AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit 10.2
AMENDED AND RESTATED
THIS AGREEMENT, made effective as of March 19, 2005, by and between STERLING FINANCIAL CORPORATION (“Sterling”) and XXXXXXX X. XXXXX (the “Executive”),
WHEREAS, the parties desire to enter into this Agreement, which is intended to amend and supersede an existing Employment Agreement, as amended (the “Prior Agreement”);
1. Employment. Sterling agrees to continue to employ the Executive, and the Executive agrees to continue to be employed by Sterling, upon the terms and conditions hereinafter provided until December 31, 2009 (the “Term”).
2. Position and Duties. During the Term, Sterling agrees to employ the Executive to serve as the President and Chief Operating Officer of Sterling, and the Executive will have such powers and duties as are commensurate with such position and as may be conferred upon him by the Board of Directors of Sterling (the “Board”). During the Term, and except for illness or incapacity and reasonable vacation periods as shall be consistent with Sterling’s policies for other key executives, the Executive shall devote all of his business time, attention, skill and efforts exclusively to the business and affairs of Sterling and its subsidiaries; provided, however, that the Executive may serve on other boards as a director or trustee if such service does not interfere with his ability to discharge his duties and responsibilities to Sterling.
3. Compensation. For all services rendered by the Executive in any capacity required hereunder during the Term, including, without limitation, services as an executive
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officer, director, or member of any committee of Sterling, or any subsidiary or division thereof, the Executive shall be compensated as follows:
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contrary herein, if and when a settlement or judgment amount is received by Sterling or its subsidiaries, successors or assigns, as a result of the Goodwill Lawsuit or any related lawsuit, the Executive shall be paid two percent of the gross amount received, in recognition of the Executive’s substantial contribution in bringing about the settlement or judgment. The parties recognize and agree that any material decisions regarding the management, settlement or dismissal of the Goodwill Lawsuit will be made by the Board. This provision shall survive any termination of this Agreement.
4. Business Expenses. It is understood that for the Executive to successfully perform his duties hereunder so as to produce the greatest economic return to Sterling, it is necessary for the Executive to entertain persons having an existing or prospective business relationship with Sterling and to attend seminars, conventions and continuing education programs. Sterling, therefore, shall pay directly or reimburse the Executive for all reasonable travel, entertainment or other expenses incurred by the Executive (and his spouse where there is a legitimate business reason for his spouse to accompany him) in connection with the performance of his duties and obligations under this Agreement, subject to the Executive’s presentation of appropriate vouchers in accordance with such procedures as Sterling may from time to time establish for senior officers and to preserve any deductions for Federal income taxation purposes to which Sterling may be entitled.
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(c) Definitions. For purposes of this Agreement, the following terms have the following meanings:
(i) The term “Termination for Cause” means:
(A) the continued failure of Executive to substantially perform the Executive’s duties with Sterling or one of its subsidiaries (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board, which specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties, or
(B) the willful engaging by the Executive in illegal conduct that is materially and demonstrably injurious to Sterling or any of its subsidiaries, or
(C) conviction of a felony involving fraud, dishonesty or moral turpitude, or a guilty or nolo contendere plea by Executive with respect thereto, or
(D) violation of the provisions of Section 7 herein.
For purposes of this provision, no act or failure to act on the part of Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith and without reasonable belief that the Executive’s action or omission was in the best interest of Sterling or its subsidiaries. Any act or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for Sterling shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of Sterling and its subsidiaries. The cessation of employment of the Executive shall not be deemed to be a Termination for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board),
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finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (A), (B) or (D) above, and specifying the particulars thereof in detail.
(ii) The term “Constructive Discharge” means a termination of the Executive’s employment by the Executive due to a failure of Sterling or its successors, without the prior consent of the Executive, to fulfill the obligations under this Agreement in any material respect, including (A) any failure of the shareholders of Sterling to elect or reelect, or of Sterling to appoint or reappoint, the Executive as a member of the Board, or to the offices of President and Chief Operating Officer of Sterling, or (B) any other material adverse change by Sterling in the functions, duties or responsibilities of the Executive’s position with Sterling.
(iii) The term “Without Cause Termination” means a termination of the Executive’s employment by Sterling, for a reason other than Permanent Disability, retirement, expiration of the Term, or Termination for Cause.
(iv) The term “Permanent Disability” means the inability of the Executive to work for a period of six full calendar months during any twelve consecutive calendar months due to illness or injury of a physical or mental nature. Any questions as to the existence of the Permanent Disability of Executive as to which Executive and Sterling cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Executive and Sterling. If Executive and Sterling cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. Such determination made in writing to Sterling and Executive shall be final and conclusive for all purposes under this Agreement.
