(5)
| Options fully vest in the event of a change of control.an optionee becomes disabled while employed. As of December 31, 2019,2020, other than for the accelerationstock option granted to Mr. O’Brien, the exercise price of the restricted stock awards of Mr. Lopp, Mr. Montemayor, Mr. Huber and Mr. Sinatra would have resulted in payments with an aggregate value of $116,851, $89,408, $43,587 and $46,283, respectively, based oneach option exceeded the closing price of our common stock as of December 31, 20192020 of $8.10. No value would be realized with respect to the options held by Messrs. Lopp, Montemayor, Huber and Sinatra as the exercise price of their unvested options exceeded the closing price of our common stock as of such date.$4.54. Mr. Sinatra may bewas not employed at the end of 2020, and thus was entitled to no payments under his Employment Agreement as described in “Executive Compensation—Employment Agreements, Peter Sinatra.” The Sinatra Employment Agreement provides that if his employment is terminated without cause, he will be entitled to a continuation of his base salary, at the rate in effect on the date of his termination for the Severance Period and continued participation in benefit programs and plans and other benefits made available to employees of the Bank until the expiration of the Severance Period. The Sinatra Employment Agreement provides that if his employment is terminated on account of an involuntary termination on account of a change in control (as defined in the agreement) within 90 days following the date of a change in control (as defined in the agreement), Mr. Sinatra would be entitled to a lump sum severance payment equal to his annual base salary then in effect, subject to signing a release. The Sinatra Employment Agreement contains confidentiality and a one year non-solicitation provision. For one year after his termination of employment, within the states that the Bank conducts business, Mr. Sinatra may not (i) employ or associate in business with an individual who is (or was within the 12-month period prior to Mr. Sinatra’s termination of employment) an employee or officer of the Bank, (ii) solicit an individual or entity who is (or was within the 12-month period prior to Mr. Sinatra’s termination of employment) a customer or vendor of the Bank to terminate its relationship with the Bank, (iii) induce a present or future employee, officer, agent, affiliate or customer of the Bank to terminate the relationship, or (iv) to disparage the Bank. As described in “Executive Compensation—Employment Agreements, Peter Sinatra,” no payments were due to Mr. Sinatra under the Quantum Plan on his vesting on December 31, 2019. CHANGE IN CONTROL AND SEVERANCE PAYMENTS AS OF DECEMBER 31, 2019
Termination without Cause - No Change of Control
| | | | | | | | | | | | | Salary Continuation | | | — | | | — | | | — | | | $500,000 | Benefits Continuation | | | — | | | — | | | — | | | $23,445 | Executive Incentive Retirement Agreement Payments | | | $192,513 | | | $346,390 | | | $482,639 | | | — | Total | | | $192,513 | | | $346,390 | | | $482,639 | | | $523,445 | Disability(1)
| | | | | | | | | | | | | Salary Continuation | | | — | | | — | | | — | | | — | Benefits Continuation | | | — | | | — | | | — | | | — | Executive Incentive Retirement Agreement Payments | | | $192,513 | | | $346,390 | | | $482,639 | | | — | Restricted Stock Award Vesting(2) | | | $43,586 | | | $116,851 | | | $89,408 | | | $46,283 | Stock Option Vesting(3) | | | — | | | — | | | — | | | — | Total | | | $236,099 | | | $463,241 | | | $572,047 | | | $46,283 | Death(4)
| | | | | | | | | | | | | Salary Continuation | | | — | | | — | | | — | | | — | Benefits Continuation | | | — | | | — | | | — | | | — | Death Benefit under Executive Incentive Retirement Agreement(5) | | | $599,153 | | | $757,271 | | | $1,389,809 | | | — | Restricted Stock Award Vesting(6) | | | $43,586 | | | $116,851 | | | $89,408 | | | $46,283 | Stock Option Vesting(7) | | | — | | | — | | | — | | | — | Total | | | $642,739 | | | $874,122 | | | $1,479,217 | | | $46,283 | Change of Control - No Termination of Employment
| | | | | | | | | | | | | Salary Continuation | | | — | | | — | | | — | | | — | Benefits Continuation | | | — | | | — | | | — | | | — | Executive Incentive Retirement Agreement Payments | | | $192,513 | | | $346,390 | | | $482,639 | | | — | Restricted Stock Award Vesting(8) | | | $43,586 | | | $116,851 | | | $89,408 | | | $46,283 | Stock Option Vesting(9) | | | — | | | — | | | — | | | — | Total | | | $236,099 | | | $463,241 | | | $572,047 | | | $46,283 | Change of Control - Termination of Employment without Cause
| | | | | | | | | | | | | Salary Continuation | | | — | | | — | | | — | | | $500,000 | Benefits Continuation | | | — | | | — | | | — | | | — | Executive Incentive Retirement Agreement Payments | | | $192,513 | | | $346,390 | | | $482,639 | | | — | Restricted Stock Award Vesting(10) | | | $43,586 | | | $116,851 | | | $89,408 | | | $46,283 | Stock Option Vesting(11) | | | — | | | — | | | — | | | — | Total | | | $236,099 | | | $463,241 | | | $572,047 | | | $546,283 |
(1)
| The Company maintains a disability plan which is generally available to all employees and any payments or benefits under this plan are not disclosed in this table. |
(2)
| Restricted stock fully vests in the event of a termination of employment by reason of disability. |
(3)
| Options fully vest in the event an optionee becomes disabled while employed. As of December 31, 2019, the exercise price of each option exceeded the closing price of our common stock as of December 31, 2019 of $8.10. |
(4)
| The Company maintains a life insurance plan which is generally available to all employees and any payments under this plan are not disclosed in this table. |
(5)
| Under the executive’s Executive Income Retirement Plan agreement, a payment will be made to his beneficiary if he dies while in active service with the Bank. This amount would be paid in lieu of the payments to the executive. If the executive dies after payments have commenced but prior to the time the executive receives all distributions, the Bank will distribute the remaining amounts to his beneficiary in a lump sum. |
(6)
| Restricted stock fully vests in the event of a termination of employment by reason of death. |
(7)
| Options fully vest in the event an optionee dies while employed. |
(8)
| Restricted stock fully vests on the date of a change of control. |
(9)
| The Committee has the discretion to provide that options are 100% vested on the date of a change of control. |
(10)
| Restricted stock fully vests on the date of a change of control. |
(11)
| The Committee has the discretion to provide that options are 100% vested on the date of a change of control. |
Compensation Committee Interlocks and Insider Participation
None of our executive officers currently serves, or in the past year has served, as a member of the Board of Directors or compensation committee of any entity that has one or more executive officers serving on our Board of Directors or compensation committee.
Chief Executive Officer Pay Ratio
The Company’s chief executive officer to median employee pay ratio was calculated in accordance with SEC requirements. However, due to the flexibility afforded by Item 402(u) of Regulation S-K in calculating the pay ratio, the ratio presented herein is a reasonable estimate and may not be comparable to the pay ratio presented by other companies.
The Company identified the median employee by examining 2019 total compensation for all employees of the Company excluding the Chief Executive Officer.
The employee population used to identify the Company’s median employee included all employees of the Company, whether employed on a full-time, part-time, or seasonal basis,these agreements as of December 31, 2019. The compensation measure described above was consistently applied to this entire employee population. The Company did not make any assumptions, adjustments, or estimates with respect to the employee population or the compensation measure, but did annualize the compensation for any employees that were not employed by the Company for all of 2019.
After identifying the median employee based on the compensation measure described above, the Company calculated annual total compensation for the median employee using the same methodology used for our named executive officers as set forth in the “Summary Compensation Table” herein. The median employee was identified as of November 30, 2019 and the chief executive officer to median employee pay ratio was calculated with respect to the annualized compensation for Mr. Judd who was the chief executive officer at that date. As illustrated in the table below, in 2019, the Company’s Chief Executive Officer’s annual total compensation was 18 times that of the Company’s median employee.
2019 Annual Total Compensation | | | $1,035,514 | | | $56,855 | Total Annual Compensation Pay Ratio | | | 18 | | | 1 |
Director Compensation
2019 Director Compensation Table
The table below sets forth the compensation of each non-employee director in 2019.
Barry Allen | | | 40,250 | | | 24,895 | | | — | | | — | | | — | | | — | | | 65,145 | Peggy Daitch(2) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Jon Fox(3) | | | 9,000 | | | — | | | — | | | — | | | — | | | — | | | 9,000 | Seth Meltzer | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Tom Minielly(4) | | | 11,250 | | | — | | | — | | | — | | | — | | | — | | | 11,250 | Sandra Seligman | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Peter Sinatra(5) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Rachel Tronstein Stewart(6) | | | 26,125 | | | 24,895 | | | — | | | — | | | — | | | — | | | 51,020 | Benjamin Wineman | | | 32,250 | | | 24,895 | | | — | | | — | | | — | | | — | | | 57,145 | Lyle Wolberg | | | 38,875 | | | 24,895 | | | — | | | — | | | — | | | — | | | 63,770 | Total | | | 157,750 | | | 99,580 | | | — | | | — | | | — | | | — | | | 257,330 |
(1)
| Represents the grant date fair value of restricted stock awards calculated based on the closing price of the Company’s common stock on the grant date, reduced by the dividends per share expected to be paid during the period the shares are not vested. |
(2)
| Ms. Daitch joined the Company’s Board of Directors on December 17, 2019. |
(3)
| Mr. Fox retired from the Company’s Board of Directors on June 18, 2019. |
(4)
| Mr. Minielly joined the Company’s Board of Directors on June 18, 2019 and resigned on December 17, 2019. |
(5)
| Mr. Sinatra served as Chief Executive Officer of Quantum pursuant to an employment agreement described under “Executive Compensation—Employment Agreements.” On October 14, 2020, Mr. Sinatra resigned from the Board of Directors and from the board of directors of the Bank in connection with the execution of an Asset Purchase Agreement by Quantum Capital Management to sell substantially all of its assets. |
(6)
| Ms. Tronstein-Stewart will resign from the Company as of December 4, 2020, the date of the Annual Meeting. |
Director Fees
Board of Directors members of the Company receive fees for Board of Directors and committee meetings attended. Board of Directors members receive a retainer of $15,000, as well as $1,000 for each Board of Directors meeting attended, $500 for each Board of Directors committee meeting attended, and $500 for each committee meeting chaired. Additionally, the committee chairs receive premiums as follows: Audit Committee, $10,000; Compensation Committee, $7,500; Nominating Committee, $2,500; and Credit & Loan Committee, $5,000.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the compensation arrangements with directors and executive officers described herein, the following is a description of transactions in 2019 and 2018, to which we have been a party in which the amount involved exceeded $120,000, and in which any of our directors, executive officers or beneficial holders of more than five percent of our capital stock, or their immediate family members or entities affiliated with them, had or will have a direct or indirect material interest.
Policies and Procedures Regarding Related Party Transactions
Transactions by the Company or its bank subsidiary, Sterling Bank & Trust, F.S.B. (the “Bank”) with related parties are subject to certain regulatory requirements and restrictions, including Sections 23A and 23B of the Federal Reserve Act (which govern certain transactions by the Bank with its affiliates) and the Federal Reserve’s Regulation O (which governs certain loans by the Bank to its executive officers, directors and principal shareholders). Both the Company and the Bank have Affiliate Transactions Policies. The Affiliate Transaction Policy limits covered transactions with any single affiliate to less than 10%, and with all affiliates, to less than 20%, of unimpaired capital and surplus. All covered transactions with affiliates must be made on terms and conditions that are consistent with safe and sound banking practices, and require appropriate security. Neither the Company nor the Bank may purchase low-quality assets from an affiliate. Transactions between the Company or Bank and affiliates must be made on terms and under circumstances that are substantially the same, or at least as favorable to the Company or the Bank, respectively, as those prevailing at the time for comparable transactions with unaffiliated companies. All service agreements are reviewed annually.
The Bank’s Regulation O Policy requires any extension of credit to insiders be on the same terms as, and following the same underwriting procedures, as those in place for non-insider customers. The Board of Directors must approve any loan to an insider which does not qualify as an exception and that causes the aggregate of loans outstanding to that individual and any related interests of that individual to exceed $25,000, or 5%, of the Bank’s capital. The aggregate of all loans to insiders shall not exceed 5% of the Bank’s equity capital. As for executive officers of the Bank, general purpose loans may not exceed $100,000 in the aggregate or 2.5% of capital, whichever is less, and all such loans must be reported to the Board of Directors. All loans to directors and officers, including renewals, require the prior approval of the Board of Directors with the exception of mortgage loans on an officer or director’s primary residence when made in accordance with underwriting standards acceptable to the secondary market. All insiders are identified on an annual basis, and are required to submit an annual report of borrowings from the Bank.
We have adopted a written related person transactions policy pursuant to which our executive officers, directors and principal shareholders, including their immediate family members, will not be permitted to enter into a related person transaction with us without the consent of our Audit Committee, another independent committee of our Board of Directors or the full Board of Directors. Any request for us to enter into a transaction with an executive officer, director, principal shareholder or any of such persons’ immediate family members, in which the amount involved exceeds $120,000, will be required to be presented to our Audit Committee for review, consideration and approval. All of our directors, executive officers and employees will be required to report to our Audit Committee any such related person transaction. In approving or rejecting the proposed transaction, our Audit Committee will take into account, among other factors it deems appropriate, whether the proposed related person transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances, the extent of the related person’s interest in the transaction and, if applicable, the impact on a director’s independence. Under the policy, if we should discover related person transactions that have not been approved, our Audit Committee will be notified and will determine the appropriate action, including ratification, rescission or amendment of the transaction.
Indemnification of Officers and Directors
Our Bylaws will generally require us to indemnify our officers and directors to the fullest extent permitted by law, and to advance expenses incurred by our directors and officers prior to the final disposition of any action or proceeding arising by reason of the fact that any such person is or was our agent. In addition, our Bylaws permit us to provide such other indemnification and advancement of expenses to our other employees and agents as permitted by law and authorized by the Board of Directors from time to time. We will also have the power to secure insurance on behalf of any director, officer, employee or other agent for any liability arising out of his or her status as such,
regardless of whether we would have the power to indemnify such person against such liability pursuant to our Bylaws. The Company entered into an indemnification agreement with Gary Judd dated July 24, 2008. See “Executive Compensation—Narrative Disclosure to Summary Compensation Table and Grants of Plan Based Awards Table—Employment Agreements—Gary Judd” above.
Related-Party Transactions
Lease Agreements
The Bank has a sublease agreement with Seligman & Associates, where Mr. Meltzer serves as President, (“S&A”) for office space, plus related expenses, in Southfield, MI at an annual amount of $21,271. The Bank also reimburses S&A for usage of the S&A Bloomberg terminal and other miscellaneous expenses.
The Bank leases 7,560 square feet of warehouse space from S&A at 1630 Thorncroft in Troy, MI at an annual base rent of $40,296. In addition to the lease amount, the Bank reimburses S&A for a proportionate share of certain expenses, such as property tax, utilities, snow removal and lawn care. The Bank directly reimburses S&A for long-distance telephone carrier access.
The Bank leases office space from Transamerica Pyramid Properties, LLC in San Francisco under the lease agreement dated August 26, 2016. In turn, the Bank subleases 75% of that space to Pioneer Realty, a subsidiary of S&A, at an annual base rent amount of $267,626.
The Bank also had subleased storage space at 545 Sansome Street in San Francisco to Pioneer Realty, an affiliate of S&A, for an annual base rent amount of $3,000. The sublease was terminated on July 23, 2020.
Charitable Donations
From time to time, the Company makes charitable donations to the Seligman Family Foundation, including $900 thousand in each of 2019, 2018, and 2017. Ms. Seligman and Mr. Meltzer are members of the Board of Trustees of the Seligman Family Foundation.
Data Processing
The Bank provides monthly data processing and programming services to entities controlled by the Company’s controlling shareholders. Aggregate fees for such services amounted to $105 thousand during 2019, $105 thousand during 2018, and $98 thousand during 2017. The Company provided written notice to terminate its data processing and programming services arrangement on July 23, 2020.
