of the applicable Schedules. Executive
shall not be entitled to receive any pro rata payment
of any Bonus Options or Bonus Shares pursuant to
paragraphs 3.3(i), (ii), (iii) or (iv) and the
attached Schedules unless the performance criteria
applicable to such Bonus Options and Bonus Shares are
satisfied for the Annual Period during which the
termination of the Executive's employment occurs.
Further, Executive shall not be entitled to receive
any pro rata payment of any Bonus Shares pursuant to
paragraph 3.3(v) and the attached Schedule 3.3(v)
unless the performance criteria set forth in Schedule
3.3(v) are satisfied for the amended 5 Year Period.
(2) "Continuation Benefits" shall mean continued
coverage under Company's medical and dental plans and life
insurance for Executive and his dependents (including his
spouse) who were covered under such plans and insurance on the
day prior to Executive's termination of employment with
Company as if he had remained employed by Company through
December 31, 2006 (provided, however, that (1) such coverage
shall terminate if and to the extent Executive becomes
eligible to receive medical, dental and life insurance
coverage from a subsequent employer (and any such eligibility
shall be promptly reported to Company by Executive), (2) if
Executive (and/or his spouse) would have been entitled to
retiree medical, dental, and/or life insurance coverage under
Company's plans had he voluntarily retired on the date of such
termination, then such coverage's shall be continued as
provided under such plans, and (3) in the event that continued
participation in any such Company plan is for whatever reason
impermissible, Company shall arrange upon comparable terms
benefits substantially equivalent to those that may not be so
provided under the plan maintained by Company).
(3) Notwithstanding the preceding provisions of this
paragraph 6.2, as a condition to the receipt of any
Termination Payments and/or Continuation Benefits pursuant to
this paragraph 6.2, Executive must first execute a release
agreement, in a form mutually acceptable to Executive and
Company, which shall release Company, its affiliates and their
officers, directors, employees and agents from any and all
claims and from any and all causes of action of any kind or
character, including but not limited to all claims or causes
of action arising out of Executive's employment with Company
and the termination of such employment.
(4) In determining the "pro rata" amount of any
payment or award to Executive under this Agreement or
Schedules attached hereto, the payment or award otherwise
deliverable to Executive hereunder shall be multiplied by a
fraction, (i) the numerator of which shall be the number of
days the Executive was employed by the Company during the
Annual Period or 5 Year Period, as applicable, and (ii) the
denominator of which shall be the total number of days during
such Annual Period or 5 Year Period, as applicable.
10
6.3 BY EXECUTIVE. If Executive's employment hereunder shall be
terminated by Executive prior to expiration of the Employment Term provided in
paragraph 2.1, then, upon such termination, regardless of the reason therefor,
all compensation and benefits to Executive hereunder shall terminate
contemporaneously with the termination of such employment (except to the extent
benefits continue pursuant to the specific terms of any plan or program);
provided, however, that if such termination shall be pursuant to paragraph
2.3(i), then Company shall (i) pay Executive, within 10 days after the last day
of Executive's employment with Company, a lump sum cash payment in an amount
equal to the Termination Payment and (ii) provide Executive with Continuation
Benefits.
6.4 NO DUTY TO MITIGATE LOSSES. Executive shall have no duty to find
new employment following the termination of his employment under circumstances
which require Company to pay any amount to Executive pursuant to this Article 6.
Any salary or remuneration received by Executive from a third party for the
providing of personal services (whether by employment or by functioning as an
independent contractor) following the termination of his employment under
circumstances pursuant to which this Article 6 apply shall not reduce Company's
obligation to make a payment to Executive (or the amount of such payment)
pursuant to the terms of this Article 6.
6.5 LIQUIDATED DAMAGES. In light of the difficulties in estimating the
damages for an early termination of this Agreement, Company and Executive hereby
agree that the payments, if any, to be received by Executive pursuant to this
Article 6 shall be received by Executive as liquidated damages.
6.6 INCENTIVE AND DEFERRED COMPENSATION. This Agreement governs the
rights and obligations of Executive and Company with respect to Executive's base
salary, bonus, life insurance and certain prerequisites of employment.
Executive's rights and obligations both during the term of his employment and
thereafter with respect to stock options, restricted stock, and incentive and
deferred compensation (including, without limitation, the Bonus Options and
Bonus Shares) shall be governed by the separate agreements, plans and other
documents and instruments governing such matters; provided, however, that such
separate written agreements shall contain terms and provisions consistent with
those set forth in this Agreement and the Schedules attached hereto.
6.7 ADDITIONAL PAYMENTS BY COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, if it is determined that any payment or distribution
by Company to or for the benefit of Executive, whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement
or otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including, without limitation, any stock
option, stock appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or exercisability of
any of the foregoing (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") by reason of being "contingent on a change of
ownership or control" of the Company, within the meaning of Section
280G of the Code or to any similar tax imposed by state or local law,
or any interest or penalties with respect to such excise tax (such tax
11
or taxes, together with any such interest and penalties, being
hereinafter collectively referred to as the "Excise Tax"), then
Executive will be entitled to receive an additional payment or payments
(a "Gross-Up Payment") in an amount such that, after payment by
Executive of all taxes (including any interest or penalties imposed
with respect to such taxes), including any Excise Tax, imposed upon the
Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) All determinations required to be made under this
paragraph 6.7, including whether an Excise Tax is payable by Executive
and the amount of such Excise Tax and whether a Gross-Up Payment is
required and the amount of such Gross-Up Payment, will be made by
Company's independent auditors. If the independent auditors determine
that any Excise Tax is payable by Executive, the Company shall pay to
the Executive (on or before the date on which the Company is required
to withhold such Excise Taxes) the required Gross-Up Payment. Any
determination by the independent auditors as to whether a Gross-Up
Payment is required and the amount of such Gross-Up Payment will be
binding upon Company and Executive.
