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Exhibit 10.5    
    

[BELLE
PLAINE FINANCIAL LETTERHEAD] 

May 19,
1999 

Tom
Nichols

Chairman of the Board

State National Bancshares, Inc.

1617 Broadway

Lubbock, TX 79401 

Dear
Tom: 

        This
letter will confirm that State National Bancshares, Inc., ("State National") has engaged Belle Plaine Financial LLC ("Belle Plaine") as the exclusive financial advisor to
State National and any entities it may form, acquire or invest in (collectively, the "Company") in connection with the Company's efforts to (a) acquire or invest in other financial
institutions, excepting therefrom the opening or purchase of individual bank branches in the ordinary course of business; (b) effect a sale of the Company or a material amount of its assets; or
(c) pursue a financing or recapitalization transaction (collectively, the "Transaction"). 

	1.
	In
connection with a proposed Transaction, at the request of the Company, Belle Plaine will provide such services as the Company shall reasonably request including:
(i) assisting the Company in the structuring of the financial aspects of a Transaction; (ii) identifying alternative potential parties and contacting such parties as the Company may
designate; (iii) assist the Company in negotiating the terms of a Transaction with such parties; (iv) assisting the Company in communicating the strategic implications of the Transaction
to the investment community; and (v) advising the Company in connection with its efforts to raise any additional capital that may be required to facilitate the Transaction.

	2.
	In
connection with a proposed Transaction, you will furnish Belle Plaine with such material regarding the business and financial condition of the Company as we reasonably request, all
of which will be accurate and complete in all material respects at the time furnished. The Company will also use its best efforts to assure that its personnel, consultants, experts, attorneys and
accountants are made available to Belle Plaine upon Belle Plaine's reasonable request in connection with services provided or to be provided by Belle Plaine. During the term of this agreement, the
Company shall promptly notify Belle Plaine of (i) and material changes in the business or financial condition of the Company from the information provided to Belle Plaine, and (ii) any
material events or developments relating to the financial condition or business operations or prospects of the Company and promptly make available for Belle Plaine's review copies of all filings made
by the Company with any regulatory agency and copies of all press releases issued by the Company. We are relying, without independent verification, on the accuracy and completeness of all information
furnished to us by the Company or any other party or potential party to any Transaction. Belle Plaine agrees that all requests for information from the Company will be directed only to the President
or Chairman of the Board of the Company or such other persons as the President and Chairman shall specifically designate and that it will not treat information obtained from any other person or source
as having been provided by the Company. In addition, Belle Plaine agrees to keep any such non-public information confidential so long as it remains non-public, unless
disclosure is required by law or requested by any governmental or regulatory agency or body, and Belle Plaine will not make any use thereof, except in connection with our services hereunder for the
Company. Any advice rendered by Belle Plaine pursuant to this letter shall not be disclosed in any manner without Belle Plaine's prior written approval and will be treated by the Company and Belle
Plaine as confidential, unless disclosure is required by law. 

 
	3.
	In
consideration of the services to be provided hereunder, the Company agrees to pay to Belle Plaine the following cash fees:

	(A)
	$9,000
upon the signing of this letter agreement and $9,000 at the beginning of each fiscal quarter beginning April 1st 1999.

	(B)
	In
the event that a sale of the Company is completed, an amount equal to one and one half percent (1.5%) of the Transaction Value (as defined below) for the Transaction, net the cost
of a "fairness opinion" if such opinion is deemed necessary,

	(C)
	In
the event that an acquisition of or investment in another financial institution is completed by the Company, an amount based upon the following schedule will be owed to Belle
Plaine upon the consummation of the acquisition based upon the Transaction Value for the Transaction, net the cost of a "fairness opinion" if such opinion is deemed necessary: 

	 
	 	 
	 	 
	 	Deal Value
	 	 
	 	Fees
	 	 

	 
	 	 
	 	 
	 	($ in millions)
 
	 	 
	 	 
	 	 

	 	 	(1)	 	If	 	$0 < $20	 	then	 	1.0%	 	 
	

 	
 	

(2)	
 	

If	
 	

$20 >	
 	

then	
 	

$200,000, plus 0.75% of amount

in excess of $20 million.	
 	

 

	(D)
	In
the event of a financing or recapitalization, the fees will be determined in accordance with paragraph 8 below.

	(E)
	Fees
payable pursuant to paragraphs 3 (B), (C) and (D) shall be paid upon and only upon the closing of the Transaction. 

        For
purposes of this agreement, "Transaction Value" means the sum of (i) with respect to each class of capital stock of the Company in the event of a sale of the Company or of the
financial institution which is acquired by the Company or in which the Company invests, the product of (a) the highest consideration paid or payable for a share of such class of capital stock
determined as described in the following paragraph and (b) the sum of (1) the total number of shares of such class of capital stock of the Company or such financial institution plus
(2) the number of shares of such class issuable upon exercise of options, warrants or other rights, or conversion or exchange of securities to the extent that such options are then exercisable;
(ii) the aggregate liquidation value of any preferred stock or other preferential interests redeemed or remaining outstanding; (iii) the fair market value of any assets of any of the
shareholders of the Company or such financial institution that are purchased; and (iv) the consideration paid or payable for the assets of the Company or the assets of another financial
institution, as the case may be. 