Aviation Services
The Company paid fees totaling $12 thousand during in 2018 and $76 thousand during 2017 to an aviation company controlled by the Company’s controlling shareholders for transportation.
Purchase of Quantum and Compensation-Related Expenses
The Company purchased Quantum in April 2017 for aggregate consideration of $2.92 million in cash, which at the time was owned 80% by the Company’s controlling shareholder and 20% by a member of the boards of directors of the Company and the Bank, Mr. Sinatra, who has continued as the Chief Executive Officer of Quantum Capital Management. Accordingly, the Company’s controlling shareholder received $2.34 million in consideration, and Mr. Sinatra received $584 thousand in consideration in connection with this transaction.
Other Family Relationships
See “Directors, Executive Officers and Corporate Governance–Board of Directors and Committees–Family Relationships.”
Indebtedness of and Transactions with Management
Certain of the directors and officers of the Company may, in the future, have transactions with the Bank, or are or will be directors or officers of corporations, or members of partnerships or limited liability companies, which may have in the future, transactions with the Bank. We expect that all such transactions (i) will be made in the ordinary course of business, (ii) will be made on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers, and (iii) will not involve more than normal risk of collectability or present other unfavorable features. The Audit Committee has responsibility for reviewing and approving transactions with related persons, in accordance with the rules of Nasdaq. The Audit Committee, as a general policy, approves transactions to related parties at essentially the same terms and conditions that apply to similar transactions with non-related parties.
PROPOSAL NO. 2: RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Crowe LLP as independent auditors for the Company, for the fiscal year ending December 31, 2020. The services provided to the Company and its subsidiaries by Crowe LLP for 2019 and 2018 are described below, under the caption “Independent Public Accountant Fees and Services.”
The affirmative vote of holders of a majority of shares entitled to vote and present at the Annual Meeting, in person or by proxy, is required for advisory approval of Crowe LLP as our independent registered public accounting firm for 2020. Abstentions and broker non-votes will have no effect on the outcome of this proposal unless you return your proxy card and select “Abstain,” which will have the same effect as a vote against the matter.
Although the vote on Proposal No. 2 is not binding on the Company, the Audit Committee will take your vote on this proposal into consideration when selecting our independent registered public accounting firm in the future.
Independent Public Accountant Fees and Services
The following table summarizes fees for professional services rendered by Crowe LLP, the Company’s independent auditors for the years ended December 31, 2019 and 2018:
Audit fees(1) | | | $375,000 | | | $353,000 | Audit-related fees | | | — | | | — | Tax fees(2) | | | $19,040 | | | $44,000 | All Other Fees(3) | | | $565 | | | $6,000 | Total fees | | | $394,605 | | | $403,000 |
(1)
| Consists of fees billed for professional services performed by Crowe LLP for its audit of the Company’s annual financial statements and services that are normally provided in connection with regulatory filings or engagements. Additional billings for 2019 audit are probable. |
(2)
| Tax fees: Tax fees are for the filing of federal and state tax returns. |
(3)
| All other fees include advisory services. |
The Audit Committee is required to review and pre-approve both audit and non-audit services to be provided by the independent auditor (other than with respect to de minimis exceptions permitted by the Sarbanes-Oxley Act of 2002). During 2019, all services provided by Crowe LLP were pre-approved by the Audit Committee. To the extent required by Nasdaq rules or any other applicable legal or regulatory requirements, approval of non-audit services must be disclosed to investors in periodic reports required by Section 13(a) of the Exchange Act. There was no change of the Company’s independent public accountants during 2019 or 2018.
Representatives of Crowe LLP will attend the meeting, will have the opportunity to make a statement, if they desire to do so, and will be available to answer appropriate questions from our shareholders.
| OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS VOTE FOR THIS PROPOSAL
| |
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the Company’s audited financial statements with management.
As described more fully in its charter, the purpose of the Audit Committee is to assist the Board of Directors in its general oversight of the Company’s financial reporting and internal control functions and the Audit Committee is directly responsible for the appointment, retention, compensation and oversight of the work of our independent registered public accounting firm, currently Crowe LLP, and our internal audit team. Crowe LLP is responsible for performing an independent audit of the Company’s consolidated financial statements and the effectiveness of the Company’s internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (U.S.) (“PCAOB”) and for expressing their opinions thereon.
In 2019, among other matters, the Audit Committee:
Reviewed and discussed with management and Crowe LLP the Company’s audited financial statements.
Reviewed and discussed with management and Crowe LLP the matters required to be discussed by Statement of Auditing Standards No. 61, as amended, as adopted by the PCAOB in Rule 3200T.
Received the written disclosures and the letter from Crowe LLP required by the applicable requirements of the PCAOB regarding Crowe LLP’s communications with the Audit Committee concerning independence, and discussed with Crowe LLP its independence with respect to the Company.
Based on the foregoing, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements of the Company be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on October 6, 2020.
| | | The Audit and Risk Management
Committee
| | | | | | | | Barry Allen (Chairman)
| | | | Benjamin Wineman
| | | | Lyle Wolberg
|
PROPOSAL NO. 3: APPROVAL OF THE STERLING BANCORP, INC.
2020 OMNIBUS EQUITY INCENTIVE PLAN
Introduction
The stockholders of the Company are being asked to approve the Sterling Bancorp, Inc. 2020 Omnibus Equity Incentive Plan (the “2020 Omnibus Plan”). The Company’s Board adopted the 2020 Omnibus Plan on October 27, 2020, and it will be effective upon the date of shareholder approval. 3,979,661 shares of the Company’s Common Stock, representing 8.0% of the total of 49,977,209 shares of Common Stock outstanding as of the Record Date, will be available for issuance under the 2020 Omnibus Plan. The number of shares is the number currently available under the Sterling Bancorp, Inc. 2017 Omnibus Equity Incentive Plan (the “2017 Omnibus Plan”). Under the 2017 Omnibus Plan, 4,237,100 shares of the Company’s Common Stock were authorized for issuance to employees, consultants and non-employee directors of the Company, and as of October 27, 2020, 3,979,661 shares remained available for issuance and use. The Company’s Board has approved an amendment to the 2017 Omnibus Plan so that, if shareholder approval of the 2020 Omnibus Plan is obtained, no shares will be available for additional awards under the 2017 Omnibus Plan (other than to satisfy awards existing as of the date of shareholder approval). This would result in all future grants being made under the 2020 Omnibus Plan. Therefore, the approval of the 2020 Omnibus Plan will not result in additional shares becoming available for equity awards.
The Board has recommended the approval of the 2020 Omnibus Plan. If shareholder approval is not obtained, the 2017 Omnibus Plan shall remain in effect in accordance with its current terms including the availability of the currently available 3,979,661 shares for future issuance.
Summary of Changes from the 2017 Omnibus Plan
The reason for the adoption of the 2020 Omnibus Plan is that the Board has determined that it is appropriate to make certain changes to the 2017 Omnibus Plan to reflect current market norms and corporate governance for equity plans. The Board believes that these changes are protective of the Company and in the best interest of the Company and shareholders. Material changes from the 2017 Omnibus Plan include the following:
Eliminating Compensation Committee discretion in granting awards to non-employee directors by providing for fixed annual grants of restricted stock to non-employee directors with a set vesting schedule, as described below in “Awards to Non-Employee Directors”.
Eliminating language from the definition of “Change of Control” that allows the Compensation Committee to determine when a change of control has occurred. Additionally, the 2020 Omnibus Plan’s definition of “Change of Control” provides that a change of control will not occur if ownership of securities by certain shareholders are determined to be aggregated or treated as a group.
Eliminating provisions permitting shares used to pay the exercise price of an award or satisfy the tax withholding obligations related to the award to become available for future grant.
Including revised performance measures for performance shares and performance units more geared towards banking institutions.
Incorporating a reference to the Clawback Policy recently adopted by the Board.
Specifying that, unless the Compensation Committee decides otherwise in the grant, the vesting schedule for options, restricted stock and restricted stock units will be 1/3 per year over three years to be more consistent with recently granted awards and market norms. The 2017 Omnibus Plan has provided that, unless the Compensation Committee decided otherwise, those grants vested 50% after 3 years and 100% after 4 years.
Adding a limited right of transfer for a grantee to transfer to certain family members or entities controlled by family members, with the consent of the committee.
Summary and Material Terms of the 2020 Omnibus Plan
The following is a general description of the material features of the 2020 Omnibus Plan if approved by shareholders. This description is qualified in its entirety by reference to the full text of the 2020 Omnibus Plan attached to this Proxy Statement as Appendix A. You are encouraged to read the 2020 Omnibus Plan in its entirety.
Purpose and Administration. The 2020 Omnibus Plan serves to align the interests of the Company’s executive officers with that of its shareholders and serves to promote the interests of the Company by providing such equity incentives to attract and retain employees, officers and directors. The Compensation Committee administers the 2020 Omnibus Plan and has the authority to authorize the grant of awards and determine the terms and conditions. The Compensation Committee may delegate authority to the Chief Executive Officer or other senior officers, except for the power to grant awards to officers who are “insiders” subject to Section 16(b) of the Exchange Act. Under the 2020 Omnibus Plan, members of the Compensation Committee and those to whom they delegate authority are entitled to indemnification as set forth in the plan.
Shares available for issuance. A maximum of 3,979,661 shares of the Company’s Common Stock may be issued under the 2020 Omnibus Plan. Shares subject to awards under the 2020 Omnibus Plan that lapse or are forfeited will be available for awards under the 2020 Omnibus Plan. The Compensation Committee may make equitable adjustments to the option price, number and class of shares awarded under the 2020 Omnibus Plan in the event of certain corporate events, including a stock dividend, stock split, or recapitalization, that affect the Company’s Common Stock such that an adjustment is required in order to preserve the intended benefits.
Eligible participants. Awards may be granted to officers, consultants and other key employees of the Company and its subsidiaries, and, as described below, non-employee directors. Approximately 50 employees and all non-employee directors are currently expected to participate in the 2020 Omnibus Plan.
Awards to Non-Employee Directors. Non-employee directors will receive fixed annual grants of 7,500 shares of restricted stock on January 1, 2021 and on January 1 of each year thereafter in which the non-employee director serves as a member of the Board. Awards to non-employee directors will become vested in equal annual installments over a three-year period and will become 100% vested as of the date of a change of control and the date of a termination of service due to death or disability. The Compensation Committee does not have discretion to grant any additional awards to non-employee directors or to change the terms of the grants of restricted stock set forth in the 2020 Omnibus Plan.
Individual Award Limits. The 2020 Omnibus Plan establishes individual limits that provide that no participant may receive in any one-year period: a grant of stock options or stock appreciation rights (“SARs”) on more than 1,000,000 shares; a grant of restricted stock or restricted stock units (“RSUs”) on more than 1,000,000 shares; and performance units or performance shares with a grant date value of more than $10,000,000.
Types of Awards. The types of awards that may be granted under the 2020 Omnibus Plan are: stock options (including both incentive stock options (“ISOs”) and nonqualified stock options), SARs, restricted stock, RSUs, performance units and performance shares.
Stock Options. A stock option gives the recipient the right to purchase shares of Common Stock at a future date at a specified price. The Compensation Committee may grant nonqualified stock options or, in the case of employees, ISOs which meet the requirements of Section 422 of the Code. An option will only be exercisable to the extent it is vested on the date of exercise and the term cannot exceed 10 years. The exercise price of any stock option granted may not be less than 100% of the fair market value of the underlying shares as of the date of grant. On October 30, 2020, the closing price per share was $3.53. On a termination of service, a participant’s options remain exercisable for three months following the termination of service (or, if earlier, until expiration), except in the case of a termination for death or disability, in which case the three months is extended to 12 months. Upon a termination for cause, each option shall be immediately forfeited. Except in the case of specified adjustments to reflect stock dividends, stock splits, recapitalizations or other specified corporate events or to reflect a change of control, the Compensation Committee may not amend options to reduce the exercise price or provide for options to be cancelled or surrendered in exchange for options with a lower exercise price, different type of award or award under a different plan or cash unless approved by shareholders.
Restricted Stock and RSUs. A restricted stock award is an award of Common Stock which is subject to certain restrictions for a period of time determined by the Compensation Committee. Participants who receive restricted stock awards do not have the rights and privileges of shareholders during the restricted period. Dividends prior to vesting or dividend equivalents are not awarded unless determined by the committee. An RSU is a bookkeeping entry representing an amount equal to the fair market value of one share of Common Stock, which is subject to certain restrictions for a period of time determined by the Compensation Committee. No shares of Common Stock are issued at the time an RSU is granted, and the Company is not required to set aside any funds for the payment of any RSU award.
SARs. A SAR is the right to receive payment of an amount in cash or in shares of Common Stock equal to or greater than the fair market value of the Common Stock. The base price of a SAR may not be reduced without shareholder approval. SARs may be granted alone or in tandem with options. Tandem SARs will generally have substantially similar terms and conditions to the options with which they are granted.
Performance Units and Performance Shares. The Compensation Committee will set performance goals or other vesting provisions to be met during a specific “performance period”, the attainment of which will determine the number or value of performance share or performance units to be paid out to the grantee. The Compensation Committee sets an initial value for each performance unit at the time of grant, and the initial value of each performance share will be the fair market value at the time of grant. The Compensation Committee will establish and set forth the performance measures to be achieved for each award based on one or more performance measures set forth in the 2020 Omnibus Plan. Unless otherwise set forth in the award agreement, upon a participant’s termination of service, all remaining performance units and performance shares are forfeited. Payments will be made in a lump sum (in case, shares or a combination as determined by the Compensation Committee) following the end of the performance period unless prior to the performance period, the Compensation Committee permits payment to be deferred. The Compensation Committee may waive the achievement of any performance goals subject to appliable law.
Vesting. The Compensation Committee shall determine the vesting conditions of an award to employees and consultants and can accelerate the vesting of options and restricted stock. Awards of restricted stock become vested upon a termination of service due to death or disability. In the case of options, restricted stock and RSUs, unless otherwise determined, awards will become vested in equal annual installments over a three-year period. Awards may be subject to time-based vesting or performance-based vesting, or both.
Change of Control. Upon a change of control of the Company, outstanding awards are subject to the agreement of merger or asset sale and may be treated as the Board determines, including that the 2020 Omnibus Plan and outstanding awards may be continued or assumed by the surviving corporation or substituted by the surviving corporation for options with substantially the same terms. The Compensation Committee has discretion to accelerate the vesting of stock options as of the date of the change of control. Each outstanding restricted stock award automatically becomes 100% vested as of the date of the change of control.
For purposes of the 2020 Omnibus Plan, “change of control” means the occurrence of any of the following, in one transaction or a series of related transactions: (i) any person becoming a beneficial owner, directly or indirectly, of securities of the Company representing more than 50% of the voting power of the Company’s then outstanding capital stock; (ii) a consolidation, share exchange, reorganization or merger of the Company resulting in the stockholders of the Company immediately prior to such event not owning at least a majority of the voting power of the resulting entity’s securities outstanding immediately following such event or, if the resulting entity is a direct or indirect subsidiary of the entity whose securities are issued in such transaction(s), the voting power of such issuing entity’s securities outstanding immediately following such event; (iii) the sale or other disposition of all or substantially all the assets of the Company (other than a transfer of financial assets made in the ordinary course of business for the purpose of securitization or any similar purpose); or (iv) a liquidation or dissolution of the Company. A transaction or a series of related transactions will not constitute a change of control if such transaction(s) result(s) in the Company, any successor to the Company, or any successor to the Company’s business, being controlled, directly or indirectly, by the same person or persons who controlled the Company, directly or indirectly, immediately before such transaction(s). In addition, to the extent the ownership of securities of the Company by Scott Seligman, Sandra Seligman, Seth Meltzer and certain entities or trusts established by or for the benefit of members of such persons or entities are determined to be aggregated or treated as a group, no change of control shall occur.
Clawback and Recoupment. All awards granted under the 2020 Omnibus Plan are subject to the terms and conditions of any recoupment policy adopted by the Company and any recoupment requirement imposed under applicable laws, including but not limited to the Sterling Bancorp, Inc. Clawback Policy.
