Exhibit 10.1
SEVERANCE AND NON-COMPETITION
AGREEMENT
THIS SEVERANCE and
NON-COMPETITION AGREEMENT (the “Agreement” ) is entered
into effective as of this 4 th day of December, 2006 by and among
Sterling Bancshares, Inc., a Texas corporation
(“Bancshares”), Sterling Bank, a banking association
chartered by the State of Texas and an indirect subsidiary of
Bancshares (“Bank”) and Zach L. Wasson (the
“‘Executive Officer”).
WHEREAS, the Executive Officer is being employed by
Bancshares and/or Bank in a position in which he will have access
to, and will gain knowledge of, confidential and proprietary
information of Bancshares, Bank, Sterling Bancorporation, Inc. and
their respective affiliates (each, a “Sterling Entity,”
and together, the “Sterling Entities”), and the parties
wish to ensure that the Executive Officer will enjoy access to the
Sterling Entities’ existing and future confidential and
proprietary information;
WHEREAS, the Sterling Entities’ confidential and
proprietary information constitutes a substantial asset of the
Sterling Entities that the parties mutually wish to
protect;
WHEREAS, the Executive Officer is already subject to
certain confidentiality obligations under Texas law, and the
parties reasonably believe that it would be difficult, if not
impossible, for the Executive Officer to refrain from using or
disclosing the confidential and proprietary information of the
Sterling Entities in the event that the Executive Officer were to
work for any other financial institution after terminating his/her
employment with Bancshares and/or the Bank;
WHEREAS, the parties mutually desire to achieve a level
of certainty and predictability concerning the post-employment
activities the Executive Officer may perform, and when;
WHEREAS, the parties mutually desire to compensate the
Executive Officer for any restriction on his ability to engage in
certain competitive activities; and
WHEREAS, the parties mutually desire to ensure that the
Executive Officer receives certain severance benefits in the event
that his employment is terminated by Bancshares and Bank without
cause, or following a “Change of Control” (as herein
defined) under the conditions set forth herein.
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. Definitions . The
following words and terms shall have the meanings set forth below
for purposes of this Agreement:
(a) Cause . A termination of
employment is for “Cause” only if it is due
to:
(i) serious intentional misconduct
on the part of the Executive Officer;
(ii) fraud, misappropriation or
embezzlement related to any of the Sterling Entities on the part of
the Executive Officer;
(iii) the conviction of the
Executive Officer of any felony or crime involving moral
turpitude;
(iv) a material violation by the
Executive Officer of any applicable federal or state banking law or
regulation that has had, or may have, a material adverse effect on
any Sterling Entity;
(v) a material breach of any
corporate policy including, without limitation, the Code of
Business Conduct and Ethics and the Code of Ethics for Senior
Officers, as applicable to the Executive Officer which, if
correctable, remains uncorrected for 30 days following written
notice to the Executive Officer by a Sterling Entity of such
breach;
(vi) a material breach of this
Agreement which, if correctable, remains uncorrected for 30 days
following written notice to the Executive Officer by a Sterling
Entity of such breach; or
(vii) the willful and continued
failure by the Executive Officer to perform substantially the
Executive Officer’s duties on behalf of any Sterling Entity,
other than any such failure resulting from the Executive
Officer’s incapacity due to Disability, which failure is not
promptly abated after a demand for substantial performance is
delivered to the Executive Officer by Bancshares or other
applicable Sterling Entity mat specifically identifies the manner
in which the Executive Officer has not substantially performed the
Executive Officer’s duties and gives the Executive Officer a
reasonable period of cure.
For purposes of this definition, any
act or failure to act on the Executive Officer’s part shall
be considered “material” or “willful” if
done or omitted to be done by the Executive Officer otherwise than
in good faith and without reasonable belief that the Executive
Officer’s action or omission was in the best interest of the
Sterling Entities.