6.8 PREEMPTIVE CONSIDERATIONS. Notwithstanding anything to the contrary
set forth herein:
(a) If Executive is suspended and/or temporarily prohibited
from participating in the conduct of the Company's or Bank's affairs by
a notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit
Insurance Act (12 U.S.C. 1818(e)(3) and (g)(1)), the Company's
obligations under this Agreement shall be suspended as of the date of
service unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Company may in its discretion (i) pay the
Executive all or part of the compensation withheld while this
Agreement's obligations were suspended, and (ii) reinstate (in whole or
in part) any of its obligations which were suspended.
(b) If the Executive is removed and/or permanently prohibited
from participating in the conduct of the Company's or Bank's affairs by
an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit
Insurance Act (12 U.S.C. 1818(e)(4) or (g)(1)), all obligations of the
Company under this Agreement shall terminate as of the effective date
of the order, but vested rights of the parties shall not be affected.
ARTICLE 7: DEfinitions
7.1 DEFINITIONS. As used in this Agreement and the Schedules
attached hereto, terms defined in the preamble and recitals of or
elsewhere in this Agreement and Schedules attached hereto shall have
the meanings set forth therein and the following terms shall have the
meanings set forth below:
12
(a) "Annual Period" shall mean each consecutive
twelve (12) month period commencing January 1 and ending
December 31 of each calendar year during the term of this
Agreement.
(b) "Bonus Options" shall refer to the options
awarded by Company to Executive pursuant to paragraph 3.3,
inclusive of the Annual ROAE Options, Annual GEPS Options and
Annual NPL Options.
(c) "Bonus Shares" shall refer to the shares of
Company Stock awarded to Executive pursuant to paragraph 3.3,
inclusive of the Annual Growth Stock Awards and the Term
Growth Stock Awards.
(d) "Change of Control" shall be deemed to have
occurred if:
(i) any person, other than Company or any
benefit plan of Company, acquires, directly or
indirectly, the beneficial ownership (as defined in
Section 13(d) of the Securities Exchange Act of 1934)
of any voting security of Company and immediately
after such acquisition such person is, directly or
indirectly, the beneficial owner of voting securities
representing 35% or more of the total voting power of
all of the then-outstanding voting securities of
Company;
(ii) the shareholders of Company shall
approve a merger, consolidation, recapitalization or
reorganization of Company, or a reverse stock split
of outstanding voting securities, or consummation of
any such transaction if shareholder approval is not
obtained, other than any such transaction which would
result in at least 75% of the total voting power
represented by the voting securities of the surviving
entity outstanding immediately after such transaction
being beneficially owned by at least 75% of the
holders of outstanding voting securities of Company
immediately prior to the transactions with the voting
power of each such continuing holder relative to
other such continuing holders not substantially
altered in the transaction;
(iii) the shareholders of Company shall
approve a plan of complete liquidation of Company or
an agreement for the sale or disposition by Company
of 50% or more of the total assets of Company; or
(iv) the individuals who constitute the
board of directors of Company as of the Effective
Date (the "Incumbent Board") shall cease for any
reason to constitute at least a majority of the
members of the board of directors, provided that any
person becoming a director after the Effective Date
whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board (other than any individual whose
nomination for election to the board of directors was
not endorsed by Company's management prior to, or at
the time of, such individual's initial nomination for
election) shall be, for purposes of this Agreement,
considered as though such person were a number of the
Incumbent Board.
13
(e) "Company Stock" shall mean the Company's common
stock, $1.00 par value.
(f) "Schedules" shall collectively mean Schedule
3.3(i), Schedule 3.3(ii), Schedule 3.3(iii), Schedule 3.3(iv),
and Schedule 3.3(v) attached hereto and incorporated herein
for all purposes. "Schedule" shall refer to any one of the
Schedules.
(g) "SEC" shall mean the Securities and Exchange
Commission.
ARTICLE 8: MISCELLANEOUS
8.1 NOTICES. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
IF TO COMPANY TO: Human Resources Programs Committee
Sterling Bancshares, Inc.
0000 Xxxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
IF TO EXECUTIVE TO: X. Xxxxxx Bridgwater
c/o Sterling Bank
0000 Xxxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
or to such other address as either party may furnish to the other in writing in
accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
8.2 APPLICABLE LAW. This Agreement is entered into under, and shall be
governed for all purposes by, the laws of the State of Texas.
8.3 NO WAIVER. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
8.4 SEVERABILITY. If a court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then the invalidity
or unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
8.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
8.6 WITHHOLDING OF TAXES AND OTHER EMPLOYEE DEDUCTIONS. Company may
withhold from any benefits and payments made pursuant to this Agreement all
00
xxxxxxx, xxxxx, xxxx and other taxes as may be required pursuant to any law or
governmental regulation or ruling and all other normal employee deductions made
with respect to Company's employees generally.