Amendment or Termination of the 2020 Omnibus Plan. The 2020 Omnibus Plan may be amended, suspended or terminated at any time by the Compensation Committee; however, without the approval by the shareholders of the Company, no amendment may (i) increase the number of shares subject to the 2020 Omnibus Plan; (ii) modify the class of persons eligible for to receive ISOs; or (iii) make modifications that would require shareholder approval under applicable law or exchange listing requirements. Except as otherwise expressly provided, neither the
amendment, alteration, suspension or termination of the 2020 Omnibus Plan shall, without the written consent of the holder of the award, impair the rights of any holder under any award granted prior to that date. The 2020 Omnibus Plan shall terminate automatically ten years after its adoption, if not terminated earlier.
Federal Income Tax Consequences of Awards.
The following discussion briefly summarizes the federal income tax consequences of the 2020 Omnibus Plan based on current provisions of the Internal Revenue Code and regulations issued thereunder, which are subject to change. This summary is not intended to be exhaustive, does not constitute tax advice and, among other things, does not describe state, local or foreign tax consequences.
Stock Options. The grant of a stock option generally will not cause the participant to realize taxable income. Upon the exercise of a nonqualified stock option, the participant will generally recognize ordinary income equal to the excess of the fair market value of the shares on the date of exercise over the exercise price. If the shares acquired upon exercise are later sold by the participant, then the difference between the amount received upon such sale and the fair market value of such shares on the date of exercise will generally be taxable as long-term or short-term capital gain or loss depending upon the length of time such shares were held by the optionee, and there will be no tax consequences to the Company.
Upon the exercise of an ISO, no ordinary income is generally realized by the optionee other than tax preference income for purposes of the federal alternative minimum tax on individual income. If the shares acquired on exercise of an ISO are held for at least two years after grant of the option and one year after exercise, then any gain or loss upon subsequent sale of the Common Stock will generally be a long-term capital gain or loss. If the employment and statutory holding period requirements are satisfied, the Company may not claim any federal income tax deduction upon either the exercise of the ISO or the subsequent sale of the Common Stock received upon exercise of the ISO.
Restricted Stock and Performance Shares. Unless a participant makes an election to accelerate the recognition of income to the grant date pursuant to a Section 83(b) election, a participant will not be taxed upon the grant of restricted stock or performance shares, but rather, will recognize ordinary income in an amount equal to the fair market value of the shares at the time the shares vest.
SARs, RSUs and Performance Units. Generally, an employee will not recognize any taxable income upon the grant of SARs, RSUs or performance units, but when payment is made the fair market value of the shares or cash is taxable to the employee as ordinary income.
Tax Consequences to the Company. Generally, the Company is entitled to a deduction based on the amount of ordinary income a participant recognizes with respect to an award. However, Section 162(m) of the Code imposes a $1,000,000 limit on the amount a public company may deduct for compensation paid in a year to certain “covered employees”.
Section 409A of the Code. This discussion assumes that the awards are either not a “deferred compensation arrangement” subject to Section 409A of the Code, or have been structured to comply with its requirements. If a deferred compensation arrangement subject to Section 409A fails to comply with the requirements of Section 409A, the affected participant would generally be required to include in income when the award vests the amount deemed “deferred,” and pay an additional 20% income tax and interest on such amount.
New Plan Benefits
No awards will be made under the 2020 Omnibus Plan until after it has been approved by the Company’s shareholders. Other than restricted stock awards granted to non-employee directors, awards under the 2020 Omnibus Plan are subject to the discretion of the Compensation Committee. Therefore, except as provided in the table below, we cannot determine future benefits for any other awards under the 2020 Omnibus Plan at this time.
Non-Executive Director Group(1)
| | | —
| | | —
|
(1)
| Subject to the approval of the 2020 Omnibus Plan, non-employee directors of the Company will receive a fixed annual grant of 7,500 shares of restricted stock per non-employee director on January 1, 2021 and on January 1 of each year thereafter in which the non-employee director serves as a member of the Board. The grant date fair value of the Company restricted stock cannot be determined as of the date of this proxy statement. |
Equity Compensation Plans
The following table sets forth certain information as of December 31, 2019 concerning our equity compensation plans.
Equity compensation plans approved by shareholders | | | 242,573 | | | $12.29 | | | 3,978,652 | Equity compensation plans not approved by shareholders | | | — | | | — | | | — | Total | | | 242,573 | | | $12.29 | | | 3,978,652 |
(1)
| Consists of 142,477 option awards and 100,096 restricted stock awards issued under the 2017 Omnibus Equity Incentive Plan. |
(2)
| Excludes restricted stock awards, which have no exercise price. |
Registration with the SEC
If the 2020 Omnibus Plan is approved by our stockholders and becomes effective, the Company intends to file a registration statement on Form S-8 registering the shares reserved for issuance under the 2020 Omnibus Plan as soon as reasonably practicable after the Company becomes eligible to use such form.
Required Vote
The affirmative vote of a majority of the votes cast on this proposal is required for advisory approval of the 2020 Omnibus Plan. Abstentions and broker non-votes will have no effect on the outcome of this proposal unless you return your proxy card and select “Abstain,” which will have the same effect as a vote against the matter.
| OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS VOTE FOR THIS PROPOSAL
| |
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of October 5, 2020 regarding the beneficial ownership of our common stock by:
each shareholder known by us to beneficially own more than 5% of our outstanding common stock;
each of our directors and named executive officers; and
all of our directors and executive officers as a group.
We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting of securities, or to dispose or direct the disposition of securities, or has the right to acquire such powers within 60 days. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each person identified in the table has sole voting and investment power over all of the shares shown opposite such person’s name.
Except as otherwise specified below, the address for each listed shareholder is: c/o Sterling Bancorp, Inc., One Towne Square, Suite 1900, Southfield, Michigan 48076.
5% Shareholders:
| | | | | | | T. Rowe Price Associates, Inc.(2)
100 E. Pratt Street, Baltimore, MD 21202 | | | 5,020,308 | | | 10% | Scott J. Seligman 1993 Long Term Irrevocable Dynasty Trust(3)(5)
c/o The First National Bank in Sioux Falls
100 South Phillips Avenue, Sioux Falls, SD 57104 | | | 5,743,579 | | | 11% | K.I.S.S. Dynasty Trust No. 9(3)(5)
c/o The First National Bank in Sioux Falls
100 South Phillips Avenue, Sioux Falls, SD 57104 | | | 12,107,732 | | | 24% | K.I.S.S. Dynasty Trust No. 5(4)(5)(6)
c/o The First National Bank in Sioux Falls
100 South Phillips Avenue, Sioux Falls, SD 57104 | | | 7,507,318 | | | 15% | Erwin A. Rubenstein(5)(6)
255 East Brown Street, Suite 320, Birmingham, MI 48009 | | | 20,209,268 | | | 40% | Michael Shawn(6)
7300 Biscayne Boulevard, Suite 200, Miami FL 33138 | | | 8,981,041 | | | 18% | Scott J. Seligman(7) | | | 3,925,071 | | | 8% | Directors:
| | | | | | | Barry Allen | | | 16,300 | | | * | Peggy Daitch | | | 864 | | | * | Steven Gallotta | | | — | | | — | Denny Kim | | | — | | | — | Seth Meltzer(8) | | | 1,490,180 | | | 3% | Thomas M. O’Brien | | | — | | | — | Sandra Seligman(9) | | | — | | | — | Benjamin Wineman | | | 17,100 | | | * | Lyle Wolberg(10) | | | 7,571 | | | * | Rachel Tronstein Stewart | | | 4,479 | | | * | Named Executive Officers (Non-Directors):
| | | | | | | Stephen Huber | | | 12,247 | | | * | Gary Judd | | | 194,011 | | | * | Thomas Lopp(11) | | | 42,553 | | | * | Michael Montemayor(12) | | | 35,714 | | | * | Peter Sinatra | | | 29,415 | | | * | All directors and executive officers as a group (16 persons total)(9) | | | 1,866,730 | | | 4% |
(1)
| Based on 49,977,209 shares of the Company’s common stock outstanding as of October 5, 2020. |
(2)
| Based on a Schedule 13G/A filed on February 10, 2020, T. Rowe Price Associates, Inc. has sole voting power over 1,066,099 shares of common stock and sole dispositive power over 5,020,308 shares of common stock. |
(3)
| Mr. Seligman disclaims beneficial ownership of the shares held by the trust except to the extent of his pecuniary interest, if any, therein. |
(4)
| Mr. Seligman disclaims beneficial ownership of the shares held by the trust except to the extent of his pecuniary interest, if any, therein. |
(5)
| Based on a Schedule 13G filed on July 27, 2020 by Erwin Rubenstein, the Scott J. Seligman 1993 Long Term Irrevocable Dynasty Trust, the K.I.S.S. Dynasty Trust No. 5 and the K.I.S.S. Dynasty Trust No. 9, (i) Mr. Rubinstein, as co-trustee of the trusts, had sole voting and dispositive power over 29,190,309 shares of common stock of the Company, consisting of (a) 2,357,957 shares of common stock held by the Scott J. Seligman 1993 Irrevocable Dynasty Trust, (b) 5,743,579 shares of common stock held by the Scott J. Seligman 1993 Long Term Irrevocable Dynasty Trust, (c) 12,107,732 shares of common stock held by the K.I.S.S. Dynasty Trust No. 9, (d) 7,507,318 shares of common stock held by K.I.S.S. Dynasty Trust No. 5, and (e) 1,473,723 shares held by the Sandra Seligman 1993 Long Term Irrevocable Trust; (ii) the Scott J. Seligman 1993 Long Term Irrevocable Dynasty Trust had shared voting and dispositive power over 5,743,579 shares of common stock, (iii) the K.I.S.S. Dynasty Trust No. 9 had shared voting and dispositive power over 12,107,732 shares of common stock and (iv) the K.I.S.S. Dynasty Trust No. 5 had shared voting and dispositive power over 7,507,318 shares of common stock. Mr. Rubenstein disclaims beneficial ownership of the shares owned by the trusts. See footnote (6) with respect to shares held by the K.I.S.S. Dynasty Trust No. 5 and the Sandra Seligman 1993 Long Term Irrevocable Trust. |
(6)
| Based on a Schedule 13D filed by Michael Shawn on September 4, 2020, effective August 19, 2020, Mr. Shawn was appointed as trustee of the K.I.S.S. Dynasty Trust No. 5 and the Sandra Seligman 1993 Long Term Irrevocable Trust, which hold 7,507,318 and 1,473,723 shares of common stock, respectively, and Mr. Shawn, in his capacity as trustee, now has sole voting and dispositive power over an aggregate of 8,981,041 shares of common stock of the Company. |
(7)
| Based on the most recent Form 4 filed by the Scott J. Seligman Revocable Living Trust, consists of shares held by the trust, over which Scott. J. Seligman, former vice president of the Company and founder of the Bank, holds sole voting and dispositive power. |
(8)
| Consists of (i) 1,483,180 shares of common stock of the Company that are held by The Seth Seligman Meltzer Revocable Living Trust, (ii) 5,000 shares of common stock held directly by Mr. Meltzer, (iii) 1,000 shares of common stock indirectly held by Mr. Meltzer’s wife, and (iv) 1,000 shares of common stock indirectly held by Mr. Meltzer’s sons. |
(9)
| Excludes 7,507,318 shares of common stock held by the K.I.S.S. Dynasty Trust No. 5 and 1,473,723 shares held by the Sandra Seligman 1993 Long Term Irrevocable Trust, for which in each case Ms. Seligman is the grantor, but has no voting or dispositive power over the shares held in such trust. |
(10)
| Consists of 6,571 shares of common stock of the Company that are held directly, and 1,000 shares of common stock of the Company that are held by the Lyle M. Wolberg Revocable Living Trust. |
(11)
| Based on the most recent Form 4 filed by Mr. Lopp. |
(12)
| Based on the most recent Form 4 filed by Mr. Montemayor. |
SHAREHOLDER PROPOSALS FOR THE 2021 ANNUAL MEETING
Deadline for Shareholder Proposals to be Considered for Inclusion in the Company’s Proxy Materials
A proposal submitted by a shareholder for the 2021 annual meeting of shareholders must be sent to the General Counsel and Assistant Secretary of the Company, One Towne Square, Suite 1900, Southfield, Michigan 48076. We expect to schedule the 2021 annual meeting of shareholders to take place on or about Tuesday, May 25, 2021. Accordingly, any shareholder proposal intended for inclusion in our proxy statement and proxy card relating to our 2021 annual meeting of shareholders must be received by the Company no later than December 21, 2020, pursuant to the proxy solicitation regulations of the SEC. Nothing in this paragraph shall be deemed to require the Company to include in its proxy statement and proxy card for such meeting any shareholder proposal which does not meet the requirements of the SEC in effect at the time. Any such proposal will be subject to 17 C.F.R. § 240.14a-8 of the rules and regulations promulgated by the SEC under the Exchange Act.
Deadline for Shareholder Proposals and Director Nominations to be Brought Before the 2021 Annual Meeting
In order to be considered at any meeting, a shareholder proposal submitted outside of Rule 14a-8 under the Exchange Act, other than a nomination of directors, must (i) comply with the requirements in the Company’s Articles of Incorporation and Bylaws as to form and content and (ii) must be received by the Company not less than one hundred twenty (120) days nor more than one hundred eighty (180) days prior to the anniversary date of the immediately preceding annual meeting of shareholders; provided, however, that in the event that the annual meeting is called for a date that is not within twenty (20) days before or after such anniversary date, such notice by the shareholder in order to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting is mailed, transmitted electronically, or public disclosure of the date of the annual meeting is made, whichever first occurs. Shareholder nominations of directors must comply with the requirements of the Articles of Incorporation and Bylaws summarized above under “Board of Directors and Committees—Nominating Committee.”
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for action at the Annual Meeting, other than the matters set forth herein. If any other business should properly come before the meeting, the proxy will be voted regarding the matter in accordance with the best judgment of the persons authorized in the proxy, and discretionary authority to do so is included in the proxy.
The proxy solicitation is being made by the Company and the cost of soliciting proxies will be borne by the Company. If requested, the Company will reimburse banks, brokerage houses and other custodians, nominees and certain fiduciaries for their reasonable expenses incurred in mailing proxy materials to their principals. In addition to solicitation by mail, officers and other employees of the Company and its subsidiaries may solicit proxies by telephone, facsimile or in person, without compensation other than their regular compensation.
The Company may elect to send a single copy of its 2019 Annual Report and this proxy statement to any household at which two or more shareholders reside, unless one of the shareholders at such address notifies the Company that he or she desires to receive individual copies. This “householding” practice reduces the Company’s printing and postage costs. Shareholders may request to discontinue or re-start householding, or to request a separate copy of the 2019 Annual Report or this proxy statement, as follows:
Shareholders owning common stock through a bank, broker or other holder of record should contact such record holder directly; and
Shareholders of record should contact the Company at (248) 355-2400 or at Shareholder Relations, Sterling Bancorp, Inc., One Towne Square, Suite 1900, Southfield, MI 48076. The Company will promptly deliver such materials upon request.
Your cooperation in giving this matter your immediate attention and in voting your proxies promptly will be appreciated.
THE COMPANY’S ANNUAL REPORT ON FORM 10-K FILED WITH THE SEC AND THE COMPANY’S PROXY STATEMENT ARE ALSO AVAILABLE AT WWW.INVESTORS.STERLINGBANK.COM AND WILL BE PROVIDED FREE TO SHAREHOLDERS UPON WRITTEN REQUEST. TO REQUEST A COPY, WRITE TO SHAREHOLDER RELATIONS DEPARTMENT, STERLING BANCORP, INC., ONE TOWNE SQUARE, SUITE 1900, SOUTHFIELD, MICHIGAN 48076.
