THIS NON-COMPETE
AGREEMENT (the “Agreement”) is entered into effective
as of this 7th day of July, 2005 between Sterling Bancshares, Inc.,
a Texas corporation (“Sterling”), and Max W. Wells (the
“Key Company Official”).
WHEREAS,
simultaneously with the execution of this Agreement, Sterling,
SBPB, Inc., a Texas corporation and a wholly owned subsidiary of
Sterling (“Merger Sub”), and Prestonwood Bancshares,
Inc., a Texas corporation (the “Company”), have entered
into an Agreement and Plan of Merger (the “Merger
Agreement”) pursuant to which the Company will merge (the
“Merger”) with Merger Sub at the Effective Time;
and
WHEREAS, after the
Merger, Sterling intends to (a) effect the merger of the
Company and Prestonwood Bancshares Nevada, Inc., a Nevada
corporation and wholly owned subsidiary of the Company, with and
into Sterling Bancorporation, Inc., a Delaware corporation and a
direct wholly owned subsidiary of Sterling
(“Bancorporation”), with Bancorporation as the
surviving corporation, and (b) effect the merger of The Oaks
Bank & Trust Company, an indirect wholly owned subsidiary of
the Company, with and into Sterling Bank, an indirect wholly owned
subsidiary of Sterling (“Sterling Bank”), with Sterling
Bank as the surviving bank; and
WHEREAS, the Key
Company Official is a shareholder of the Company and also serves as
an officer of the Company; and
WHEREAS, the Key
Company Official will, as a result of his equity ownership interest
in the Company, be receiving substantial consideration from the
Merger of the Company with Merger Sub; and
WHEREAS, Sterling
has required, as a condition to its execution of the Merger
Agreement, the Key Company Official to execute and deliver this
Agreement; and
WHEREAS, the Key
Company Official, through his association with the Company, has
obtained knowledge of the trade secrets, customer goodwill, and
proprietary information of the Company and its business, which
trade secrets, customer goodwill, and proprietary information
constitute a substantial asset to be acquired by Sterling;
and
WHEREAS, the Key
Company Official, for the consideration set forth below and the
consideration to be received in connection with the Merger, has
agreed to, and does hereby enter into this Agreement on the terms
and conditions set forth below.
NOW, THEREFORE, in
consideration of the foregoing and the premises, representations,
and mutual covenants hereinafter set forth, the parties do hereby
agree as follows:
1. Defined
Terms . Capitalized terms used herein but not otherwise defined
shall have the meaning set forth in the Merger
Agreement.
2.
Consideration . In consideration of the covenants and
agreements of the Key Company Official contained herein, Sterling
hereby agrees to pay the Key Company Official as
follows:
(a) The
consideration stated in the Merger Agreement for the Key Company
Official’s equity in the Company.
(b) If Key Company
Official accepts employment with Sterling, Bancorporation, Sterling
Bank, the Company, The Oaks Bank & Trust Company or any of
their respective wholly-owned direct or indirect Subsidiaries
(each, a “Sterling Entity”, and together, the
“Sterling Entities”) then the Sterling Entities promise
to disclose and provide access to certain Confidential Information
(as herein defined) of the Sterling Entities.
(c) Upon the
execution of this Agreement, Sterling shall and does hereby pay to
the Key Company Official the sum of $1,000.
(d) Upon the
Closing of the Merger and Key Company Official’s acceptance
of employment with any Sterling Entity, Sterling shall pay and
deliver to the Key Company Official the following:
A closing bonus
of $25,000 cash and a restricted shares stock agreement issued
pursuant to Sterling’s 2003 Stock Incentive and Compensation
Plan granting to the Key Company Official an opportunity to acquire
3,000 shares of Sterling Common Stock on the Key Company
Official’s date of hire with Sterling Bank. The grant of such
3,000 shares of restricted stock shall vest 25% per annum over a
period of four years and shall otherwise be subject to the terms
and conditions of Sterling’s 2003 Stock Incentive and
Compensation Plan.
3.