8.7 HEADINGS. The paragraph headings have been inserted for purposes of
convenience and shall not be used for interpretive purposes.
8.8 GENDER AND PLURALS. Wherever the context so requires, the masculine
gender includes the feminine or neuter, and the singular number includes the
plural and conversely.
8.9 AFFILIATE. As used in this Agreement, the term "affiliate" shall
mean any entity which owns or controls, is owned or controlled by, or is under
common ownership or control with, Company.
8.10 SUCCESSOR OBLIGATIONS. This Agreement shall be binding upon and
inure to the benefit of Company and any successor of Company, by merger or
otherwise.
8.11 ASSIGNMENT. Except as provided in paragraph 8.10, this Agreement,
and the rights and obligations of the parties hereunder, are personal and
neither this Agreement, nor any right, benefit, or obligation of either party
hereto, shall be subject to voluntary or involuntary assignment, alienation or
transfer, whether by operation of law or otherwise, without the prior written
consent of the other party.
8.12 TERM. This Agreement has a term co-extensive with the Employment
Term provided in paragraph 2.1. Termination shall not affect any right or
obligation of any party which is accrued or vested prior to such termination.
Without limiting the scope of the preceding sentence, the provisions of Articles
4 and 5 shall survive any termination of the employment relationship and/or of
this Agreement.
8.13 ENTIRE AGREEMENT. Except as provided in (i) the written benefit
plans and programs referenced in paragraphs 3.5(ii) and 6.6; and (ii) any signed
written agreement contemporaneously or hereafter executed by Company and
Executive, this Agreement constitutes the entire agreement of the parties with
regard to the subject matter hereof, and contains all the covenants, promises,
representations, warranties and agreements between the parties with respect to
employment of Executive by Company. Without limiting the scope of the preceding
sentence, all prior understandings and agreements among the parties hereto
relating to the subject matter hereof are hereby null and void and of no further
force and effect. Any modification of this Agreement shall be effective only if
it is in writing and signed by the party to be charged.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the 31st day of October, 2001, to be effective as of the Effective Date.
STERLING BANCSHARES, INC.
BY: /s/ XXXXXX XXXXXXXX
--------------------------------
Xxxxxx Xxxxxxxx, Chairman
"COMPANY"
BY: /s/ X. XXXXXX BRIDGWATER
--------------------------------
X. Xxxxxx Bridgwater
"EXECUTIVE"
16
SCHEDULE 3.3(i)
1. Subject to the terms and conditions herein, during the Employment
Term Executive shall be entitled to receive, and Company shall award to
Executive, on an annual basis, options to purchase up to 6,000 shares of the
Company Stock. The maximum number of shares of Company Stock for which options
may be awarded to Executive pursuant to paragraph 3.3(i) and this Schedule
3.3(i) is 30,000 shares. The options to be granted to Executive pursuant to
paragraph 3.3(i) and this Schedule 3.3(i) with respect to each Annual Period are
referred to as the "Annual ROAE Options."
2. The number of shares of Company Stock subject to the Annual ROAE
Options to be awarded to Executive will be calculated, on an annual basis, on
the basis of the Company's Return on Average Equity (as herein defined) for each
respective Annual Period in accordance with the following:
(i) If the Company's Return on Average Equity for the Annual
Period is equal to or less than 15%, then Executive shall not be
entitled to receive any award of the Annual ROAE Options for such
Annual Period.
(ii) If the Company's Return on Average Equity for the Annual
Period is greater than 15% but less than 19%, the number of shares of
Company Stock subject to the Annual ROAE Options awarded for such
Annual Period shall be determined by (A) multiplying (1) 6,000 by (2)
Return on Average Equity for such Annual Period less 15, and (B)
dividing the product obtained in clause (A) by 4. Expressed as a
formula, the calculation is as follows:
Number of shares = 6,000 x (Return on Average Equity - 15)
---------------------------------------
4
By way of example, if the Return on Average Equity for the Annual
Period is 16%, the number of shares of Common Stock subject to the
Annual ROAE Options awarded for such Annual Period is determined as
follows:
Number of shares = 6,000 x (16 - 15)
-----------------
4
= 1,500 shares
(iii) If the Company's Return on Average Equity for the Annual
Period is equal to or greater than 19%, the number of shares of Company
Stock subject to the Annual ROAE Options awarded for such Annual Period
shall be 6,000 shares.
The calculations set forth in this Section 2 shall be made on an annual basis
and will not be affected by the Company's cumulative Return on Average Equity in
either preceding or succeeding Annual Periods. If the Company's Return on
Average Equity in any Annual Period exceeds 19% or is less than 15%, such excess
or deficit, as applicable, will not be taken into consideration for purposes of
determining the Annual ROAE Options to be received by Executive for any other
Annual Period.
3.3(i)-1
3. As used in this Agreement and this Schedule 3.3(i), the Company's
"Return on Average Equity" for any Annual Period shall be the ratio set forth in
the Company's Annual Report on Form 10-K as filed with the SEC. If for any
reason the Company is no longer required to file an Annual Report on Form 10-K
with the SEC, the Company shall cause such ratio to be calculated in a manner
consistent with the Company's most recently filed Annual Report on Form 10-K.