(b) Change of Control . A
“Change of Control” shall be deemed to have occurred
if:
(i) any “person” or
“group” (within the meanings of Sections 13(d) or
14(d)(2) of the Securities Exchange Act of 1934) becomes the
“beneficial owner” (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of
securities of Bancshares representing thirty-five percent
(35%) or more of the combined voting power of
Bancshares’ then outstanding securities eligible to vote for
the election of the board of directors of Bancshares (the
“Bancshares Voting Securities”); provided, however,
that the event described in this paragraph (i) shall not be
deemed to be a Change of Control by virtue of any of the following
acquisitions: (A) by Bancshares, (B) by any employee
benefit plan (or related trust) sponsored or maintained by
Bancshares, (C) by any underwriter temporarily holding
securities pursuant to an offering of such securities, or
(D) pursuant to a Non-Qualifying Transaction (as defined in
paragraph (ii) below);
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(ii) the consummation of a merger,
consolidation, share exchange or similar form of corporate
transaction involving Bancshares that requires the approval of
Bancshares’ shareholders, whether for such transaction or the
issuance of securities in the transaction (a “Business
Combination”), unless immediately following such Business
Combination: (A) more than seventy-five percent (75%) of
the total voting power of (x) the corporation resulting from
such Business Combination (the “Surviving
Corporation”), or (y) if applicable, the ultimate parent
corporation that directly or indrectly has beneficial ownership of
100% of the voting securities eligible to elect directors of the
Surviving Corporation (the “Parent Corporation”), is
represented by Bancshares Voting Securities that were outstanding
immediately prior to such Business Combination (or if applicable,
is represented by shares into which such Bancshares Voting
Securities were converted pursuant to such Business Combination),
and such voting power among the holders thereof is in substantially
the same proportion of the voting power of such Bancshares Voting
Securities among the holders thereof immediately prior the Business
Combination, (B) no person (other than any employee benefit
plan (or related trust) sponsored or maintained by the Surviving
Corporation or the Parent Corporation), is or becomes the
beneficial owner, directly or indrectly, of fifty-percent
(50%) or more of the total voting power of the outstanding
voting securities eligibile to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) and (C) at least the majority of the board of
directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) following the consummation
of the Business Combination were Incumbent Directors (as herein
defined) at the time the board of directors of Bancshares approved
the execution of the intial agreement providing for such Business
Combination (any Business Combination which satisfies all of the
criteria specified in (A), (B) and (C) above shall be deemed
to be a “Non-Qualifying Transaction”);
(iii) the individuals who constitute
the board of directors of Bancshares as of the date of this
Agreement (the “Incumbent Directors”) shall cease for
any reason to constitute at least a majority of the members of the
board of directors of Bancshares, provided that any person becoming
a director subsequent to the date of this Agreement, whose election
or nomination was approved by a vote of at least a majority of the
Incumbent Directors then comprising the board of directors of
Bancshares shall be, for purposes of this Agreement, considered an
Incumbent Director; provided, however, that no individual initially
elected or nominated as a director of Bancshares as a result of an
actual or threatened contest with respect to directors or as a
result of any other actual or threatened solicitation of proxies
(or consents) by or on behalf of any person other than the board of
directors shall be deemed to be an Incumbent Director;
(iv) the consummation of a sale of
all or substantially all of the assets of Bancshares; or
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(v) the shareholders of Bancshares
shall approve a plan of complete liquidation or dissolution of
Bancshares.
(c) Change of Control
Termination . A “Change of Control Termination”
shall mean the termination of the Executive Officer’s
employment with the Sterling Entities (or any Parent Corporation or
Surviving Corporation), within a two-year period commencing on the
effective date of a Change of Control, due to (i) an
Involuntary Termination or (ii) a termination for Good
Reason.
(d) Disability .
“Disability” means the Executive Officer’s
permanent and total disability as defined in any long-term
disability plan sponsored by Bancshares and applicable to the
Executive Officer or in the absence of any such long-term
disability plan, the term “Disability” shall mean the
absence of the Executive Officer from his or her duties with the
Sterling Entities on a full-time basis for at least twelve
(12) consecutive weeks as a result of the Executive
Officer’s incapacity due to illness, accident, injury,
physical or mental incapacity or other disability.
