Document:

Exhibit 10.5

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “Agreement”) is made the 16th day of June, 2019, by and among PROSPERITY BANK, a Texas banking association having a principal place of business at 1301 North Mechanic Street, El Campo, Texas 77437 (“Employer”), LEGACYTEXAS BANK, a Texas banking association having a principal place of business at 5851 Legacy Circle, Suite 1200, Plano, Texas 75024 (the “Bank”) and Thomas S. Swiley, an individual who resides in the State of Texas (“Employee”).

 

WHEREAS, this Agreement is being entered into in connection with the Agreement and Plan of Reorganization, dated as of June 16, 2019 (the “Merger Agreement”), by and between Prosperity Bancshares, Inc., a Texas corporation (“Bancshares”), and LegacyTexas Financial Group, Inc., a Maryland corporation (the “Company”); and

 

WHEREAS, Employee’s agreement to and compliance with the provisions of Article V of this Agreement are a material factor, material inducement and material condition to Bancshares’ participation in the transactions contemplated by the Merger Agreement.  Moreover, Employee acknowledges that a substantial portion of the value of the transactions contemplated by the Merger Agreement is Employee’s promises to refrain from competing with the Bank, Employer, or Bancshares as set forth in Article V hereof; and

 

WHEREAS, prior to the entry into the Merger Agreement, Employee was an officer of the Bank and is receiving a considerable benefit as a result of the transactions contemplated by the Merger Agreement;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, and intending to be legally bound hereby, it is hereby agreed as follows:

 

ARTICLE I

 

TERM OF EMPLOYMENT

 

1.1  Term.  Provided that Employee is employed by the Bank immediately preceding the Effective Time (as defined in the Merger Agreement), Employer hereby employs Employee and Employee hereby accepts employment with Employer under this Agreement for a period of three (3) years (the “Term”) beginning as of the Effective Time; provided, however, that this Agreement may be terminated earlier as hereinafter provided.  However, if (i) the Merger Agreement is terminated for any reason, (ii) Employee’s employment with the Bank terminates for any reason, or (iii) the Prior Agreement (as defined below) is not terminated and liquidated in accordance with Section 1.2 hereof, in each case, before the Effective Time occurs, (a) Employee will not be employed under this Agreement and all of the provisions of this Agreement will terminate upon the earlier of the time of termination of the Merger Agreement or the time of termination of Employee’s employment with the Bank or, in the case of (iii) above, immediately prior to the Effective Time, and (b) there will be no liability of any kind under this Agreement.  Subject to Section 7.6 below, this Agreement shall terminate automatically upon the expiration of the Term.

 

 

1.2  Termination of Prior Agreement.  The Bank and Employee are parties to that certain Change in Control and Severance Benefits Agreement dated December 2, 2013 (the “Prior Agreement”), which provides for severance benefits pursuant to its terms and conditions. The Bank and Employee hereby agree to take action to terminate and fully liquidate the Prior Agreement in accordance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and Treasury Regulation Section 1.409A-3(j)(4)(ix)(B) within thirty (30) days prior to the Effective Time. In connection with such termination and liquidation, Employee acknowledges that he will not receive Transaction Payments (as defined in the Prior Agreement) in an aggregate amount greater than the Reduced Payment (as defined in the Prior Agreement).  The Bank and Employee agree that the Prior Agreement shall not be deemed to be terminated unless and until the requirements of Treasury Regulation Section 1.409A-3(j)(4)(ix)(B) are satisfied, including the requirement that any other agreements, methods, programs and other arrangements that are required to be aggregated with the Prior Agreement are terminated and liquidated. Employee acknowledges that, upon the termination of the Prior Agreement, Employee shall have no further rights under the Prior Agreement. Employee acknowledges that the benefits that Employee will receive pursuant to this Agreement constitute consideration to which Employee is not otherwise entitled and is adequate consideration to support termination of the Prior Agreement and replacement by this Agreement.

 

ARTICLE II

 

TITLE AND DUTIES OF EMPLOYEE

 

2.1  Title.  As of the Effective Time, Employee is hereby employed by Employer as Executive Vice President Lending.

 

2.2  Primary Duties.  Employee shall perform such duties as are consistent with Employee’s title set forth above in Section 2.1, and shall perform such other work as may be assigned to him subject to the instructions, directions, and control of Employer, which shall be consistent with the type and nature of work normally performed by senior banking officers and as may be assigned by Employer from time to time.

 

2.3  Engaging in Other Employment.  While employed by Employer, Employee shall devote all of his entire productive time, ability, and attention to the business of Employer during Employer’s normal business hours.

 

ARTICLE III

 

COMPENSATION

 

3.1  Base Salary.  As compensation for employment services rendered under this Agreement, Employee shall be entitled to receive from Employer an annual rate of salary (“Base Salary”) of $381,000.00, subject to applicable taxes and withholdings, paid semi-monthly and prorated for any partial employment period during the Term of this Agreement.  The Base Salary shall not be reduced during the Term of this Agreement, but may be increased, in Employer’s sole discretion, in accordance with the then existing procedures of Employer.

 

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3.2  Bonus.  Prior to the Effective Time, Employee will be paid a bonus by the Bank for the 2019 calendar year, which bonus shall be consistent with the Bank’s bonus program in effect as of the date of execution of this Agreement and the Bank’s past practice.  For each calendar year thereafter, during the Term of this Agreement, Employee will be eligible for the bonus program in accordance with Employer’s policies and procedures regarding such bonuses.

 

3.3  Other Compensation.  Employee shall be eligible to participate in the stock-based incentive compensation programs administered by the Board of Directors of Bancshares pursuant to the terms of the plans then in effect and in accordance with Section 5.6 below.