4. Promptly following the Company's filing of its Annual Report on Form
10-K for any Annual Period, but in no event later than the April 15 immediately
following such Annual Period, the Company shall deliver to Executive the Annual
ROAE Options, if any, earned by Executive for the preceding Annual Period. All
Annual ROAE Options granted pursuant to this Schedule 3.3(i) shall be granted
effective as of January 1 immediately following the Annual Period for which such
Annual ROAE Options are granted.
5. In the event Executive's employment hereunder is terminated prior to
the expiration of the Employment Term by Company pursuant to paragraphs 2.2(i),
(ii), (iii) or (iv) or by Executive pursuant to paragraph 2.3(ii), Executive's
right to receive any further compensation or awards under paragraph 3.3(i) or
this Schedule 3.3(i) shall immediately terminate with such termination of
employment and Executive shall not be entitled to receive any pro rata award of
Annual ROAE Options hereunder.
6. In the event Executive's employment hereunder is terminated prior to
the expiration of the Employment Term by Company for any reason other than those
encompassed by paragraphs 2.2(i), (ii), (iii) or (iv) or by Executive pursuant
to paragraph 2.3(i), Executive shall be entitled to receive a pro rata award of
any Annual ROAE Options otherwise earned for the Annual Period during which such
termination occurs. Executive shall not be entitled to receive any pro rata
award of the Annual ROAE Options unless the performance criteria set forth in
Section 2 above for such Annual Period is satisfied. Following any such
termination by either Company or Executive, Company shall calculate the Annual
ROAE Options, if any, earned for such Annual Period in accordance with Section 2
above. If any Annual ROAE Options are otherwise earned for such Annual Period,
Executive shall be entitled to a pro rata award and delivery of such Annual ROAE
Options, such award to be delivered in accordance with the schedule set forth in
Section 4 above.
7. In the event of a Change of Control, (i) all outstanding Annual ROAE
Options shall fully vest and become exercisable, and (ii) with respect to any
Annual ROAE Options which may be awarded to Executive for the Annual Period in
which such Change of Control occurs and any Annual Period thereafter, the
performance criteria set forth in this Schedule 3.3(i) with respect to such
Annual ROAE Options shall be deemed to have been met in full to the maximum
extent, such Annual ROAE Options shall be awarded to Executive and all such
Annual ROAE options shall fully vest and become exercisable.
3.3(i)-2
SCHEDULE 3.3(ii)
1. Subject to the terms and conditions herein, during the Employment
Term Executive shall be entitled to receive, and the Company shall award to
Executive, on an annual basis, options to purchase up to 4,500 shares of the
Company Stock. The maximum number of shares of Company Stock for which options
may be granted pursuant to paragraph 3.3(ii) and this Schedule 3.3(ii) is 22,500
shares. The options to be granted to Executive pursuant to paragraph 3.3(ii) and
this Schedule 3.3(ii) with respect to each Annual Period are referred to as the
"Annual GEPS Options."
2. The number of shares of Company Stock subject to the Annual GEPS
Options to be awarded to Executive will be calculated, on an annual basis, on
the basis of Company's Growth in Earnings Per Share (as herein defined) for each
respective Annual Period in accordance with the following:
(i) If the Company's Growth in Earnings Per Share for the
Annual Period is equal to or less than 15%, then Executive shall not be
entitled to receive any award of the Annual GEPS Options for such
Annual Period.
(ii) If the Company's Growth in Earnings Per Share for the
Annual Period is greater than 15% but less than 19%, the number of
shares of Company Stock subject to the Annual GEPS Options awarded for
such Annual Period shall be determined by (A) multiplying (1) 4,500 by
(2) the Growth in Earnings Per Share for such Annual Period less 15,
and (B) dividing the product obtained in clause (A) by 4. Expressed as
a formula, the calculation is as follows:
Number of shares = 4,500 x (Growth in Earnings Per Share - 15)
-------------------------------------------
4
By way of example, if the earnings per share for the previous Annual
Period is $0.65 and the earnings per share for the Annual Period for
which such calculation is being made is $0.77, the number of shares of
Company Stock subject to the Annual GEPS Options awarded for such
Annual Period is determined as follows:
Growth in Earnings Per Share = .77 - 1 = 18.4%
---
.65
Number of shares = 4,500 (18.4 - 15)
-----------------
4
= 3,825 shares
(iii) If the Company's Growth in Earnings Per Share for the
Annual Period is equal to or greater than 19%, the number of shares of
Company Stock subject to the Annual GEPS Options awarded for such
Annual Period shall be 4,500 shares.
The calculations set forth in this Section 2 shall be made on an annual basis
and will not be affected by the Company's cumulative Growth in Earnings Per
Share in either preceding or
3.3(ii)-1
succeeding Annual Periods. If the Company's Growth in Earnings Per Share in any
Annual Period exceeds 19% or is less than 15%, such excess or deficit, as
applicable, will not be taken into consideration for purposes of determining the
Annual GEPS Options to be received by Executive for any other Annual Period.