(e) General Release of
Liability . A “General Release of Liability” means
the legal document in which the Executive Officer, in exchange for
benefits under this Agreement, releases the Sterling Entities,
their affiliates, their directors, officers, employees and agents,
their employee benefit plans and the fiduciaries and agents of said
plans from liability and damages in any way related to the
Executive Officer’s employment with or separation from the
Sterling Entities.
(f) Good Reason . “Good
Reason” means, without the Executive Officer’s express
written consent, the occurrence of any one of the following events
after a Change of Control:
(i) (A) any change in the
duties or responsibilities of the Executive Officer that is
inconsistent in any material and adverse respect with the Executive
Officer’s position, duties, responsibilities or status with
the Sterling Entities immediately prior to such Change of Control
or (B) a material and adverse change in the Executive
Officer’s titles or offices with the Sterling Entities (or
any Parent Corporation or Surviving Corporation) and including, if
applicable, membership or position on a board of directors with
Bancshares or Bank (or their respective successor), as in effect
immediately prior to such Change of Control;
(ii) a reduction of ten percent
(10%) or more in the Executive Officer’s rate of annual
base salary or annual target bonus opportunity (including any
material and adverse change in the formula for such annual bonus
target) as in effect immediately prior to such Change of Control or
as the same may be increased from time to time thereafter, or the
failure of the applicable Sterling Entity (or any Parent
Corporation or Surviving Corporation) to pay any such amounts when
due;
(iii) any requirement that the
Executive be based anywhere more than twenty-five (25) miles
from the office where the Executive Officer was located at the time
of the Change of Control, if such relocation increases the
Executive Officer’s commute by more than twenty-five
(25) miles;
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(iv) the failure of the Sterling
Entities (or any Parent Corporation or Surviving Corporation) to
continue in effect benefits and a total compensation package
including, without limitation, employee benefit plans, compensation
plans, welfare benefit plans, material fringe benefit plans
vacation policies and other similar benefit plans providing not
less than ninety percent (90%) of the Executive
Officer’s total compensation package in the twelve
(12) months immediately preceding the Change of Control;
and
(v) the failure of Bancshares to
obtain the assumption (and, if applicable, guarantee) agreement
from any Surviving Corporation (and, if applicable, Parent
Corporation) as contemplated in Section 13(b).
(g) Involuntary Termination .
An “Involuntary Termination” means an involuntary
termination of employment of the Executive Officer by the Sterling
Entities (or any successor thereto including a Parent Corporation
or Surviving Corporation); provided, however, that
“involuntary Termination” shall not include termination
of employment by reason of death, Disability or Cause.
2. Compensation and Stock
Award . In consideration of the services to be provided by the
Executive and the covenants and agreements contained in Sections 3,
4 and 5 of this Agreement, Bancshares shall award the Executive
Officer a $50,000 cash bonus on the first available regular payroll
date of 2006 following employment and five thousand
(5,000) shares of Bancshares’ common stock with a
equalization bonus to cover the taxes attributed to the stock
grant. The 5,000 shares of common stock issued to the Executive
Officer, as referenced in the preceding sentence, shall be awarded
under the terms of Bancshares’ 2003 Stock Incentive and
Compensation Plan (or any successor plan) and shall not be subject
to any forfeiture or vesting requirements.
3. Non-Competition .
Executive Officer acknowledges that the Sterling Entities are
providing Executive with access to Confidential Information as
defined below. Ancillary to Executive Officer’s agreement not
to disclose Confidential Information, to protect the Confidential
Information described below, and in consideration for Executive
Officer receiving access to this Confidential Information, being
entitled to Severance Payments, having rights after a Change in
Control, and other benefits provided in this Agreement, the
Sterling Entities and Executive Officer agree to the following
non-competition provisions. The Executive Officer shall not, during
the time that he/she is employed by any Sterling Entity and, in the
event of a termination of employment for Cause