 

3.4  Automobile Allowance.  During the Term of this Agreement, Employer shall provide Employee with a monthly automobile allowance of $600.00, subject to applicable taxes and withholdings, paid through the normal payroll practices of Employer.

 

3.5  Cell Phone Allowance.  During the Term of this Agreement, Employer shall provide Employee with a monthly cell phone allowance of $100.00, subject to applicable taxes and withholdings, paid through the normal payroll practices of Employer.

 

ARTICLE IV

 

REIMBURSEMENT OF EMPLOYEE BUSINESS EXPENSES AND
 PARTICIPATION IN EMPLOYER BENEFIT PLANS

 

4.1  Out of Pocket Expenses.  Employee is authorized to incur reasonable business expenses for promoting the business of Employer, including expenditures for entertainment, meals and travel and other similar business expenses, in accordance with Employer policy.  Employer will reimburse Employee from time to time for all such business expenses; provided, that Employee presents Employer with appropriate documentation of such expenditures in accordance with Employer’s established procedures relating to such reimbursements.

 

4.2  Participation in Employer Benefit Plans.  Until the termination of Employee’s employment, Employee will be eligible to participate in all compensation programs and employee benefit plans maintained by Employer from time to time and generally available to the officers and employees of Employer, subject to the terms of such programs and plans.  Employer reserves the right to amend or cancel any compensation programs and employee benefit plans at any time in its sole discretion, subject to the terms of such programs and plans and applicable law.

 

4.3  Reimbursements and In-Kind Benefits in General.  All reimbursements under this Agreement shall be paid to Employee as soon as administratively practicable after Employee has provided the appropriate documentation, but in no event shall any reimbursements be paid later than the last day of the calendar year following the calendar year in which the expense was incurred.  Notwithstanding anything herein to the contrary, to the extent required by Section 409A of the Code:  (a) the amount of expenses eligible for reimbursement or in-kind benefits provided under this Agreement during a calendar year will not affect the expenses eligible for reimbursement or in-kind benefits provided in any other calendar year, and (b) the

 

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right to reimbursement or in-kind benefits provided under this Agreement shall not be subject to liquidation or exchange for another benefit.

 

ARTICLE V

 

RESTRICTIVE COVENANTS

 

5.1  Confidential Information.  “Confidential Information” means and includes the Bank’s and Employer’s, and their affiliated entities’, confidential or proprietary information or trade secrets.  Confidential Information includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, including, but not limited to the following: information regarding past and current customers and investors and business affiliates and contractors; information regarding the industry not generally known to the public; strategies, methods, books, records, and documents; technical information concerning products, equipment, services, and processes; procurement procedures, pricing, and pricing techniques; including contact names, services provided, pricing, type and amount of services used, financial data; pricing strategies and price curves; positions; plans or strategies for expansion or acquisitions; budgets; research; financial and sales data; trading methodologies and terms; communications information; evaluations, opinions and interpretations of information and data; marketing and merchandising techniques; electronic databases; models; specifications; computer programs; contracts; bids or proposals; technologies and methods; training methods and processes; organizational structure; payments or rates paid to consultants or other service providers.  Confidential Information includes any such information that Employee may originate, learn, have access to or obtain, whether in tangible form or memorized.  Additionally, Employee recognizes that the Confidential Information is dynamic and ever-changing.  Confidential Information does not include information that is generally available to and known by the public, provided that such disclosure to the public is through no direct or indirect fault of the Employee or person(s) acting on the Employee’s behalf.  Employee acknowledges that the Bank’s and Employer’s respective businesses are highly competitive, that this Confidential Information constitutes a valuable, special and unique asset used by each of the Bank and Employer in its business, and that protection of such Confidential Information against unauthorized disclosure and use is of critical importance to the Bank and Employer.

 

5.2  Promises of Employer and the Bank.  The Bank promises and agrees that reasonably soon after the execution of this Agreement by Employee, the Bank shall provide Employee with Confidential Information in an expanded nature than that already provided to Employee by the Bank.  In addition, Employer promises and agrees that, reasonably soon after the execution of this Agreement by Employee and during the Term and as part of the employment under this Agreement, Employer shall provide Employee with Confidential Information, which will enable Employee to perform his job for Employer.  In addition, after the Effective Time, Employee will have immediate access to, or knowledge of, Confidential Information of third parties, such as actual and potential customers, suppliers, partners, joint ventures, investors, and financing sources of Employer.  Employee acknowledges that: (a) the Bank and Employer have devoted substantial time, effort, and resources to develop and compile the Confidential Information; (b) public disclosure of such Confidential Information would have an adverse effect on the businesses of the Bank and Employer; (c) the Bank and Employer would not disclose such information to the Employee, nor would the Bank or Employer employ or

 

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continue to employ the Employee without the agreements and covenants set forth in this Article V; and (d) the provisions of this Article V are reasonable and necessary to prevent the improper use or disclosure of Confidential Information.

 

5.3  Employee’s Promises.

 

(a)                                 Non-Disclosure Obligations.  Employee agrees that Employee will not, at any time during the period of his employment with the Bank or Employer, and after the Employee’s termination date, make any unauthorized disclosure, directly or indirectly, of any Confidential Information of the Bank or Employer, or confidential information belonging to third parties that was obtained by Employee during his employment with the Bank or Employer (excepting any third party confidential information provided to Employee independently of Employee’s employment with the Bank or Employer), or make any use thereof, directly or indirectly, except in performance of Employee’s duties for the Bank or Employer.  Employee also agrees that Employee shall promptly deliver to the Bank or Employer, as directed, upon the termination of employment or at any other time at the Bank or Employer’s request, without retaining any copies, all documents and other material in Employee’s possession relating to any Confidential Information or other information of the Bank or Employer, or Confidential Information regarding third parties learned as an employee of the Bank or Employer.

