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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 27, 2000
STERLING BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 0-20750 74-2175590
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
15000 NORTHWEST FREEWAY 77040
HOUSTON, TEXAS
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (713) 466-8300
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ITEM 5. OTHER EVENTS.
The Chairman of the Board of Directors (the "Board") of Sterling Bancshares,
Inc. (the "Company") recently received a letter dated April 27, 2000 from Howard
Wolf, a shareholder of the Company, requesting, among other things, that the
Board engage an investment banker to market the Company. A copy of Mr. Wolf's
letter is filed as Exhibit 99.1 to this Current Report. On May 4, 2000, the
Chairman, on behalf of the Board, sent a response to Mr. Wolf noting, among
other things, that the Company is not for sale and that the Board does not
intend to hire an investment banker to market the Company at the present time. A
copy of the Chairman's letter to Mr. Wolf is filed as Exhibit 99.2 hereto.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits. The following materials are filed as exhibits to this Current
Report on Form 8-K:
Exhibit
Number Description of Exhibit
- -------- ----------------------
99.1 Letter to the Chairman of the Board of Directors of Sterling
Bancshares, Inc. from Mr. Howard Wolf dated April 27, 2000.
99.2 Response of the Board of Directors of Sterling Bancshares, Inc. to
Mr. Wolf dated May 4, 2000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STERLING BANCSHARES, INC.
By: /s/ Michael A. Roy
--------------------------------
Michael A. Roy
Title: Senior Vice President, General
Counsel and Secretary
Dated: May 5, 2000.
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EXHIBIT INDEX
Exhibit
Number Description
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99.1 Letter to the Chairman of the Board of Directors of Sterling
Bancshares, Inc. from Mr. Howard Wolf dated April 27, 2000.
99.2 Response of the Board of Directors of Sterling Bancshares, Inc.
to Mr. Wolf, dated May 4, 2000.
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EXHIBIT 99.1
Fulbright & Jaworski L.L.P.
A Registered Limited Liability Partnership
600 Congress Avenue, Suite 2400
Austin, Texas 78701
April 27, 2000
Chairman George Martinez
Sterling Bank
15000 Northwest Freeway
Houston, Texas 77040
Dear Chairman:
Following the Annual Meeting on Monday, several Shareholders commented on
the question and answer session and expressed appreciation for the focus on
Shareholder value, return on invested capital and the importance of timing in
exiting investments. Since then I have been contacted by Shareholders urging
continued efforts to have proposals submitted to the Board of Directors for
objective review and consideration. Based upon my cursory reading of the
situation, I believe it would be possible to quickly assemble 10 to 20 people in
Houston that either own or have direct relationships with owners of a large
aggregate amount of stock of Sterling who would support a transaction that
captures the available Shareholder value before the pooling of interest rules
change later this year. My calculations do not include institutional
Shareholders who, I am confident, would be interested in such a transaction. It
is clear that the assessment that management has lost touch with the aspirations
of a majority of Shareholders may be correct.
One of the most disturbing things that arose from conversations after the
meeting was the reaction to management's new strategy to hire 20 plus lending
officers and focus on the Dallas market. I cannot help but wonder how much
collective wisdom management obtained from the Board on these proposed
initiatives. I am especially concerned in this regard because I heard comments
about how it is now clear that Sterling has abandoned its Colorado de novo
strategy. In the discussions about the lending officers, it was pointed out by
one former director that Sterling's track record in managing its loan portfolio
is not encouraging, and this person said he was "terrified by the thought of a
group of new Sterling lending officers being turned loose with the expectation
that they will be judged by the amount of new loans put on the books".
Turning to the Dallas market, based upon some brief calls I made after the
meeting to bankers active in this market, I seriously question whether
management has done its homework on its proposed new strategy and also whether
it has called upon the Board to review the costs, risks and time frame involved
in trying to implement this strategy. Dallas is one of the most overbanked
markets in the United States. It is going to take a substantial investment and
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considerable time before this initiative can even be evaluated. Why is this
thrust more likely to succeed than the failed Colorado initiative? It is very
difficult to understand how this can be in the interest of Shareholders as
compared to other possible courses of action.
I am going to visit personally next week in Minneapolis with some of the
Shareholders who invested with me in BOA Bancshares before it was acquired by
Sterling. These persons are quite knowledgeable in regard to financial
institutions, and I will seek their counsel on how to proceed so that proposals
are submitted by responsible parties or entities to the Board for consideration.
I am pleased that the management of Sterling will allow the Board to discharge
its fiduciary duty to Shareholders.
My concern, however, is the same as a Shareholder expressed to me on the
phone yesterday and that I have observed in my career as a lawyer specializing
in corporate transactions. Once large groups of stockholders of a corporation
begin to agitate for action, management and the board of the corporation must
either take control of the process or allow events to marginalize their
effectiveness. As knowledge of the attitudes expressed at the Annual Meeting and
afterwards becomes widely known, interested persons often acquire stock to
enhance their bargaining position and to protect their downside if they are not
successful in participating in a transaction. The board of the corporation can
find itself with less negotiating leverage and flexibility to deal with
alternatives. Even worse, the failure of a board to be closely involved can be
viewed as an invitation to investors or groups that specialize in praying on
situations of this type.
