SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
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STERLING BANCORP
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(Name of Registrant as Specified in Its Charter)
STERLING BANCORP
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[STERLING BANCORP LOGO] 650 FIFTH AVENUE / NEW YORK, N.Y. 10019-6108
LOUIS J. CAPPELLI
CHAIRMAN
& CHIEF EXECUTIVE
OFFICER
March 31, 2005
Dear Shareholder:
Sterling's Annual Meeting of Shareholders will be held on Thursday, May 5, 2005,
at 10:00 A.M., at The University Club, One West 54th Street, New York, New York
10019, for the purpose of electing directors and to transact any other business
as may come before the meeting. You are invited to attend this Annual Meeting.
It is important that your shares be represented at the Annual Meeting whether or
not you are personally able to attend. Proxy material for the meeting
accompanies this letter. You may vote your shares by using a toll free telephone
number or on the Internet (see the instructions on the accompanying proxy card)
or you may sign, date and mail the proxy card in the postage paid envelope
provided.
Thank you for your continued interest and support.
Sincerely,
/s/ Louis Cappelli
[STERLING BANCORP LOGO]
STERLING BANCORP
650 FIFTH AVENUE, NEW YORK, NY 10019-6108
NOTICE OF ANNUAL MEETING
MAY 5, 2005
The Annual Meeting of Shareholders of Sterling Bancorp will be held on
Thursday, May 5, 2005, at 10:00 A.M., New York City time, at The University
Club, One West 54th Street, New York, New York 10019, to consider and act upon
the following matters:
1. Election of 9 directors to serve until the next Annual Meeting of
Shareholders and until their successors are elected.
2. Such other matters as may properly come before the meeting or any
adjournment thereof.
The close of business on March 25, 2005 has been fixed as the record date
for the meeting. Only shareholders of record at that time are entitled to notice
of, and to vote, at the Annual Meeting.
IMPORTANT
WE URGE THAT YOU SIGN, DATE AND SEND IN THE ENCLOSED PROXY AT YOUR EARLIEST
CONVENIENCE, OR TO VOTE VIA THE TOLL FREE TELEPHONE NUMBER OR VIA THE INTERNET
AS INSTRUCTED ON THE PROXY CARD, WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
MEETING. SENDING IN YOUR PROXY OR VOTING BY TELEPHONE OR ON THE INTERNET WILL
NOT PREVENT YOU FROM VOTING YOUR SHARES PERSONALLY AT THE MEETING, SINCE YOU MAY
REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED.
By Order of the Board of Directors
MONICA LERCHER
Corporate Secretary
March 31, 2005
[STERLING BANCORP LOGO]
STERLING BANCORP
650 Fifth Avenue
New York, N.Y. 10019-6108
------------------
PROXY STATEMENT
------------------
MARCH 31, 2005
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Sterling Bancorp (the "Company") with
respect to the Annual Meeting of Shareholders of the Company to be held on May
5, 2005. Any proxy given by a shareholder may be revoked at any time before it
is voted by giving appropriate notice to the Corporate Secretary of the Company
or by delivering a later dated proxy or by a vote by the shareholder in person
at the Annual Meeting. Proxies in the accompanying form which are properly
executed by shareholders and duly returned to the Company and not revoked will
be voted for all nominees listed under "Election of Directors" and on other
matters in accordance with the Board of Directors' recommendations, unless the
shareholder directs otherwise. This proxy statement and the accompanying form of
proxy are being mailed to shareholders on or about April 11, 2005.
The outstanding shares of the Company at the close of business on, March
25, 2005 entitled to vote at the Annual Meeting consisted of 18,290,641 common
shares, $1 par value (the "Common Shares").
The Common Shares are entitled to one vote for each share on all matters to
be considered at the meeting and the holders of a majority of such shares,
present in person or represented by proxy, constitute a quorum for the
transaction of business at the Annual Meeting of Shareholders. Only shareholders
of record at the close of business on March 25, 2005 are entitled to vote at the
Annual Meeting.
ELECTION OF DIRECTORS
Nine directors, constituting the entire Board of Directors, are to be
elected at the Annual Meeting of Shareholders to be held on May 5, 2005, to
serve until the next Annual Meeting and until their respective successors have
been elected. It is intended that, unless authority to vote for any nominee or
all nominees is withheld by the shareholder, a properly executed and returned
proxy will be voted in favor of the election as directors of the nominees named
below. All nominees are members of the present Board of Directors, having been
elected at the 2004 Annual Meeting of Shareholders. There is no family
relationship between any of the nominees or executive officers. In the event
that any of the nominees shall not be a candidate, the persons designated as
proxies are authorized to substitute one or more nominees, although there is no
reason to anticipate that this will occur.
Assuming the presence of a quorum, directors are elected by a plurality of
the votes cast. Abstentions and broker non-votes (arising from the absence of
discretionary authority on the part of a broker-dealer to vote shares held in
street name for a customer) will have no effect on the election of directors.
The information set forth below has been furnished by the nominees(1):
YEAR
NAME, PRINCIPAL OCCUPATION FOR LAST FIVE YEARS, ELECTED A
BUSINESS EXPERIENCE, DIRECTORSHIP OF THE COMPANY DIRECTOR
AND OF STERLING NATIONAL BANK (THE "BANK"), OF THE
A SUBSIDIARY OF THE COMPANY, AND OTHER INFORMATION AGE COMPANY
-------------------------------------------------- --- ---------
Robert Abrams 66 1999
Member, Stroock & Stroock & Lavan LLP (since 1994); former
Attorney General of the State of New York (1979-1993);
former Bronx Borough President (1970-1978)
Joseph M. Adamko* 72 1992
Former Managing Director, Manufacturers Hanover Trust Co.
(now J.P. Morgan Chase & Co.) (1983-1992)
Anthony E. Burke 58 2004**
Director and Treasurer of Richmond County Savings
Foundation (since 1998) and Director of Peter B. Cannell &
Co. (since 1999); former President, Chief Operating
Officer and Director of New York Community Bank and
Richmond County Savings Bank (1997-2003)
Louis J. Cappelli* 74 1971
Chairman of the Board and Chief Executive Officer of the
Company (since 1992); Chairman of the Board of the Bank
(since 1992)
Walter Feldesman* 87 1975
Counsel, Brown Raysman Millstein Felder & Steiner LLP
(since 2002); Counsel, Baer Marks & Upham (1993-2001)
Fernando Ferrer 54 2002***
Former President, Drum Major Institute for Public Policy
(2002-2004); former Bronx Borough President (1988 - 2002)
Allan F. Hershfield 73 1994
President, Resources for the 21st Century (since 1998);
former President, Fashion Institute of Technology (1992 -
1997)
Henry J. Humphreys 76 1994
Counselor-Permanent Observer, Mission of the Sovereign
Military Order of Malta to the United Nations (since
1998); former Chancellor and Chief Operating Officer,
American Association of the Sovereign Military Order of
Malta (1991-2000)
John C. Millman* 62 1988
President of the Company (since 1992); President and Chief
Executive Officer of the Bank (since 1987)
Eugene T. Rossides* 77 1989
Retired Senior Partner, Rogers & Wells LLP (now Clifford
Chance US LLP) (1973-1993); former Assistant Secretary,
United States Treasury Department (1969-1973)
---------------
* Member of the Executive Committee.
** Appointed at a regular meeting of the Board of Directors of Company held on
May 20, 2004.
*** Appointed at a regular meeting of the Board of Directors of Company held in
November 21, 2002.
(1) As set forth in the current report on Form 8-K of Sterling filed with the
Securities and Exchange Commission on February 15, 2004, Anthony E. Burke
has notified the Company that he will not be standing for re-election at the
Annual Meeting of Shareholders to be held on May 5, 2005.
Each nominee is currently a director of the Bank.
Reference is made to "Security Ownership of Directors and Executive
Officers and Certain Beneficial Owners" on page 14 for information as to the
nominees' holdings of the Company's equity securities.