3. As used in this Agreement and this Schedule 3.3(ii), the Company's
"Growth in Earnings Per Share" for any Annual Period shall be calculated on the
basis of the annual growth in the Company's diluted earnings per share as set
forth in the Company's Annual Report on Form 10-K as filed with the SEC. The
Company's Growth in Earnings Per Share for any Annual Period shall be expressed
as a percentage and shall be determined by (A) dividing the Company's diluted
earnings per share for such Annual Period by the Company's diluted earnings per
share for the preceding Annual Period, and (B) subtracting 1 from the quotient
obtained in clause (A). Expressed as a formula, the calculation is as follows:
Growth in Earnings = [(diluted earnings per share for the Subject Annual Period)] - 1
----------------------------------------------------------
Per Share [(diluted earnings per share for the preceding Annual Period)]
If for any reason the Company is no longer required to file an Annual Report on
Form 10-K with the SEC, the Company shall cause its diluted earnings per share
to be calculated in a manner consistent with the Company's most recently filed
Annual Report on Form 10-K.
4. Promptly following the Company's filing of its Annual Report on Form
10-K for any Annual Period, but in no event later than the April 15 immediately
following such Annual Period, Company shall deliver to Executive the Annual GEPS
Options, if any, earned by the Executive for the preceding Annual Period. All
Annual GEPS Options granted pursuant to this Schedule 3.3(ii) shall be granted
effective as of January 1 immediately following the Annual Period for which such
Annual GEPS Options are granted.
5. In the event Executive's employment hereunder is terminated prior to
the expiration of the Employment Term by Company pursuant to paragraphs 2.2(i),
(ii), (iii) or (iv) or by Executive pursuant to paragraph 2.3(ii), Executive's
right to receive any further compensation or awards under paragraph 3.3(ii) or
this Schedule 3.3(ii) shall immediately terminate with such termination of
employment and Executive shall not be entitled to receive any pro rata award of
Annual GEPS Options hereunder.
6. In the event Executive's employment hereunder is terminated prior to
the expiration of the Employment Term by Company for any reason other than those
encompassed by paragraphs 2.2(i), (ii), (iii) or (iv) or by Executive pursuant
to paragraph 2.3(i), Executive shall be entitled to receive a pro rata award of
any Annual GEPS Options otherwise earned for the Annual Period during which such
termination occurs. Executive shall not be entitled to receive any pro rata
award of the Annual GEPS Options unless the performance criteria set forth in
Section 2 above for such Annual Period is satisfied. Following any such
termination by either Company or Executive, Company shall calculate the Annual
GEPS Options, if any, earned for such Annual Period in accordance with Section 2
above. If any Annual GEPS Options are otherwise earned for such Annual Period,
Executive shall be entitled to a pro rata award and delivery of such Annual GEPS
Options, such award to be delivered in accordance with the schedule set forth in
Section 4 above.
3.3(ii)-2
8. In the event of a Change of Control, (i) all outstanding Annual GEPS
Options shall fully vest and become exercisable, and (ii) with respect to any
Annual GEPS Options which may be awarded to Executive for the Annual Period in
which such Change of Control occurs and any Annual Period thereafter, the
performance criteria set forth in this Schedule 3.3(ii) with respect to such
Annual GEPS Options shall be deemed to have been met in full to the maximum
extent, such Annual GEPS Options shall be awarded to Executive and all such
Annual GEPS options shall fully vest and become exercisable.
3.3(ii)-3
SCHEDULE 3.3(iii)
1. Subject to the terms and conditions herein, during the Employment
Term Executive shall be entitled to receive, and Company shall award to
Executive, on an annual basis, options to purchase up to 4,500 shares of the
Company Stock. The maximum number of shares of Company Stock for which options
may be granted pursuant to paragraph 3.3(iii) and this Schedule 3.3(iii) is
22,500 shares. The options to be granted to the Executive pursuant to paragraph
3.3(iii) and this Schedule 3.3(iii) with respect to each Annual Period are
referred to as the "Annual NPL Options."
2. The number of shares of Company Stock subject to the Annual NPL
Options to be awarded to Executive will be calculated, on an annual basis, on
the basis of the Company's ratio (the "NPL Ratio") of Nonperforming Loans to
Total Loans (as such terms are herein defined) for each respective Annual Period
in accordance with the following:
(i) If the Company's NPL Ratio for the Annual Period is equal
to or greater than 73 basis points (.73%), then the Executive shall not
be entitled to receive any grant of the Annual NPL Options for such
Annual Period.
(ii) If the Company's NPL Ratio for the Annual Period is less
73 basis points (.73%) but greater than 50 basis points (.50%), the
number of shares of Company Stock subject to the Annual NPL Options
awarded to Executive for such Annual Period shall be determined by (A)
multiplying (1) 4,500 by (2) 73 less the NPL Ratio for such Annual
Period (expressed in basis points), and (B) dividing the product
obtained in clause (A) by 23. Expressed as a formula, the calculation
is as follows:
Number of shares = 4,500 (73 - NPL Ratio)
----------------------
23
By way of example, if the Ratio of Nonperforming Loans to Total Loans
for the Annual Period is 60 basis points (.60%), the number of shares
of Company Stock subject to the Annual NPL Options awarded for such
Annual Period is determined as follows:
Number of shares = 4,500 (73 - 60)
---------------
23
= 2,543 shares
(iii) If the NPL Ratio for the Annual Period is equal to or
less than 50 basis points (.50%), the number of shares of Company Stock
subject to the Annual NPL Option awarded to the Executive for such
Annual Period shall be 4,500 shares.