 

(b)                                 Restrictive Covenants.  Ancillary to the consideration to be provided pursuant to this Agreement, including but not limited to the Bank’s and Employer’s agreement to provide Confidential Information to Employee and Employee’s agreement not to disclose Confidential Information, and in order to protect the Confidential Information, Employee agrees to the non-competition and non-solicitation provisions set forth in this Section 5.3(b)(1)-(2) (the “Restrictive Covenants”).  Employee agrees that, for the Restricted Period, as defined below, Employee will not, except as an employee of the Bank or Employer, in any capacity for Employee or others, directly or indirectly:

 

(1)                                 Non-Competition Obligations

 

(A)                               anywhere in the geographic area comprised of the Counties of: Collin, Dallas, Denton, Jack, Parker, Tarrant, Wise (collectively, the “Market Area”), (a) compete in, engage in, or contribute knowledge to, a business similar to or otherwise competitive with that of the Bank or Employer, or (b) compete in, engage in, or contribute knowledge to that type of business which the Bank or Employer (i) has plans to engage in, or (ii) has engaged in during the preceding twelve (12) month period if, in either the case of (i) or (ii), within the twenty-four (24) months before the termination of Employee’s employment from Employer, Employee had access to information regarding the proposed plans or the business in which the Bank or Employer engaged;

 

(B)                         take any action to invest in, own, manage, operate, control, participate in, be employed or engaged by or be connected in any manner with any partnership, corporation or other business or entity engaging in a business similar to or otherwise competitive with that of the Bank or Employer anywhere within the Market Area.  Notwithstanding the foregoing, the Employee is permitted hereunder to own,

 

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directly or indirectly, up to one percent (1%) of the issued and outstanding securities of any publicly traded financial institution conducting business in the Market Area;

 

(2)                                 Non-Solicitation Obligations

 

(A)                               call on, solicit, service, or attempt to do any of the foregoing with respect to, customers or prospective customers of the Bank or Employer if, within the twelve (12) months before the termination of Employee’s employment with the Bank or Employer, Employee had material contact with the customer or prospective customer, or had obtained material information about the customer or prospective customer; or

 

(B)                               hire, retain, call on, solicit for hire or induce to leave employment, any individual who is or was an employee of the Bank or the Employer on the date of, or within the three (3) month period before the date of, such hire, retention, solicitation or inducement, provided that such individual is an individual whom Employee had contact with, knowledge of, or association with in the course of Employee’s employment with the Bank or Employer, and Employee will not assist any other person or entity in such activities.

 

Notwithstanding anything else provided herein, if Employee is a licensed attorney, securities broker or real estate broker or agent, Employee shall not be prohibited from representing or serving as an agent for any insured depository institution or holding company thereof or other individual or entity in such capacity.

 

5.4  Restricted Period.  The non-competition obligations set forth in Section 5.3(b)(1) shall apply from the Effective Time through the end of the Term, regardless of whether Employee’s employment terminates prior to the end of the Term, and the non-solicitation obligations set forth in Section 5.3(b)(2) shall apply from the Effective Time through the later of (a) the end of the Term, regardless of whether Employee’s employment terminates prior to the end of the Term or (b) one (1) year following the date of Employee’s termination of employment with the Bank, Employer or their affiliated entities (any transfer of employment between the Bank, the Employer, and any affiliated entities does not constitute termination of employment) (the restricted time period in the case of non-competition or non-solicitation, as applicable, is the “Restricted Period”).  However, if the Merger Agreement is terminated for any reason before the Effective Time occurs, the Restrictive Covenants will not apply, all of the provisions of this Agreement will terminate, and there will be no liability of any kind under this Agreement.

 

5.5  Restrictive Covenants Reasonable.  The parties to this Agreement hereby agree that the Restrictive Covenants set forth in this Article V are ancillary to this Agreement, which is an otherwise enforceable agreement.  Employee agrees that his promises in this Article V are reasonable and reasonably necessary to protect the legitimate business interest of the Bank, the Employer, and their affiliated entities.

 

5.6  Consideration.

 

(a)                                 In consideration for the above obligations of the Employee, on the fifth (5th) business day after the Effective Time, Employer shall deliver to Employee a restricted stock award agreement issued pursuant to the Prosperity Bancshares, Inc. 2012 Stock Incentive

 

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Plan granting to Employee 3,000 shares of Bancshares restricted common stock (“Restricted Stock”). The forfeiture restrictions applicable to the Restricted Stock shall lapse on the third (3rd) anniversary of the grant date, provided that Employee is employed by Employer on such date.

 

(b)                                 The Bank promises and agrees that reasonably soon after the execution of this Agreement by Employee, it shall provide Employee with Confidential Information in an expanded nature than that already provided to Employee.

 

(c)                                  In addition, after the Effective Time, Employer agrees to provide Employee with access to Confidential Information relating to Employer’s business and to specialized training regarding Employer’s methodologies and business strategies, which will enable Employee to perform his job for Employer.  After the Effective Time, Employee also will have immediate access to, or knowledge of, new Confidential Information of third parties, such as actual and potential customers, suppliers, partners, joint venturers, investors, financing sources, etc. of Employer.

 

5.7  Enforcement and Legal Remedies.  The Bank, Employer and Employee acknowledge and agree that breach of any of the covenants made by Employee in this Agreement would cause irreparable injury to the Bank or Employer, which could not sufficiently be remedied by monetary damages; and, therefore, that the Bank or Employer shall be entitled to obtain such equitable relief as declaratory judgments; temporary, preliminary and permanent injunctions, without posting of any bond, and order of specific performance to enforce those covenants or to prohibit any act or omission that constitutes a breach thereof.