2
EXECUTIVE COMPENSATION AND RELATED MATTERS
The following table sets forth information concerning the compensation for
the Company's last three completed fiscal years with respect to its chief
executive officer and the four other most highly compensated executive officers
who served as such at December 31, 2004.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL ----------------------------
COMPENSATION RESTRICTED SECURITIES ALL OTHER
-------------------- SHARE UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION AGE YEAR SALARY($) BONUS($) AWARDS($)(1) OPTIONS(#)(2) SATION($)(3)
--------------------------- --- ---- --------- -------- ------------ ------------- ------------
Louis J. Cappelli 74 2004 693,693 * 46,180
Chairman of the Board and 2003 672,113 825,000 170,268
Chief Executive Officer, 2002 651,929 825,000 1,378,000 45,000 119,498
Sterling Bancorp
Chairman of the Board,
Sterling National Bank
John C. Millman 62 2004 429,497 * 10,086
President, 2003 416,136 350,000 74,237
Sterling Bancorp 2002 403,639 350,000 275,600 36,000 80,815
President and Chief Executive
Officer,
Sterling National Bank
John W. Tietjen 60 2004 223,500 82,000 2,812
Executive Vice President, 2003 215,000 82,000 21,144
Treasurer and Chief Financial 2002 207,500 100,000 36,000 14,323
Officer,
Sterling Bancorp
Executive Vice President
Sterling National Bank
John A. Aloisio 62 2004 235,000 50,000 3,571
Senior Vice President, 2003 227,500 77,000 18,429
Sterling Bancorp 2002 220,000 65,000 27,000 15,696
Executive Vice President,
Sterling National Bank
Howard M. Applebaum 46 2004 195,000 100,000 470
Senior Vice President, 2003 175,500 77,000 13,796
Sterling Bancorp 2002 169,500 65,000 18,000 10,770
Executive Vice President,
Sterling National Bank
---------------
(1) Effective February 6, 2002, Messrs. Cappelli and Millman were granted 50,000
and 10,000 Common Shares, respectively, which Common Shares are subject to
restrictions and as to which dividends are payable. Such restrictions lapse
as to 25% of the Common Shares on the first through fourth anniversaries of
the effective date of the grant. As of December 31, 2004, after adjustment
to reflect the six for five share split in the form of a twenty percent
share dividend in 2004, Messrs. Cappelli and Millman, respectively, owned
45,000 and 9,000 Common Shares, subject to restriction valued at $1,271,250
and $254,250.
(2) In November 2004, the Board of Directors increased the number of Common
Shares underlying all previously granted options and correspondingly
decreased the applicable option exercise price to reflect a six for five
share split in the form of a twenty percent share dividend declared on
November 18, 2004 and paid on December 8, 2004.
(3) Represents for each executive, the term life insurance premiums paid by the
Company on his behalf, and as to Mr. Cappelli, includes premiums paid by the
Company for split-dollar life insurance policies insuring the joint lives of
him and his spouse. This insuring of joint lives reduces the premiums paid
for the coverage. Premiums paid by the Company will be refunded to the
Company on termination of the split-dollar policies. The value of the
benefits to Mr. Cappelli of the premiums paid by the Company on the split-
dollar policies and included in the figure for 2004 was $43,534. This does
not include any amount with respect to the split-dollar policies entered
into in connection with Mr. Cappelli's participation in the Company's Mutual
Benefit Exchange Program (see "Retirement Plans" below). As to Messrs.
Millman, Tietjen, Aloisio and Applebaum, includes the value of benefits of
the premiums paid by the Company on split-dollar policies insuring the life
of each executive officer, in the amount of $9,858, $2,584, $3,343 and $242,
respectively.
* In light of the restatement of the Company's financial statements, as
discussed in the Company's Form 8-K dated March 15, 2005 (and discussed
further in Note 2 to the consolidated financial statements included in the
Company's annual report on Form 10-K for the year ended December 31, 2004),
the Compensation Committee has decided that it is appropriate to postpone
the determination of bonuses to be awarded to the Company's Chairman/CEO and
President, until the Committee has had ample opportunity to evaluate the
quantitative and qualitative performance measures, pursuant to the Company's
Key Executive Bonus Plan.
Employment Contracts. The Company has agreements with Messrs. Cappelli and
Millman which currently provide for terms extending until December 31, 2009 and
December 31, 2007, respectively, and contain change of control provisions
entitling each of them to a lump-sum cash payment in an amount equal to
3
three times his average annual compensation during the Company's three fiscal
years preceding the date of termination and the continuation of health and
similar benefits for a period of 36 months following termination if he is
terminated within two years of a change in control. Messrs. Cappelli and Millman
each also have thirteen months after a change of control to terminate employment
for any reason and receive the severance benefits. These agreements were entered
into upon the recommendation of the Board's Compensation Committee in 1993, and
approved by the Board of Directors, were amended and restated in 2002 and were
further amended in February 2003, February 2004 and March 2005. The Company also
has change of control agreements with other executive officers, including
Messrs. Tietjen, Aloisio and Applebaum, providing for guaranteed severance
payments equal to two times the annual compensation of the officer and
continuation of health and similar benefits for the applicable period if the
officer is terminated within two years following a change of control. All change
of control agreements provide for cash payments in amounts necessary to ensure
that the payments made thereunder are not subject to reduction due to the
imposition of excise taxes payable under Internal Revenue Service Code Section
4999 or any similar tax.
Retirement Plans. In November 1984, (1) the Sterling Bancorp/Sterling
National Bank Employees' Retirement Plan (the "New Plan"), a defined benefit
plan which covers all of their respective eligible employees, was adopted and
(2) the separate defined benefit plans (the "Old Plans") previously maintained
by Sterling National Bank and Standard Financial Corporation (since merged into
the Company) were terminated, vesting the benefits of the participants in the
Old Plans for all years of credited service. The New Plan gives credit for
credited service under the Old Plans but provides, in substance, for a
participant's vested benefits under the Old Plans to be offset against the
benefits to be provided the participant under the New Plan. Accordingly, the
retirement benefits to be provided to a continuing employee can be determined
simply by reference to the provisions of the New Plan.
An employee becomes eligible for participation in the New Plan upon the
attainment of age 21 and the completion of one year of service. All
contributions required by the New Plan are made by the employers and no employee
contributions are required or permitted.
The Internal Revenue Code imposes limitations on the retirement benefits
payable to more highly compensated employees. The Company has a Supplemental
Executive Retirement Plan for designated employees (the "Supplemental Plan"),
which provides for supplemental retirement payments to such persons in amounts
equal to the difference between retirement benefits such persons actually
receive under the Company's plans and the amount which would have been received
were such Internal Revenue Code limitations not in effect.
The following table sets forth the estimated annual retirement benefits
under the above plans, on a life annuity and guaranteed ten-year certain basis,
payable to persons in specified remuneration and years of service
classifications, not subject to any offset amount.
PENSION PLAN TABLE
HIGHEST
CONSECUTIVE
FIVE YEAR
AVERAGE ESTIMATED ANNUAL RETIREMENT BENEFIT AT AGE 65 FOR
COMPENSATION REPRESENTATIVE YEARS OF CREDITED SERVICE
IN LAST ------------------------------------------------------------------------------------------------
10 YEARS 10 15 20 25 30 35 40 45 50
------------ -------- -------- -------- -------- -------- -------- -------- -------- --------
$ 100,000 $ 14,760 $ 22,140 $ 29,520 $ 36,900 $ 44,280 $ 51,660 $ 59,040 $ 66,420 $ 73,800
200,000 29,760 44,640 59,520 74,400 89,280 104,160 119,040 133,920 148,800
300,000 44,760 67,140 89,520 111,900 134,280 156,660 179,040 201,420 223,800
400,000 59,760 89,640 119,520 149,400 179,280 209,160 239,040 268,920 298,800
500,000 74,760 112,140 149,520 186,900 224,280 261,660 299,040 336,420 373,800
600,000 89,760 134,640 179,520 224,400 269,280 314,160 359,040 403,920 448,800
700,000 104,760 157,140 209,520 261,900 314,280 366,660 419,040 471,420 523,800
800,000 119,760 179,640 239,520 299,400 359,280 419,160 479,040 538,920 598,800
900,000 134,760 202,140 269,520 336,900 404,280 471,660 539,040 606,420 673,800
1,000,000 149,760 224,640 299,520 374,400 449,280 524,160 599,040 673,920 748,800
1,100,000 164,760 247,140 329,520 411,900 494,280 576,660 659,040 741,420 823,800
Annual benefits are calculated on the highest consecutive five-year average
compensation during the ten years preceding retirement as provided in the New
Plan.