The calculations set forth in this Section 2 shall be made on an annual basis
and will not be affected by the Company's cumulative ratio of Nonperforming
Loans to Total Loans in either preceding or succeeding Annual Periods. If the
Company's Nonperforming Loans to Total Loans in any Annual Period exceeds 73
basis points (.73%) or is less than 50 basis points (.50%), such excess or
deficit, as applicable, will not be taken into consideration for purposes of
determining the Annual NPL Options to be awarded to Executive for any other
Annual Period.
3.3(iii)-1
3. As used in this Agreement and this Schedule 3.3(iii), the Company's
"Ratio of Nonperforming Loans to Total Loans" for any Annual Period shall be the
ratio of nonperforming loans to total period-end loans set forth in the
Company's Annual Report on Form 10-K as filed with the SEC. If for any reason
the Company is no longer required to file an Annual Report on Form 10-K with the
SEC, the Company shall cause such ratio to be calculated in a manner consistent
with the Company's most recently filed Annual Report on Form 10-K.
4. Promptly following the Company's filing of its Annual Report on Form
10-K for any Annual Period, but in no event later than the April 15 immediately
following such Annual Period, Company shall deliver to Executive the Annual NPL
Options, if any, earned by Executive for the preceding Annual Period. All Annual
NPL Options granted pursuant to this Schedule 3.3(iii) shall be granted
effective as of January 1 immediately following the Annual Period for which such
Annual NPL Options are granted.
5. In the event Executive's employment hereunder is terminated prior to
the expiration of the Employment Term by Company pursuant to paragraphs 2.2(i),
(ii), (iii) or (iv) or by Executive pursuant to paragraph 2.3(ii), Executive's
right to receive any further compensation or awards under paragraph 3.3(iii) or
this Schedule 3.3(iii) shall immediately terminate with such termination of
employment and Executive shall not be entitled to receive any pro rata award of
Annual NPL Options hereunder.
6. In the event Executive's employment hereunder is terminated prior to
the expiration of the Employment Term by Company for any reason other than those
encompassed by paragraphs 2.2(i), (ii), (iii) or (iv) or by Executive pursuant
to paragraph 2.3(i), Executive shall be entitled to receive a pro rata award of
any Annual NPL Options otherwise earned for the Annual Period during which such
termination occurs. Executive shall not be entitled to receive any pro rata
award of the Annual NPL Options unless the performance criteria set forth in
Section 2 above for such Annual Period is satisfied. Following any such
termination by either Company or Executive, Company shall calculate the Annual
NPL Options, if any, earned for such Annual Period in accordance with Section 2
above. If any Annual NPL Options are otherwise earned for such Annual Period,
Executive shall be entitled to a pro rata award and delivery of such Annual NPL
Options, such award to be delivered in accordance with the schedule set forth in
Section 4 above.
7. In the event of a Change of Control, (i) all outstanding Annual NPL
Options shall fully vest and become exercisable, and (ii) with respect to any
Annual NPL Options which may be awarded to Executive for the Annual Period in
which such Change of Control occurs and any Annual Period thereafter, the
performance criteria set forth in this Schedule 3.3(iii) with respect to such
Annual NPL Options shall be deemed to have been met in full to the maximum
extent, such Annual NPL Options shall be awarded to Executive and all such
Annual NPL options shall fully vest and become exercisable.
3.3(iii)-2
SCHEDULE 3.3(iv)
1. Subject to the terms and conditions herein, during the Employment
Term Executive shall be entitled to receive, and the Company shall grant to
Executive, on an annual basis, up to 7,500 shares of the Company Stock. The
maximum number of shares of Company Stock which may be awarded to Executive
pursuant to paragraph 3.3(iv) and this Schedule 3.3(iv) is 37,500 shares. The
shares of Company Stock to be awarded to Executive pursuant to paragraph 3.3(iv)
and this Schedule 3.3(iv) are referred to as the "Annual Growth Stock Awards."
2. The number of shares of Company Stock to be awarded to Executive
pursuant to paragraph 3.3(iv) and this Schedule 3.3(iv) will be calculated, on
an annual basis, on the basis of the annual increase in the market price of the
Company Stock for such Annual Period relative to the annual growth in the Nasdaq
Composite Bank Index for the same Annual Period in accordance with the
following:
(i) Subject to the provisions of clause (ii) below, the number
of shares of Company Stock to be awarded to Executive during any Annual
Period shall be determined in accordance with the following formula:
AGSA = [7,500 x (XXXX - XXXX)] / .064
-------------
NAGI
where:
AGSA = the Annual Growth Stock Award for such Annual
Period
SAGI = the Sterling Annual Growth Index for such
Annual Period
NAGI = the Nasdaq Bank Annual Growth Index (as herein
defined) for such Annual Period
By way of example, if the SAGI for an Annual Period is 1.14 and the
NAGI for such Annual Period is 1.08, the number of shares of Company
Stock to be awarded to Executive for such Annual Period is determined
as follows:
AGSA = [7,500 x (1.14 - 1.08)] / .064
-----------
1.08
= 6,510 shares
(ii) The maximum Annual Growth Stock Award for any Annual
Period is 7,500 shares of Company Stock. If the calculation under
clause (i) above results in a number greater than 7,500, the maximum
number of shares of Company Stock awarded to Executive for such Annual
Period shall be limited to 7,500 shares.