6. Effect of Termination of Employment in Connection with a Change in Control.
(i) A “Change in Control” shall be deemed to have occurred at such time as:
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(A) any “person” (as that term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other than Sterling or affiliates of Sterling) becomes, directly or indirectly, the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities representing 25% or more of the then outstanding securities of Sterling;
(B) during any period of two (2) consecutive years or less, individuals who at the beginning of such period constituted the Board of Sterling cease, for any reason, to constitute at least a majority of the Board, unless the election or nomination for election of each new member of the Board was approved by a vote of at least two-thirds of the members of the Board then still in office who were members of the Board at the beginning of the period; or
(C) the Shareholders of Sterling approve: (1) a plan of complete liquidation of Sterling; (2) an agreement for the sale or disposition of all or substantially all of Sterling’s assets; or (3) a merger or consolidation of Sterling with any other corporation, other than a merger or consolidation that would result in the voting securities of Sterling outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of Sterling or such surviving entity outstanding immediately after such merger or consolidation.
(ii) “Separation Period” means the balance of the Term or a three-year period beginning on the date of Termination of Employment, whichever is longer.
(iii) “Termination of Employment” shall mean the termination of the Executive’s actual employment with Sterling.
(iv) “Termination Upon a Change of Control” shall mean a Termination of Employment upon or within eighteen months after a Change of Control.
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(i) the Executive’s earned but unpaid Base Salary and Incentive Bonus amounts and amounts (whether vested or not) held for the Executive’s account in the deferred compensation plan and the supplemental executive retirement plan then in effect as of the date of Termination of Employment;
(ii) the benefits, if any, to which the Executive is entitled as a former employee under the employee benefit programs and compensation plans and programs maintained for the benefit of Sterling’s officers and employees;
(iii) continued medical, dental care, life or other insurance, including travel or accident insurance and disability insurance, and the perquisites set forth in Section 3(d) throughout the Separation Period, with coverage equivalent to the coverage to which the Executive would have been entitled had the Executive continued working for Sterling during the Separation Period at the highest annual rate of Base Salary achieved during the Executive’s period of actual employment with Sterling; provided, however, that the Executive may upon written notice elect to receive the present value of such coverage in cash in a lump sum, computed using a discount rate of 6% per year compounded monthly;
(iv) an amount equal to the Base Salary and Incentive Bonus amounts the Executive would have earned if the Executive had continued working for Sterling during the Separation Period, at the highest annual rate of Base Salary, and the highest annual Incentive Bonus achieved during the Executive’s period of actual employment with Sterling; and
(v) an amount equal to Sterling’s contributions to which the Executive would have been entitled under Sterling’s 401(k) Plan if the Executive had continued working for Sterling during the Separation Period at the highest annual rate of Base Salary achieved during the Executive’s period of actual employment with Sterling, and the Executive had made the maximum amount of employee contributions as are permitted under such plans.
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(e) In the event that, on or after the occurrence of a Change in Control, Sterling fails to make any payment or provide any coverage to Executive arising out of or relating in any way to this Agreement or to the Executive’s employment by Sterling (collectively, “Employment Rights”), then Sterling shall pay to the Executive and reimburse the Executive for the Executive’s full costs (including, without limitation, the fees and expenses of the Executive’s attorneys and court and related costs) of enforcing the Executive’s Employment Rights. In addition, if the enforceability of this Agreement or the payment of any benefit to the Executive hereunder is disputed by Sterling on or after the occurrence of a Change in Control, then the Term of this Agreement shall be extended for the period of the dispute in the event of a final judicial determination that
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the Executive is entitled to at least fifty percent (in dollar amount) of the benefits which he claimed from, and which were disputed by, Sterling.
7. Other Duties of Executive During and After Term.
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During the Non-Compete Period, the Executive also agrees that he will not solicit for the account of any Competitor, any customer or client of Sterling or its subsidiaries. The Executive also agrees not to act on behalf of any Competitor to interfere with the relationship between Sterling or its subsidiaries and their employees during the Non-Compete Period. In addition, if the Executive obtains non-competitive employment during the Non-Compete Period, for such period the Executive agrees not to solicit employees of Sterling or its subsidiaries for new employment without the prior written consent of Sterling. For purposes of this section, (i) the term “proprietary interest” means legal or equitable ownership, whether through stockholdings or otherwise, of greater than a 20% equity interest in a business, firm or entity, and (ii) an entity shall be considered to be “engaged in competition” if such entity is, or is a holding company for, a bank, savings and loan association or other financial services business engaged in a business that competes with Sterling in the States of Washington, Idaho, Montana or Oregon. Executive acknowledges the receipt and sufficiency of specific consideration for the agreements in this Section 7.
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8. Withholding Taxes. Sterling may directly or indirectly withhold from any payments made under this Agreement all Federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling.
9. Consolidation, Merger, or Sale of Assets. Nothing in this Agreement shall preclude Sterling from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation which assumes this Agreement and all obligations and undertakings of Sterling hereunder. Upon such a consolidation, merger or transfer of assets, the term “Sterling” as used herein shall mean such other corporation and this Agreement shall continue in full force and effect.