4
The pensions computed under the New Plan are equal to the sum of:
(1) 1.2% of the average compensation up to $8,000, multiplied by the
number of years of credited service, plus
(2) 1.5% of the average compensation in excess of $8,000, multiplied
by the number of years of credited service.
Average compensation under the New Plan includes salary compensation but
not other types of compensation; bonus compensation for designated senior
management executives is included in average compensation under the Supplemental
Plan as currently in effect.
The current number of years of service credited to Messrs. Cappelli,
Millman, Tietjen, Aloisio and Applebaum are 53, 28, 15, 14 and 13, respectively.
The annual benefits shown in the above table are payable at age 65 and are
based on average compensation and credited service at age 65. Participants that
remain employed beyond age 65 are credited with accruals for years of service
after such age. Such participants may elect to receive benefits as early as age
65 while working. Absent this election, the accrued benefit at age 65 (along
with any accruals earned subsequent) are actuarially adjusted to reflect the
delayed receipt of the benefit.
In 2000 and 2004, Mr. Cappelli elected to participate in the Company's
Mutual Benefit Exchange Program (the "Program"), pursuant to which he
relinquished his right to receive an annual retirement benefit at his then age
(69 years, 6 months, and 73 years, 1 month, respectively) of $236,516 and
$363,876, respectively, under the Supplemental Plan (these amounts represent a
portion of his then accrued benefit under the defined benefit portion of the
Supplemental Plan) in exchange for the Company's payment of premiums under
additional split-dollar life insurance policies. Pursuant to calculations
prepared for the Company by actuaries, the present value of the costs of these
policies to the Company is not expected to exceed the present value of the
supplemental plan benefits relinquished by Mr. Cappelli under the Program.
Options
The following table sets forth information as to options held at December
31, 2004 by each of the executive officers named in the Summary Compensation
Table. No new options were granted to the executive officers during the fiscal
year ended December 31, 2004.
In order to permit option holders to retain their potential proportionate
interest in the Company following a six for five share split in the form of a
twenty percent share dividend payable on December 8, 2004, the number of Common
Shares underlying options previously granted under the Company's Share Incentive
Plan was increased by twenty percent and the exercise price of all such options
was decreased by 16.7 percent. This adjustment was required to ensure that the
value of the options was neither increased nor decreased on account of the share
dividend.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF COMMON
SHARES UNDERLYING
UNEXERCISED OPTIONS VALUE OF UNEXERCISED OPTIONS
------------------------- -------------------------------
SHARES ACQUIRED VALUE NON- NON-
NAME ON EXERCISE REALIZED($) EXERCISABLE EXERCISABLE EXERCISABLE($) EXERCISABLE($)
---- --------------- ----------- ----------- ----------- -------------- --------------
Louis J. Cappelli.... 15,000 295,050 661,608 38,139 11,684,464 795,928
John C. Millman...... 22,970 409,325 213,902 30,786 3,706,175 387,546
John W. Tietjen...... 6,000 116,160 83,960 74,301 1,380,688 1,360,074
John A. Aloisio...... 9,153 193,677 80,357 73,000 1,373,201 1,324,424
Howard M. Applebaum.. 11,432 210,920 52,256 4,942 904,100 62,212
5
BOARD COMPENSATION REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee's policies applicable to the executive officers
are described in the following report.
COMPENSATION COMMITTEE REPORT
The Compensation Committee is comprised of three independent directors and
operates pursuant to a written Charter that is available on our website at
http//www.sterlingbancorp.com/ir/governance.cfm. During the 2004 fiscal year,
the Compensation Committee held four meetings. The purpose of the Compensation
Committee is to (i) evaluate the performance and determine the compensation of
the Company's Chief Executive Officer and President, (ii) to make
recommendations to the Board of Directors with respect to the Company's
compensation philosophy and programs and (iii) to produce an annual report on
executive compensation for inclusion in the Company's proxy statement, in
accordance with the rules and regulations of the Securities and Exchange
Commission.
In accordance with the Committee's Charter, in determining the long-term
incentive component of the compensation of the Chief Executive Officer and the
President, the Committee considers the Company's performance and relative
shareholder return, the value of similar incentives to Chief Executive Officers
and Presidents at comparable companies, and the awards given to the Chief
Executive Officer and President in past years.
The continuing policy of the Company, originally adopted by the Board of
Directors in 1993 on the recommendation of our Committee, and subsequently
reaffirmed by the Committee upon regular review, is:
"Company policy should be to make a meaningful part of the
compensation of executive officers be based on performance. While the
relative importance of performance measures may vary from year to year in
line with corporate business plans and the Committee's judgment, the
measures would include, amongst other criteria, earnings, return on assets,
return on equity, loan and deposit growth."
With respect to the Company's Chairman/Chief Executive Officer and
President, their employment agreements, as mandated by our Committee, provide
for annual performance bonuses to be based on quantitative (financial)
performance elements set by the Committee together with its evaluation of
relevant qualitative (non-financial) performance measures, having regard to the
broad criteria described above as set forth in the Committee's Charter. Such
quantitative factors include growth of consolidated earnings, improvement of
return on assets and return on equity, and growth of loans, and deposits and
customer repurchase agreements. Performance should represent meaningful growth
over the appropriate base period.
In light of the restatement of the Company's financial statements, as set
forth in the Company's Form 8-K filing dated March 15, 2005, the Compensation
Committee has decided that it is appropriate to postpone the determination of
bonuses to be awarded to the Company's Chairman/Chief Executive Officer and
President, until the Committee has had an ample opportunity to evaluate the
beforementioned quantitative and qualitative performance measures, pursuant to
the Company's Key Executive Bonus Plan.
After evaluating the significant contributions made by Messrs. Cappelli and
Millman and the demanding responsibilities undertaken by them, our Committee
determined that the terms of their Employment Agreements be extended to December
31, 2009 and December 31, 2007, respectively.
6
The Compensation Committee currently intends for compensation paid to the
Company's executive officers to be tax deductible to the Company pursuant to
Section 162(m) of the Internal Revenue Code. Section 162(m) provides that
compensation paid to executive officers in excess of $1,000,000 cannot be
deducted by the Company for federal income tax purposes unless, in general, the
compensation is performance-based, is established by an independent committee of
Directors, is objective and the plan or agreement providing for compensation has
been approved in advance by the shareholders. The Compensation Committee
believes that tax deductibility is an important consideration in determining
compensation for our senior executive officers. We retain the flexibility to pay
compensation to senior executive officers based on other considerations if we
believe that doing so is in the best interest of shareholders.
Dated: March 15, 2005
WALTER FELDESMAN, CHAIR HENRY J. HUMPHREYS ALLAN F. HERSHFIELD
7
PERFORMANCE GRAPH
The following graph sets forth a comparison of the percentage change in the
cumulative total shareholder return on the Company's Common Shares compared to
the cumulative total return on the Standard & Poor's 500 Stock Index (the "S&P
500 Index"), and the Keefe, Bruyette & Woods 50 Index (the "KBW 50 Index"). The
share price performance shown on the graph below is not necessarily indicative
of future performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG STERLING BANCORP, THE S&P 500 INDEX
AND THE KBW 50 INDEX
[COMPARISON LINE GRAPH]
--------------------------------------------------------------------------------
12/99 12/00 12/01 12/02 12/03 12/04
--------------------------------------------------------------------------------
STERLING BANCORP 100.00 155.50 234.16 259.68 361.67 442.22
S & P 500 100.00 90.89 80.09 62.39 80.29 89.02
KBW 50 100.00 120.06 115.11 107.00 143.42 157.83
---------------
* $100 invested on 12/31/99 in Stock or Index. Including reinvestment of
dividends. Fiscal year ending December 31.