Non-Competition . Key Company Official acknowledges that
contemporaneous with the execution of this Agreement, Sterling is
providing Key Company Official with valuable consideration stated
in paragraph 2. Key Company Official’s non-competition
obligations are ancillary to the Merger Agreement, Sterling’s
agreements to provide the consideration stated in paragraph 2, and
other agreements provided herein that are enforceable at the time
this agreement is made. In order to protect Sterling’s
interests in the Merger and the consideration that Sterling is
providing and will provide Key Company Official if any Sterling
Entity employs Key Company Official, Sterling and Key Company
Official agree to the following non-competition provisions. The Key
Company Official covenants and agrees that from the Closing Date
and for the Applicable Period (as hereinafter defined) after the
Closing Date, he shall not:
(a) directly or
indirectly, own, manage, operate, control, invest or acquire an
equity interest in any entity located or conducting business in
Dallas County or Collin County, Texas, or should Key Company
Official accept employment with a Sterling Entity after the
Closing, any other county in which Key Company Official’s
office was located in the twelve months prior to termination of
employment with a Sterling Entity, and any county contiguous to
such counties (Dallas County, Collin County and such other counties
are herein collectively called, the “Territory”), in
each case which
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competes with
the banking, lending, deposit taking, and related banking and trust
services business (“Financial Institution Business”)
conducted in the Territory by any Sterling Entity; provided that
Key Company Official shall not be deemed to be in violation of this
Section 3(a) should Key Company Official be employed in a location
outside the Territory by a business (including, without limitation,
a business with office(s) inside the Territory) (even if such
business competes with the Financial Institution Business or other
business conducted by any Sterling Entity in the Territory) so long
as Key Company Official does not otherwise violate the purpose and
intent of the provisions of this paragraph 3 by competing with the
Financial Institution Business conducted by any Sterling Entity in
the Territory;
(b) engage in or
carry on, either directly or indirectly, whether for himself or as
an employee, officer, director, agent, consultant, proprietor,
partner, stockholder, member, joint venturer, investor, or other
paid participant in any business within the Territory which
competes with the Financial Institution Business conducted in the
Territory by any Sterling Entity; provided that Key Company
Official shall not be deemed to be in violation of this Section
3(b) should Key Company Official be employed in a location outside
the Territory by a business (including, without limitation, a
business with office(s) inside the Territory) (even if such
business competes with the Financial Institution Business or other
business conducted by any Sterling Entity in the Territory) so long
as Key Company Official does not otherwise violate the purpose and
intent of the provisions of this paragraph 3 by competing with the
Financial Institution Business conducted by any Sterling Entity in
the Territory;
(c) directly or
indirectly request any customer or borrower of any Sterling Entity
or any other person which has a business relationship with any
Sterling Entity to curtail, cancel, or otherwise discontinue its
business or relationship with any such Sterling Entity;
or
(d) directly or
indirectly denigrate or in any manner undertake to discredit any of
the Sterling Entities or any person or operation associated with
any Sterling Entity.
Notwithstanding
the foregoing, nothing contained in this Agreement shall prohibit
the Key Company Official from (i) owning not more than one
percent (1%) of any corporation the securities of which are traded
on a national securities exchange or market and which is engaged in
a business which is in competition with any Sterling Entity, or
(ii) owning an interest in The Oaks Trust Company or in
serving as an officer or director of such company or in servicing
accounts of family members of the Key Company Official at The Oaks
Trust Company.
The
non-competition obligations stated herein are not dependent on
Sterling’s employment of Key Company Official with any
Sterling Entity. The primary purpose of this Agreement including
the non-competition provision is to effectuate the
Merger.
If Key Company
Official accepts employment with a Sterling Entity, Key Company
Official warrants that Key Company Official is not a party to any
other restrictive agreement limiting Key Company Official’s
activities for the Sterling Entities. Key Company Official further
warrants that at the time of the signing of this Agreement, Key
Company Official knows
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of no written
or oral contract or of any other impediment that would inhibit or
prohibit his employment with the Sterling Entities and that Key
Company Official will not knowingly use any trade secret,
confidential information, or other intellectual property right of
any other party in the performance of Key Company Official’s
duties as an employee should he accept employment with a Sterling
Entity.
4.
Non-Solicitation . From the Closing Date and for the
Applicable Period after the Closing Date, the Key Company Official
covenants and agrees not to directly or indirectly solicit the
employment of the executive officers or key employees of the
Sterling Entities; provided, however, that this Agreement shall not
prohibit (a) any advertisement or general solicitation that is
not specifically targeted at such officers or employees, or
(b) soliciting the employment of any such officer or employee
who has been terminated by any Sterling Entity except Key Company
Official may not solicit any such officer or employee who
voluntarily terminated employment or who any Sterling Entity
terminated for “Cause” within six months of Key Company
Official’s termination of employment from any Sterling
Entity.
5.
Confidentiality . The Key Company Official shall not
disclose to any person, or use or otherwise exploit for his own
benefit or for the benefit of any person other than a Sterling
Entity, any Confidential
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