It is important that proxies be submitted promptly in order to ensure your representation at the Annual Meeting. You may vote your shares electronically via the internet, by using telephone, or if you prefer the paper copy, you may submit your proxy by completing, signing and dating the proxy card as promptly as possible and returning it in the accompanying envelope (to which no postage need be affixed if mailed in the United States). Please refer to the section entitled “Voting via the Internet, Telephone or by Mail” on page 1 for a description of voting methods. If your shares are held by a bank, brokerage firm or other nominee that holds shares on your behalf and you have not given that nominee instructions on how to vote your shares, your nominee will be prohibited from voting uninstructed shares on a discretionary basis, and no votes will be cast on your behalf, for Proposal No. 3 at the Annual Meeting. We strongly encourage you to vote.LOCATION OF STERLING BANCORP 2020
ANNUAL MEETING OF SHAREHOLDERS
Friday, December 4, 2020, at 1:00 p.m., Eastern Time
www.VirtualShareholderMeeting.com/SBT2020
Appendix A
STERLING BANCORP, INC.
2020 OMNIBUS EQUITY INCENTIVE PLAN
STERLING BANCORP, INC.
2020 OMNIBUS EQUITY INCENTIVE PLAN
TABLE OF CONTENTS
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STERLING BANCORP, INC.
2020 OMNIBUS EQUITY INCENTIVE PLAN
SECTION 1. Establishment and Purpose.(a) Purpose. The purpose of the Plan is to promote the interests of Sterling Bancorp, Inc., a Michigan corporation, (the “Corporation”) and its stockholders by providing eligible employees, directors and consultants with additional incentives to remain with the Corporation or its Subsidiaries, to increase their efforts to make the Corporation more successful, to reward such persons by providing an opportunity to acquire shares of Common Stock on favorable terms and to attract and retain the best available personnel to participate in the ongoing business operations of the Corporation and its Subsidiaries.The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units and Performance Shares.
(b) Adoption and Term. The Plan has been approved by the Board of Directors of the Corporation, and subject to the approval of the stockholders of the Corporation as provided in Section 15, is effective October 27, 2020. The Plan will remain in effect until terminated by action of the Board of Directors except as otherwise provided in Section 15.(a) “Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, applicable U.S. federal and state banking laws, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.
(b) “Award” means the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units or Performance Shares made pursuant to the Plan.
(c) “Award Agreement” means an agreement entered into by the Corporation and the Participant setting forth the terms applicable to an Award granted to the Participant under the Plan.
(d) “Board of Directors” means the Board of Directors of the Corporation, as constituted from time to time.
(e) “Cause” means (i) conviction of, or the entry of a plea of guilty or no contest to, a felony or any other crime that causes the Corporation or a Subsidiary public disgrace or disrepute, or adversely affects the reputation, operations, condition (financial or otherwise), prospects or interests of the Corporation or any of its Subsidiaries, (ii) gross negligence or willful misconduct with respect to the Corporation or a Subsidiary, including, without limitation fraud, embezzlement, theft or dishonesty in the course of his or her Service or continual neglect of his or her assigned duties; (iii) alcohol abuse or use of controlled drugs other than in accordance with a physician’s prescription; (iv) refusal, failure or inability to perform any material obligation or fulfill any duty (other than any duty or obligation of the type described in clause (6) below) to the Corporation or a Subsidiary (other than due to a disability), which failure, refusal or inability is not cured within 10 days after delivery of notice thereof; (v) material breach of any agreement with or duty owed to the Corporation or a Subsidiary; (vi) any breach of any obligation or duty to the Corporation or a Subsidiary (whether arising by statute, common law, contract or otherwise) relating to confidentiality, noncompetition, nonsolicitation or proprietary rights; or (vii) any violation, in any material respect, of any law, rule, regulation, written agreement or final cease-and-desist order applicable to the Corporation or a Subsidiary in the Participant’s performance of services for the Corporation or a Subsidiary or the Corporation’s or Subsidiary’s code of conduct. Notwithstanding the foregoing, if a Participant and the Corporation or Subsidiary have entered into an employment agreement, consulting agreement or other similar agreement that specifically defines “Cause,” then with respect to such Participant, “Cause” shall have the meaning defined in that employment agreement, consulting agreement or other agreement.
(f) “Change of Control” means the occurrence of any of the following, in one transaction or a series of related transactions: (i) any person (as such term is used in Section 13(d) and 14(d) of the Exchange Act) becoming a “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Corporation representing more than 50% of the voting power of the Corporation’s then outstanding capital stock;
(ii) a consolidation, share exchange, reorganization or merger of the Corporation resulting in the stockholders of the Corporation immediately prior to such event not owning at least a majority of the voting power of the resulting entity’s securities outstanding immediately following such event or, if the resulting entity is a direct or indirect subsidiary of the entity whose securities are issued in such transaction(s), the voting power of such issuing entity’s securities outstanding immediately following such event; (iii) the sale or other disposition of all or substantially all the assets of the Corporation (other than a transfer of financial assets made in the ordinary course of business for the purpose of securitization or any similar purpose); or (iv) a liquidation or dissolution of the Corporation. For the avoidance of doubt, a transaction or a series of related transactions will not constitute a Change of Control if such transaction(s) result(s) in the Corporation, any successor to the Corporation, or any successor to the Corporation’s business, being controlled, directly or indirectly, by the same person or persons who controlled the Corporation, directly or indirectly, immediately before such transaction(s). In addition, for the avoidance of doubt, to the extent that ownership of securities of the Corporation by Scott Seligman, Sandra Seligman, Seth Meltzer, Seligman & Associates, the Seligman Family Foundation, the Seligman Group Family Office, the Seligman Group, Seligman & Associates, Inc., Seligman Western Enterprises, Ltd., the Scott J. Seligman 1993 Long Term Irrevocable Dynasty Trust, or any other trust established by or for the benefit of one of the aforementioned persons or entities, is determined to be aggregated or deemed to constitute a group, no Change of Control shall occur.
(g) “Code” means the Internal Revenue Code of 1986, as amended.
(h) “Committee” means the Compensation Committee of the Board of Directors or such other committee or individuals satisfying Applicable Laws appointed by the Board of Directors in accordance with Section 3 hereof, including that the Committee shall consist of not less than two (2) members of the Board of Directors, each member of which will be an “independent” director, for purposes of the National Association of Securities Dealers Automatic Quotations Exchange listing requirements or other applicable listing exchange or national market system and a “Non-Employee Director” within the meaning of Rule 16b-3, as promulgated under the Exchange Act.
(i) “Common Stock” means the common stock of the Corporation, no par value per share.
(j) “Consultant” means any person other than an Employee, engaged by the Corporation or a Subsidiary to render services to such entity.
(k) “Date of Grant” means the date on which the Committee grants an Award pursuant to the Plan.
(l) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Committee in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Committee from time to time.
(m) “Effective Date” means October 27, 2020.
(n) “Employee” means any individual who is a common-law employee of the Corporation or a Subsidiary.
(o) “Exchange Act'’ means the Securities Exchange Act of 1934, as amended.
(p) “Exchange Program” means a program established by the Committee under which outstanding Awards are amended to provide for a lower Exercise Price or surrendered or cancelled in exchange for (i) Awards with a lower exercise price, (ii) a different type of Award or awards under a different equity incentive plan, (iii) cash, or (iv) a combination of (i), (ii) and/or (iii). Notwithstanding the preceding, the term Exchange Program does not include any (i) action described in Section 12 or any action taken in connection with a Change of Control transaction or (ii) transfer or other disposition permitted under Section 12. For the purpose of clarity, each of the actions described in the prior sentence, none of which constitute an Exchange Program, may be undertaken (or authorized) by the Committee in its sole discretion without approval by the Corporation’s shareholders.
(q) “Exercise Price” with respect to an Option, means the price per share at which an Optionee may exercise the Optionee’s Option to acquire all or a portion of the shares of Common Stock that are the subject of such Option, as determined by the Committee on the Date of Grant. In no event shall the Exercise Price of any Common Stock made the subject of an Option, be less than the Fair Market Value on the Date of Grant.
(r) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the New York Stock Exchange, the Nasdaq Global Select Market, the Nasdaq
Global Market or the Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such stock as quoted on such exchange or system on the day of determination (or, if none, on the most recent trade date immediately prior to the day of determination), as reported in The Wall Street Journal or such other source as the Committee deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, or if the Common Stock is quoted on the Over-the-Counter (OTC) market, be that the OTCQB, OTCBB or Pink Sheets, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal, the OTC, or such other source as the Committee deems reliable;
(iii) In the absence of an established market for the Common Stock, the Fair Market Value will be determined in good faith by the Board of Directors after taking into account such factors as the Board of Directors shall deem appropriate.
(s) “Incentive Stock Option” or “ISO” means a stock option intended to satisfy the requirements of Section 422(b) of the Code.
(t) “Nonstatutory Option” means a stock option not intended to satisfy the requirements of Section 422(b) of the Code.
(u) “Officer” means a person who is an officer of the Corporation within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(v) “Option” means an ISO or Nonstatutory Option granted under the Plan and entitling the holder to purchase shares of Common Stock.
(w) “Option Stock” means those shares of Common Stock made the subject of an Option granted pursuant to the Plan.
(x) “Optionee” means an individual who is granted an Option.
(y) “Outside Director” means a member of the Board of Directors who is not an Employee.
(z) “Participant” means a person who has an outstanding Award under the Plan. The term Participant also refers to an Optionee.
(aa) “Performance Goal” means a performance goal established by the Committee pursuant to Section 10(c) of the Plan.
(bb) “Performance Share” means an Award denominated in Shares which may be earned in whole or in part upon attainment of Performance Goals or other vesting criteria as the Committee may determine pursuant to Section 10.
(cc) “Performance Unit” means an Award which may be earned in whole or in part upon attainment of Performance Goals or other vesting criteria as the Committee may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 10.
(dd) “Permitted Transferee” means, to the extent approved by the Committee, a Participant’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Participant’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets and any other entity in which these persons (or the Participant) own more than fifty percent of the voting interests. The rights of a Permitted Transferee shall be limited to the rights conveyed to such Permitted Transferee, who shall be subject to and bound by the terms of the agreement or agreements between the Participant and the Corporation.
(ee) “Plan” means this Sterling Bancorp, Inc. 2020 Omnibus Equity Incentive Plan.
(ff) “Restricted Stock” means those shares of Common Stock made the subject of an Award granted under the Plan.
(gg) “Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 8. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Corporation.
(hh) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.
(ii) “Section 16(b)” means Section 16(b) of the Exchange Act.
(jj) “Service” means service as an Employee, Consultant or Outside Director.
(kk) “Share” means a share of the Common Stock, as adjusted in accordance with Section 12 of the Plan.
(ll) “Stock Appreciation Right” or “SAR” means a right awarded to an Employee or Consultant pursuant to Section 9 of the Plan, which shall entitle the Participant to receive cash, Common Stock, other property or a combination thereof, as determined by the Committee, in an amount equal to or otherwise based on the excess of (a) the Fair Market Value of a share of Common Stock at the time of exercise over (b) the exercise price of the right, as established by the Committee on the date the award is granted..
(mm) “Subsidiary” means Sterling Bank & Trust, FSB and any other any entity (other than the Corporation) in an unbroken chain of entities beginning with the Corporation if each of the entities other than the last entity in the unbroken chain owns stock or other equity possessing fifty percent (50%) or more of the total combined voting power of all classes of stock or equity in one of the other entities in such chain. An entity that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.
SECTION 3. Administration.(a) Committee of the Board of Directors. The Plan shall be administered by the Committee. No member of the Committee shall receive any Award pursuant to the Plan or any similar plan of the Corporation while serving on the Committee, unless the Board of Directors determines that the grant of such an Award satisfies the then current Rule 16b-3 requirements under the Exchange Act. The Committee may impose such conditions on any Award as may be required to satisfy the requirements for exemption under Rule 16b-3.(b) Authority. Subject to the terms and conditions of the Plan, the Committee shall have the sole discretionary authority:(i) to authorize the granting of Awards under the Plan;
(ii) to select the Employees or Consultants who are to be granted Awards under the Plan and to determine the conditions subject to Awards;
(iii) to construe and interpret the Plan;
(iv) to determine Fair Market Value;
(v) to establish and modify administrative rules for the Plan;
(vi) to impose such conditions and restrictions with respect to the Awards, not inconsistent with the terms of the Plan, as it determines appropriate;
(vii) to execute or cause to be executed Award Agreements; and
(viii) generally, to exercise such power and perform such other acts in connection with the Plan and the Awards, and to make all determinations under the Plan as it may deem necessary or advisable or as required, provided or contemplated hereunder.
Any person delegated or designated by the Committee subject to Section 3(d) below shall be subject to the same obligations and requirements imposed on the Committee and its members under the Plan.
(c) Exchange Program. Notwithstanding the anything in this Section 3, the Committee shall not implement an Exchange Program without the approval of the holders of a majority of the Shares that are present in person or by proxy and entitled to vote at any annual or special meeting of Corporation’s shareholders.(d) Delegation by the Committee.If permitted by applicable law, the Committee, in its sole discretion and on such terms and conditions as it may provide, may delegate all or any part of its authority and powers under the Planto the chief executive officer and other senior officers of the Corporation; provided, however, that the Committee may not delegate its authority and powers (a) with respect to an Officer or (b) in any way which would jeopardize the Plan’s qualification under Rule 16b-3. Only the Committee may select, and grant Awards to, Participants who are subject to Section 16 of the Exchange Act.
(e) Indemnification.To the maximum extent permitted by law, the Corporation shall indemnify each member of the Committee, the Board of Directors, and each person to which the Committee has delegated authority pursuant to Section 3(d), against all liabilities and expenses (including any amount paid in settlement or in satisfaction of a judgment) reasonably incurred by the individual in connection with any claims against the individual by reason of the performance of the individual’s duties under the Plan. This indemnity shall not apply, however, if: (i) it is determined in the action, lawsuit, or proceeding that the individual is guilty of gross negligence or intentional misconduct in the performance of those duties; or (ii) the individual fails to assist the Corporation in defending against any such claim. The Corporation shall have the right to select counsel and to control the prosecution or defense of the suit. The Corporation shall not be obligated to indemnify any individual for any amount incurred through any settlement or compromise of any action unless the Corporation consents in writing to the settlement or compromise.SECTION 4. Eligibility and Award Limitations.(a) Award Eligibility. Employees, Consultants and Outside Directors (to the extent set forth in Section 7(h)) shall be eligible for the grant of Awards under the Plan. Only Employees shall be eligible for the grant of Incentive Stock Options.(b) Award Limitations. The following limits shall apply to the grant of any Award:(i) Options and Stock Appreciation Rights. Subject to adjustment as provided in Section 12, no Participant shall be granted within any fiscal year of the Corporation one or more Options or Stock Appreciation Rights, which in the aggregate cover more than 1,000,000 Shares reserved for issuance under the Plan.
(ii) Restricted Stock and Restricted Stock Units. Subject to adjustment as provided in Section 12, no Participant shall be granted within any fiscal year of the Corporation one or more awards of Restricted Stock or Restricted Stock Units, which in the aggregate cover more than 1,000,000 Shares reserved for issuance under the Plan.
(iii) Performance Units and Performance Shares. Subject to adjustment as provided in Section 12, no Participant shall receive Performance Units or Performance Shares having a grant date value (assuming maximum payout) greater than ten million dollars ($10,000,000) or covering more than 1,000,000 Shares, whichever is greater. No Participant may be granted more than one award of Performance Units or Performance Shares for the same Performance Period.
SECTION 5. Stock Subject To The Plan.(a) Shares Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares that may be issued under the Plan is 3,979,661 Shares (the “Initial Share Reserve”). The Shares may be authorized, but unissued, or reacquired Common Stock. Notwithstanding the foregoing and, subject to adjustment as provided in Section 12, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in this Section 5(a), plus, to the extent allowable under Section 422 of the Code and the Treasury Regulations promulgated thereunder, any Shares that become available for issuance under the Plan pursuant to Section 5(b).(b) Lapsed Awards. To the extent an Award expires, is surrendered pursuant to an Exchange Program or becomes unexercisable without having been exercised or, with respect to Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares, is forfeited to or repurchased by the Corporation due to failure to vest, the unpurchased Shares (or for Awards other than Options or Stock Appreciation Rights the forfeited or repurchased Shares), which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). Notwithstanding the foregoing (and except with respect to Shares of Restricted Stock that are forfeited rather than vesting), Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if Shares issued pursuant to Awards of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased by the Corporation or are forfeited to the Corporation, such Shares will become available for future grantunder the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan.
