Exhibit 10.1
AMENDED AND
RESTATED
EMPLOYMENT
AGREEMENT
THIS AGREEMENT,
made effective as of March 19, 2005, by and between STERLING
FINANCIAL CORPORATION (“Sterling”) and HAROLD B. GILKEY
(the “Executive”),
WITNESSETH:
WHEREAS, the
Executive is Chairman of the Board and Chief Executive Officer of
Sterling, and Sterling desires to retain the Executive and the
Executive is willing to continue to serve in such capacities on the
terms and conditions herein set forth; and
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”);
NOW THEREFORE, in
consideration of the mutual covenants herein contained, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as
follows:
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 Chairman of the Board and
Chief Executive 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:
(a)
Base Salary. Sterling shall pay the Executive a fixed minimum
salary of $500,000 per annum (such amount or such higher annual
amount as is paid from time to time pursuant to the terms hereof
being referred to as the “Base Salary”). The Base
Salary shall be subject to such periodic review (which shall occur
at least annually) and such periodic increases as the Board shall
deem appropriate in accordance with Sterling’s customary
procedures and practices regarding the salaries of senior
officers. The Base Salary shall be payable in accordance with
the customary payroll practices of Sterling, but in no event less
frequently than monthly.
(b)
Bonus Awards. The Executive shall be entitled to receive an
incentive bonus (the “Incentive Bonus”) for each fiscal
year during the Term. The Incentive Bonus shall be paid
within thirty days of the end of each fiscal year. The
Incentive Bonus shall be a minimum of ten percent of the
Executive’s Base Salary and the Executive shall be awarded a
minimum of 10,000 nonqualified stock options under Sterling’s
stock option or incentive plan(s) then in effect. The
Incentive Bonus may be increased, upon the recommendation of the
Personnel Committee and the approval of the Board, depending, among
other factors, upon the attainment of performance goals set by the
Board for the Executive and for Sterling.
(c)
Stock Options. The Executive shall be eligible to receive
grants under Sterling’s stock option or incentive plan(s)
then in effect subject to the terms and conditions of such
plan(s).
(d)
Perquisites. Sterling also will furnish the Executive during
each fiscal year of the Term, without cost to him except any
associated tax liability, with reasonable (i) payment for tax
preparation and financial planning; (ii) payment for an annual
physical examination of the Executive by a physician selected by
the Executive; (iii) reimbursement for club membership fees or
dues; and (iv) payment of an automobile allowance, it being
understood that the club membership fees or dues and the automobile
allowance shall be primarily to further the business of
Sterling.
(e)
Goodwill Lawsuit. Sterling is the plaintiff in a lawsuit in
the United States Court of Federal Claims (the “Goodwill
Lawsuit”). Notwithstanding anything to the
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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 three
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.
(f)
Additional Benefits. Except as modified by this Agreement,
the Executive shall be entitled to participate in all compensation
or employee benefit plans or programs, and to receive all benefits,
perquisites and emoluments, for which any salaried employees of
Sterling are eligible under any plan or program now or hereafter
established and maintained by Sterling for senior officers, to the
fullest extent permissible under the general terms and provisions
of such plans or programs and in accordance with the provisions
thereof, including group hospitalization, health, dental care, life
or other insurance, tax-qualified pension, savings, thrift, 401(k)
and profit-sharing plans, termination pay programs, sick-leave
plans, travel or accident insurance, salary continuation plans,
disability insurance, automobile allowance or automobile lease
plans, and executive contingent compensation plans, including,
without limitation, stock option or incentive plan(s) then in
effect.
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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5.
Effect of Termination of Employment Other Than in Connection
with a Change in Control .
(a)
Certain Terminations. In the event the Executive’s
employment hereunder terminates due to either Permanent Disability,
a Without Cause Termination or a Constructive Discharge, Sterling
shall, as severance pay, continue, subject to the provisions of
Section 7 below, to pay the Executive’s Base Salary as in
effect at the time of such termination until (i) the expiration of
the Term or (ii) for a three-year period beginning on the date of
Termination of Employment, whichever is longer (the
“Severance Period”), provided, that in the case of
Permanent Disability, such payments shall be offset by any amounts
otherwise paid to the Executive under Sterling’s disability
program generally available to other employees. In addition,
earned but unpaid Base Salary and Incentive Bonus amounts and
amounts (whether vested or not) held for the Executive’s
account in Sterling = s
deferred compensation plan and supplemental executive retirement
plan then in effect as of the date of Termination of Employment
shall be payable in full. Medical, dental care, life or other
insurance, including travel or accident insurance, disability
insurance and the perquisites set forth in Section 3(d) shall
continue through the end of the Severance Period. All stock
options and other incentive awards held by the Executive shall
become fully exercisable during the Severance Period.
(b)
Other Terminations. In the event that the Executive’s
employment hereunder terminates due to a Termination for Cause or
the Executive’s death, or the Executive voluntarily
terminates employment with Sterling for reasons other than a
Constructive Discharge or Permanent Disability, earned but unpaid
Base Salary and Incentive Bonus amounts as of the date of
Termination of Employment shall be payable in full. However,
no other payments shall be made, or benefits provided, by Sterling
under this Agreement except for stock options and other incentive
awards held by the Executive pursuant to the terms of the grant(s)
thereof, vested benefits payable under the terms of the deferred
compensation plan and supplemental executive retirement plan then
in effect, and any other benefits which the Executive is entitled
to receive under the terms of employee benefit programs maintained
by Sterling or its subsidiaries for its employees.
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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 Chairman of the Board and Chief Executive 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 .
(a)
Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(i)
A “Change in Control” shall be deemed to have occurred
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