For this reason, I renew my request that the Board of Directors not only
assure an active and ongoing role in responding to proposals but also, at the
same time, take the initiative in examining possible transactions that would be
to the greater good of all interested parties. For example, an out-of-Texas
holding company with no significant operations in areas served by Sterling might
be more likely to (i) pay a higher price in a transaction because of the
increased opportunity, and (ii) retain a greater percentage of existing
employees because of the lack of duplication of facilities. These are matters
which the Board should be considering now.
It is, as you and the Board know, the role of investment bankers to
facilitate finding the best solution, and I renew my request that the Board
employ an appropriate firm to immediately undertake this assignment. It would be
unfortunate for all Shareholders if the failure of the Board to act promptly in
this regard resulted in Sterling missing an opportunity to take advantage of the
pooling rules before they change later this year.
Please take due note of the foregoing and govern your actions accordingly.
Very truly yours,
/s/ Howard Wolf
-----------------
Howard Wolf
HW/my
cc: Sterling Board of Directors
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EXHIBIT 99.2
May 4, 2000
Mr. Howard Wolf
Fulbright & Jaworski L.L.P.
600 Congress Avenue, Suite 2400
Austin, Texas 78701
Dear Mr. Wolf:
Earlier this week a small delegation of members of the Board of Directors of
Sterling Bancshares, Inc. and certain members of Sterling's senior management
met with Edgar J. Marston III of Bracewell & Patterson L.L.P. to discuss your
letter dated April 27, 2000 to me, as Chairman of Sterling. Based upon the
results of that meeting, the Board of Sterling asked me to send you this letter
on its behalf.
While the Board does not intend to address all of the matters raised in your
letter since many are based on misconceptions or dated information, the Board
does want to emphasize the following points:
. The members of the Board are fully aware of their duties and
responsibilities under Texas law to the shareholders of Sterling.
. In late 1995 the management of Sterling developed a multi-faceted, long
term business strategy to assist in the determination of whether the Board
should pursue a sale of Sterling or make a large investment to upgrade
Sterling's core data processing capabilities. The Board concluded that the
pursuit of management's strategy would deliver superior value to
Sterling's shareholders over the long term.
. Since that time, most major decisions of the Board, including those
relating to the acquisition of existing banks, have been evaluated in
terms of whether they are consistent with the realization of Sterling's
long term business objectives.
. From time to time, Sterling receives acquisition overtures. The Board
continues to believe, however, that adherence to Sterling's long term
business strategy will deliver superior value to Sterling's shareholders.
Therefore, it has no present intention of hiring an investment banker to
find a buyer for Sterling to create a liquidity event for you.
. The Board is not concerned about being "marginalized" by continuing to
pursue a business strategy that has delivered twelve consecutive years of
record earnings, a compounded annual growth rate in earnings per share of
16% for the last five years and a return on equity of 17% for each of the
last five years.
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Mr. Howard Wolf
May 4, 2000
Page 2
. While Sterling is not for sale, the Board wants to emphasize that it
will consider alternatives to the continued implementation of Sterling's
long term strategy, including a sale of the enterprise, that the Board
believes could deliver superior value to Sterling's shareholders. To
facilitate the expeditious consideration of such proposals, the Board
has asked the outside directors who sit on the Executive Committee to
assist in screening acquisition proposals presented to Sterling.
. Your dismissal of the wisdom of Sterling's expansion into the Dallas
market evidences a lack of appreciation of Sterling's core business
strategy. The best possible market for the implementation of Sterling's
strategy of pursuing and serving the owner-operated business customer is
a market dominated by large bank holding companies, such as Dallas,
where the large banks are unable or unwilling to serve the needs of
Sterling's targeted customers.
. Finally, in response to your observation that "management has lost touch
with the aspirations of a majority of the shareholders", the Board notes
that the company's executive officers and directors own beneficially in
the aggregate approximately 18% of the outstanding common stock. I
personally account for about 3%, and outside directors account for
approximately another 15%. Under the circumstances, the Board believes
that the economic interests of management in the future of Sterling are
precisely aligned with, and in fact identical to, the economic interests
of most of the shareholders.
We are filing a copy of your letter and this response with the Securities and
Exchange Commission on a Form 8-K so that everyone will have a clear
understanding of the Board's position on these matters.
If you have any questions, please feel free to call me at 713-507-2627. The
Board encourages open communications between the shareholders of the Company and
Sterling's senior management.
Cordially,
/s/ GEORGE MARTINEZ
George Martinez, Chairman,
for the Board of Directors
cc: Sterling Board of Directors