SECTION 6. Terms And Conditions Of Stock Options.(a) Power to Grant Options. Subject to the maximum per person share limitation in Section 4, the Committee may grant to such Employees or Consultants Options entitling the Optionee to purchase shares of Common Stock from the Corporation in such quantity, and on such terms and subject to such conditions not inconsistent with the terms of the Plan, as may be established by the Committee at the time of grant or pursuant to applicable resolution of the Committee, and as set forth in the Participant’s Option Award Agreement. Options granted under the Plan may be Nonstatutory Stock Options or Incentive Stock Options.(b) Optionee to Have No Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder of the Corporation with respect to the shares of Common Stock made subject to an Option unless and until such Optionee exercises such Option and is issued the shares purchased thereby. No adjustments shall be made for distributions, dividends, allocations, or other rights with respect to any shares of Common Stock prior to the exercise of such Option.(c) Award Agreements. The terms of any Option shall be set forth in an Award Agreement in such form as the Committee shall from time to time determine. Each Award Agreement shall comply with and be subject to the terms and conditions of the Plan and such other terms and conditions as the Committee may deem appropriate. In the event that any provision of an Option granted under the Plan shall conflict with any term in the Plan as constituted on the Date of Grant of such Option, the term in the Plan constituted on the Date of Grant of such Option shall control. No person shall have any rights under any Option granted under the Plan unless and until the Corporation and the Optionee have executed an Award Agreement setting forth the grant and the terms and conditions of the Option.(d) Vesting. Unless a different vesting schedule is listed in an individual Award Agreement, the Shares subject to an Option granted under the Plan shall vest and become exercisable in accordance with the following schedule:Completed Years of Employment/Service
From Date of Grant | | | Cumulative
Vesting Percentage | 1 | | | 33% | 2 | | | 66% | 3 years or more | | | 100% |
(e) Exercise Price and Procedures.(i) Exercise Price. The Exercise Price means the price per share at which an Optionee may exercise the Optionee’s Option to acquire all or a portion of the shares of Common Stock that are the subject of such Option. Notwithstanding the foregoing, in no event shall the Exercise Price of any Common Stock made the subject of an Option be less than the Fair Market Value of such Common Stock, determined as of the Date of Grant.
(ii) Exercise Procedures. Each Option granted under the Plan shall be exercised by providing written notice to the Committee, together with payment of the Exercise Price, which notice and payment must be received by the Committee on or before the earlier of (1) the date such Option expires, and (2) the last date on which such Option may be exercised as provided in paragraph (f) below.
(iii) Payment of Exercise Price. The Exercise Price times the number of the shares to be purchased upon exercise of an Option granted under the Plan shall be paid in full at the time of exercise. The Committee will determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Committee will determine the acceptable form of consideration at the time of grant. To the extent permitted by Applicable Laws, such consideration for both types of Options may consist entirely of: (i) cash; (ii) check; (iii) other Shares, provided that such Shares have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option will be exercised and provided that accepting such Shares will not result in any adverse accounting consequences to the Corporation, as the Committee determines in its sole discretion; (iv) consideration received by the Corporation
under a broker-assisted (or other) cashless exercise program (whether through a broker or otherwise) implemented by the Corporation in connection with the Plan; (v) by net exercise; (vi) such other consideration and method of payment for the issuance of Shares; or (vii) any combination of the foregoing methods of payment.
(f) Effect of Termination of Service. Subject to paragraph (k) below regarding Special Rules for Incentive Stock Options, the following provisions shall govern the exercise of any Options granted to an Optionee that are vested and outstanding at the time Optionee’s Service ceases:(i) Termination of Service for Reasons Other than Death, Disability or a Termination for Cause. Should Optionee’s Service with the Corporation or a Subsidiary cease for any reason other than death, Disability or a termination for Cause (as determined by the Committee), then each Option shall remain exercisable until the close of business on the earlier of (1) 3 months following the date Optionee’s Service ceased or (2) the expiration date of the Option.
(ii) Termination of Service Due to Death or Disability. Should Optionee’s Service cease due to death or Disability, then each Option shall remain exercisable until the close of business on the earlier of (1) the 12 month anniversary of the date Optionee’s Service ceased, or (2) the expiration date of the Option.
(iii) Termination for Cause. Should Optionee’s Service be terminated for Cause while the Optionee’s Option remains outstanding, each outstanding Option granted to Optionee (whether vested or unvested) shall terminate immediately and Optionee shall forfeit all rights with respect to such Award.
(g) Limited Transferability of Options. Unless otherwise permitted by the Code, by Rule 16b-3 of the Exchange Act and by applicable state securities laws, and approved in advance by the Committee, an Option shall be exercisable only by the Optionee or a Permitted Transferee during the Optionee’s lifetime and shall not be assignable or transferable other than to a Permitted Transferee or by will or by the laws of inheritance following Optionee’s death.(h) Acceleration of Exercise Vesting. Notwithstanding anything to the contrary in the Plan, the Committee, in its discretion, may allow the exercise in whole or in part, at any time after the Date of Grant, any Option held by an Optionee, which Option has not previously become exercisable. In the event of a Change of Control of the Corporation, the Committee, in its discretion may provide that Options shall become 100% vested and exercisable on the date of the Change of Control. Options shall also become 100% vested in the event Optionee dies or becomes Disabled while providing Service to the Corporation or a Subsidiary.(i) Modification, Extension, Cancellation and Regrant. Within the limitations of the Plan and after taking into account any possible adverse tax or accounting consequences, the Committee may modify or extend outstanding Options or may accept the cancellation of outstanding Options (whether granted by the Corporation or another issuer) in return for the grant of new Options for the same or a different number of shares and at the same or a different Exercise Price. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, impair the Optionee’s rights or increase the Optionee’s obligations under such Option or cause a violation of Code Section 409A.(j) Term of Option. No Option shall have a term in excess of ten (10) years measured from the date that the Option is granted.(k) Special Rules For Incentive Stock Options (“ISOs”). In addition to the provisions of this Section 6, the terms specified below shall be applicable to all Incentive Stock Options granted under the Plan. Except as modified by the provisions of this paragraph (k), all of the provisions of the Plan shall be applicable to Incentive Stock Options. Options that are specifically designated as Nonstatutory Options are not subject to the terms of this paragraph (k).(i) Eligibility. Incentive Options may only be granted to Employees.
(ii) Dollar Limitation. The aggregate Fair Market Value of the shares of Common stock (determined as of the Date of Grant) for which one or more Incentive Options granted to any Employee pursuant to the Plan may for the first time become exercisable as Incentive Options during any one calendar year shall not exceed $100,000. To the extent that an Optionee’s Options exceed that limit, they will be treated as Nonstatutory Options (but all of the other provisions of the Option shall remain applicable), with the first Options that were awarded to Optionee to be treated as Incentive Stock Options.
(iii) Restrictions on Sale of Shares. Shares issued pursuant to the exercise of an Incentive Stock Option may not be sold by the Employee until the expiration of 12 months after exercise and 24 months from the Date of Grant. Shares that do not satisfy these restrictions shall be treated as a grant of Nonstatutory Options.
(iv) Special Rules for Incentive Stock Options Granted to 10% Stockholder.
a. Exercise Price. If any Employee to whom an Incentive Stock Option is granted is a 10% Stockholder, the Exercise Price of the Incentive Stock Option must be at least 110% of the Fair Market Value of the Corporation’s Common Stock.
b. Term of Option. If any Employee to whom an Incentive Stock Option is granted is a 10% Stockholder, then the Option term shall not exceed five years measured from the date the Incentive Stock Option is granted.
c. Definition of 10% Stockholder. For purposes of the Plan, an Employee is deemed to be a “10% Stockholder” if the Employee owns more than 10% of the Corporation or any Subsidiary.
(v) Special Rules for Exercise of Incentive Stock Options Following Termination of Employment.
a. Death or Disability. In order to preserve tax treatment as an Incentive Stock Option, Options granted to an Optionee who dies or becomes Disabled while employed must be exercised by the Optionee or the Optionee’s executor or beneficiary no later than (i) 12 months following the date of death or Disability, or (ii) the expiration date of the Incentive Stock Option, if earlier.
b. Termination For Reason Other Than Death or Disability. In order to preserve tax treatment as an Incentive Stock Option, an Optionee must exercise any vested and outstanding Incentive Stock Options no later than: (i) three (3) months following the date the Optionee terminates employment for any reason other than death or Disability; or (ii) the expiration date of the Incentive Stock Option if earlier.
(vi) Miscellaneous. With respect to Incentive Stock Options, if this Plan does not contain any provision required to be included herein under Section 422 of the Code, such provision shall be deemed to be incorporated herein with the same force and effect as if such provision had been set out at length herein. To the extent any Option that is intended to qualify as an Incentive Stock Option cannot so qualify, such Option, to that extent, shall be deemed to be a Nonstatutory Stock Option for all purposes of this Plan.
(l) Shareholder Rights. Until the Shares covered by an Option are issued (as evidenced by the appropriate entry on the books of the Corporation or of a duly authorized transfer agent of the Corporation), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option. The Corporation will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 12 of the Plan.SECTION 7. Restricted Stock.(a) Grant of Restricted Stock. The Committee may cause the Corporation to issue shares of Restricted Stock under the Plan to Employees or Consultants, subject to such restrictions, conditions and other terms as the Committee may determine in addition to those set forth herein, and shall cause the Corporation to issue shares of Restricted Stock under the Plan to Outside Directors as provided in Section 7(h) below, subject to such restrictions, conditions and other terms set forth herein, in any award agreement and in Section 7(h) below.(b) Establishment of Performance Criteria and Restrictions. Restricted Stock Awards to Employees and Consultants will be subject to time vesting under paragraph (f) of this Section 7. The Committee may, in its sole discretion, at the time a grant is made, prescribe restrictions in addition to or other than time vesting, including the satisfaction of corporate or individual performance objectives, which shall be applicable to all or any portion of the Restricted Stock. Corporate or individual performance criteria include, but are not limited to, designated levels or changes in total shareholder return, net income, total asset return, improved regulatory ratings or such other financial measures or performance criteria as the Committee may select. Such restrictions shall be set forth in the Participant’s Restricted Stock Agreement.(c) Share Certificates and Transfer Restrictions. Restricted Stock awarded to a Participant may be held under the Participant’s name in a book entry account maintained by or on behalf of the Corporation. Upon vesting of the Restricted Stock, the Corporation will establish procedures regarding the delivery of share certificates or thetransfer of shares in book entry form. None of the Restricted Stock may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of prior to the date on which such Restricted Stock vests in accordance with the Plan, except, as permitted by applicable law, to a Permitted Transferee.
(d) Voting and Dividend Rights. Except as otherwise determined by the Committee either at the time Restricted Stock is awarded or at any time thereafter prior to the lapse of the restrictions, holders of Restricted Stock shall not have the right to vote such shares or the right to receive any dividends with respect to such shares, until such shares are vested. All distributions, if any, received by the Participant with respect to Restricted Stock as a result of any stock split, stock distributions, combination of shares, or other similar transaction shall be subject to the restrictions of the Plan.(e) Award Agreements. The terms of the Restricted Stock granted under the Plan shall be as set forth in an Award Agreement in such form as the Committee shall from time to time determine. Each Award Agreement shall comply with and be subject to the terms and conditions of the Plan and such other terms and conditions as the Committee may deem appropriate. No Person shall have any rights under the Plan unless and until the Corporation and the Participant have executed an Award Agreement setting forth the grant and the terms and conditions of the Restricted Stock. The terms of the Plan shall govern all Restricted Stock granted under the Plan. In the event that any provision of an Award Agreement shall conflict with any term in the Plan as constituted on the Date of Grant, the term in the Plan shall control.(f) Time Vesting. Except as otherwise provided in a Participant’s Award Agreement or as provided in Section 7(h) below, the Restricted Stock granted under the Plan will vest in accordance with the following schedule:Completed Years of Employment/Service
From Date of Grant | | | Cumulative
Vesting Percentage | 1 | | | 33% | 2 | | | 66% | 3 years or more | | | 100% |
In the event a Participant terminates Service prior to 100% vesting, any Shares of Restricted Stock which are not vested shall be forfeited immediately and permanently. However, a Participant shall be 100% vested in the Participant’s Restricted Stock in the event the Participant terminates Service by reason of death or Disability. A Participant shall also be 100% vested in the Participant’s Restricted Stock on the date of a Change of Control. If a Participant’s Service is terminated for Cause as determined in the sole discretion of the Committee, the portion of his or her Restricted Stock Award which is unvested at the time of such termination shall be forfeited immediately. The Committee may approve Restricted Stock grants that provide alternate vesting schedules. Fractional shares shall be rounded down.
(g) Acceleration of Vesting. Notwithstanding anything to the contrary in the Plan, the Committee, in its discretion, may accelerate, in whole or in part, the vesting schedule applicable to a grant of Restricted Stock.(h) Outside Directors. Subject to the terms and provisions of the Plan, each Outside Director shall receive a grant of 7,500 Shares of Restricted Stock on January 1, 2021 and on January 1 of each year thereafter, subject to such Outside Director’s continued Service on such date. Notwithstanding any provision of the Plan to the contrary, including, and without limitation, Section 7(f) of the Plan, the Restricted Stock granted to Outside Directors shall be vested as to 33% of Shares on the first January 1 next following the Date of Grant, as to 66% of Shares on the second January 1 next following the Date of Grant, and as to 100% of Shares on the third January 1 next following the Date of Grant. In the event an Outside Director terminates Service prior to 100% vesting, any Shares of Restricted Stock which are not vested shall be forfeited immediately and permanently. However, an Outside Director shall be 100% vested in the Outside Director’s Restricted Stock in the event the Outside Director terminates Service by reason of death or Disability. An Outside Director shall also be 100% vested in the Outside Director’s Restricted Stock on the date of a Change of Control. Fractional shares shall be rounded down. For purposes of clarity, Outside Directors may not receive any other form of Award described in this Plan, other than grants of Shares of Restricted Stock as provided in this Section 7(h).SECTION 8. Restricted Stock Units(a) Grant. Restricted Stock Units may be granted to Employees and Consultants at any time and from time to time as determined by the Committee. After the Committee determines that it will grant Restricted Stock Unitsunder the Plan, it will advise the Participant in an Award Agreement of the terms, conditions, and restrictions (if any) related to the grant, including the number of Restricted Stock Units.
(b) Vesting Criteria and Other Terms. The Committee will set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. The Committee may set vesting criteria based upon the achievement of Corporation-wide, business unit, or individual goals (including, but not limited to, continued Service), or any other basis (including the passage of time) determined by the Committee in its discretion. Unless a different vesting schedule is set forth in the Award Agreement, the following time vesting schedule will apply:Completed Years of Employment/Service
From Date of Grant | | | Cumulative
Vesting Percentage | 1 | | | 33% | 2 | | | 66% | 3 years or more | | | 100% |
(c) Earning of Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as determined by the Committee. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units, the Committee, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout as long as such reduction or waiver does not violate Code Section 409A.(d) Dividend Equivalents. The Committee may, in its sole discretion, award dividend equivalents in connection with the grant of Restricted Stock Units that may be settled in cash, in Shares of equivalent value, or in some combination thereof.(e) Form and Timing of Payment. Payment of earned Restricted Stock Units will be made upon the date(s) determined by the Committee and set forth in the Award Agreement. The Committee, in its sole discretion, may settle earned Restricted Stock Units in cash, Shares, or a combination of both.On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be forfeited to the Corporation.