8
MEETINGS AND ATTENDANCE OF DIRECTORS; CERTAIN COMMITTEES; CORPORATE GOVERNANCE
PRACTICES; FEES
During the year ended December 31, 2004, the Board of Directors of the
Company held five regularly scheduled meetings. In addition, various committees
of the Board met at regular meetings. No director attended fewer than 75% of the
meetings he was required to attend.
The Company has standing Audit, Compensation and Corporate Governance and
Nominating Committees, as well as an Executive Committee and an administrative
Retirement Committee.
Audit Committee. The members of the audit committee (the "Audit
Committee") are Messrs. Adamko (chair), Feldesman, Humphreys and Rossides. The
Audit Committee held six meetings during the year ended December 31, 2004. In
carrying out its responsibilities, the Audit Committee engaged independent
accountants, established hiring policies for former employees of the independent
accountants and established certain complaint procedures for both employees and
shareholders. The Board has determined that each of the members of the Audit
Committee is "independent" as that term is defined in the applicable New York
Stock Exchange (the "NYSE") listing standards and regulations of the Securities
and Exchange Commission (the "SEC") and all members are financially literate as
required by the applicable NYSE listing standards. In addition the Board has
determined that at least one member of the Audit Committee has the financial
expertise required by the applicable NYSE listing standards and is an "Audit
Committee Financial Expert" as defined by applicable standards of the SEC. The
Board has designated the Audit Committee chairman, Mr. Adamko, as an Audit
Committee Financial Expert.
Compensation Committee. The members of the compensation committee (the
"Compensation Committee") are Messrs. Feldesman (chair), Humphreys and
Hershfield. The Board of Directors has determined that all members of the
Compensation Committee are "independent" as that term is defined by the
applicable NYSE listing standards. The Compensation Committee reports to the
Board on issues concerning executive officer compensation, including the
relationship between compensation and performance and the measures of
performance to be considered, and concerning the compensation and other key
terms of employment agreements. (See "Compensation Committee Report" on page 6
of this Proxy Statement.) The Compensation Committee held four meetings during
the year ended December 31, 2004.
Corporate Governance and Nominating Committee. The members of the
corporate governance and nominating committee (the "Corporate Governance and
Nominating Committee") are Messrs. Rossides (chair), Humphreys and Hershfield.
The Board has determined that all of the members of the Corporate Governance and
Nominating Committee are "independent" as the term is defined by the applicable
NYSE listing standards. The Corporate Governance and Nominating Committee
evaluates the following criteria, as set forth in the Company's Corporate
Governance Guidelines, in making recommendations to the Board of Directors for
director nominees:
- personal qualities and characteristics, accomplishments and reputation in
the business community;
- current knowledge and contacts in the communities in which the Company
does business and in the Company's industry or other industries relevant to the
Company's business;
- ability and willingness to commit adequate time to Board and committee
matters;
- the fit of the individual's skills and personality with those of other
directors and potential directors in building a board that is effective,
collegial and responsive to the needs of the Company; and
- diversity of viewpoints, background experience and other demographics.
The Committee will evaluate nominees for director, submitted by
shareholders pursuant to the procedure outlined in this Proxy under the heading
"2006 Annual Meeting" using the above mentioned criteria.
The Corporate Governance and Nominating Committee held three meeting during
the year ended December 31, 2004.
Retirement Committee. The members of the retirement committee (the
"Retirement Committee") are Messrs. Cappelli (chair), Millman, Tietjen and
Humphreys and Ms. Elizabeth DeBaro.
9
The Retirement Committee is an administrative committee that meets
periodically to review applications submitted by plan members for distributions
under the Company's Retirement Plan. The Retirement Committee held three
meetings during the year ended December 31, 2004.
Executive Committee. The members of the executive committee (the
"Executive Committee") are Messrs. Cappelli (chair), Millman, Adamko, Feldesman
and Rossides. The Executive Committee has the authority to act on most matters
that the full Board of Directors could have acted on during intervals between
Board meetings. During the year ended December 31, 2004, the Executive Committee
held one meeting.
All of the Directors on the slate were in attendance at the 2004 Meeting of
Shareholders. There is no corporate policy concerning Board Members' attendance
at Annual Shareholder Meetings.
CORPORATE GOVERNANCE PRACTICES
The Board of Directors has long been committed to sound and effective
corporate governance practices.
The Company's management has closely reviewed, internally and with the
Board of Directors, the provisions of the Sarbanes-Oxley Act of 2002, the
related rules of the SEC and the NYSE corporate governance listing standards
regarding corporate governance policies and procedures. As a result of this
review process, the Board of Directors made certain revisions to the charter
setting forth the powers and responsibilities of the Audit Committee to reflect
changes in the implementation of internal controls rules that apply to the Audit
Committee. (A copy of the revised Audit Committee charter is attached as Annex A
to this proxy statement.) The Company had also reviewed and decided not to
modify charters of the Compensation Committee and the Corporate Governance and
Nominating Committee adopted in 2003. The Board continues to monitor guidance
from the SEC, the NYSE and other relevant agencies regarding corporate
governance procedures and policies and will continue to assess these charters to
ensure full compliance with the applicable requirements.
Director Independence. A majority of the members of the Board have
historically been independent and key committees are comprised solely of
independent directors in accordance with applicable SEC and NYSE rule
requirements. The Board has determined that a majority of the current directors
are "independent" as that term is defined by applicable SEC and NYSE rules.
These independent directors are:
Robert Abrams
Anthony E. Burke
Joseph M. Adamko
Walter Feldesman
Fernando Ferrer
Allan F. Hershfield
Henry J. Humphreys
Eugene T. Rossides
Code of Ethics. In November 2003, the Board adopted a Code of Ethics for
the Company's Board of Directors, officers and employees in order to promote
honest and ethical conduct and compliance with the laws and governmental rules
and regulations to which the Company is subject. All directors, officers and
employees of the Company are expected to be familiar with the Code of Ethics and
to adhere to its principles and procedures.
Corporate Governance Guidelines. The Board adopted a comprehensive set of
Corporate Governance Guidelines on November 21, 2003. These guidelines address a
number of important governance issues including director independence, criteria
for Board membership, dealings of the Board in executive session, expectations
regarding attendance and participation in meetings, authority of the Board and
committees to engage outside independent advisors as they deem appropriate,
succession planning for the Chief Executive Officer and annual Board evaluation.
Procedures for Communications to the Board of Directors, Audit Committee
and Non-Management Directors. The Board has adopted procedures for the
Company's shareholders and other interested parties to communicate regarding (i)
accounting, internal accounting controls or auditing matters to the Board's
Audit
10
Committee and (ii) other matters to the non-management directors of the Board
entitled "Method for Interested Persons to Communicate with Non-management
Directors and Audit Committee Procedures for Treatment of Complaints Regarding
Accounting, Internal Accounting Controls or Auditing Matters." Communications
should be made, pursuant to such procedures, to the Company's Director of Human
Resources at 145 East 40th Street, New York, New York 10016, or by e-mail to
HRdir.corpgov@sterlingbancorp.com. The Company also adopted a separate procedure
for employees to confidentially communicate concerns regarding questionable
accounting and auditing matters on an anonymous basis.
Copies of the Company's current corporate governance documents, including
the Company's Corporate Governance Guidelines, Code of Ethics, Method for
Interested Persons to Communicate with Non-management Directors, as well as the
current charters of the Audit, Corporate Governance and Nominating and
Compensation Committees, are available on the investor relations section of the
Company's website at www.sterlingbancorp.com/ir/investor.cfm. Requests by
shareholders for printed versions of these documents should be made to the
attention of the Corporate Secretary of the Company.