 

5.8  Tolling.  In the event that Employer shall file a lawsuit in any Court of competent jurisdiction alleging a breach of the Non-Competition Obligations by the Employee, then any time period set forth in this Agreement including the time periods set forth above, will be extended one month for each month the Employee was in breach of this Agreement, so that Employer is provided the benefit of the full Restricted Period.

 

ARTICLE VI

 

TERMINATION RIGHTS

 

6.1  Termination for Cause by the Employer.  The Employer may terminate this Agreement and Employee’s employment for Cause (as defined hereinafter), such termination to be effective immediately upon written notice to Employee.  Any termination of Employee’s employment under this Section 6.1 will not be in limitation of any other right or remedy which the Employer may have under this Agreement, at law, or in equity.  The term “Cause” means (a) Employee’s fraud, embezzlement, theft or misappropriation of funds or other property of the Employer or its affiliated entities, (b) self-dealing or gross negligence in the performance by Employee of his duties pursuant to this Agreement, (c) the repeated failure or refusal by Employee to perform his lawful duties to the Employer as provided herein, other than due to Disability, (d) the commission by Employee of any willful acts of bad faith or gross misconduct against the Employer or its affiliated entities, (e) the indictment of Employee for a felony or other criminal act involving dishonesty or other moral turpitude, whether or not relating to his

 

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employment with the Employer, (f) the material violation by Employee of a lawful, established policy or procedure of the Employer and (g) the Employee’s material breach of any provision of this Agreement; provided that with respect to clauses (c) and (f) and (g), Employer shall give Employee written notice of the breach or other failure on the part of Employee and the actions necessary to correct such breach, if applicable.  If Employee fails to cure the breach or failure within fifteen (15) days of receipt of such notice or if the breach or failure is incurable, Employer may proceed to terminate Employee’s employment for Cause without further notice.

 

6.2  Termination by Employer Upon Employee’s Disability.  The Employer may terminate this Agreement and Employee’s employment upon a determination of Disability (as defined below), such termination to be effective immediately upon written notice to Employee.  The term “Disability” means Employee’s inability to perform his usual services to the Employer because of mental or physical illness or injury for the consecutive days as defined in the Employer’s disability policy then in effect, which inability to perform will be determined by a physician reasonably selected by the Employer.

 

6.3  Termination Upon Employee’s Death.  In the event of Employee’s death, this Agreement and Employee’s employment under this Agreement shall immediately terminate.

 

6.4  Termination by Employer Other Than for Cause, Disability or Death.  Notwithstanding anything to the contrary contained in this Agreement, the Employer may terminate this Agreement and Employee’s employment under this Agreement for any or no reason during the Term (i.e., other than for Cause or Disability), such termination to be effective immediately upon the giving of written notice to Employee from the Employer.

 

6.5  Termination by Employee.  Employee shall have the right, at his election and for any reason prior to the expiration of the Term of this Agreement, to voluntarily terminate this Agreement and his employment with Employer upon thirty (30) days’ written notice.  Such notice requirement may be waived by Employer at its sole discretion.

 

6.6  Termination by Expiration.  This Agreement shall terminate upon the expiration of the Term.  Although the Agreement shall expire, Employee’s employment with Employer shall not automatically terminate upon expiration of the Term.

 

6.7  Certain Payments Following Termination of Employment.

 

(a)                                 If, during the Term of this Agreement, Employee’s employment with the Employer is terminated by the Employer for Cause or Disability, or if Employee voluntarily terminates employment with the Employer, Employee shall thereafter be entitled to receive from the Employer payment of any accrued but unpaid Base Salary, less applicable taxes, withholding, and deductions, through the date of employment termination and expense reimbursements through the date of such termination for which Employee is entitled to reimbursement in accordance with Section 4.1 (collectively, the “Accrued Benefits”), and Employee’s Restrictive Covenants set forth in Article V shall continue during the Restricted Period.  For the avoidance of doubt, the Accrued Benefits do not include the yet to be accrued Base Salary that Employee would have earned had his employment not terminated prior to the expiration of the Term.

 

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(b)                                 If, during the Term of this Agreement, Employee’s employment with the Employer is terminated during the Term by the Employer for any reason other than for Cause or Disability, Employee shall be entitled to receive from the Employer (1) the Accrued Benefits (payable within thirty (30) days after the date of termination), and (2) provided Employee has executed a release in a form reasonably acceptable to the Employer and such release has become effective prior to the sixtieth (60th) day following the date of termination, Employee shall be entitled to (A) a lump sum payment equal to payment of Base Salary for the remaining portion of the Term of this Agreement, less applicable statutory deductions, payable on the sixtieth (60th) day following the date of termination, and (B) the forfeiture restrictions applicable to the Restricted Stock set forth in Section 5.6 hereof shall lapse on a pro rata basis at a rate of 33% for each full year of employment completed during the Term.  Further, Employee’s obligations set forth in Article V shall continue during the Restricted Period.

 

(c)                                  If Employee’s employment with the Employer is terminated upon Employee’s death, Employee’s legal representatives shall thereafter be entitled to receive from the Employer payment of the Accrued Benefits within thirty (30) days after the date of death, and Employee’s Non-Competition Obligations set forth in Article V shall automatically cease.

 

(d)                                 If this Agreement terminates by expiration, as set forth in Section 6.6, Employee shall be entitled to receive the Accrued Benefits, and Employee’s Restrictive Covenants set forth in Article V shall continue during the Restricted Period.