The calculations set forth in this Section 2 shall be made on an annual basis
and will not be affected by the cumulative growth in the market price of the
Company Stock in either preceding
3.3(iv)-1
or succeeding Annual Periods. If the Nasdaq Bank Annual Growth Index is greater
than the Sterling Annual Growth Index for any Annual Period or as a result of
the calculation as set forth in Section 2 hereinabove, the Executive would
otherwise be entitled to receive in excess of 7,500 shares for any Annual
Period, the deficit or excess, as applicable, will not be taken into
consideration for purposes of determining the Annual Growth Stock Award to be
received by Executive for any other Annual Period.
3. As used in this Agreement and this Schedule 3.3(iv), the following
terms shall have the meanings indicated below:
"Beginning Period Index Value" for any Annual Period shall mean the
average daily midpoint index value of the Nasdaq Composite Bank Index for the
ten consecutive trading days immediately preceding such Annual Period.
"Beginning Period Stock Price" for any Annual Period shall mean the
average daily midpoint price per share of the Company Stock on the Nasdaq
National Market for the ten consecutive trading days immediately preceding such
Annual Period.
"Ending Period Index Value" for any Annual Period shall mean the
average daily midpoint index value of the Nasdaq Composite Bank Index for the
last ten consecutive trading days of such Annual Period.
"Ending Period Stock Price" for any Annual Period shall mean the
average daily midpoint price per share of the Company Stock on the Nasdaq
National Market for the last ten consecutive trading days of such Annual Period.
"Nasdaq Bank Annual Growth Index" for any Annual Period shall be the
number obtained by dividing the Beginning Period Index Value by the Ending
Period Index Value
"Sterling Annual Growth Index" for any Annual Period shall be the
number obtained by dividing the Beginning Period Stock Price by the Ending
Period Stock Price.
4. The Annual Growth Stock Award, if any, earned by Executive for any
Annual Period shall be delivered to the Executive concurrently with the awards
contemplated by paragraphs 3.3(i), (ii), and (iii), provided, however, if no
such awards are to be granted for such Annual Period, the Annual Growth Stock
Award, if any, shall be delivered no later than the April 15 immediately
following such Annual Period. All Annual Growth Stock Awards awarded pursuant to
this Schedule 3.3(iv) shall be granted effective as of January 1 immediately
following the Annual Period for which such Annual Growth Stock Award is granted.
5. In the event Executive's employment hereunder is terminated prior to
the expiration of the Employment Term by Company pursuant to paragraphs 2.2(i),
(ii), (iii) or (iv) or by Executive pursuant to paragraph 2.3(ii), Executive's
right to receive any further compensation or awards under paragraph 3.3(iv) or
this Schedule 3.3(iv) shall immediately terminate with such termination of
employment and Executive shall not be entitled to receive any pro rata Annual
Growth Stock Awards hereunder.
3.3(iv)-2
6. In the event Executive's employment hereunder is terminated prior to
the expiration of the Employment Term by Company for any reason other than those
encompassed by paragraphs 2.2(i), (ii), (iii) or (iv) or by Executive pursuant
to paragraph 2.3(i), Executive shall be entitled to receive a pro rata award of
any Annual Growth Stock Awards otherwise earned for the Annual Period during
which such termination occurs. Executive shall not be entitled to receive any
pro rata award of the Annual Growth Stock Awards unless the performance criteria
set forth in Section 2 above for such Annual Period is satisfied. Following any
such termination by either Company or Executive, Company shall calculate the
Annual Growth Stock Awards, if any, earned for such Annual Period in accordance
with Section 2 above. If any Annual Growth Stock Awards are otherwise earned for
such Annual Period, Executive shall be entitled to a pro rata award and delivery
of such Annual Growth Stock Awards, such award to be delivered in accordance
with the schedule set forth in Section 4 above.
7. In the event of a Change of Control, (i) all outstanding Annual
Growth Stock Awards shall fully vest and the forfeiture provisions shall fully
lapse with respect to such shares, and (ii) with respect to any Annual Growth
Stock Awards which may be awarded to Executive for the Annual Period in which
such Change of Control occurs and any Annual Period thereafter, the performance
criteria set forth in this Schedule 3.3(iv) with respect to such Annual Growth
Stock Awards shall be deemed to have been met in full to the maximum extent,
such Annual Growth Stock Awards shall be awarded to Executive and all such
Annual Growth Stock Awards shall fully vest and the forfeiture provisions shall
fully lapse with respect to such shares.
3.3(iv)-3
SCHEDULE 3.3(v)
1. Subject to the terms and conditions herein, the Executive shall be
entitled to receive, and the Company shall award to Executive, up to 37,500
shares of Company Stock. The shares of Company Stock to be awarded pursuant to
paragraph 3.3(v) and this Schedule 3.3(v) (the "Term Growth Stock Awards") shall
be based upon the increase in the market price of the Company Stock over the
initial five (5) year Employment Term and shall be delivered to Executive
following the expiration of the Employment Term.
2. The number of shares of Company Stock to be awarded to Executive
pursuant to paragraph 3.3(v) and this Schedule 3.3(v) will be calculated on the
basis of the increase in the market price of the Company Stock over the period
commencing January 1, 2002 and ending December 31, 2006 (the "5 Year Period")
relative to the increase in the Nasdaq Composite Bank Index over the 5 Year
Period in accordance with the following:
(i) If the Sterling Term Growth Index (as herein defined) over
the 5 Year Period is equal to or less than one (1), the Executive shall
not be entitled to receive any Term Growth Stock Awards under this
Agreement.
