exv10w5



 






EXHIBIT 10.5




CREDIT AGREEMENT




     THIS CREDIT AGREEMENT (this “Agreement”) is entered into as of October 1, 2004, by and between
STERLING BANCSHARES, INC., a Texas corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL
ASSOCIATION (“Bank”).



RECITALS




     Borrower has requested that Bank extend or continue credit to Borrower as described below, and
Bank has agreed to provide such credit to Borrower on the terms and conditions contained herein.



     NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Bank and Borrower hereby agree as follows:



ARTICLE I

CREDIT TERMS




     SECTION 1.1. LINE OF CREDIT.



     (a)       Line of Credit. Subject to the terms and conditions of this Agreement, Bank
hereby agrees to make advances to Borrower from time to time up to and including September 30,
2005, not to exceed at any time the aggregate principal amount of Twenty Million Dollars
($20,000,000.00) (“Line of Credit”), the proceeds of which shall be used for Borrower’s working
capital purposes. Borrower’s obligation to repay advances under the Line of Credit shall be
evidenced by a promissory note dated as of October 1, 2004 (“Line of Credit Note”), all terms of
which are incorporated herein by this reference.



     (b)       Borrowing and Repayment. Borrower may from time to time during the term of the
Line of Credit borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject
to all of the limitations, terms and conditions contained herein or in the Line of Credit Note;
provided however, that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth above.



     SECTION 1.2. INTEREST/FEES.



     (a)       Interest. The outstanding principal balance of the Line of Credit shall bear
interest at the rate of interest set forth in the Line of Credit Note.



     (b)       Computation and Payment. Interest shall be computed on the basis of a 360-day
year, actual days elapsed, unless such calculation would result in a usurious rate, in which case
interest shall be computed on the basis of a 365/366-day year, as the case may be, actual days
elapsed. Interest shall be payable at the times and place set forth in each promissory note or
instrument or document required hereby.



     (c)       Unused Commitment Fee. Borrower shall pay to Bank a fee equal to one eighth
percent (.125%) per annum (computed on the basis of a 360-day year, actual days elapsed) on the
average daily unused amount of the Line of Credit, which fee shall be calculated on a quarterly
basis by Bank and shall be due and payable by Borrower in arrears within ten (10) days after each
billing is sent by Bank.



 









 





     SECTION 1.3. GUARANTIES. All indebtedness of Borrower to Bank shall be guaranteed by Sterling
Bancorporation, Inc., a Delaware corporation (“Guarantor”) in the principal amount of Twenty
Million Dollars ($20,000,000.00), as evidenced by and subject to the terms of guaranties in form
and substance satisfactory to Bank.



ARTICLE II

REPRESENTATIONS AND WARRANTIES




     Borrower makes the following representations and warranties to Bank, which representations and
warranties shall survive the execution of this Agreement and shall continue in full force and
effect until the full and final payment, and satisfaction and discharge, of all obligations of
Borrower to Bank subject to this Agreement.



     SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and existing and in good
standing under the laws of the State of Texas, and is qualified or licensed to do business (and is
in good standing as a foreign corporation, if applicable) in all jurisdictions in which such
qualification or licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.



     SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each promissory note, contract,
instrument and other document required hereby or at any time hereinafter delivered to Bank in
connection herewith (collectively, the “Loan Documents”) have been duly authorized, and upon their
execution and delivery in accordance with the provisions hereof will constitute legal, valid and
binding agreements and obligations of Borrower or the party which executes the same, enforceable in
accordance with their respective terms.



     SECTION 2.3. NO VIOLATION. The execution, delivery and performance by Borrower of each of the
Loan Documents do not violate any provision of any law or regulation, or contravene any provision
of the Articles of Incorporation or By-Laws of Borrower, or result in any breach of or default
under any contract, obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.



     SECTION 2.4. LITIGATION. There are no pending, or to the best of Borrower’s knowledge
threatened, actions, claims, investigations, suits or proceedings by or before any governmental
authority, arbitrator, court or administrative agency which could have a material adverse effect on
the financial condition or operation of Borrower other than those disclosed by Borrower to Bank in
writing prior to the date hereof.



     SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of Borrower dated
December 31, 2003, a true copy of which has been delivered by Borrower to Bank prior to the date
hereof, (a) is complete and correct and presents fairly the financial condition of Borrower, (b)
discloses all liabilities of Borrower that are required to be reflected or reserved against under
generally accepted accounting principles, whether liquidated or unliquidated, fixed or contingent,
and (c) has been prepared in accordance with generally accepted accounting principles consistently
applied. Since the date of such financial statement there has been no material adverse change in
the financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a security
interest in or otherwise encumbered any of its assets or properties except in favor of Bank or as
otherwise permitted by Bank in writing.



     SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending assessments or
adjustments of its income tax payable with respect to any year.



- 2 -









 





     SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract or instrument to
which Borrower is a party or by which Borrower may be bound that requires the subordination in
right of payment of any of Borrower’s obligations subject to this Agreement to any other obligation
of Borrower.



     SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter possess, all
permits, consents, approvals, franchises and licenses required and rights to all trademarks, trade
names, patents, and fictitious names, if any, necessary to enable it to conduct the business in
which it is now engaged in compliance with applicable law.



     SECTION 2.9. ERISA. Borrower is in compliance in all material respects with all applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended or recodified from
time to time (“ERISA”); Borrower has not violated any provision of any defined employee pension
benefit plan (as defined in ERISA) maintained or contributed to by Borrower (each, a “Plan”); no
Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan
initiated by Borrower; Borrower has met its minimum funding requirements under ERISA with respect
to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in
accordance with the Plan documents and under generally accepted accounting principles.



     SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any obligation for borrowed
money, any purchase money obligation or any other material lease, commitment, contract, instrument
or obligation.



     SECTION 2.11. BANK SUBSIDIARIES. As of the date of this Agreement there are 1,000 shares of
issued and outstanding common voting stock in the Guarantor, of which Borrower owns 1,000 shares.
As of the date of this Agreement, there are 12,753,500 shares of issued and outstanding common
voting stock in Sterling Bank, of which the Guarantor owns 12,753,500 shares. Each bank, if any,
named in this Section, and each bank at any time hereafter established or acquired by Borrower, is
referred to as a “Bank Subsidiary”.



ARTICLE III

CONDITIONS




     SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Bank to extend any
credit contemplated by this Agreement is subject to the fulfillment to Bank’s satisfaction of all
of the following conditions:



     (a)       Approval of Bank Counsel. All legal matters incidental to the extension of credit
by Bank shall be satisfactory to Bank’s counsel.



     (b)       Documentation. Bank shall have received, in form and substance satisfactory to
Bank, each of the following, duly executed:



     (i)        This Agreement and each promissory note or other instrument or document
required hereby.



     (ii)        Corporate Resolution: Borrowing.



     (iii)       Corporate Resolution: Continuing Guaranty.



     (iv)       Certificate of Incumbency (2).



     (v)       Continuing Guaranty.



- 3 -









 





     (vi)       Such other documents as Bank may require under any other Section of this
Agreement,



     (c)       Financial Condition. There shall have been no material adverse change, as
determined by Bank, in the financial condition or business of Borrower or any guarantor hereunder,
nor any material decline, as determined by Bank, in the market value of any collateral required
hereunder or a substantial or material portion of the assets of Borrower or any such guarantor.



     SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank to make each
extension of credit requested by Borrower hereunder shall be subject to the fulfillment to Bank’s
satisfaction of each of the following conditions:



     (a)       Compliance. The representations and warranties contained herein and in each of
the other Loan Documents shall be true on and as of the date of the signing of this Agreement and
on the date of each extension of credit by Bank pursuant hereto, with the same effect as though
such representations and warranties had been made on and as of each such date, and on each such
date, no Event of Default as defined herein, and no condition, event or act which with the giving
of notice or the passage of time or both would constitute such an Event of Default, shall have
occurred and be continuing or shall exist.



     (b)       Documentation. Bank shall have received all additional documents which may be
required in connection with such extension of credit.



ARTICLE IV

AFFIRMATIVE COVENANTS




     Borrower covenants that so long as Bank remains committed to extend credit to Borrower
pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of
Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of
all obligations of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in
writing:



     SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or other
liabilities due under any of the Loan Documents at the times and place and in the manner specified
therein.



     SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in accordance with
generally accepted accounting principles consistently applied, and permit any representative of
Bank, at any reasonable time, to inspect, audit and examine such books and records, to make copies
of the same, and to inspect the properties of Borrower.



     SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in form and detail
satisfactory to Bank:



     (a)       not later than 120 days after and as of the end of each fiscal year, an audited financial
statement of Borrower and each Bank Subsidiary, prepared by a certified public accountant
acceptable to Bank, to include balance sheet and income statement;



- 4 -









 





     (b)       contemporaneously with each annual and fiscal quarter financial statement of Borrower
required hereby, a compliance certificate of the president or chief financial officer of Borrower
that said financial statements are accurate, that there exists no Event of Default nor any
condition, act or event which with the giving of notice or the passage of time or both would
constitute an Event of Default, and demonstrating compliance with the financial covenants contained
in this Agreement;



     (c)       as soon as available, and in any event within 45 days after the end of each calendar
quarter, the complete Consolidated Reports of Condition and Income for a Bank With Domestic Offices
Only (FFIEC 041) or With Domestic and Foreign Offices (FFIEC 031), whichever is applicable (the
“Call Report”), prepared by each Bank Subsidiary at the end of such calendar quarter in compliance
with the requirements of any federal or state regulatory agency which has authority to examine any
Bank Subsidiary, all prepared in accordance with the requirements imposed by the applicable
regulatory authorities and applied on a basis consistent with the accounting practices reflected in
any previous Call Report(s) and similar statements delivered to Bank prior to the date of this
Agreement;



     (d)       as soon as available, and in any event no later than 60 days after the end of each fiscal
quarter, the complete Parent Company Only Financial Statements for Large Bank Holding Companies (FR
Y-91P) required to be filed by Borrower quarterly with the Federal Reserve Bank in the applicable
Federal Reserve District;



     (e)       as soon as available, and in any event within 90 days after each fiscal year end of
Borrower, the Annual Report of Bank Holding Companies (FR Y-6) required by the Federal Reserve Bank
in the applicable Federal Reserve District;



     (f)       as soon as available, and in any event no later than 90 days after the end of each fiscal
quarter, the complete Consolidated Financial Statements for Bank Holding Companies (FR Y-9C)
required to be filed by Borrower quarterly with the Federal Reserve Bank in the applicable Federal
Reserve District;



     (g)       as soon as available (but without duplication of any other requirements set forth in this
Section 4.3) a copy of all reports which are required by law to be furnished to any regulatory
authority having jurisdiction over Borrower or any Bank Subsidiary (including without limitation
Call Reports, but excluding any report which applicable law or regulation prohibits Borrower or a
Bank Subsidiary from furnishing to Bank);



     (h)       from time to time such other information as Bank may reasonably request.



     SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits, governmental approvals,
rights, privileges and franchises necessary for the conduct of its business; and comply with the
provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower’s
continued existence and with the requirements of all laws, rules, regulations and orders of any
governmental authority applicable to Borrower and/or its business.



     SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types and in amounts
customarily carried in lines of business similar to that of Borrower, including but not limited to
fire, extended coverage, public liability, flood, property damage and workers’ compensation, with
all such insurance carried with companies and in amounts satisfactory to



- 5 -









 







Bank, and deliver to Bank from time to time at Bank’s request schedules setting forth
all insurance then in effect.



     SECTION 4.6. FACILITIES. Keep all properties useful or necessary to Borrower’s business
in good repair and condition, and from time to time make necessary repairs, renewals and
replacements thereto so that such properties shall be fully and efficiently preserved and
maintained.



     SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real or personal, including without
limitation federal and state income taxes and state and local property taxes and assessments,
except such (a) as Borrower may in good faith contest or as to which a bona fide dispute may arise,
and (b) for which Borrower has made provision, to Bank’s satisfaction, for eventual payment thereof
in the event Borrower is obligated to make such payment.



     SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any litigation pending or
threatened against Borrower with a claim in excess of $5,000,000.00.



     SECTION 4.9. BORROWER’S FINANCIAL CONDITION. Maintain Borrower’s consolidated financial
condition as follows using generally accepted accounting principles consistently applied and used
consistently with prior practices (except to the extent modified by the definitions herein), with
compliance determined commencing with Borrower’s financial statements for the period ending
September 30, 2004:



     (a)       Maintain Borrower’s categorization as Well Capitalized as defined by regulatory agencies
having jurisdiction over Borrower.