 

6.8  Code Section 409A.

 

(a)                                 Notwithstanding any provision of this Agreement to the contrary, if at the time of Employee’s termination of employment with Employer, Employee is a “specified employee” as defined in Section 409A of the Code, then to the extent that any amount to which Employee is entitled in connection with the termination of his employment is subject to Section 409A of the Code, payments of such amounts to which Employee would otherwise be entitled during the six (6) month period following Employee’s termination of employment will be accumulated and paid in a lump sum on the first day of the seventh month after the date of Employee’s termination of employment.  The first sentence of this paragraph shall apply only to the extent required to avoid Employee’s incurrence of any additional tax or interest under Section 409A of the Code or any regulations or Treasury guidance promulgated thereunder.

 

(b)                                 Notwithstanding any provision of this Agreement to the contrary, to the extent that any payment under the terms of this Agreement would constitute an impermissible acceleration of payments under Section 409A of the Code or any regulations or Treasury guidance promulgated thereunder, such payments shall be made no earlier than at such times allowed under Section 409A of the Code.

 

(c)                                  If any provision of this Agreement (or of any award of compensation) would cause Employee to incur any additional tax or interest under Section 409A of the Code or any regulations or Treasury guidance promulgated thereunder, Employer may reform such provision; provided, that Employer shall (1) maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the provisions of Section 409A of the

 

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Code and (2) notify and consult with Employee regarding such amendments or modifications prior to the effective date of any such change.

 

6.9  Return of Property.  Upon Employee’s termination of employment for any reason, or at any time upon Employer’s request, Employee (or Employee’s executor or personal representative in the event of Employee’s death or Disability) shall immediately return to the Employer all property of the Employer, including, but not limited to, all keys, credit cards and all other property of the Employer in Employee’s possession.

 

6.10  Resignation of All Other Positions. Upon termination of the Employee’s employment for any reason, the Employee shall be deemed to have resigned from all positions that the Employee holds as an officer or member of the Board (or a committee thereof) of Employer, the Bank, or any of their affiliates.

 

6.11  Code Section 280G.  If any of the payments or benefits received or to be received by Employee (including, without limitation, any payment or benefits received in connection with a change in control or Employee’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement, or otherwise) (all such payments collectively referred to herein as the “280G Payments”) constitute “parachute payments” within the meaning of Section 280G of the Code and would, but for this Section 6.11, be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then such 280G Payments shall be reduced in a manner determined by the Employer that is consistent with the requirements of Section 409A until no amount payable to Employee will be subject to the Excise Tax.

 

ARTICLE VII

 

GENERAL PROVISIONS

 

7.1  Notices.  Any notices to be given hereunder by either party to the other may be effected either by personal delivery in writing or by mail, registered or certified, postage prepaid with return receipt requested.  Mailed notices shall be addressed to the parties at the addresses appearing in the introductory paragraph of the Agreement, but each party may change its address by written notice in accordance with this paragraph.  Notices delivered personally shall be deemed communicated as of actual receipt; mailed notices shall be deemed communicated as of three (3) days after mailing.

 

7.2  Entire Agreement.  This Agreement sets forth the entire agreement of the parties relating to the subject matter hereof, and, effective after the Effective Time, supersedes any other employment agreements or understandings, written or oral, between the Employer or its predecessors and the Employee, including, without limitation, the Prior Agreement.  The Employee has no oral representations, understandings or agreements with the Bank or Employer or any of their officers, directors or representatives covering the same subject matters as this Agreement.  The Agreement is the final, complete and exclusive statement and expression of the agreement between the Bank, Employer and the Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented by evidence of any prior or contemporaneous oral or written agreements.

 

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7.3  Governing Law.  All questions concerning the validity, operation and interpretation of this Agreement and the performance of the obligations imposed upon the parties hereunder shall be governed by the laws of the State of Texas.  Exclusive venue of any dispute relating to this Agreement shall be, and is convenient in, Harris County, Texas.  Employee agrees that he will not contest venue in Harris County, Texas or the application of Texas laws to any dispute relating to, connected with or arising under this Agreement.

 

7.4  Modification.  This Agreement shall not be amended, modified, or altered in any manner except in writing signed by both parties.

 

7.5  Failure to Enforce Not Waiver.  Any failure or delay on the part of the Bank, Employer or Employee to exercise any remedy or right under this Agreement shall not operate as a waiver.  The failure of either party to require performance of any of the terms, covenants or provisions of this Agreement by the other party shall not constitute a waiver of any of the rights under the Agreement.  No forbearance by either party to exercise any rights or privileges under this Agreement shall be construed as a waiver, but all rights and privileges shall continue in effect as if no forbearance had occurred.  No covenant or condition of this Agreement may be waived except by the written consent of the waiving party.  Any such written waiver of any term of this Agreement shall be effective only in the specific instance and for the specific purpose given.

 

7.6  Survival.  Notwithstanding anything in this Agreement to the contrary, upon the expiration or other termination of this Agreement following the Effective Time, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the mutual intention of the parties under this Agreement, including, without limitation, the provisions of Article V.

 

7.7  Partial Invalidity.  If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall remain in full force and effect, as if this Agreement has been executed without any such invalid provisions having been included.  Such invalid provision shall be reformed in a manner that is both (i) legal and enforceable, and (ii) most closely represents the parties’ original intent.

 

7.8  Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

 

7.9  Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the Bank, Employer and Employee, and their respective heirs, executors, administrators, successors and assigns, including, without limitation, any successor by merger, consolidation or stock purchase of the Bank, Employer and any entity or person that acquires all or substantially all of the assets of the Bank or Employer.

 

[Signature Page Immediately Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Employment Agreement to be duly executed as of the date first written above.