SECTION 9. Stock Appreciation Rights.(a) Grant An Employee or Consultant may be granted one or more Stock Appreciation Rights under the Plan and such SARs shall be subject to such terms and conditions, consistent with the other provisions of the Plan, as shall be determined by the Committee in its sole discretion. A SAR may relate to a particular Stock Option and may be granted simultaneously with or subsequent to the Stock Option to which it relates. Except to the extent otherwise modified in the grant, (i) SARs not related to a Stock Option shall be granted subject to the same terms and conditions applicable to Stock Options as set forth in Section 6, and (ii) all SARs related to Stock Options granted under the Plan shall be granted subject to the same restrictions and conditions and shall have the same vesting, exercisability, forfeiture and termination provisions as the Stock Options to which they relate. SARs may be subject to additional restrictions and conditions. The per-share base price for exercise or settlement of SARs shall be determined by the Committee, but shall be a price that is equal to or greater than the Fair Market Value of such shares. Other than as adjusted pursuant to Section 12, the base price of SARs may not be reduced without shareholder approval (including canceling previously awarded SARs and regranting them with a lower base price).(b) Exercise and Payment. To the extent a SAR relates to a Stock Option, the SAR may be exercised only when the related Stock Option could be exercised and only when the Fair Market Value of the shares subject to the Stock Option exceed the exercise price of the Stock Option. When a Participant exercises such SARs, the Stock Options related to such SARs shall automatically be cancelled with respect to an equal number of underlying shares. Unless the Committee decides otherwise (in its sole discretion), SARs shall only be paid in cash or in shares of Common Stock. For purposes of determining the number of shares available under the Plan, each Stock Appreciation Right shall count as one share of Common Stock, without regard to the number of shares, if any, that are issued upon the exercise of the Stock Appreciation Right and upon such payment. Shares issuable in connection with a SAR are subject to the transfer restrictions under the Plan.SECTION 10. Performance Units and Performance Shares.(a) Grant of Performance Units/Shares. Subject to the terms of the Plan, Performance Units and Performance Shares may be granted to eligible Employees or Consultants at any time and from time to time, as shall be determined by the Committee, in its sole discretion. The Committee shall have complete discretion in determining the number of Performance Units and Performance Shares granted to each Participant.(b) Value of Performance Units/Shares. Each Performance Unit shall have an initial value that is established by the Committee at the time of the grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the Date of Grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units/Shares that will be paid out to the Participants. The time period during which the performance goals must be met shall be called a “Performance Period.”(c) Performance Objectives and Other Terms. The Committee will set Performance Goals or other vesting provisions (including, without limitation, continued status as an Employee or Consultant) in its discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units/Shares that will be paid out to an Employee or Consultant. The time period during which the performance objectives or other vesting provisions must be met will be called the “Performance Period.” Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period, and such other terms and conditions as the Committee, in its sole discretion, will determine. The Committee may set performance objectives based upon the achievement of Corporation-wide, divisional, or individual goals, applicable federal or state securities laws, or any other basis determined by the Committee in its discretion.(d) Measurement of Performance Goals. Performance Goals shall be established by the Committee on the basis of targets to be attained (“Performance Targets”) with respect to one or more measures of business or financial performance (each, a “Performance Measure”), subject to the following:(i) Performance Measures. For each Performance Period, the Committee shall establish and set forth in writing the Performance Measures, if any, and any particulars, components and adjustments relating thereto, applicable to each Participant. The Performance Measures, if any, will be objectively measurable and will be based upon the achievement of a specified percentage or level in one or more objectively defined and non-discretionary factors preestablished by the Committee. Performance Measures may be one or more of the following, as determined by the Committee: (i) revenue; (ii) income or earnings, including operating income; (iii) net income; (iv) pre-tax income or after-tax income; (v) earnings growth; (vi) earnings per share; (vii) stock price (including growth measures and total shareholder return); (viii) cost targets, reductions and savings and expense management; (ix) return on assets (gross or net), return on investment, return on equity, return on tangible common equity, or return on shareholder equity; (x) improvement of financial ratings; (xi) internal rate of return; (xii) cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (xiii) pre-tax profit or after-tax profit; (xiv) EBIT, EBITA and EBITDA, within the meaning of generally accepted accounting principles; (xv) gross profit; (xvi) cash generation; (xvii) asset quality; (xviii) efficiency ratio or market-spending efficiency; (xix) core non-interest income; (xx) change in working capital; (xxi) return on capital; (xxii) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration or market share, geographic business expansion, or objective customer satisfaction goals; (xxiii) objective goals relating to divestitures, joint ventures, mergers, acquisitions and similar transactions; (xxiv) objective goals relating to staff management, results from staff attitude and/or opinion surveys, staff satisfaction scores, staff safety, headcount, performance management, completion of critical staff training initiatives; (xxv) regulatory capital ratios, and (xxvi) key regulatory objectives.
(ii) Committee Discretion on Performance Measures. As determined in the discretion of the Committee, the Performance Measures for any Performance Period may (a) differ from Participant to Participant and from Award to Award, (b) be based on the performance of the Corporation as a whole or the performance of a specific Participant or one or more Subsidiaries, divisions, departments, regions, segments, products, functions or business units of the Corporation, (c) be measured on a per share, per capita, per employee, per branch basis, and/or other objective basis, (d) be measured on a pre-tax or after-tax basis, and (e) be measured on an absolute basis or in relative terms (including, but not limited to, the passage of time and/or against other companies, financial metrics and/or an index). Without limiting the foregoing, the Committee shall adjust any performance criteria, Performance Measures or other feature of an Award that relates to or is wholly or partially based on the
number of, or the value of, any stock of the Corporation, to reflect any stock dividend or split, repurchase, recapitalization, combination, or exchange of shares or other similar changes in such stock.
(e) Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units/Shares shall be entitled to receive a payout of the number of Performance Unit/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals have been achieved. Notwithstanding the preceding sentence, after the grant of a Performance Unit/Share, and subject to restrictions under Applicable Laws such as Code Section 409A, the Committee, in its sole discretion, may waive the achievement of any performance goals for such Performance Unit/Share.(f) Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares shall be made in a single lump sum, within 90 calendar days following the close of the applicable Performance Period. The Committee, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate fair market value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in combination thereof. Prior to the beginning of each Performance Period, Participants may, if so permitted by the Corporation, elect to defer the receipt of any Performance Unit/Share payout upon such terms as the Committee shall determine.(g) Cancellation of Performance Units/Shares. Subject to the applicable Award Agreement, upon the earlier of (a) the Participant’s termination of Service, or (b) the date set forth in the Award Agreement, all remaining Performance Units/Shares shall be forfeited by the Participant to the Corporation, the Shares subject thereto shall again be available for grant under the Plan.(h) Non-transferability. Performance Units/Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or, as permitted by Applicable Law, to a Permitted Transferee. Further a Participant’s rights under the Plan shall be exercisable during the Participant’s lifetime only by the Participant, the Participant’s legal representative or a Permitted Transferee.SECTION 11. Tax Withholding.The Corporation or the applicable Subsidiary shall have the right to deduct from all amounts paid to a Participant in cash (whether under this Plan or otherwise) any amount of taxes required by law to be withheld in respect of Awards under this Plan as may be necessary in the opinion of the Corporation or applicable Subsidiary to satisfy all tax withholding required by law to be withheld or paid by the Corporation or Subsidiary with respect to any amount payable. In the case of payments of Awards in the form of Common Stock, at the Committee’s discretion, the Participant shall be required to either pay to the Corporation or applicable Subsidiary the amount of any taxes required to be withheld with respect to such Common Stock or, in lieu thereof, the Corporation or applicable Subsidiary shall have the right to retain (or the Participant may be offered the opportunity to elect to tender) the number of shares of Common Stock whose Fair Market Value equals such amount required to be withheld, all subject to Applicable Law. The amount of any such withholding shall be determined by the Corporation or applicable Subsidiary.
SECTION 12. Adjustment of Shares.(a) General. Should any change be made to the Common Stock by reason of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, the Committee shall make appropriate adjustments to (i) the maximum number and/or class of securities issuable pursuant to the Plan, (ii) the number and/or class of securities and the Exercise Price per share in effect for each outstanding Option in order to prevent the dilution or enlargement of benefits, (iii) the number of shares of Restricted Stock granted; or (iv) the number of Performance Shares awarded, if applicable. As a condition to the exercise of an Award, the Corporation may require the person exercising such Option to make such representations and warranties at the time of any such exercise as the Corporation may at that time determine, including without limitation, representations and warranties that (i) the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares in violation of applicable federal or state securities laws, and (ii) such person is knowledgeable and experienced in financial and business matters and is capable of evaluating the merits and the risks associated with purchasing the Shares.The inability of the Corporation to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Corporation’s counsel to be necessary to the lawful issuance and sale of any Shares under this Plan, shall relieve the Corporation of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
(b) Mergers and Consolidations. In the event that the Corporation is a party to a Change of Control, outstanding Awards shall be subject to the agreement of merger or consolidation or asset sale. Such agreement, without the Participant’s consent, may provide for:(i) The continuation of such outstanding Awards by the Corporation (if the Corporation is the surviving Corporation);
(ii) The assumption of the Plan and such outstanding Awards by the surviving Corporation;
(iii) The substitution by the surviving Corporation of options with substantially the same terms for such outstanding Awards;
(iv) Such other action as the Board of Directors determines.
Each Option that is assumed or otherwise continued in effect in connection with a Change of Control shall be appropriately adjusted, immediately after such Change of Control, to apply to the number and class of securities which would have been issuable to the Optionee in connection with the consummation of such Change of Control, had the Option been exercised immediately prior to such Change of Control.
(c) Reservation of Rights. Except as provided in this Section 12, a Participant shall have no Shareholder rights by reason of (i) any subdivision or consolidation of shares of stock of any class, or (ii) any other increase or decrease in the number of shares of stock of any class. Any issuance by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of shares subject to an Option. The grant of an Option pursuant to the Plan shall not affect in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.SECTION 13. Miscellaneous.(a) Regulatory Approvals. The implementation of the Plan, the granting of any Options, Restricted Stock or Performance Unit/Performance Share Awards under the Plan, and the issuance of any shares of Common Stock upon the exercise of any Option, lapse of restrictions on Restricted Stock, or payout of Performance Share Award shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory authorities, if any, including applicable securities laws and applicable banking laws having jurisdiction over the Plan, the Options or Restricted Stock granted, and the shares of Common Stock issued pursuant to it.(b) Strict Construction. No rule of strict construction shall be implied against the Committee, the Corporation or Subsidiary or any other person in the interpretation of any of the terms of the Plan, any Award granted under the Plan or any rule or procedure established by the Committee.(c) Choice of Law. All determinations made and actions taken pursuant to the Plan shall be governed by the internal laws of the State of Michigan and construed in accordance therewith.(d) Compliance With Code Section 409A. Awards will be designed and operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Code Section 409A such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A. The Plan and each Award Agreement under the Plan is intended to meet the requirements of Code Section 409A (or an exemption therefrom) and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Committee. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Code Section 409A, the Award will be granted, paid, settled or deferred in a manner that will meet the requirements of Code Section 409A (or an exemption therefrom), such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A. In no event will the Corporation or a Subsidiary be responsible for or reimburse a Participant for any taxes or other penalties incurred as a result of applicable of Code Section 409A.(e) Date of Grant. The Date of Grant of an Award will be, for all purposes, the date on which the Committee makes the determination granting such Award, or such other later date as is determined by the Committee. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.(f) Conditions Upon Issuance of Shares.(i) Legal Compliance. Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Corporation with respect to such compliance.
(ii) Investment Representations. As a condition to the exercise of an Award, the Corporation may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Corporation, such a representation is required.
(g) Stockholder Approval. The Plan will be subject to approval by the stockholders of the Corporation within twelve (12) months after the date the Plan is adopted by the Board of Directors. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws.(h) Recoupment of Awards. All Awards granted under this Plan shall be subject to the terms and conditions, if applicable, of any recoupment policy adopted by the Corporation from time to time or any recoupment requirement imposed under applicable laws, rules or regulations, including but not limited to the Sterling Bancorp, Inc. Clawback Policy.SECTION 14. No Employment or Service Retention Rights.Nothing in the Plan or in any Award granted under the Plan shall confer upon the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Subsidiary employing or retaining the Participant) or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.
SECTION 15. Duration and Amendments.(a) Term of the Plan. The Plan, as set forth herein, shall become effective on the date of its adoption by the Board of Directors, subject to the approval of the Corporation’s stockholders as provided herein. In the event that the stockholders fail to approve the Plan as provided herein, any grants of Awards that have already occurred shall be rescinded, and no additional grants or awards shall be made thereafter under the Plan. The Plan shall terminate automatically ten (10) years after its adoption and may be terminated earlier at any date by the Board of Directors pursuant to paragraph (b) below.(b) Right to Amend or Terminate the Plan. The Committee may amend, suspend or terminate the Plan at any time and for any reason; provided, however, that certain amendments, including amendments that increase the number of Shares of Common Stock available for issuance under the Plan (except as provided in Section 12) or change the class of persons who are eligible for the grant of ISOs, shall be subject to the approval of the Corporation’s stockholders. The Corporation will obtain stockholder approval of any Plan amendment to the extent required to comply with Applicable Laws.(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan will impair the rights of any Participant with respect to Awards granted prior to such amendment, alteration, suspension or termination, unless mutually agreed otherwise between the Participant and the Committee, which agreement must be in writing and signed by the Participant and the Corporation. No Shares of Common Stock shall be issued or sold under the Plan after the termination thereof, except upon exercise of an Option granted prior to such termination. The termination of the Plan, or any amendment thereof, shall not affect any shares of Restricted Stock or Performance Shares previously issued or any Option previously granted under the Plan.SECTION 16. Savings ClauseThis Plan is intended to comply in all respects with Applicable Law and regulations. In case any one or more provisions of this Plan shall be held invalid, illegal, or unenforceable in any respect under Applicable Law and regulation, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or
impaired thereby and the invalid, illegal, or unenforceable provision shall be deemed null and void; however, to the extent permitted by law, any provision that could be deemed null and void shall first be construed, interpreted, or revised retroactively to permit this Plan to be construed in compliance with all Applicable Law so as to foster the intent of this Plan. The grant and settlement of Awards shall be conditioned upon and subject to compliance with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. 1828(k), and the rules and regulations promulgated thereunder, to the extent applicable.