     SECTION 4.10. BANK SUBSIDIARY FINANCIAL CONDITION. Cause each Bank Subsidiary to maintain its
financial condition as follows using generally accepted accounting principles consistently applied
and used consistently with prior practices (except to the extent modified by the definitions
herein), with compliance determined commencing with such Bank Subsidiary’s financial statements for
the period ending September 30, 2004:



     (a)       ROA not less than .70% on a rolling four quarter basis, determined as of each fiscal
quarter end, with “ROA” defined as the percentage arrived at by dividing net income by Total
Assets, as reported in the most recent Call Report.



     (b)       Allowance for loan and lease losses not less than 85% of the total amount of
Non-Performing Assets, determined as of each fiscal quarter end, with “Non-Performing Assets”
defined as the sum of: (i) all loans classified as past due 90 days or more and still accruing
interest; (ii) all loans classified as ‘non-accrual’ and no longer accruing interest; (iii) all
loans classified as ‘restructured loans and leases’; and (iv) all other ‘non-performing assets’,
including those classified as ‘other real estate owned’ and ‘repossessed property’, as reported in
the then most recent Call Report.



     (c)       Non-Performing Assets not greater than 12.5% of Primary Equity Capital, determined as of
each fiscal quarter end, with “Non-Performing Assets” as defined above, and with “Primary Equity
Capital” defined as the aggregate of allowance for loan and lease losses, as reported in the then
most recent Call Report, plus Equity-Capital (defined as the aggregate of perpetual preferred stock
(and related surplus), common stock, surplus (excluding all surplus related to perpetual preferred
stock), undivided profits and capital reserves.



- 6 -









 





     (d)       Maintain its categorization as Well Capitalized as defined by regulatory agencies having
jurisdiction, which, pursuant to Section 38 of the Federal Deposit Insurance Act (created by
Section 131 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991)
(entitled “Prompt Corrective Action”) (herein, “Section 38”), considers an institution “Well
Capitalized”, among other things, if its Total Risk-Based Capital Ratio equals or exceeds 10%, its
Tier 1 Risk-Based Capital equals or exceeds 6% and its Leverage equals or exceeds 5%. As used
herein, “Total Risk-Based Capital Ratio”, “Tier 1 Risk-Based Capital” and “Leverage” shall be
defined and calculated in conformity with Section 38.



     SECTION 4.11. NOTICE TO BANK. Promptly (but in no event more than ten (10) days after
Borrower knew or should have known of the occurrence of each such event or matter) give written
notice to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time or both would
constitute an Event of Default; (b) any change in the name or the organizational structure of
Borrower; (c) the occurrence and nature of any Reportable Event or Prohibited Transaction, each as
defined in ERISA, or any funding deficiency with respect to any Plan; (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or any uninsured or
partially uninsured loss through liability or property damage, or through fire, theft or any other
cause affecting Borrower’s property in excess of an aggregate of $5,000,000.00; (e) any change in
Executive Management of Borrower or of any Bank Subsidiary, with “Executive Management” defined as
the Chief Executive Officer or Chief Financial Officer; or (f) any negotiations to sell any capital
stock of Borrower and/or any Bank Subsidiary, together with copies of any proposed buy/sell
agreements; provided however, that this clause shall not be deemed approval by Bank of any such
negotiation and shall not apply to information which under applicable law or regulation is
prohibited from disclosure to Bank.



ARTICLE V

NEGATIVE COVENANTS




     Borrower further covenants that so long as Bank remains committed to extend credit to Borrower
pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of
Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of
all obligations of Borrower subject hereto, Borrower will not without Bank’s prior written consent:



     SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended hereunder except
for the purposes stated in Article 1 hereof.



     SECTION 5.2. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or consolidate with any
other entity; make any substantial change in the nature of Borrower’s business as conducted as of
the date hereof; nor sell, lease, transfer or otherwise dispose of all or a substantial or material
portion of Borrower’s assets except in the ordinary course of its business.



     SECTION 5.3. GUARANTIES. Guarantee or become liable in any way as surety, endorser (other
than as endorser of negotiable instruments for deposit or collection in the ordinary course of
business), accommodation endorser or otherwise for, nor pledge or hypothecate any assets of
Borrower as security for, any liabilities or obligations of any other person or entity, except any
of the foregoing in favor of Bank.