 

 

	
 
    	
PROSPERITY   BANK
    
	
 
    	
EMPLOYER
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   David Zalman
    
	
 
    	
Name:   
    	
David   Zalman
    
	
 
    	
Title:
    	
Senior Chairman and Chief   Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LEGACYTEXAS   BANK
    
	
 
    	
THE   BANK
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Kevin J. Hanigan
    
	
 
    	
Name:
    	
Kevin   J. Hanigan
    
	
 
    	
Title:
    	
President and CEO
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EMPLOYEE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Thomas S. Swiley
    
	
 
    	
Thomas   S. SwileyEX-10.1

 Exhibit 10.1 

CONFIDENTIAL SEPARATION AGREEMENT AND MUTUAL RELEASE 

THIS CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE (this “Agreement”) is entered into and made effective as of
June 14, 2019 (the “Effective Date”) by and between MICHAEL J. NANKO (the “Employee”) and AMERICAN ADDICTION CENTERS, INC. (the “Employer”). 

1.    Separation Date. The parties acknowledge that the Employee’s employment with the Employer terminated
June 14, 2019 (the “Separation Date”). 
 2.    Separation Amount. In exchange for the release of
claims and other covenants and promises by the Employee detailed in this Agreement, the Employer agrees (a) to pay a total of One Hundred Eighty-Five Thousand Eight Hundred Thirty Three Dollars and Twenty Eight Cents ($185,833.28), by paying
Employee at his current salary through the Separation Date, as contemplated in Section 3.a., with paychecks payable in accordance with the normal payroll schedule (the “Severance Payments”) and (b) to make a payment to the
Employee of one thousand fifty four dollars and thirty eight cents ($1,504.38) (the “Final Payment”), payable by October 15, 2019. The Employee acknowledges that the Employee would not be entitled to the Severance Payments and
Final Payment but for his execution of this Agreement. 
 3.    Acknowledgment of No Other Payments or Benefits. 

 

	 	a.	 As of the Effective Date, the Employee (a) has resigned all employment with the Company , the positions of
President and Chief Operating Officer of the Company, and all other executive, officer or other senior leadership positions with the Company and its subsidiaries and affiliates; (b) is no longer required to perform the duties of said positions
nor report to work at the Employers corporate office; and (c) may immediately seek other employment. 

  

	 	b.	 Except for payments referenced in Section 2 above and any vested benefits under the
Employer’s 401(k) savings plan, no other payments, bonuses or benefits will be made by the Employer to the Employee. The Employee acknowledges that the Employee has no entitlement to, or any right to make any claim for, any additional payments,
commissions, bonuses or benefits by the Employer of any kind whatsoever. The Employee’s eligibility for medical, dental and vision coverage as an active employee shall terminate on October 30, 2019. All other employee benefits offered by
the Employer shall terminate on the Separation Date. Continuation of health benefits coverage will then be at the Employee’s expense to the extent and period provided by law. 

4.    Non-Admission. The Employee understands and acknowledges that this Agreement
is in no way an admission of any legal liability or wrongdoing by the Employer for any acts or omissions with respect to the Employee, including without limitation, the Employee’s employment with, or separation of employment from the Employer,
with all such wrongdoing or liability being expressly denied. 

 5.    Mutual Release. The Employee, on the one hand, hereby releases the
Employer and the Employer, on the other hand, hereby releases the Employee, together in each case with all of such other party’s Employer’s parents, subsidiaries, affiliates and divisions, including all related companies, employee leasing
companies, and as to each, their respective successors and assigns, general and limited partners, directors, officers, representatives, attorneys, shareholders, agents, employees, and their respective heirs and personal representatives
(collectively, the “Releasees”), from any and all claims, causes of action, grievances, expenses, liabilities, costs (including attorneys’ fees), obligations whether known or unknown, that in anyway arise from, grow out of, or
are related to the Employee’s employment with the Employer, the Employee’s termination of employment with the Employer, or events that occurred before the date the Employee executes this Agreement (collectively, the “Released
Claims”). Each of the Employee and Employer represents and warrants that it has not sold, assigned or transferred any Released Claims. 

The Released Claims include, without limitation, any rights or claims in law or equity for breach of contract, wrongful termination or past
wages under applicable state law; claims relating to discrimination, harassment, retaliation, accommodation, or whistle blowing (for example, claims under the Age Discrimination in Employment Act (“ADEA”); claims
relating to benefits (for example, claims under the Employee Retirement Income Security Act of 1974); claims relating to employee leave (for example, claims under the Family and Medical Leave Act); claims relating to mandatory notifications (for
example, claims under the Worker Adjustment and Retraining Notification Act or the Fair Credit Reporting Act); claims relating to worker safety (for example, claims under the Occupational Health and Safety Act of 1970); or claims for personal
injury, defamation, mental anguish, injury to health and personal reputation; and any other related claim under federal, state or local law of any form against Releasees; provided, however, that this release does not extend to rights or claims the
release of which is expressly prohibited by law or that may arise after the Effective Date of this Agreement. The Employee understands that the categories and statutes listed above are for example only, and that the Employee is waiving all claims,
whether based on federal, state, or local law, common law or otherwise. 
 As part of this release, the Employee covenants and agrees not to
file, commence or initiate any suits, grievances, demands or causes of action against any Releasee based upon or relating to any Released Claim forever discharged pursuant to this Agreement. In accordance with 29 C.F.R. § 1625.23(b), this
covenant not to sue is not intended to preclude the Employee from bringing a lawsuit to challenge the validity of the release language contained in this Agreement. If the Employee breaches this covenant not to sue, the Employee hereby agrees to pay
all of the reasonable costs and attorneys’ fees actually incurred by the Releasees in defending against such claims, demands, or causes of action, together with such and further damages as may result, directly or indirectly, from that breach.
Moreover, the Employee agrees that the Employee will not persuade or instruct any person to file a suit, claim, or complaint with any state or federal court or administrative agency against the Releasees. The parties agree that this Agreement will
not prevent the Employee from filing a charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”), or its equivalent state or local agencies, or otherwise participating in an administrative investigation.
However, to the fullest extent permitted by law, the Employee agrees to relinquish and forgo all legal relief, equitable relief, statutory relief, reinstatement, back pay, front pay, and any other damages, benefits, remedies,

  
 2 

 
and relief to which the Employee may be entitled as a result of any claim, charge, or complaint against the Releasees and agrees to forgo and relinquish reinstatement, all back pay, front pay,
and other damages, benefits, remedies, and relief that the Employee could receive from claims, actions, or suits filed or charges instituted or pursued by any agency or commission based upon or arising out of the matters that are released and waived
by this Agreement. The Parties intend that this paragraph and the release of claims herein be construed as broadly as lawfully possible. 