To record the adoption of the Plan by the Board of Directors, the Corporation has caused its authorized officer to execute the same.
| | | STERLING BANCORP, INC.
| | | | | | | | | By:
| | | | | | | Title:
| | | | | | | Date:
| | | |
TABLE OF CONTENTS (6)
| The Company maintains a life insurance plan that is generally available to all employees, and any payments under this plan are not disclosed in this table. |
(7)
| Under the executive’s executive incentive retirement plan agreement, a payment will be made to his beneficiary if he dies while in active service with the Bank. This amount would be paid in lieu of the payments to the executive. If the executive dies after payments have commenced but prior to the time the executive receives all distributions, the Bank will distribute the remaining amounts to his beneficiary in a lump sum. |
(8)
| Restricted stock fully vests in the event of a termination of employment by reason of death. Mr. Sinatra was not employed at the end of 2020, and thus was entitled to no payments under these agreements as of December 31, 2020. |
(9)
| Options fully vest in the event an optionee dies while employed. Mr. Sinatra was not employed at the end of 2020, and thus was entitled to no payments under these agreements as of December 31, 2020. |
(10)
| Restricted stock fully vests on the date of a change of control. Mr. Sinatra was not employed at the end of 2020, and thus was entitled to no payments under these agreements as of December 31, 2020. |
(11)
| The Committee has the discretion to provide that options are 100% vested on the date of a change of control. Mr. Sinatra was not employed at the end of 2020, and thus was entitled to no payments under these agreements as of December 31, 2020. |
(12)
| Restricted stock fully vests on the date of a change of control. Mr. Sinatra was not employed at the end of 2020, and thus was entitled to no payments under these agreements as of December 31, 2020. |
(13)
| The Committee has the discretion to provide that options are 100% vested on the date of a change of control. Mr. Sinatra was not employed at the end of 2020, and thus was entitled to no payments under these agreements as of December 31, 2020. |
Compensation Committee Interlocks and Insider Participation None of our executive officers currently serves, or in the past year has served, as a member of the Board of Directors or compensation committee of any entity that has one or more executive officers serving on our Board of Directors or compensation committee. Chief Executive Officer Pay Ratio The Company’s chief executive officer to median employee pay ratio was calculated in accordance with SEC requirements. However, due to the flexibility afforded by Item 402(u) of Regulation S-K in calculating the pay ratio, the ratio presented herein is a reasonable estimate and may not be comparable to the pay ratio presented by other companies. The Company identified the median employee by examining 2020 total compensation for all employees of the Company excluding the Chief Executive Officer. The employee population used to identify the Company’s median employee included all employees of the Company, whether employed on a full-time, part-time or seasonal basis, as of December 31, 2020. The compensation measure described above was consistently applied to this entire employee population. The Company did not make any assumptions, adjustments or estimates with respect to the employee population or the compensation measure, but it did annualize the compensation for any employees that were not employed by the Company for all of 2020. After identifying the median employee based on the compensation measure described above, the Company calculated annual total compensation for the median employee using the same methodology used for our named executive officers as set forth in the “Summary Compensation Table” herein. The median employee was identified as of November 30, 2020, and the chief executive officer to median employee pay ratio was calculated with respect to the annualized compensation for Mr. O’Brien, who was the chief executive officer at that date. As illustrated in the table below, in 2020, the Company’s Chief Executive Officer’s annual total compensation was 56 times that of the Company’s median employee. 2020 Annual Total Compensation | | | $3,362,550 | | | $59,600 | Total Annual Compensation Pay Ratio | | | 56 | | | 1 |
TABLE OF CONTENTS 2020 Director Compensation Table The table below sets forth the compensation of each non-employee director in 2020. Barry Allen(1) | | | 98,000 | | | — | | | — | | | — | | | — | | | — | | | 98,000 | Peggy Daitch | | | 64,750 | | | — | | | — | | | — | | | — | | | — | | | 64,750 | Tracey Dedrick(2) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Denny Kim(3) | | | 16,000 | | | — | | | — | | | — | | | — | | | — | | | 16,000 | Steven Gallotta(4) | | | 17,000 | | | — | | | — | | | — | | | — | | | — | | | 17,000 | Seth Meltzer | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Sandra Seligman | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Peter Sinatra(5) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Rachel Tronstein Stewart(6) | | | 63,375 | | | — | | | — | | | — | | | — | | | — | | | 63,375 | Benjamin Wineman | | | 98,000 | | | — | | | — | | | — | | | — | | | — | | | 98,000 | Lyle Wolberg | | | 95,375 | | | — | | | — | | | — | | | — | | | — | | | 95,375 | Total | | | 452,500 | | | — | | | — | | | — | | | — | | | — | | | 452,500 |
(1)
| Mr. Allen notified the Company of his resignation from the Board of Directors effective as of December 31, 2020. |
(2)
| Ms. Dedrick was appointed to the Board of Directors on December 17, 2020, effective upon receipt of regulatory non-objection from the OCC, which has been recently received. Accordingly, Ms. Dedrick received no compensation for 2020. |
(3)
| Mr. Kim was appointed to the Board of Directors on September 22, 2020, effective upon receipt of regulatory non-objection from the OCC, which was received later in 2020. |
(4)
| Mr. Gallotta was appointed to the Board of Directors on September 22, 2020, effective upon receipt of regulatory non-objection from the OCC, which was received later in 2020. |
(5)
| Mr. Sinatra served as Chief Executive Officer of Quantum Capital Management pursuant to an employment agreement described under “Executive Compensation—Employment Arrangements.” On October 14, 2020, Mr. Sinatra resigned from the Board of Directors and from the board of directors of the Bank in connection with the execution of an Asset Purchase Agreement by Quantum Capital Management to sell substantially all of its assets. |
(6)
| Ms. Tronstein-Stewart resigned from the Company as of December 4, 2020, the date of the 2020 annual meeting of shareholders. |
Director Fees Board of Directors members receive fees for Board of Directors and committee meetings attended. Board of Directors members receive a quarterly retainer of $7,500. For each standing committee of the Board of Directors, committee chairs receive $5,000 quarterly, and committee members receive $3,000 quartlerly. Fees for special and temporary committee assignments are as follows: $7,500 quarterly for the Demand Review Committee, $7,500 quarterly for the Independent Director Review Committee and $5,000 per quarter for the Compliance Committee. TABLE OF CONTENTS CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS In addition to the compensation arrangements with directors and executive officers described herein, the following is a description of transactions in 2020 to which we have been a party, in which the amount involved exceeded $120,000 and in which any of our directors, executive officers or beneficial holders of more than five percent of our capital stock, or their immediate family members or entities affiliated with them, had or will have a direct or indirect material interest. Policies and Procedures Regarding Related Party Transactions Transactions by the Company or the Bank with related parties are subject to certain regulatory requirements and restrictions, including Sections 23A and 23B of the Federal Reserve Act and the Federal Reserve’s Regulation W (which govern certain transactions by the Bank with its affiliates) and the Federal Reserve’s Regulation O (which governs certain loans by the Bank to its insiders—i.e., executive officers, directors, principal shareholders and any related interest of such a person). The Bank’s written Regulation O Policy was revised in November 2020 to prohibit the extension of credit to insiders. Prior to this amendment, the Company had extended mortgage loans to insiders on their primary residences. These loans were all made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers and did not involve more than normal risk of collectability or present other unfavorable features. Several of these loans currently remain outstanding with the Bank. Both the Company and the Bank have a written Affiliate Transactions Policy, which limits covered transactions with any single affiliate to less than 10%, and with all affiliates to less than 20%, of unimpaired capital and surplus. All covered transactions with affiliates must be made on terms and conditions that are consistent with safe and sound banking practices and are secured by a statutorily-defined amount of collateral. Neither the Company nor the Bank may purchase low-quality assets from an affiliate. Transactions between the Company or Bank and affiliates must be made on terms and under circumstances that are substantially the same, or at least as favorable to the Company or the Bank, respectively, as those prevailing at the time for comparable transactions with unaffiliated companies. No loans or extensions of credit may be made to an affiliate, unless the affiliate is engaged only in activities that a bank holding company may conduct. We have adopted a written Related Persons Transactions Policy pursuant to which any person who currently is (or was since the beginning of the last fiscal year) an executive officer or a director (or director nominee) or the owner of more than 5% of our voting securities, including their immediate family members, and any entity employing any of the foregoing persons or in which any of the foregoing persons collectively have a direct or indirect interest of 10% or greater or is a general partner, will not be permitted to enter into a related person transaction with us without the consent of our Audit Committee, another independent committee of our Board of Directors or the full Board of Directors. Any request for us to enter into a transaction with any of the foregoing parties in which the amount involved exceeds $120,000 and in which the related party will have a direct or indirect material interest will be required to be presented to our Audit Committee for review, consideration and approval. All of our directors and executive officers are be required to report to our Audit Committee any such related person transaction. In approving or rejecting the proposed transaction, our Audit Committee will review all relevant information available, including the terms of the transaction, and consider the following factors: whether the transaction was undertaken in the ordinary course of business, which party initiated such transaction, whether such transaction would be entered into on terms no less favorable to us than terms generally available to an unaffiliated third party, the purpose of the transaction and the potential benefits to us, the approximate dollar value involved (particularly as it relates to the related party), the related party's interest in the such transaction and any other information that would be material to investors. If we should discover related person transactions that have not been approved, our Audit Committee will be notified and will determine the appropriate action, including ratification, rescission or amendment of the transaction. TABLE OF CONTENTS Related-Party Transactions Lease Agreements The Bank had a sublease agreement with Seligman & Associates (“S&A”) for office space, plus related expenses, in Southfield, MI at an annual rent amount of $21,271. The Bank also reimbursed S&A for usage of the S&A Bloomberg terminal and other miscellaneous expenses. This sublease was terminated on July 23, 2020. The Bank leased 7,560 square feet of warehouse space from S&A at 1630 Thorncroft Drive in Troy, MI at an annual base rent of $40,296. In addition to the lease amount, the Bank reimbursed S&A for a proportionate share of certain expenses, such as property tax, utilities, snow removal and lawn care. The Bank directly reimbursed S&A for long-distance telephone carrier access. This lease was terminated on December 31, 2020. The Bank leases office space from Transamerica Pyramid Properties, LLC in San Francisco under a lease agreement dated August 26, 2016. In turn, the Bank subleases 75% of that space to Pioneer Realty, a subsidiary of S&A, at an annual base rent amount of $267,626. During 2020, the Bank also had subleased storage space at 545 Sansome Street in San Francisco to Pioneer Realty for an annual base rent amount of $3,000. The sublease was terminated on July 23, 2020. Charitable Donations From time to time, the Company had made charitable donations to the Seligman Family Foundation, including $375,000 in 2020. Ms. Seligman and Mr. Meltzer are members of the Board of Trustees of the Seligman Family Foundation. Such donations ceased as of June 2020. Data Processing During 2020, the Bank provided monthly data processing and programming services to entities controlled by the Company’s controlling shareholders. The Company provided written notice to terminate its data processing and programming services arrangement on July 23, 2020. Aggregate fees for such services amounted to $79,000 during 2020. Other Family Relationships See “Corporate Governance—Family Relationships.” TABLE OF CONTENTS PROPOSAL NO. 2: ADVISORY, NON-BINDING VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS FOR 2020 This proposal provides our shareholders with an opportunity to approve, on an advisory, non-binding basis, the compensation of our named executive officers named in the “Summary Compensation Table” of this Proxy Statement, as such compensation is described in the Compensation Discussion and Analysis section, the compensation tables and the related disclosure contained in this Proxy Statement (a “Say on Pay” vote). The “Summary Compensation Table” provides a snapshot of the compensation paid or granted to our named executive officers for the fiscal year ending December 31, 2020. The Say on Pay vote is an advisory, non-binding vote, which means that it will not bind the Company or our Board of Directors. We cannot predict what actions the Board of Directors will take, if any, in response to this vote. We believe that the complex interplay between performance, risk management, succession planning and compensation should not require material changes based solely on the results of a “for or against” vote. Due to its broad nature, the outcome of a Say on Pay vote does not convey nuanced information about the shareholders’ views regarding the compensation of individual executives, the different elements of our compensation program or the choices our Compensation Committee makes during a year. This does not mean that a Say on Pay vote is without value, however. We believe that open lines of communication among the Board of Directors, executive management, and our shareholders serve as the foundation for good corporate governance and responsible stewardship. The Board of Directors recognizes the importance of aligning executive compensation with shareholder interests in light of the risks and economic conditions faced by the Company. This vote may assist us in our ongoing engagement and outreach efforts, as we continue to serve our core constituencies of shareholders, customers, employees and communities. The Board of Directors believes that the compensation arrangements for its named executive officers are aligned with the Company’s long-term performance and with shareholders’ interests. |
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS VOTE FOR THE FOLLOWING
ADVISORY RESOLUTION: | | | | | | “RESOLVED, that the Company’s shareholders approve, on an advisory, non-binding basis, the compensation paid to the Company’s named executive officers for the fiscal year ending December 31, 2020, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”
| | | | |
TABLE OF CONTENTS PROPOSAL NO. 3: ADVISORY, NON-BINDING VOTE RECOMMENDING THE FREQUENCY OF THE ADVISORY, NON-BINDING VOTE ON THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, not less than once every six years, a public company is required to hold a nonbinding, advisory shareholder vote on the frequency of Say on Pay votes on the Company’s executive compensation policies. Although the Company is exempt from this requirement due to its status as an emerging growth company, the Company is nonetheless electing to hold an advisory, non-binding Say on Pay vote at this Annual Meeting (Proposal No. 2). In addition, the Company is seeking an advisory shareholder vote on the frequency of such advisory shareholder Say on Pay votes. Such advisory shareholder vote (an advisory, non-binding “Say When on Pay” vote) shall determine whether the advisory, non-binding shareholder vote on the compensation of our named executive officers that is the subject of Proposal No. 2 should occur every year, every two years or every three years. The Board of Directors welcomes the views of shareholders on executive compensation matters. The Board of Directors believes that more frequent input from shareholders is relevant to Compensation Committee and Board of Directors deliberations and decisions on executive compensation. In addition, the Board of Directors believes that a vote every year will allow shareholders the means to express their views on the appropriateness of the Company’s compensation of its named executive officers. Accordingly, the Board of Directors recommends that shareholders vote in favor of the Company holding an advisory shareholder Say on Pay vote every year. The vote on this proposal will not be binding on the Board of Directors and may not be construed as overruling a decision by the Board of Directors or creating or implying any change to the fiduciary duties of the Board of Directors related to executive compensation. |
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS VOTE IN FAVOR OF HOLDING AN ADVISORY,
NON-BINDING SHAREHOLDER VOTE ON THE COMPENSATION OF OUR
NAMED EXECUTIVE OFFICERS EVERY YEAR
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TABLE OF CONTENTS PROPOSAL NO. 4: RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee has selected Crowe LLP as independent auditors for the Company for the fiscal year ending December 31, 2021. The services provided to the Company and its subsidiaries by Crowe LLP for 2020 and 2019 are described below, under the caption “Independent Public Accountant Fees and Services.” The affirmative vote of a majority of the votes cast by the holders of shares entitled to vote, with one vote, in person or by written proxy, for each share entitled to vote, is required for ratification of the appointment of Crowe LLP as our independent registered public accounting firm for 2021. Shares withheld or otherwise not voted with respect to the ratification of the appointment of Crowe LLP (because of abstention, broker non-vote or otherwise) will not be counted as votes cast and will have no effect on the vote on such proposal. Although the vote on Proposal No. 4 is not binding on the Company, the Audit Committee will take your vote on this proposal into consideration when selecting our independent registered public accounting firm in the future. Independent Public Accountant Fees and Services The following table summarizes fees billed for professional services rendered by Crowe LLP, the Company’s independent auditors for the years ended December 31, 2020 and 2019: Audit fees(1) | | | $728,825 | | | $1,258,750 | Audit-related fees | | | — | | | — | Tax fees(2) | | | 64,787 | | | 19,040 | All other fees(3) | | | — | | | 565 | Total fees | | | $793,612 | | | $1,278,355 |
