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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;
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(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.
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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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(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:
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(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, an Involuntary Termination, or a
termination of employment by the Executive Officer, for a period of
twelve (12) months after any such termination:
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(a) directly or indirectly, own, manage, operate, control, i
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