6.    Acknowledgement Regarding Wages. The Employee acknowledges and agrees that with following the payment noted in
Section 1 hereof, the Employee: (a) has received all pay to which the Employee was entitled during the Employee’s employment with the Employer; (b) is not owed unpaid wages or unpaid overtime compensation by the Employer; and
(c) does not believe that the Employee’s rights under any state or federal wage and hour laws, including the federal Fair Labor Standards Act (“FLSA”), were violated by any Releasee during the Employee’s employment
with the Employer. 
 7.    Disclosure. The Employee acknowledges and warrants that the Employee is not aware of, or that
the Employee has fully disclosed to the Employer in writing, any matters for which the Employee was responsible or which came to the Employee’s attention as an employee of the Employer that might give rise to, evidence or support any claim of
illegal or improper conduct, regulatory violation, unlawful discrimination, retaliation or other cause of action against the Employer. 

8.    Compliance with Older Worker Benefit Protection Act.  

(a)    Consideration Period. The Employee acknowledges and understands that the Employee has a period of up
to forty-five (45) days from receipt of this Agreement to consider its terms, although the Employee need not take that long, and that the Employee hereby waives any and all additional rights to any further review period. If the Employee has not
executed this Agreement and returned it to the Employer within forty-five (45) days, this Agreement will be cancelled and will have no effect. 

(b)    Revocation Period. The Employee acknowledges and understands that, for a period of seven
(7) days following the Employee’s signing of this Agreement, the Employee may revoke the Employee’s acceptance of this Agreement by delivering a written revocation to Tim Stein, who is the Vice President, Human Capital, for the
Employer, via email at tstein@ContactAAC.com. If the Employee timely revokes this Agreement, all of its provisions will be null and void. This Agreement will not be effective or enforceable and no Separation Amount will be provided to the
Employee until the expiration of the seven (7) day period for revocation has expired. 
 (c)    Knowing and
Voluntary Execution. The Employee acknowledges that the Employee is hereby advised and encouraged to consult with an attorney of the Employee’s choice before signing this Agreement; that the Employee has carefully read and fully
understands the terms and conditions of this Agreement in their entirety and is fully satisfied with its terms, including without limitation, the consideration paid to the Employee by Employer; that the Employee has had an adequate opportunity to
consider the Agreement; that the Employee knowingly and voluntarily assents to all the terms and conditions contained in this 

  
 3 

 
Agreement without any duress, coercion or undue influence by the Employer, its representatives, or any other person; that the Employee has no pending claim, complaint, grievance with any federal
or state agency or any court seeking money damages or relief against Releasees; that the Employee is not waiving rights or claims that may arise after the date this Agreement is executed; and that the Employee is not suffering from any disability or
condition that would render the Employee unable to enter into this Agreement. 
 (d)    Confidentiality of
Agreement. The Employee will keep the terms of this Agreement confidential and will not disclose its terms to anyone other than the following: (i) the Employee’s spouse; (ii) the Employee’s attorney; or (iii) the
Employee’s professional tax adviser or tax preparer for the limited purpose of preparing or obtaining advice regarding such tax return or returns as may be necessary; provided that in each case all such persons agree to this obligation of
confidentiality. If the Employee does not comply with the provisions of this Section 9, the Employee will be liable to the Employer for any damages incurred as a result of such noncompliance. The Employee also acknowledges
that equitable relief, including, without limitation, specific performance by injunction, would be an appropriate remedy for the breach of this Section 9. The Company acknowledges that this
Section 9 will no longer apply upon the Company’s public filing of this Agreement with the United States Securities & Exchange Commission, or otherwise upon the Company’s making public this Agreement
pursuant to applicable law or regulation. 
 9.    Return of Property; Confidential Information. The Employee represents
that the Employee has not retained, but rather has returned to the Employer, all property and business records of Releasees in any form and all copies of such records. To the extent such information was in electronic form, the Employee represents
that the Employee has irretrievably deleted it to the best of the Employee’s ability and will take no steps to retrieve it. The Employee also acknowledges that, in the Employee’s position with the Employer, the Employee had access to the
Employer’s confidential information, including, without limitation, confidential client and treatment information, confidential financial records; financial and other plans; marketing methods and systems; advertising strategies and methods;
strategic plans; databases; payroll information; information regarding suppliers; reports prepared by consultants; training materials; management and administrative systems; and other business information (collectively and separately,
“Confidential Information”). The Employee agrees not to use or disclose such Confidential Information to any third parties for so long as it remains confidential to the public. If the Employee does not comply with the provisions of
this Section 10, the Employee will be liable to the Employer for any damages incurred as a result of such noncompliance. The Employee also acknowledges that equitable relief, including, without limitation, specific
performance by injunction, would be an appropriate remedy for the breach of this Section 10. 
 10.    Non-Solicitation of Employer’s Employees and Contractor Relationships. In further consideration for the payment of the Severance Payments, the Employee agrees not to, for a period of one (1) year
following the Employee’s termination of employment, directly or indirectly, on the Employee’s behalf or on behalf of or in conjunction with any person or legal entity, recruit, solicit, or induce, or attempt to recruit, solicit, or induce,
any employee or independent contractor of the Employer to terminate their employment or independent contractor relationship with the Employer. 