(1)
| Consists of fees billed for professional services performed by Crowe LLP for its audit of the Company’s annual financial statements and services that are normally provided in connection with regulatory filings or engagements. Additional billings for the 2020 audit are probable. |
(2)
| Tax fees are for the filing of federal and state tax returns. |
(3)
| All other fees include advisory services. |
The Audit Committee is required to review and pre-approve both audit and non-audit services to be provided by the independent auditor (other than with respect to de minimis exceptions permitted by the Sarbanes-Oxley Act of 2002). During 2020, all services provided by Crowe LLP were pre-approved by the Audit Committee. To the extent required by Nasdaq rules or any other applicable legal or regulatory requirements, approval of non-audit services must be disclosed to investors in periodic reports required by Section 13(a) of the Exchange Act. There was no change of the Company’s independent public accountants during 2020 or 2019. Representatives of Crowe LLP will attend the Annual Meeting, will have the opportunity to make a statement, if they desire to do so, and will be available to answer appropriate questions from our shareholders. |
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS VOTE FOR THIS PROPOSAL
| |
TABLE OF CONTENTS The Audit Committee has reviewed and discussed the Company’s audited financial statements with management. As described more fully in its charter, the purpose of the Audit Committee is to assist the Board of Directors in its general oversight of the Company’s financial reporting and internal control functions and the Audit Committee is directly responsible for the appointment, retention, compensation and oversight of the work of our independent registered public accounting firm, currently Crowe LLP, and our internal audit team. Crowe LLP is responsible for performing an independent audit of the Company’s consolidated financial statements and the effectiveness of the Company’s internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (U.S.) (“PCAOB”) and for expressing their opinions thereon. In 2020, among other matters, the Audit Committee: Reviewed and discussed with management and Crowe LLP the Company’s audited financial statements. Reviewed and discussed with management and Crowe LLP the matters required to be discussed by Statement of Auditing Standards No. 61, as amended, as adopted by the PCAOB in Rule 3200T. Received the written disclosures and the letter from Crowe LLP required by the applicable requirements of the PCAOB regarding Crowe LLP’s communications with the Audit Committee concerning independence, and discussed with Crowe LLP its independence with respect to the Company. Based on the foregoing, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements of the Company be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 26, 2021. | | | The Audit Committee | | | | | | | | Steven Gallotta | | | | Benjamin Wineman | | | | Lyle Wolberg |
TABLE OF CONTENTS BENEFICIAL OWNERSHIP OF COMMON STOCK The following table sets forth information as of March 29, 2021 regarding the beneficial ownership of our common stock by: each shareholder known by us to beneficially own more than 5% of our outstanding common stock; each of our directors and named executive officers; and all of our directors and executive officers as a group. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting of securities, or to dispose or direct the disposition of securities, or has the right to acquire such powers within 60 days. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each person identified in the table has sole voting and investment power over all of the shares shown opposite such person’s name. Except as otherwise specified below, the address for each listed shareholder is: c/o Sterling Bancorp, Inc., One Towne Square, Suite 1900, Southfield, Michigan 48076. 5% Shareholders:
| | | | | | | K.I.S.S. Dynasty Trust No. 9(2)(3)
c/o The First National Bank in Sioux Falls
100 South Phillips Avenue, Sioux Falls, SD 57104 | | | 12,107,732 | | | 24% | Erwin A. Rubenstein(3)
255 East Brown Street, Suite 320, Birmingham, MI 48009 | | | 12,107,732 | | | 24% | Michael Shawn(4)
7300 Biscayne Boulevard, Suite 200, Miami FL 33138 | | | 8,981,041 | | | 18% | Harry S. Stern(5)
220 Montgomery Street, 15th Floor, San Francisco, CA 94104 | | | 8,101,536 | | | 16% | K.I.S.S. Dynasty Trust No. 5(4)
c/o The First National Bank in Sioux Falls
100 South Phillips Avenue, Sioux Falls, SD 57104 | | | 7,507,318 | | | 15% | Scott J. Seligman 1993 Long Term Irrevocable Dynasty Trust(2)(4)(6)
c/o The First National Bank in Sioux Falls
100 South Phillips Avenue, Sioux Falls, SD 57104 | | | 5,743,579 | | | 11% | Scott J. Seligman(7) | | | 3,641,401 | | | 7% | T. Rowe Price Associates, Inc.(8)
100 E. Pratt Street, Baltimore, MD 21202 | | | 2,755,996 | | | 6% | FJ Capital Management LLC(6)
1313 Dolley Madison Blvd, Ste 306, McLean, VA 22101 | | | 2,501,503 | | | 5% | Martin Friedman(9)
1313 Dolley Madison Blvd, Ste 306, McLean, VA 22101 | | | 2,501,503 | | | 5% | Directors:
| | | | | | | Peggy Daitch(10) | | | 864 | | | * | Tracey Dedrick(10) | | | — | | | — | Steven Gallotta(10) | | | — | | | — | Denny Kim(10) | | | — | | | — | Seth Meltzer(11) | | | 1,490,180 | | | 3% | Thomas M. O’Brien(12) | | | 100,000 | | | * | Sandra Seligman(13) | | | — | | | — | Benjamin Wineman(10)(14) | | | 17,100 | | | * | Lyle Wolberg(10)(14)(15) | | | 7,571 | | | * | Named Executive Officers (Non-Directors):
| | | | | | | Stephen Huber(16) | | | 7,284 | | | * | Colleen Kimmel (17) | | | 5,726 | | | * | Thomas Lopp(18) | | | 7,000 | | | * |
TABLE OF CONTENTS Christine Meredith(19) | | | 2,347 | | | * | Peter Sinatra(20) | | | 29,415 | | | * | All directors and executive officers as a group (14 persons total)(21) | | | 1,667,487 | | | 3% |
(1)
| Based on 49,981,861 shares of the Company’s common stock issued and outstanding as of March 29, 2021, plus the 105,374 shares which our directors and executive officers in the aggregate have the right to acquire within sixty (60) days of March 29, 2021. |
(2)
| Mr. Seligman disclaims beneficial ownership of the shares held by the trust except to the extent of his pecuniary interest, if any, therein. |
(3)
| Based on a Schedule 13G filed by Erwin Rubenstein and the K.I.S.S. Dynasty Trust No. 9 on February 16, 2021, Mr. Rubenstein, as trustee of the K.I.S.S. Dynasty Trust No. 9, had sole voting and dispositive power over 12,107,732 shares of common stock of the Company beneficially owned by the K.I.S.S. Dynasty Trust No. 9. Mr. Rubenstein disclaims beneficial ownership of the shares owned by the K.I.S.S. Dynasty Trust No. 9. |
(4)
| Based on a Schedule 13D filed by Michael Shawn on September 4, 2020, effective August 19, 2020, Mr. Shawn was appointed as trustee of the K.I.S.S. Dynasty Trust No. 5 and the Sandra Seligman 1993 Long Term Irrevocable Trust, which hold 7,507,318 and 1,473,723 shares of common stock, respectively, and Mr. Shawn, in his capacity as trustee, now has sole voting and dispositive power over an aggregate of 8,981,041 shares of common stock of the Company. Mr. Shawn disclaims beneficial ownership of the shares held by the K.I.S.S. Dynasty Trust No. 5 and the Sandra Seligman 1993 Long Term Irrevocable Trust. Mr. Meltzer and Rachel Seligman Lowy, acting by unanimous consent, may remove the trustee of each of those trusts and replace him with a new trustee that meets certain independence requirements. Mr. Meltzer and Ms. Lowy disclaim beneficial ownership of the shares held by those trusts. |
(5)
| Based on a Schedule 13G filed by Harry S. Stern on February 18, 2021, effective November 18, 2020, Mr. Stern was appointed as trustee of the Scott J. Seligman 1993 Long Term Irrevocable Dynasty Trust and the Scott J. Seligman 1993 Irrevocable Dynasty Trust, which hold 5,743,579 and 2,357,957 shares of common stock, respectively, and Mr. Stern, in his capacity as trustee, now has sole voting and dispositive power over an aggregate of 8,101,536 shares of common stock of the Company. Mr. Stern disclaims beneficial ownership of such shares of common stock. |
(6)
| Based on a Schedule 13G filed by Financial Opportunity Fund LLC, Financial Opportunity Long/Short Fund LLC, FJ Capital Management LLC and Martin Friedman on February 10, 2021, consists of 2,106,308 shares of common stock of the Company held by Financial Opportunity Fund LLC and 114,029 shares of common stock of the Company held by Financial Opportunity Long/Short Fund LLC, of which FJ Capital Management LLC is the managing member, and 281,166 shares of common stock of the Company held by managed accounts that FJ Capital Management manages. FJ Capital Management LLC disclaims beneficial ownership as to the shares. |
(7)
| Based on a Schedule 13G filed by the Scott J. Seligman Revocable Living Trust on March 2, 2021, consists of shares held by the trust, over which Scott. J. Seligman, former vice president of the Company and founder of the Bank, holds sole voting and dispositive power. |
(8)
| Based on a Schedule 13G/A filed by T. Rowe Price Associates, Inc. on February 16, 2021, T. Rowe Price Associates, Inc. has sole voting power over 612,027 shares of common stock and sole dispositive power over 2,755,996 shares of common stock. |
(9)
| Martin Friedman is the Managing Member of FJ Capital Management LLC. Mr. Friedman has sole voting power over 2,501,503 shares of common stock of the Company. Mr. Friedman disclaims beneficial ownership as to the shares owned by FJ Capital Management LLC. |
(10)
| For each independent director, excludes 7,500 shares which are awards of restricted stock pursuant to the Sterling Bancorp, Inc. 2020 Omnibus Equity Incentive Plan. These awards have not yet vested, do not carry any voting or dividend rights until vested, but are considered issued and outstanding. |
(11)
| Consists of (i) 1,483,180 shares of common stock of the Company that are held by The Seth Seligman Meltzer Revocable Living Trust, (ii) 5,000 shares of common stock held directly by Mr. Meltzer, (iii) 1,000 shares of common stock indirectly held by Mr. Meltzer’s wife, and (iv) 1,000 shares of common stock indirectly held by Mr. Meltzer’s sons. Excludes 7,507,318 shares of common stock held by the K.I.S.S. Dynasty Trust No. 5 and 1,473,723 shares held by the Sandra Seligman 1993 Long Term Irrevocable Trust. Mr. Meltzer and Rachel Seligman Lowy, acting by unanimous consent, may remove the trustee of each of those trusts and replace him with a new trustee that meets certain independence requirements. Mr. Meltzer and Ms. Lowy disclaim beneficial ownership of the shares held by those trusts. |
(12)
| Mr. O’Brien holds an option to buy 300,000 shares of common stock of the Company with an expiration date of June 5, 2030, of which options to buy 100,000 shares vested on January 1, 2021. Mr. O’Brien is also obligated to purchase from the Company an additional 300,000 shares of common stock of the Company by May 31, 2021 under the Stock Purchase Agreement. See “Executive Compensation—Employment Arrangements—Thomas M. O’Brien.” |
(13)
| Excludes 7,507,318 shares of common stock held by the K.I.S.S. Dynasty Trust No. 5 and 1,473,723 shares held by the Sandra Seligman 1993 Long Term Irrevocable Trust, for which, in each case, Ms. Seligman is the grantor, but has no voting or dispositive power over the shares held in such trust. Ms. Seligman disclaims beneficial ownership of the shares held by the K.I.S.S. Dynasty Trust No. 5 and the Sandra Seligman 1993 Long Term Irrevocable Trust, except to the extent of her pecuniary interest, if any, therein. |
(14)
| Includes 4,479 shares of restricted stock awards that have vested. |
(15)
| Includes 1,000 shares of common stock of the Company that are held by the Lyle M. Wolberg Revocable Living Trust. |
(16)
| Mr. Huber holds an option to buy 9,028 shares of common stock of the Company with an expiration date of March 2, 2030, of which 3,009 options have vested; an option to buy 3,894 shares of common stock of the Company with an expiration date of March 1, 2029, of which none have vested; and an option to buy 2,300 shares of common stock of the Company with an expiration date of March 21, 2028, of which 1,150 options have vested. Mr. Huber also holds 3,125 shares of restricted stock awards that have vested and 9,122 shares of restricted stock awards that have not vested, do not carry any voting or dividend rights until vested, but are considered issued and outstanding. |
(17)
| Ms. Kimmel holds an option to buy 3,150 shares of common stock of the Company with an expiration date of March 21, 2028, of which 1,575 options have vested. Ms. Kimmel also holds 4,151 shares of restricted stock awards that have vested and 12,145 shares of restricted stock awards that have not vested, do not carry any voting or dividend rights until vested, but are considered issued and outstanding. |
TABLE OF CONTENTS (18)
| Based on the most recent Form 4 filed by Mr. Lopp. Upon his resignation, Mr. Lopp forfeited all of his respective restricted stock, and his unexercised stock options are no longer outstanding. |
(19)
| Ms. Meredith holds 2,347 shares of restricted stock awards that have vested and 4,695 shares of restricted stock awards that have not vested, do not carry any voting or dividend rights until vested, but are considered issued and outstanding. |
(20)
| Upon his resignation, Mr. Sinatra forfeited all of his respective restricted stock, and his unexercised stock options are no longer outstanding. |
(21)
| The directors and executive officers in the aggregate hold vested options to buy 105,374 shares of common stock of the Company. No additional options are scheduled to vest within sixty (60) days of March 29, 2021. |
TABLE OF CONTENTS SHAREHOLDER PROPOSALS FOR THE 2022 ANNUAL MEETING Deadline for Shareholder Proposals to be Considered for Inclusion in the Company’s Proxy Materials To be considered for inclusion in the Company’s proxy statement and form of proxy relating to the annual meeting of shareholders to be held in 2022, a shareholder proposal, including a recommendation of a director nominee, must be received by the General Counsel and Corporate Secretary of the Company, One Towne Square, Suite 1900, Southfield, Michigan 48076 no later than December 14, 2021, pursuant to the proxy solicitation regulations of the SEC. Nothing in this paragraph shall be deemed to require the Company to include in its proxy statement and proxy card for such meeting any shareholder proposal that does not meet the requirements of the SEC then in effect. Any such proposal will be subject to 17 C.F.R. § 240.14a-8 of the rules and regulations promulgated by the SEC under the Exchange Act. Deadline for Shareholder Proposals and Director Nominations to be Brought Before the 2022 Annual Meeting In order to be considered at any meeting, a shareholder proposal, including for the nomination of directors, must (i) comply with the requirements in the Company’s Articles of Incorporation and Bylaws as to form and content and (ii) must be received by the Company not less than one hundred twenty (120) days nor more than one hundred eighty (180) days prior to the anniversary date of the immediately preceding annual meeting of shareholders; provided, however, that in the event that the annual meeting is called for a date that is not within twenty (20) days before or after such anniversary date, such notice by the shareholder in order to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting is mailed or transmitted electronically, or public disclosure of the date of the annual meeting is made, whichever first occurs. All shareholder proposals must comply with all requirements of Rule 14a-8 promulgated by the SEC under the Exchange Act. TABLE OF CONTENTS The Board of Directors is not aware of any matter to be presented for action at the Annual Meeting, other than the matters set forth herein. If any other business should properly come before the meeting, all properly executed proxies received will be voted regarding the matter as directed by the Board. The proxy solicitation is being made by the Company and the cost of soliciting proxies will be borne by the Company. If requested, the Company will reimburse banks, brokerage houses and other custodians, nominees and certain fiduciaries for their reasonable expenses incurred in mailing proxy materials to beneficial owners of the Company’s common stock. In addition to solicitation by mail, officers and other employees of the Company and its subsidiaries may solicit proxies by telephone, facsimile or in person, without compensation other than their regular compensation. The Company may elect to send a single copy of its 2020 Annual Report and this proxy statement to any household at which two or more shareholders reside, unless one of the shareholders at such address notifies the Company that he or she desires to receive individual copies. This “householding” practice reduces the Company’s printing and postage costs. Shareholders may request to discontinue or re-start householding, or to request a separate copy of the 2020 Annual Report or this proxy statement, as follows: Shareholders owning common stock through a bank, broker or other holder of record should contact such record holder directly; and Shareholders of record should contact the Company at (248) 355-2400 or at Shareholder Relations, Sterling Bancorp, Inc., One Towne Square, Suite 1900, Southfield, MI 48076. The Company will promptly deliver such materials upon request. Your cooperation in giving this matter your immediate attention and in voting your shares by proxy promptly will be appreciated. THE COMPANY’S ANNUAL REPORT ON FORM 10-K FILED WITH THE SEC AND THE COMPANY’S PROXY STATEMENT ARE ALSO AVAILABLE AT INVESTORS.STERLINGBANK.COM AND WILL BE PROVIDED FREE TO SHAREHOLDERS UPON WRITTEN REQUEST. TO REQUEST A COPY, WRITE TO SHAREHOLDER RELATIONS DEPARTMENT, STERLING BANCORP, INC., ONE TOWNE SQUARE, SUITE 1900, SOUTHFIELD, MICHIGAN 48076. It is important that your proxy be submitted promptly in order to ensure your representation at the Annual Meeting. You may vote your shares electronically via the Internet, by using the telephone, or if you prefer the paper copy, you may submit your proxy by completing, signing and dating the proxy card as promptly as possible and returning it in the accompanying envelope (to which no postage need be affixed if mailed in the United States). Please refer to the section entitled “Voting via the Internet, Telephone or by Mail” on page 1 for a description of voting methods. If your shares are held by a bank, brokerage firm or other nominee that holds shares on your behalf and you have not given that nominee instructions on how to vote your shares, your nominee may be prohibited from voting uninstructed shares on a discretionary basis for Proposal Nos. 1, 2 and 3 at the Annual Meeting. We strongly encourage you to vote or, if applicable, provide your nominee with instructions on how to vote your shares. LOCATION OF STERLING BANCORP 2021
ANNUAL MEETING OF SHAREHOLDERS Thursday, May 27, 2021, at 1:00 p.m., Eastern Time
www.virtualshareholdermeeting.com/SBT2021 |