- 7 -









 





     SECTION 5.4. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or investments in
any person or entity, except any of the foregoing existing as of, and disclosed to Bank prior to,
the date hereof in excess of $15,000,000.



     SECTION 5.5. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or distribution either in
cash, stock or any other property on Borrower’s stock now or hereafter outstanding, nor redeem,
retire, repurchase or otherwise acquire any shares of any class of Borrower’s stock now or
hereafter outstanding in excess of $15,000,000.



     SECTION 5.6. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a security interest
in, or lien upon, all or any substantial portion of Borrower’s assets now owned or hereafter
acquired, including all or any stock of Sterling Bank, Houston, Texas, except any of the foregoing
in favor of Bank or which is existing as of, and disclosed to Bank in writing prior to, the date
hereof.



ARTICLE VI

EVENTS OF DEFAULT




     SECTION 6.1. The occurrence of any of the following shall constitute an “Event of Default”
under this Agreement:



     (a)       Borrower shall fail to pay when due any principal, interest, fees or other amounts payable
under any of the Loan Documents.



     (b)       Any financial statement or certificate furnished to Bank in connection with, or any
representation or warranty made by Borrower or any other party under this Agreement or any other
Loan Document shall prove to be incorrect, false or misleading in any material respect when
furnished or made.



     (c)       Any default in the performance of or compliance with any obligation, agreement or other
provision contained herein or in any other Loan Document (other than those referred to in
subsections (a) and (b) above), and with respect to any such default which by its nature can be
cured, such default shall continue for a period of thirty (30) days from its occurrence.



     (d)       Any default in the payment or performance of any obligation, or any defined event of
default, under the terms of any contract or instrument (other than any of the Loan Documents)
pursuant to which Borrower, any Bank Subsidiary, or any guarantor hereunder or any general partner
in any Borrower which is a partnership (with each such guarantor and/or general partner referred to
herein as a “Third Party Obligor”) has incurred any debt or other liability to any person or
entity, including Bank.



     (e)       The filing of a notice of judgment lien against Borrower or any Bank Subsidiary or Third
Party Obligor; or the recording of any abstract of judgment against Borrower or any Bank Subsidiary
or Third Party Obligor in any county in which Borrower or such Bank Subsidiary or Third Party
Obligor has an interest in real property; or the service of a notice of levy and/or of a writ of
attachment or execution, or other like process, against the assets of Borrower or any Bank
Subsidiary or Third Party Obligor; or the entry of a judgment against Borrower or any Bank
Subsidiary or Third Party Obligor, each of which, or any, substantially interfering with Borrower’s
ability to conduct its business or otherwise having a material impact on Borrower’s financial
condition.



- 8 -









 





     (f)       Borrower or any Bank Subsidiary or Third Party Obligor shall become insolvent, or shall
suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator
of itself or any of its property, or shall generally fail to pay its debts as they become due, or
shall make a general assignment for the benefit of creditors; Borrower or any Bank Subsidiary or
Third Party Obligor shall file a voluntary petition in bankruptcy, or seeking reorganization, in
order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy
Reform Act, Title 11 of the United States Code, as amended or recodified from time to time
(“Bankruptcy Code”), or under any state or federal law granting relief to debtors, whether now or
hereafter in effect; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or
any other applicable state or federal law relating to bankruptcy, reorganization or other relief
for debtors is filed or commenced against Borrower or any Bank Subsidiary or Third Party Obligor,
or Borrower or any Bank Subsidiary or Third Party Obligor shall file an answer admitting the
jurisdiction of the court and the material allegations of any involuntary petition; or Borrower or
any Bank Subsidiary or Third Party Obligor shall be adjudicated a bankrupt, or an order for relief
shall be entered against Borrower or any Bank Subsidiary or Third Party Obligor by any court of
competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law
relating to bankruptcy, reorganization or other relief for debtors.



     (g)       There shall exist or occur any event or condition which Bank in good faith believes
impairs, or is substantially likely to impair, the prospect of payment or performance by Borrower
of its obligations under any of the Loan Documents.



     (h)       The death or incapacity of any individual Third Party Obligor. The dissolution or
liquidation of Borrower, any Bank Subsidiary or any Third Party Obligor which is a corporation,
partnership, joint venture or other type of entity; or Borrower, any Bank Subsidiary or any such
Third Party Obligor, or any of its directors, stockholders or members, shall take action seeking to
effect the dissolution or liquidation of Borrower or such Bank Subsidiary or Third Party Obligor.