DIRECTOR FEES
Directors who are not salaried officers receive fees for attendance at
Board and committee meetings. Beginning with the third quarter of 2004 each
eligible director receives $1,325 for attending each Board meeting, $800 for
attending each committee meeting and a $500 supplemental payment in December of
each year. Prior to the third quarter each eligible director received $1,250 for
attending Board meetings and $750 for attending committee meetings. In 2000,
non-employee directors were granted options for 4,356* Common Shares on the last
day a trade was reported in June 2000, and on the last day a trade is reported
in each July from July 2001 through July 2004. Additionally, pursuant to the
adoption of an automatic grant of options in 2002, non-employee directors are to
be granted options for 4,500* Common Shares on the last day a trade is reported
in June, for each of the years 2003 through 2006. The options are nonqualified
share options exercisable in four equal installments, commencing on the first
anniversary of the date of grant and expiring on the fifth anniversary of such
date; provided, however, that they become immediately exercisable in the event
of a change in control of the Company. The exercise price is equal to 100% of
the fair market value of the Common Shares on the date of grant. Upon
termination of the services of a director who is not also a salaried officer,
all options then exercisable may be exercised for a period of three months,
except that if termination is by reason of death, the legal representative of
such deceased director has six months to exercise all options regardless of
whether the decedent could have exercised them. Expenses of directors incurred
in traveling to Board and committee meetings are reimbursed by the Company. The
chair of the Audit Committee received an annual stipend of $7,500 for service in
such capacity in lieu of Audit Committee meeting fees, through the second
quarter of 2004. Beginning with the third quarter of 2004, the stipend paid to
the chair of the Audit Committees was reduced to $2,500 per year and the chair
was paid for his attendance at Committee meetings. Additionally beginning in the
third quarter of 2004 the chairs of the Compensation Committee and Corporate
Governance and Nominating Committee received an annual stipend of $1,000 for
services, payable quarterly.
---------------
* Inclusive of adjustment for share dividends declared on Common Shares.
11
AUDIT FEES
The following shows information about fees billed to the Company by KPMG
LLP ("KPMG").
PERCENTAGE OF 2004
SERVICES APPROVED
2004 BY AUDIT COMMITTEE 2003
---------------- ------------------ ----------------
($ IN THOUSANDS) ($ IN THOUSANDS)
Audit fees.................................... 914(a) 100 320
Audit-related fees(b)......................... 47 100 41
Tax fees(c)................................... 180 100 181
All other fees................................ 0 N/A 12
---------------
(a) Audit fees for 2004 constitute fees for an "integrated audit"
comprising audits of the Company's financial statements and its internal control
over financial reporting. As of the date of this proxy statement, KPMG has not
yet completed its audit of the Company's internal control over financial
reporting. The Audit Committee has approved all services comprising the
integrated audit. The audit fees for 2004 shown above have been billed by KPMG
and approved by the Audit Committee. KPMG has billed approximately $700,000 of
additional fees for the 2004 integrated audit over the amount shown above. KPMG
and management are in discussions regarding the amounts billed and proposed to
be billed. Accordingly, the ultimate aggregate amount of KPMG's audit fees has
not been approved by the Audit Committee as of the date of this proxy statement.
(b) Audit-related fees are fees in respect of attest services not required
by statute or regulation, due diligence and employee benefit plan audits.
(c) Tax fees are fees in respect of tax return preparation, consultation on
tax matters, tax advice relating to transactions and other tax planning and
advice.
The Audit Committee has considered whether KPMG's provision of non-audit
services is compatible with maintaining the auditor's independence.
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
In accordance with the Company's Audit Committee charter, the Audit
Committee pre-approves all audit and non-audit services before the independent
auditors are engaged by the Company to render such services.
AUDIT COMMITTEE REPORT
The role of the Audit Committee is to assist the Board in its oversight of
(i) the integrity of the Company's financial statements, (ii) the Company's
compliance with legal and regulatory requirements, (iii) the independent
auditor's qualifications and independence and (iv) the performance of the
independent auditors and the Company's internal audit function; and to prepare
this report. The Board of Directors, in its business judgement, has determined
that all members of the Committee are "independent," as required by applicable
listing standards of The New York Stock Exchange and the Sarbanes-Oxley Act of
2002 and the rules promulgated thereunder. The Committee operates pursuant to a
Charter that was originally adopted by the Board on May 18, 2000, as amended on
November 15, 2001, and further amended and restated on November 21, 2003 and
again on March 15, 2005. As set forth in the Charter, management of the Company
is responsible for the preparation, presentation and integrity of the Company's
financial statements and the effectiveness of internal control over financial
reporting. Management is responsible for maintaining the Company's accounting
and financial reporting principles and internal controls and procedures designed
to assure compliance with accounting standards and applicable laws and
regulations. The independent auditors are responsible for auditing the Company's
financial statements, expressing an opinion as to their conformity with
generally accepted accounting principles and annually auditing management's
assessment of the effectiveness of internal control over financial reporting in
accordance with PCAOB Auditing Standard No. 2, An Audit of Internal Control Over
Financial Reporting Performed in Conjunction with an Audit of Financial
Statements.
12
In the performance of its oversight function, the Committee has considered
and discussed the audited financial statements with management and the
independent auditors. The Committee has also discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees, as adopted by the PCAOB and
currently in effect. The Committee has received the written disclosures and the
letter from the independent auditors required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees, as adopted by
the PCAOB and currently in effect, and has discussed with the independent
auditor the auditor's independence from the Company and its management in
accordance with the applicable rules and regulations of the SEC and PCAOB
implementing the auditor independence requirements prescribed by the
Sarbanes-Oxley Act of 2002. Any non-audit services performed by the independent
auditors have been specifically pre-approved by the Audit Committee.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not employed by the Company for
accounting, financial management, internal control or to set auditor independent
standards. Members of the Committee rely without independent verification on the
information provided to them and on the representations made by management and
the independent accountants. Accordingly, the Audit Committee's oversight does
not provide an independent basis to determine that management has maintained
appropriate (i) accounting and financial reporting principles and policies
designed to assure compliance with accounting standards and applicable standards
and applicable laws and regulations or (ii) internal control over financial
reporting. Furthermore, the Audit Committee's considerations and discussions
referred to above do not assure that the audit of the Company's financial
statements has been carried out in accordance with generally accepted auditing
standards of the PCAOB, that the financial statements are presented in
accordance with generally accepted accounting principles or that the Company's
auditors are in fact "independent."
Based upon the reports and discussions described in this report, and
subject to the limitations on the role and responsibilities of the Committee
referred to above and in the Charter, the Committee is recommending to the Board
of Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2004 to be filed with
the Securities and Exchange Commission.
SUBMITTED BY THE AUDIT COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS
Dated: March 29, 2005
JOSEPH M. ADAMKO, CHAIR WALTER FELDESMAN HENRY J. HUMPHREYS EUGENE T.
ROSSIDES
TRANSACTIONS WITH THE COMPANY AND OTHER MATTERS
From time to time, officers and directors of the Company and their family
members or associates have purchased, or may purchase, short-term notes of the
Company and certificates of deposit from the Bank on the same terms available to
other persons. The Bank and its mortgage subsidiary also make loans from time to
time to related interests of directors and executive officers. Such loans are
made in the ordinary course of business, on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and do not involve more than the
normal risk of collectability or present other unfavorable features.
13
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL
OWNERS
The following table sets forth, as of March 25, 2005, holdings of the
Company's Common Shares by each present director and each of the executive
officers named in the Summary Compensation Table on page 3 and by all directors
and executive officers as a group. The Common Shares are traded on The New York
Stock Exchange and the closing price on March 24, 2005 was $23.54 per share.
NUMBER AND
NATURE OF
COMMON SHARES
BENEFICIALLY % OF OUTSTANDING
NAME OWNED(1)(2) COMMON SHARES
---- ------------- ----------------
Robert Abrams............................................... 41,859 0.23
Joseph M. Adamko............................................ 49,195 0.27
Anthony E. Burke............................................ 7,200 0.04
Louis J. Cappelli........................................... 1,288,897 6.79
Walter Feldesman............................................ 64,539 0.35
Fernando Ferrer............................................. 2,364 0.01
Allan F. Hershfield......................................... 47,218 0.26
Henry J. Humphreys.......................................... 46,802 0.26
John C. Millman............................................. 551,264 2.98
Eugene T. Rossides.......................................... 36,907 0.20
John W. Tietjen............................................. 142,208 0.77
John A. Aloisio............................................. 146,861 0.80
Howard M. Applebaum......................................... 84,153 0.46
--------- -----
All directors and executive officers as a group (13 in
group).................................................... 2,509,467 12.81
---------------
(1) For purposes of this table "beneficial ownership" is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, pursuant
to which a person or group of persons is deemed to have "beneficial ownership"
of any Common Shares that such person or group has the right to acquire within
60 days after March 25, 2005. For purposes of computing the percentage of
outstanding Common Shares held by each person or group of persons named above,
any shares that such person or group has the right to acquire within 60 days
after March 25, 2004 are deemed outstanding but are not deemed to be outstanding
for purposes of computing the percentage ownership of any other person or group.