(ii) Subject to the provisions of clause (iii) below, if the
Sterling Term Growth Index is greater than one (1), the number of
shares of Company Stock to be awarded to Executive shall be determined
in accordance with the following formula.
TGSA = [37,500 x (XXXX - XXXX)] / .00
-------------
XXXX
where:
TGSA = the Term Growth Stock Award
STGI = the Sterling Term Growth Index
NTGI = the Nasdaq Bank Term Growth Index (as herein
defined)
By way of example, if the STGI for the 5 Year Term is 2.04 and the NTGI
for the 5 Year Term is 1.60, the number of shares of Company Stock to
be awarded to Executive is determined as follows:
TGSA = [37,500 x (2.04 - 1.60)] / .36
-----------
1.60
= 28,645 shares
(iii) The maximum Term Growth Stock Award is 37,500 shares of
Company Stock. If the calculation under clause (ii) above results in a
number greater than 37,500, the maximum number of shares of Company
Stock awarded to Executive shall be limited to 37,500 shares.
3.3(v)-1
3. As used in this Agreement and this Schedule 3.3(v), the following
terms shall have the meanings indicated below:
"Beginning Term Index Value" shall mean the average daily midpoint
index value of the Nasdaq Composite Bank Index for the ten consecutive trading
days immediately preceding the Effective Date.
"Beginning Term Stock Price" shall mean the average daily midpoint
price per share of the Company Stock on the Nasdaq National Market for the ten
consecutive trading days immediately preceding the Effective Date.
"Ending Term Index Value" shall mean the average daily midpoint index
value of the Nasdaq Composite Bank Index for the last ten consecutive trading
days of the 5 Year Period.
"Ending Term Stock Price" shall mean the average daily midpoint price
per share of the Company Stock on the Nasdaq National Market for the last ten
consecutive trading days of the 5 Year Period.
"Sterling Term Growth Index" shall be the number obtained by dividing
the Beginning Term Stock Price by the Ending Term Stock Price.
"Nasdaq Bank Term Growth Index" shall be the number obtained by
dividing the Beginning Term Index Value by the Ending Term Index Value.
4. The Term Growth Stock Award, if any, earned by Executive shall be
delivered to the Executive concurrently with the awards contemplated by
paragraphs 3.3(i), (ii), (iii), and (iv), provided, however, if no such awards
are to be granted, the Term Growth Stock Award, if any, shall, except as
otherwise provided in Section 6 below, be delivered no later than April 15,
2007.
5. In the event Executive's employment hereunder is terminated by
Company pursuant to paragraphs 2.2(i), (ii), (iii) or (iv) or by Executive
pursuant to paragraph 2.3(ii) prior to the expiration of the Employment Term,
Executive's right to receive any further compensation or awards under paragraph
3.3(v) or this Schedule 3.3(v) shall immediately terminate with such termination
of employment and Executive shall not be entitled to receive any pro rata Term
Growth Stock Award.
6. In the event Executive's employment hereunder is terminated prior to
the expiration of the Employment Term by Company for any reason other than those
encompassed by paragraphs 2.2(i), (ii), (iii) or (iv) or by Executive pursuant
to paragraph 2.3(i), Executive shall be entitled to receive a pro rata award of
any Term Growth Stock Award otherwise earned for the 5 Year Period. Executive
shall not be entitled to receive any pro rata award of the Term Growth Stock
Award unless the performance criteria set forth in Section 2, as amended herein,
is satisfied. The performance criteria for the Term Growth Stock Award shall be
determined as of the end of the Annual Period in which such termination occurs
and for purposes of calculating the number of shares of Company Stock, if any,
earned by Executive through the date of termination, the formula set forth in
Section 2 above shall be modified as follows:
3.3(v)-2
TGSA = [37,500 x (STGI - NTGI)] / Target Rate
-----------
NTGI
where:
Target Rate shall equal 6.4% compounded annually beginning
with the Effective Date of this Agreement through the end of
the Annual Period in which such termination occurs.
Following the end of the Annual Period during which any such termination by
either Company or Executive shall occur, the Company shall calculate the pro
rata Term Growth Stock Award, if any, earned by Executive. If any Term Growth
Stock Award is otherwise earned by Executive through the end of the Annual
Period during which such termination shall occur, Executive shall be entitled to
a pro rata award of the Term Growth Stock Award and delivery of such shares,
such award to be delivered concurrently with the awards contemplated by
paragraphs 3.3(i), (ii), (iii), and (iv), provided, however, if no such awards
are to be granted, the pro rata Term Growth Stock Award, if any, shall be
delivered no later than the April 15 immediately following the Annual Period in
which such termination shall occur.
7. In the event of a Change of Control prior to the expiration of the 5
Year Period, the performance criteria set forth in this Schedule 3.3(v) with
respect to the Term Growth Stock Awards shall be deemed to have been met in full
to the maximum extent, such Term Growth Stock Award shall be awarded to
Executive and all such shares of Company Stock awarded to Executive shall fully
vest, and the forfeiture provisions shall fully lapse with respect to such
shares.
3.3(v)-3