     (i)       The issuance or proposed issuance against Borrower, or any affiliate of Borrower
(including without limitation, any Bank Subsidiary) of any informal or formal administrative
action, temporary or permanent, by any federal or state regulatory agency having jurisdiction or
control over Borrower or such affiliate, such action taking the form of, but not limited to: (i)
any informal or formal directive citing conditions or activities deemed to be unsafe or unsound or
breaches of fiduciary duty or law or regulation; (ii) a memorandum of understanding; (iii) a cease
and desist order; (iv) the termination of insurance coverage of customer deposits by the Federal
Deposit Insurance Corporation; (v) the suspension or removal of an officer or director, or the
prohibition of participation by any others in the business affairs of Borrower or such affiliate;
(vi) any capital maintenance agreement; or (vii) any other regulatory action, agreement or
understanding with respect to Borrower or such affiliate.



     (j)       Any change in ownership of an aggregate of twenty-five percent (25%) or more of the common
stock of Borrower.



     SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all indebtedness of
Borrower under each of the Loan Documents, any term thereof to the contrary notwithstanding, shall
at Bank’s option and without notice become immediately due and payable without presentment, demand,
protest or any notices of any kind, including without limitation notice of nonperformance, notice
of protest, protest, notice of dishonor, notice of intent to accelerate or notice of acceleration
all of which are hereby expressly waived by each Borrower;



- 9 -









 





(b) the obligation, if any, of Bank to extend any further credit under any of the Loan
Documents shall immediately cease and terminate; and (c) Bank shall have all rights, powers and
remedies available under each of the Loan Documents, or accorded by law, including without
limitation the right to resort to any or all security for any credit subject hereto and to exercise
any or all of the rights of a beneficiary or secured party pursuant to applicable law. All rights,
powers and remedies of Bank may be exercised at any time by Bank and from time to time after the
occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to
any other rights, powers or remedies provided by law or equity.



ARTICLE VII

MISCELLANEOUS




     SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in exercising any right,
power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right,
power or remedy; nor shall any single or partial exercise of any such right, power or remedy
preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any
breach of or default under any of the Loan Documents must be in writing and shall be effective only
to the extent set forth in such writing.



     SECTION 7.2. NOTICES. All notices, requests and demands which any party is required or may
desire to give to any other party under any provision of this Agreement must be in writing
delivered to each party at the following address:



	 	 	 	 	 
	

	 	BORROWER:
	 	STERLING BANCSHARES, INC.

2550 North Loop West

Houston, TX 77240
	 
	 	 	 	 
	

	 	BANK:
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION

One O’Connor Plaza, 3rd Floor

Victoria, TX 77901





or to such other address as any party may designate by written notice to all other parties. Each
such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand
delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3)
days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.




     SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to Bank immediately upon
demand the full amount of all payments, advances, charges, costs and expenses, including reasonable
attorneys’ fees (to include outside counsel fees and all allocated costs of Bank’s in-house counsel
to the extent permissible), expended or incurred by Bank in connection with (a) the negotiation and
preparation of this Agreement and the other Loan Documents, Bank’s continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and thereto, (b) the
enforcement of Bank’s rights and/or the collection of any amounts which become due to Bank under
any of the Loan Documents, and (c) the prosecution or defense of any action in any way related to
any of the Loan Documents, including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including
any of the foregoing incurred in connection with any bankruptcy proceeding (including without
limitation,



- 10 -









 







any adversary proceeding, contested matter or motion brought by Bank or any other person)
relating to any Borrower or any other person or entity.



     SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the heirs, executors, administrators, legal representatives, successors and assigns of
the parties; provided however, that Borrower may not assign or transfer its interest hereunder
without Bank’s prior written consent. Bank reserves the right to sell, assign, transfer, negotiate
or grant participations in all or any part of, or any interest in, Bank’s rights and benefits under
each of the Loan Documents. In connection therewith, Bank may disclose all documents and
information which Bank now has or may hereafter acquire relating to any credit subject hereto,
Borrower, any Bank Subsidiary, any guarantor hereunder or any collateral required hereunder.



     SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan Documents
constitute the entire agreement between Borrower and Bank with respect to each credit subject
hereto and supersede all prior negotiations, communications, discussions and correspondence
concerning the subject matter hereof. This Agreement may be amended or modified only in writing
signed by each party hereto.



     SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into for the
sole protection and benefit of the parties hereto and their respective permitted successors and
assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or
indirect cause of action or claim in connection with, this Agreement or any other of the Loan
Documents to which it is not a party.



     SECTION 7.7. TIME. Time is of the essence of each and every provision of this Agreement and
each other of the Loan Documents.



     SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity without invalidating the remainder of such provision or
any remaining provisions of this Agreement.



     SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each
of which when executed and delivered shall be deemed to be an original, and all of which when taken
together shall constitute one and the same Agreement.



     SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas.



     SECTION 7.11. SAVINGS CLAUSE. It is the intention of the parties to comply strictly with
applicable usury laws. Accordingly, notwithstanding any provision to the contrary in the Loan
Documents, in no event shall any Loan Documents require the payment or permit the payment, taking,
reserving, receiving, collection or charging of any sums constituting interest under applicable
laws that exceed the maximum amount permitted by such laws, as the same may be amended or modified
from time to time (the “Maximum Rate”). If any such excess interest is called for, contracted for,
charged, taken, reserved or received in connection with any Loan Documents, or in any communication
by Bank or any other person to Borrower or any other person, or in the event that all or part of
the principal or interest hereof or thereof shall be prepaid or accelerated, so that under any of
such circumstances or under any other circumstance whatsoever the amount of interest contracted
for, charged, taken, reserved or



- 11 -









 







received on the amount of principal actually outstanding from time to time under the Loan
Documents shall exceed the Maximum Rate, then in such event it is agreed that: (a) the provisions
of this paragraph shall govern and control; (b) neither Borrower nor any other person or entity now
or hereafter liable for the payment of any Loan Documents shall be obligated to pay the amount of
such interest to the extent it is in excess of the Maximum Rate; (c) any such excess interest which
is or has been received by Bank, notwithstanding this paragraph, shall be credited against the then
unpaid principal balance hereof or thereof, or if any of the Loan Documents has been or would be
paid in full by such credit, refunded to Borrower, and (d) the provisions of each of the Loan
Documents, and any other communication to Borrower, shall immediately be deemed reformed and such
excess interest reduced, without the necessity of executing any other document, to the Maximum
Rate. The right to accelerate the maturity of the Loan Documents does not include the right to
accelerate, collect or charge unearned interest, but only such interest that has otherwise accrued
as of the date of acceleration. Without limiting the foregoing, all calculations of the rate of
interest contracted for, charged, taken, reserved or received in connection with any of the Loan
Documents which are made for the purpose of determining whether such rate exceeds the Maximum Rate
shall be made to the extent permitted by applicable laws by amortizing, prorating, allocating and
spreading during the period of the full term of such Loan Documents, including all prior and
subsequent renewals and extensions hereof or thereof, all interest at any time contracted for,
charged, taken, reserved or received by Bank. The terms of this paragraph shall be deemed to be
incorporated into each of the other Loan Documents.



     To the extent that either Chapter 303 or 306, or both, of the Texas Finance Code apply in
determining the Maximum Rate, Bank hereby elects to determine the applicable rate ceiling by using
the weekly ceiling from time to time in effect, subject to Bank’s right subsequently to change such
method in accordance with applicable law, as the same may be amended or modified from time to time.



     SECTION 7.12. RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the occurrence of an Event of
Default, (a) Borrower hereby authorizes Bank, at any time and from time to time, without notice,
which is hereby expressly waived by each Borrower, and whether or not Bank shall have declared any
credit subject hereto to be due and payable in accordance with the terms hereof, to set off
against, and to appropriate and apply to the payment of, Borrower’s obligations and liabilities
under the Loan Documents (whether matured or unmatured, fixed or contingent, liquidated or
unliquidated), any and all amounts owing by Bank to Borrower (whether payable in U.S. dollars or
any other currency, whether matured or unmatured, and in the case of deposits, whether general or
special (except trust and escrow accounts), time or demand and however evidenced), and (b) pending
any such action, to the extent necessary, to hold such amounts as collateral to secure such
obligations and liabilities and to return as unpaid for insufficient funds any and all checks and
other items drawn against any deposits so held as Bank, in its sole discretion, may elect. Borrower
hereby grants to Bank a security interest in all deposits and accounts maintained with Bank and
with any other financial institution to secure the payment of all obligations and liabilities of
Borrower to Bank under the Loan Documents.