  
 4 

 11.    Cooperation. The Employee agrees that it is an essential term of
this Agreement that the Employee cooperate with the Employer and its counsel at all times in any internal or external claims, charges, audits, investigations, and/or lawsuits involving the Employer of which the Employee may have knowledge or in
which the Employee may be a witness. Such cooperation includes meeting with the Employer representatives and counsel to disclose such facts as the Employee may know; preparing with the Employer’s counsel for any deposition, trial, hearing, or
other proceeding; attending any deposition, trial, hearing or other proceeding to provide truthful testimony; and providing other assistance to the Employer and its counsel in the defense or prosecution of litigation as may, in the judgment of the
Employer’s counsel, be necessary. The Employer shall take reasonable measures to minimize inconvenience to Employee in complying with this provision, including minimizing interference with his employment, ability to earn a living, or receipt of
necessary medical care. The Employer agrees to reimburse the Employee, whether he is under subpoena or not, for reasonable and necessary out-of-pocket expenses and
reasonable, permanently lost wages by the Employee in the course of complying with this obligation, in each case that are pre-authorized by the Employer. Nothing in this Section 12
should be construed in any way as prohibiting or discouraging the Employee from testifying truthfully under oath as part of, or in connection with, any such proceeding. 

12.    Indemnification.    To the full extent permitted by law, Employer shall defend, indemnify and
hold harmless Employee for any and all claims, lawsuits, judgments, expenses, and /or other losses that have arisen or subsequently arise due to his employment with Employer, whether now known or unknown. Said indemnification shall include costs
associated with defending any dispute or litigation, including reasonable attorneys’ fees and expenses. Any counsel retained to defend Employee shall be selected by mutual agreement. The rights and obligations contained in this section shall
apply regardless of whether Employee’s liability is found in his individual capacity or as an officer of Employer. To the extend that Employer has procured insurance coverage for this indemnification obligation of Employee and procurement of
tail insurance coverage is necessary to extend coverage of Employee beyond his employment, Employer shall procure and pay for such insurance coverage. 

13.    Mutual Non-Disparagement. To the extent permitted by law, the Employee, on
the one hand, and the Employer on the other, affirms and agrees that he or she will not, at any time after the date hereof, make any remarks or comments, orally or in writing, to anyone, via media or otherwise, which remarks or comments reasonably
could be construed to be derogatory or disparaging to the other party or any of its Releasees, or to any of the other party’s current or former directors, officers, employees, products or services, or which comments reasonably could be
anticipated to be damaging or injurious to the reputation or goodwill of same. The term “media” includes, without limitation, radio, television, film, internet, and social media such as Twitter and Facebook. This
Section 14 does not in any way interfere with any Party’s right and responsibility to give truthful testimony under oath. The Employee and the Employer each acknowledge that neither this provision nor any other portion
of this Agreement is intended to prohibit such party from making a truthful and accurate report to any governmental agency with oversight authority over the applicable Releasees. 

14.    No Precedent. The terms of this Agreement will not establish any precedent, nor will this Agreement be used as a
basis to seek or justify similar terms in any subsequent situation involving persons other than the Employee. This Agreement may not be offered, used or admitted into evidence in any proceeding or litigation, whether civil, criminal, arbitral or
otherwise for such purpose. 

  
 5 

 15.    Attorneys’ Fees.    If either party
breaches any provision or obligation of this Agreement and the other party must assert a legal claim in court or arbitration to enforce its rights, the prevailing party shall be entitled to recover from the
non-prevailing party reimbursement of all costs incurred, including reasonable attorneys’ fees and expenses. 

16.    Entire Agreement. This Agreement constitutes the entire understanding of the parties, supersedes all prior oral or
written agreements on the subject matter of this Agreement and cannot be modified except by a writing signed by both parties. 

17.    Choice of Law. This Agreement will be governed and construed under the laws of the State of Tennessee without regard
to the conflict of laws principles of that state. 
 18.    Arbitration. Should any dispute arise regarding the
interpretation or enforcement of this Agreement, the parties agree to waive their rights to seek redress in a court of law and shall submit and adjudicate the matter exclusively through binding arbitration. The rules of the American Arbitration
Association shall apply. The appropriate state or federal court in Williamson County, Tennessee shall enforce the decision of the arbitrator. 

19.    Binding Effect. This Agreement inures to the benefit of, and is binding upon, the parties and their respective
successors and assigns. 
 20.    Captions. The captions to the various sections of this Agreement are for convenience
only and are not part of this Agreement. 
 21.    Severability. If any provisions of this Agreement are determined to be
invalid or unenforceable for any reason, such determination will not affect the validity of the remainder of this Agreement, including any other provision of this Agreement. If a court finds that any provision of this Agreement is invalid or
unenforceable, but that modification of such provision will make it valid or enforceable, then such provision will be deemed to be so modified. 

22.    Waiver. The waiver by either party of a breach by the other party of any provision of this Agreement will not operate
or be construed as a waiver of any subsequent breach by the party. 

  
 6 

 23.    Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which together will constitute the same agreement. 
 IN WITNESS
WHEREOF, the parties hereto have executed this agreement as of the Effective Date. 
  

			
	EMPLOYEE:

 
			
	
	 /s/
Michael J. Nanko                                    
June 20, 2019

	Michael J. Nanko                                
                Date

 
			
	
	EMPLOYER:

 
			
	
	AMERICAN ADDICTION CENTERS, INC.

 
			
		
	By:	 	 /s/ Timothy K. Stein

	Name:	 	Timothy K. Stein
	Title:	 	Vice President, Human Capital
	Date:	 	June 20, 2019

  
 7

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