(2) Each director and officer has sole voting and investment power with
respect to the securities indicated above to be owned by him, except that in the
case of Messrs. Millman, Tietjen and Aloisio, shares shown as owned include
11,077, 211 and 6 Common Shares, respectively, held in profit sharing plans as
to which they have power to direct the vote. The shares shown as owned include
as to Messrs. Adamko and Hershfield, 32,593 Common Shares each; as to Mr.
Humphreys, 31,201 Common Shares; as to Messrs. Feldesman and Rossides, 19,091
Common Shares each; as to Mr. Abrams, 22,466 Common Shares; as to Mr. Ferrer,
2,214 Common Shares; as to Messrs. Cappelli, Millman, Tietjen, Aloisio and
Applebaum and all directors and executive officers as a group, 680,660, 220,431,
95,402, 91,339, 57,198 and 1,303,919 Common Shares, respectively, covered by
outstanding share options exercisable within 60 days; and, as to Messrs.
Cappelli and Millman, include 22,500 and 4,500 Common Shares, respectively,
granted under the Company's Share Incentive Plan as to which they do not have
sole investment power.
In addition, the shares shown as owned by Mr. Adamko include 4,602 Common
Shares owned by his wife, the shares shown as owned by Mr. Cappelli include 678
Common Shares owned by his wife, the shares shown as owned by Mr. Millman
include 278 Common Shares owned by his wife and 1,140 Common Shares owned by his
wife's Individual Retirement Account, and the shares shown as owned by Mr.
Aloisio include 181 Common Shares owned by his wife, beneficial ownership of
which each of them disclaims.
14
The following table sets forth the persons or groups known to the Company
to be the beneficial owner of more than five percent of the outstanding Common
Shares based upon information provided by them to the Company as of March 25,
2005.
NUMBER AND
NATURE OF
COMMON SHARES APPROXIMATE
BENEFICIALLY PERCENTAGE OF
NAME AND ADDRESS OWNED(1) CLASS
---------------- ------------- -------------
FMR Corp.,
Edward C. Johnson 3d, and Abigail P. Johnson,
Fidelity Management & Research Company...................... 1,818,492(2) 9.94
82 Devonshire Street
Boston, Massachusetts 02109
Louis J. Cappelli........................................... 1,288,897(3) 6.79
650 Fifth Avenue
New York, New York 10019
Babson Capital Management, LLC.............................. 1,240,887.60(4) 6.78
One Memorial Drive
Cambridge, Massachusetts 02142-1300
Certain Barclays Bank related entities...................... 1,050,065(5) 5.74
45 Fremont Street
San Francisco, California 94105
---------------
(1) See Footnote 1, page 14, for definition of "beneficial ownership."
(2) The number and nature of the Common Shares beneficially owned are set
forth in a statement on Schedule 13G filed with the Securities and Exchange
Commission on February 14, 2005 by FMR Corp., Edward C. Johnson 3d, and Abigail
P. Johnson. According to said schedule, Fidelity Management & Research Company
("Fidelity"), a wholly-owned subsidiary of FMR Corp. and an investment adviser,
is the beneficial owner of 1,818,492 of the Common Shares set forth in the above
table as a result of acting as investment adviser to various investment
companies ("Fidelity Funds"). Fidelity states that one Fidelity Fund, Fidelity
Low Priced Stock Fund, owns 1,818,492 of the Common Shares owned by Fidelity.
Edward C. Johnson 3d, Chairman of FMR Corp., FMR Corp. (through its control of
Fidelity) and the Fidelity Funds each has sole dispositive power with respect to
1,818,492 Common Shares, but do not have the sole power to vote or direct the
voting of the Common Shares owned directly by the Fidelity Funds, which power
resides with the Funds' Board of Trustees. Fidelity carries out the voting of
the shares under written guidelines established by the Funds' Board of Trustees.
Through their ownership of voting common shares of FMR Corp. and the execution
of a shareholders' voting agreement with respect to FMR Corp., Edward C. Johnson
3d, Abigail P. Johnson, and other members of the Johnson family may be deemed to
form a controlling group with respect to FMR Corp.
(3) See Footnote 2, page 14, for number and nature of the Common Shares.
(4) The number and nature of the Common Shares beneficially owned are set
forth in a statement on Schedule 13G filed with the Securities and Exchange
Commission on February 11, 2005 by Babson Capital Management, LLC ("Babson").
According to said schedule, Babson, which is an investment advisor, states that
the shares of Common Stock are owned by various of its investment advisory
clients. Moreover, according to said schedule, Babson has sole voting power for
1,233,967.60 Common Shares, shared voting power for 6,920 Common Shares and sole
dispositive power for 1,240,887.6 Common Shares.
(5) The number and nature of the Common Shares beneficially owned are set
forth in a statement on Schedule 13G filed with the Securities and Exchange
Commission on February 14, 2005 by certain Barclays Bank related entities.
According to said schedule, the reporting entities are Banks. Barclays Global
Investors, NA, has the sole voting power for 766,851 and sole dispositive power
for 857,024 Common Shares. Barclays Global Fund Advisors has the sole voting
power for 182,344 and sole dispositive power for 193,041 Common Shares and
together have the power to vote or to direct the vote for 949,195 Common Shares
and the power to
15
dispose or to direct the disposition of 1,050,065 Common Shares. The shares are
reported to be held in trust accounts for the economic benefit of the
beneficiaries of those accounts.
Except as set forth above, the Company does not know of any person that
owns more than 5% of any class of the Company's voting securities.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on the review of the Forms 3, 4 and 5 furnished to the Company
and certain representations made to the Company, the Company believes that there
were no filing deficiencies under Section 16(a) by its directors, executive
officers and 10 percent holders.
GENERAL
2006 ANNUAL MEETING
Any shareholder who may desire to submit under the Securities and Exchange
Commission's shareholder proposal rule (Rule 14a-8) a proposal for inclusion in
the Company's proxy and proxy statement for the 2006 Annual Meeting of
Shareholders currently scheduled to be held on April 20, 2006, must present such
proposal in writing to the Company at 650 Fifth Avenue, New York, New York
10019-6108, Attention: Monica Lercher, Corporate Secretary, not later than the
close of business on December 12, 2005. Under the Company's Bylaws, any
shareholder who desires to submit a proposal outside of the process provided by
the Securities and Exchange Commission's shareholder proposal rule (Rule 14a-8)
or desires to nominate a director at the 2006 Annual Meeting of Shareholders
must provide timely notice thereof in the manner and form required by the
Company's Bylaws by February 20, 2006 (but not before January 20, 2006). If the
date of the 2006 Annual Meeting should change, such deadline would also change.
OTHER
Management knows of no other business to be presented to the Annual Meeting
of Shareholders, but if any other matters are properly presented to the meeting
or any adjournments thereof, the persons named in the proxies will vote upon
them in accordance with their best judgment.
The cost of the solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, directors, officers and employees of the
Company may solicit proxies by personal interview, telephone or telegram. The
Company reimburses brokerage houses, custodians, nominees and fiduciaries for
their expenses in forwarding proxies and proxy material to their principals. The
Company has retained Morrow & Co., Inc. to assist in the solicitation of
proxies, which firm will, by agreement, receive compensation of $3,500, plus
expenses, for these services.
The Annual Report to Shareholders (which is not a part of the proxy
soliciting material) for the fiscal year ended December 31, 2004 accompanies
this Notice and Proxy Statement.
THE COMPANY FILES WITH THE SECURITIES AND EXCHANGE COMMISSION AN ANNUAL
REPORT ON FORM 10-K. A COPY OF THE REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31,
2004, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, WILL BE
FURNISHED, WITHOUT CHARGE, TO ANY SHAREHOLDER SENDING A WRITTEN REQUEST THEREFOR
TO JOHN W. TIETJEN, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER,
STERLING BANCORP, 650 FIFTH AVENUE, NEW YORK, NEW YORK 10019-6108.