     SECTION 7.13. BUSINESS PURPOSE. Borrower represents and warrants that each credit subject
hereto is for a business, commercial, investment, agricultural or other similar purpose and not
primarily for a personal, family or household use.



- 12 -









 





     SECTION 7.14. ARBITRATION.



     (a)       Arbitration. The parties hereto agree, upon demand by any party, to submit to
binding arbitration all claims, disputes and controversies between or among them (and their
respective employees, officers, directors, attorneys, and other agents), whether in tort, contract
or otherwise arising out of or relating to in any way (i) the loan and related Loan Documents which
are the subject of this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation, inducement,
enforcement, default or termination; or (ii) requests for additional credit.



     (b)       Governing Rules. Any arbitration proceeding will (i) proceed in a location in
Texas selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal
Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law
provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such
other administrator as the parties shall mutually agree upon, in accordance with the AAA’s
commercial dispute resolution procedures, unless the claim or counterclaim is at least
$1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the
arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex
commercial disputes (the commercial dispute resolution procedures or the optional procedures for
large, complex commercial disputes to be referred to, as applicable, as the “Rules”). If there is
any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein
shall control. Any party who fails or refuses to submit to arbitration following a demand by any
other party shall bear all costs and expenses incurred by such other party in compelling
arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable
state law.



     (c)       No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration
requirement does not limit the right of any party to (i) foreclose against real or personal
property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of
collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such
as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after
the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the
right or obligation of any party to submit any dispute to arbitration or reference hereunder,
including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii)
of this paragraph.



     (d)       Arbitrator Qualifications and Powers. Any arbitration proceeding in which the
amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected
according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any
dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote
of a panel of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed
in the State of Texas with a minimum of ten years experience in the substantive law applicable to
the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an
issue is arbitratable and will give effect to the statutes of limitation in determining any claim.
In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at
the arbitrator’s discretion) any pre-hearing motions which are similar to motions to dismiss for
failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of Texas and may grant any remedy or relief that a
court of such state could order or grant within the scope hereof and such ancillary relief as is
necessary



- 13 -









 







to make effective any award. The arbitrator shall also have the power to award recovery of all
costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary
to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Texas Rules
of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may
be entered in any court having jurisdiction, The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the controversy or claim to arbitration
if any other party contests such action for judicial relief.



     (e)       Discovery. In any arbitration proceeding discovery will be permitted in
accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to
the dispute being arbitrated and must be completed no later than 20 days before the hearing date
and within 180 days of the filing of the dispute with the AAA. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final determination by the
arbitrator upon a showing that the request for discovery is essential for the party’s presentation
and that no alternative means for obtaining information is available.



     (f)       Class Proceedings and Consolidations. The resolution of any dispute arising
pursuant to the terms of this Agreement shall be determined by a separate arbitration proceeding
and such dispute shall not be consolidated with other disputes or included in any class proceeding.



     (g)       Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs and
expenses of the arbitration proceeding.



     (h)       Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and
the parties shall take all action required to conclude any arbitration proceeding within 180 days
of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration
proceeding may disclose the existence, content or results thereof, except for disclosures of
information by a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties potentially
applies to a dispute, the arbitration provision most directly related to the Loan Documents or the
subject matter of the dispute shall control. This arbitration provision shall survive termination,
amendment or expiration of any of the Loan Documents or any relationship between the parties.


NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS CONSTITUTE A WRITTEN
LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THE INDEBTEDNESS.




- 14 -









 








     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day
and year first written above.



	 	 	 	 	 	 	 
	
STERLING BANCSHARES, INC.	 	WELLS FARGO BANK, 
      NATIONAL ASSOCIATION
	 
	 	 	 	 	 	 
	By:

	 	/s/ Stephen C. Raffaele
	 	By:
	 	/s/ Michael W. Moses
	

	 	 
	 	 	 	 
	

	 	Stephen C. Raffaele

Executive Vice President and

Chief Financial Officer
	 	 	 	Michael W. Moses

Vice President







- 15 -