Sterling Financial Corp. has entered into amended employment agreements with three of its top executives in an attempt to send the market a calming message.


The Spokane-based company reached the agreements last month with Harold Gilkey, its chairman, president, and CEO; Heidi Stanley, vice chairwoman, president, and CEO of its Sterling Savings Bank subsidiary; and Dan Byrne, its executive vice president and chief financial officer.


One of the main reasons for entering into the amended agreements was to provide continuity of management during this challenging period of time within the financial industry, the company said in a public filing.


The company took the step in light of Bill Zuppes retirement as president and CEO of Sterling Savings Bank at the end of 2007 and Gilkeys age, Byrne says. Zuppe remains chairman of Sterling Savings. Gilkey is 69 years old.


It was a signal to the market that the executive team is going to be around, Byrne says. I think it was basically trying to calm market questions that we were getting.


After Sterling announced the extensions, its executive team met with a group of stock analysts, he says. Those that we did talk to seemed to be taking a positive view of that action, he says.


The stocks of regional banks have plummeted this year as the national credit crunch has hurt financial companies.


The agreement with Gilkey extends the termination date of his employment agreement to Dec. 31, 2013, from Dec. 31, 2009. It maintains his base salary at its current level of $650,000 a year and provides him with a retention grant of 40,000 restricted shares of Sterlings stock in each year in which he is employed there.


In an interview on Aug. 5, the longtime Spokane banker said, I dont plan to retireperiod. As long as the board of directors believes that I deliver value to the company, thats the case.


Under the amended agreement, Gilkey no longer is entitled to receive 3 percent of the gross amount of a judgment or settlement in a lawsuit Sterling brought against the U.S. government years ago for breach of contract. The company alleged it was damaged by the loss of goodwill treatment of certain assets and other matters linked to Sterlings acquisition of two troubled thrifts. In February, the U.S. Court of Federal Claims awarded Sterling $1.05 million in damages stemming from that litigation. Sterling says the amount of the damages was far lower than the damages it believes it suffered, and its evaluating its options on whether to take further legal action.


Stanleys and Byrnes amended agreements put their base salaries at $425,000 and $276,000, respectively, and provide for their employment until Dec. 31, 2013.


Separately, Byrne says neither Sterling nor Zuppe had any control over the timing of a distribution of 184,392 shares of the companys stock to Zuppe on July 14, the day Sterlings shares fell to $2.53 a share, their lowest point in years.


Because Zuppe, who turned 67 on Wednesday, was an insider when he terminated his employment at the end of 2007, rules that went into effect after the Enron accounting scandal required him to wait for at least six months after leaving the company to receive the shares, Byrne says. Also, Byrne says, Sterling had announced July 2 that it would release its second-quarter earnings July 22, and its announcement triggered a quiet period during which insiders could neither buy nor sell stock nor make public statements about the company.


It was up to a third-party administrator outside the company to decide when to distribute the shares to Zuppe, Byrne adds.


Bill had no discretion with respect to that timing, he says. We hadnt thought about it being in a quiet period. We have to go ahead (with such a distribution) when they tell us we can go. We were just complying with that regulation.


Because the stock was awarded through the companys deferred compensation program, it became current income, and thus taxable, when it was distributed, Byrne says.


Contact Richard Ripley at (509) 344-1261 or via e-mail at editor@spokanejournal.com.