STERLING BANCORP
Dated: March 31, 2005
16
ANNEX A
STERLING BANCORP
AUDIT COMMITTEE CHARTER
I. Purpose of the Audit Committee: The purpose of the Audit Committee
(the "Committee") of the Board of Directors (the "Board") of Sterling Bancorp
(the "Company") is to:
1. assist Board oversight of (i) the integrity of the Company's
financial statements, (ii) the Company's compliance with legal and
regulatory requirements, (iii) the independent auditors' qualifications and
independence, and (iv) the performance of the independent auditors and the
Company's internal audit function; and
2. prepare the report required to be prepared by the Audit Committee
pursuant to the rules of the Securities and Exchange Commission ("SEC") for
inclusion in the Company's annual proxy statement to shareholders.
The function of the Committee is oversight. The management of the Company
is responsible for the preparation, presentation and integrity of the Company's
financial statements. Management is responsible for maintaining appropriate
accounting and financial reporting principles and policies and internal controls
and procedures that provide for compliance with accounting standards and
applicable laws and regulations. The independent auditors are responsible for
planning and carrying out a proper audit of the Company's annual financial
statements and Form 10-K, reviews of the Company's quarterly financial
statements prior to the filing of each quarterly report on Form 10-Q, annually
auditing management's assessment of the effectiveness of internal control over
financial reporting and other procedures. In fulfilling their responsibilities
hereunder, it is recognized that members of the Committee are not employees of
the Company and are not, and do not represent themselves to be, performing the
functions of auditors or accountants. As such, it is not the duty or
responsibility of the Committee or its members to conduct "field work" or other
types of auditing or accounting reviews or procedures or to set auditor
independence standards.
The independent auditors shall submit to the Committee annually a formal
written statement (the "Auditors' Statement") describing: (i) the auditors'
internal quality-control procedures; (ii) any material issues raised by the most
recent internal quality-control review or peer review of the auditors, or by any
inquiry or investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits carried out by
the auditors, and any steps taken to deal with any such issues; and (iii) (to
assess the auditors' independence) all relationships between the independent
auditors and the Company, including each non-audit service provided to the
Company and the matters set forth in Independence Standards Board Standard No.
1.
The independent auditors shall submit to the Committee annually a formal
written statement of the fees billed to the Company in each of the last two
fiscal years for each of the following categories of services rendered by the
independent auditors: (i) the audit of the Company's annual financial statements
and the reviews of the financial statements included in the Company's Quarterly
Reports on Form 10-Q and services that are normally provided by the independent
auditors in connection with statutory and regulatory filings or engagements;
(ii) assurance and related services not included in clause (i) that are
reasonably related to the performance of the audit or review of the Company's
financial statements, in the aggregate and by each service; (iii) tax
compliance, tax advice and tax planning services, in the aggregate and by each
service; and (iv) all other products and services rendered by the independent
auditors, in the aggregate and by each service.
II. Committee Membership: The Committee shall be comprised of at least
three directors, each of whom the Board has determined has no material
relationship with the Company and each of whom is otherwise "independent" under
the rules of the New York Stock Exchange, Inc., and the Sarbanes-Oxley Act of
2002 and rules promulgated thereunder. The Board shall determine that each
Committee member is "financially literate," and that at least one member of the
Committee has "accounting or related financial management expertise," as such
qualifications are interpreted by the Board of Directors in its business
judgment, and whether any member is an "audit committee financial expert," as
defined by the SEC. The SEC rules require disclosure of whether the Company has
an audit committee financial expert serving on its audit committee in its annual
report in accordance with applicable regulations. If the Board has determined
that a member of the Committee is an audit committee financial expert, it may
presume that such member has accounting or related financial management
expertise.
No director may serve as a member of the Committee if such director serves
on the audit committee of more than two other public companies unless the Board
of Directors determines that such simultaneous service would not impair the
ability of such director to effectively serve on the Committee, and discloses
this determination in the Company's annual proxy statement. No member of the
Committee may receive, directly or indirectly, any consulting, advisory or other
compensatory fee from the Company other than (i) director's fees, which may be
received in cash, share options or other in-kind consideration ordinarily
available to directors; (ii) a pension or other deferred compensation for prior
service that is not contingent on future service; and (iii) any other regular
benefits that other directors receive.
Members shall be appointed by the Board, and shall serve at the pleasure of
the Board and for such term or terms as the Board may determine. Members shall
have such knowledge, ability and experience as the Board considers appropriate
for the effective discharge of the Audit Committee's duties and
responsibilities.
III. Committee Structure and Operations: The Board shall designate one
member of the Committee as its chairperson. In the event of a tie vote on any
issue, the chairperson's vote shall decide the issue. The Committee shall meet
periodically, as required to discuss with management the annual audited
financial statements and quarterly financial statements, as applicable. The
Committee shall meet separately with management, the chief auditor of the
internal auditing department and the independent auditors to discuss any matters
that the Committee or any of these persons or firms believe should be discussed
privately. The Committee may request any officer or employee of the Company or
the Company's outside counsel or independent auditors to attend a meeting of the
Committee or to meet with any members of, or consultants to, the Committee.
Members of the Committee may participate in a meeting of the Committee by
conference call or similar communications equipment by means of which all
persons participating in the meeting can hear each other.
IV. Duties and Powers of the Committee: To carry out its purposes, the
Committee shall have the following duties and powers:
1. with respect to the independent auditors,
(i) to be directly responsible for the appointment, retention,
compensation and oversight of the work of the independent auditors
(including the resolution of disagreements between management and
independent auditors regarding financial reporting) who shall report
directly to the Committee;
(ii) to be directly responsible for the appointment, retention,
compensation and oversight of the work of any public accounting firm,
other than the independent auditors, engaged to perform audit, review or
attestation services for the Company, which firm shall report directly
to the Committee.