10. Notices. All notices, requests, demands and other communications required or permitted hereunder shall be given in writing and shall be deemed to have been duly given if delivered or mailed, postage prepaid, by same day or overnight mail as follows:
(a) To Sterling:
000 Xxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Chief Financial Officer
With a copy to:
Witherspoon, Kelley, Xxxxxxxxx & Xxxxx, X.X.
000 Xxxx Xxxxxxxxx, Xxx. 0000
Xxxxxxx, XX 00000-0000
(b) To the Executive:
At his regular office and to his
primary residence
or to such other address as either party shall from time-to-time specify in writing to the other.
11. No Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment,
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encumbrance, charge, pledge or hypothecation, or to execution, attachment, levy or similar process, or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect; provided, however, that nothing in this Section 11 shall preclude the assumption of such rights by executors, administrators or other legal representatives of the Executive or his estate and their assigning any rights hereunder to the person or persons entitled thereto.
12. No Mitigation. The Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Agreement be reduced by any compensation earned by other employment or otherwise, except as provided herein.
13. Source of Payment. All payments provided for under this Agreement shall be paid in cash from the general funds of Sterling. To the extent that any person acquires a right to receive payments from Sterling hereunder, such right, without prejudice to rights which employees may have, shall be no greater than the right of an unsecured creditor of Sterling.
14. Further Action. Sterling shall perform all acts and execute all documents as may be reasonably necessary to effect performance of this Agreement by Sterling. In the event Sterling's Deferred Compensation Plan, the 1992 Stock Option Plan, the 1998 Long-Term Incentive Plan, the 2001 Long-Term Incentive Plan, and the Supplemental Executive Retirement Plan, or plans which are substantially similar to such plans are not maintained, Sterling shall provide the Executive with compensation which is substantially similar in financial effect to the compensation which would otherwise have been provided through such plans. References herein to deferred compensation, stock option or incentive plan(s) and any other benefit plans shall be deemed to include all successor plans. Nothing in this Agreement shall be deemed to be a modification of Sterling's stock option or incentive plans.
15. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is finally adjudicated by a court of competent jurisdiction to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction.
16. Contents of Agreement. This Agreement supersedes all prior agreements and sets forth the entire understanding among the parties hereto with respect to the subject matter hereof
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and cannot be changed, modified, extended or terminated except upon written amendment approved by the parties hereto.
17. Governing Law. The validity, interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of Washington, and the Executive consents to the jurisdiction of the state and federal courts of Washington in any dispute arising under this Agreement.
18. Survival of Benefits. If the Term expires and no employment agreement between Sterling and Executive is in effect, but Executive’s employment relationship with Sterling continues, any section of this Agreement which provides a benefit to the Executive and which does not expressly provide for its termination upon the expiration of the Term shall survive the expiration of the Term and the obligation to provide benefits to the Executive as set forth in such Section shall remain binding upon Sterling until such time as the Executive’s employment relationship with Sterling is terminated and the benefits provided under such Section are paid in full to the Executive or until such time as a new employment agreement between Sterling and Executive is in effect. Anything to the contrary herein notwithstanding, following any Termination of Employment, including retirement, but not following a Termination for Cause, Sterling shall continue to provide the perquisites set forth in Section 3(d)(i), (ii) and (iii), as well as medical, dental, disability and travel accident insurance coverages for the Executive and his spouse to the same extent as if the Executive had continued in Sterling’s employ, provided that such coverages shall be offset by the receipt of any alternate benefits under Medicare or similar programs.
19. Representations. The Executive hereby represents and warrants that he has the legal capacity to execute and perform this Agreement, that it is a valid and binding agreement against him according to its terms, and that its execution and performance by him does not and will not violate the terms of any existing agreement or understanding to which the Executive is a party. In addition, the Executive represents and warrants that he knows of no reason why he is not physically capable of performing his obligations under this Agreement in accordance with its terms.
20. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in any number of counterparts, each of which when executed shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. It
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shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.
21. Compliance with Section 409A of the Code. This Agreement is intended to constitute an enforceable contract for the payment of compensation, severance and certain other benefits. The Agreement is not intended to constitute a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code. Notwithstanding the foregoing, in the event this Agreement and/or any benefit paid to the Executive hereunder is deemed to be subject to Section 409A of the Code, this Agreement shall be amended as reasonably necessary to bring this Agreement and/or any such benefit into compliance with Section 409A of the Code, without reducing the amounts of any benefits due to the Executive hereunder.
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STERLING FINANCIAL CORPORATION |
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BY: |
/s/ Xxxxxx X. Xxxxxxxx |
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XXXXXX X. XXXXXXXX |
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ATTEST: |
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STERLING FINANCIAL CORPORATION |
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BY: |
/s/ Xxxxxx X. Xxxxx |
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XXXXXX X. XXXXX |
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Senior Vice President - Finance |
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/s/ Xxxxxxx X. Xxxxx |
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XXXXXXX X. XXXXX |
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