(iii) to pre-approve, or to adopt appropriate procedures to
pre-approve, all audit and non-audit services to be provided by the
independent auditors;
(iv) to ensure that the independent auditors prepare and deliver
annually an Auditors' Statement (it being understood that the
independent auditors are responsible for the accuracy and completeness
of this Statement), and to discuss with the independent auditors any
relationships or services disclosed in this Statement that may impact
the quality of audit services or the objectivity and independence of the
Company's independent auditors;
(v) to obtain from the independent auditors in connection with any
audit a timely report relating to the Company's annual audited financial
statements describing all critical accounting policies and practices
used, all alternative treatments of financial information within
generally accepted accounting principles for policies and practices
related to material items that have been
2
discussed with management, ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the
independent auditors, and any material written communications between
the independent auditors and management, such as any "management" letter
or schedule of unadjusted differences;
(vi) to review and evaluate the qualifications, performance and
independence of the lead partner of the independent auditors assigned to
the Company's account;
(vii) to discuss with management the timing and process for
implementing the rotation of the lead audit partner assigned to
Company's account, the concurring partner and any other active audit
engagement team partner and consider whether there should be a regular
rotation of the audit firm itself; and
(viii) to take into account the opinions of management and the
Company's internal auditors in assessing the independent auditors'
qualifications, performance and independence;
2. with respect to the internal auditing department,
(i) to review the appointment and any replacements of the chief
auditor of the internal auditing department; and
(ii) to advise the chief auditor of the internal auditing
department that he or she is expected to provide to the Committee
summaries of and, as appropriate, complete copies of the significant
reports to management prepared by the internal auditing department and
management's responses thereto;
3. with respect to accounting principles and policies, financial
reporting and internal control over financial reporting,
(i) to advise management, the internal auditing department and the
independent auditors that they are expected to provide to the Committee
a timely analysis of significant issues and practices relating to
accounting principles and policies, financial reporting and internal
control over financial reporting;
(ii) to consider any reports or communications (and management's
and/or the internal audit department's responses thereto) submitted to
the Committee by the independent auditors required by or referred to in
SAS 61 (as codified by AU Section 380), as it may be modified or
supplemented, including reports and communications related to:
- deficiencies including significant deficiencies or material
weaknesses, in internal control identified during the audit or
other matters relating to internal control over financial
reporting;
- consideration of fraud in a financial statement audit;
- detection of illegal acts;
- the independent auditors' responsibility under generally accepted
auditing standards;
- any restrictions on audit scope;
- significant accounting policies;
- significant issues discussed with the national office of the
independent auditors respecting auditing or accounting issues
presented by the engagement;
- management judgments and accounting estimates;
- any accounting adjustments arising from the audit that were noted
or proposed by the auditors but were passed (as immaterial or
otherwise);
- the responsibility of the independent auditors for other
information in documents containing audited financial statements;
- disagreements with management;
- consultation by management with other accountants;
3
- major issues discussed with management prior to retention of the
independent auditors;
- difficulties encountered with management in performing the audit;
- the independent auditors' judgments about the quality of the
entity's accounting principles;
- reviews of interim financial information conducted by the
independent auditors; and
- the responsibilities, budget and staffing of the Company's
internal audit function;
(iii) to meet with management, the independent auditors and the
chief auditor of the internal auditing department:
- to discuss the scope of the annual audit;
- to discuss the annual audited financial statements and quarterly
financial statements, including the Company's disclosures under
"Management's Discussion and Analysis of Financial Condition and
Results of Operations";
- to discuss any significant matters arising from any audit,
including any audit problems or difficulties, whether raised by
management, the internal auditing department or the independent
auditors, relating to the Company's financial statements;
- to discuss any difficulties the independent auditors encountered
in the course of the audit, including any restrictions on their
activities or access to requested information and any significant
disagreements with management;
- to discuss any "management" or "internal control" letter issued,
or proposed to be issued, by the independent auditors to the
Company;
- to review the form of opinion the independent auditors propose to
render to the Board of Directors and shareholders; and
- to discuss, as appropriate: (a) any major issues regarding
accounting principles and financial statement presentations,
including any significant changes in the Company's selection or
application of accounting principles, and major issues as to the
adequacy of the Company's internal controls and any special audit
steps adopted in light of material control deficiencies; (b)
analyses prepared by management and/or the independent auditors
setting forth significant financial reporting issues and judgments
made in connection with the preparation of the financial
statements, including analyses of the effects of alternative GAAP
methods on the financial statements; and (c) the effect of
regulatory and accounting initiatives, as well as off-balance
sheet structures, on the financial statements of the Company;
(iv) to inquire of the Company's chief executive officer and chief
financial officer as to the existence of any significant deficiencies or
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
Company's ability to record, process, summarize and report financial
information and to the existence of any fraud, whether or not material,
that involves management or other employees who have a significant role
in the Company's internal control over financial reporting;
(v) to discuss guidelines and policies governing the process by
which senior management of the Company and the relevant departments of
the Company assess and manage the Company's exposure to risk, and to
discuss the Company's major financial risk exposures and the steps
management has taken to monitor and control such exposures;
(vi) to obtain from the independent auditors assurance that the
audit was conducted in a manner consistent with Section 10A of the
Securities Exchange Act of 1934, as amended, which sets forth certain
procedures to be followed in any audit of financial statements required
under the Securities Exchange Act of 1934;
(vii) to discuss with appropriate Company personnel any
significant legal, compliance or regulatory matters that may have a
material effect on the financial statements or the Company's
4
business, or compliance policies, including material notices to or
inquiries received from governmental agencies;
(viii) to discuss and review the type and presentation of
information to be included in earnings press releases;
(ix) to discuss the types of financial information and earnings
guidance provided, and the types of presentations made, to analysts and
rating agencies;
(x) to establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters, and for the
confidential, anonymous submission by Company employees of concerns
regarding questionable accounting or auditing matters;
(xi) to consider any reports submitted to it concerning material
violations of applicable securities laws, material breaches of fiduciary
duty or similar material violations of any law by the Company or by any
director, officer, employee, or agent of the Company and determine what
action or response is necessary or appropriate;
(xii) to interpret and apply the Sterling Bancorp Code of Business
Conduct and Ethics to specific situations in which questions are
presented to it and to take all action it considers appropriate to
investigate any violations reported to it; and
(xiii) to establish hiring policies for employees or former
employees of the independent auditors;
4. with respect to reporting and recommendations,
(i) to prepare any report or other disclosures, including any
recommendation of the Committee, required by the rules of the SEC to be
included in the Company's annual proxy statement;
(ii) to review this Charter at least annually and recommend any
changes to the full Board of Directors;
(iii) to report its activities to the full Board of Directors on a
regular basis and to make such recommendations with respect to the above
and other matters as the Committee may deem necessary or appropriate;
and
(iv) to prepare and review with the Board an annual performance
evaluation of the Committee, which evaluation shall compare the
performance of the Committee with the requirements of this Charter. The
performance evaluation by the Committee shall be conducted in such
manner as the Committee deems appropriate. The report to the Board may
take the form of an oral report by the chairperson of the Committee or
any other member of the Committee designated by the Committee to make
this report.
V. Delegation to Subcommittee. The Committee may, in its discretion,
delegate all or a portion of its duties and responsibilities to a subcommittee
of the Committee. The Committee may, in its discretion, delegate to one or more
of its members the authority to pre-approve any audit or non-audit services to
be performed by the independent auditors, provided that any such approvals are
presented to the Committee at its next scheduled meeting.
VI. Resources and Authority of the Committee: The Committee shall have
the resources and authority appropriate to discharge its duties and
responsibilities, including the authority to select, retain, terminate, and
approve the fees and other retention terms of special or independent counsel,
accountants or other experts and advisors, as it deems necessary or appropriate,
without seeking approval of the Board or management.
5
STERLING BANCORP
650 FIFTH AVENUE, NEW YORK, NY 10019-6108
[STERLING BANCORP LOGO]
Mark Here [ ]
for Address
Change or
Comments
SEE REVERSE SIDE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR WITHHOLD 2. In their discretion the Proxies are authorized
FOR All Nominees For All Nominees to vote to upon such other business as may
1. ELECTION OF DIRECTORS [ ] [ ] properly come before the meeting.
01 Robert Abrams, 02 Joseph M. Adamko,
03 Louis J. Cappelli, 04 Walter Feldesman
05 Fernando Ferrer, 06 Allan F. Hershfield,
07 Henry J. Humphreys, 08 John C. Millman,
09 Eugene T. Rossides.
To withhold authority to vote for any
individual nominee(s) write that nominee's name
in the space provided.
------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER IN THE MANNER DIRECTED HEREIN. IF
THIS CARD CONTAINS NO SPECIFIC VOTING
INSTRUCTIONS, SHARES WILL BE VOTED IN ACCORDANCE
WITH THE RECOMMENDATION OF THE BOARD OF
DIRECTORS.
Signature Signature Date
------------------------------------------ ------------------------------------- --------------------------
Please mark, date, and sign as your name appears above and return in the enclosed envelope. If acting as executor, administrator,
trustee, guardian, etc., you should so indicate when signing. If the signer is a corporation, please sign the full corporate name,
by duly authorized officer. If shares are held jointly, each shareholder named should sign.
-- FOLD AND DETACH HERE --
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11:59 PM Eastern Time
the business day prior to annual meeting day.
Your internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
Internet Telephone Mail
http://www.proxyvoting.com/stl 1-866-540-5760 Mark, sign and date
Use the internet to vote your proxy. OR Use any touch-tone telephone to OR your proxy card and
Have your proxy card in hand vote your proxy. Have you proxy return it in the
when you access the web site. card in hand when you call. enclosed postage-paid
envelope.
If you vote you proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
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PROXY
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
STERLING BANCORP
ANNUAL MEETING OF SHAREHOLDERS, THURSDAY, MAY 5, 2005
The undersigned appoints Louis J. Cappelli, Allan F. Hershfield and Henry
J. Humphreys, or any one of them, attorneys and proxies with power of
substitution, to vote all of the Common Shares of Sterling Bancorp standing in
the name of the undersigned at the Annual Meeting of Shareholders on Thursday,
May 5, 2005, and all adjournments thereof, hereby revoking any proxy heretofore
given.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
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Address Change/Comments (Mark the corresponding box on the reverse side)
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-- FOLD AND DETACH HERE --
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