        The
determination of the "consideration paid or payable for a share of such class of capital stock" in connection with the Transaction shall include cash, securities (valued in
accordance with the following paragraph), or other assets or consideration paid or payable by the purchaser or any of its affiliates, as the case may be, determined without regard to any allocations
between the Company or its affiliates in the event of a sale of the Company or between the financial institution or its affiliates in the event such financial institution is acquired by the Company or
the Company invests in such financial institution, including but not limited to (i) assets (net of debt or payables) of the Company or such financial institution retained by the Company or such
financial institution or their respective stockholders and affiliates, as the case may be, (ii) any deferred installments of the purchase price, (iii) any portion of the purchase price
held in escrow subsequent to closing which is payable pursuant to the terms of the escrow arrangement, irrespective of whether such amounts are in fact paid, (iv) any extraordinary compensation
paid directly or indirectly by the purchaser to principals, management or employees of the Company or affiliates of the Company in connection with or in anticipation of the Transaction or by the
Company to principals, management or employees of a financial institution 

2

 

acquired
by the Company or in which the Company invests, including but not limited to cash payments, stock or option grants, consulting arrangements and non-competition arrangements,
(v) any payments to the Company or the financial institution and their respective affiliates for non-competition agreements, (vi) any payments pursuant to
earn-outs, royalties or other similar arrangements, (vii) any payments payable after closing upon the occurrence of certain contingencies or conditions or the satisfaction of
certain earnings, sales levels or other performance objectives which are agreed to on or before the closing, irrespective of whether such amounts are in fact paid, (vii) the amount of any
extraordinary dividends or other extraordinary payments or distributions to stockholders of the Company or the financial institution in connection with or in anticipation of the Transaction, and
(iv) consideration paid by the purchaser or its affiliates as a deposit, reimbursement of expenses, liquidated damages, walk-away fee or other arrangement. 

        In
the event that all or any portion of the Transaction Value for a Transaction is paid in stock or other securities, deferred installments or other non-cash consideration,
the amount of the fee payable with respect to such items shall be determined on the basis of the fair market cash equivalent value of such non-cash consideration as of the day preceding
the closing date of the
Transaction as reasonably determined by Belle Plaine and the Company, provided that the value of securities (received as consideration) which have an existing public trading market shall be determined
by the average closing sale (trade) price for such securities during the five trading days immediately preceding the closing date. 

        Any
portion of the fee which is payable with respect to any earn-out, royalty or similar arrangement where the amount payable is not a certain amount, shall be calculated and
paid at the closing based upon the estimated net present value thereof as reasonably determined by Belle Plaine and the Company. 

        If
a Transaction takes the form of a purchase of assets and an assumption of liabilities, then the "Transaction Value" of the Company or the financial institution shall be deemed to
include the amount of cash, securities, or other consideration paid to the Company or the financial institution and their respective shareholders, and affiliates, as the case may be, in respect of the
assets, plus the aggregate face amount of all liabilities, including accounts payable, accruals, and income taxes payable of the Company, or the financial institution, assumed by the purchaser and its
affiliates or the Company, as the case may be. 

        If
a Transaction involves the acquisition of less than all of the Company's outstanding equity securities, then the fee payable pursuant to Section 3(B) shall nonetheless be
calculated as though all such equity securities had been so acquired by the purchaser. 

	4.
	Regardless
of whether a Transaction is completed, the Company will reimburse Belle Plaine, upon its demand, for all reasonable out-of-pocket expenses (including
travel expenses and fees and disbursements of counsel retained by Belle Plaine in connection with this engagement). In addition to professional fees, our billing statements include reimbursable
expenses normally incurred in the conduct of the work. The reimbursable expenses will include a flat ten percent of Belle Plaine's monthly costs for data services, telephone, fax, postage and general
office expenses which will be categorized on our statement as indirect expenses, but excluding any allocation for employee costs or debt service costs.

	5.
	The
Company agrees to indemnify and hold Belle Plaine harmless in accordance with the terms and conditions of Appendix A attached hereto and made a part hereof as though fully
set forth in this agreement. No termination or modification hereof, or completion of Belle Plaine's engagement hereunder, shall limit or affect such indemnification.

	6.
	Belle
Plaine's services hereunder may be terminated by the Company or Belle Plaine at any time upon 30 days written notice, provided that Belle Plaine shall be entitled to any
fees payable 

3

 

pursuant
to Section 3 and Section 8 hereof in the event that the Company completes a Transaction (i) on which Belle Plaine provided advice or participated in discussions with any
of the investors in such Transaction or (ii) with any of the parties as to which Belle Plaine advised the Company or with whom the Company engaged in discussions regarding a possible
Transaction prior to the termination of this letter agreement, providing that such Transaction is completed within two years following the termination of this letter agreement. In addition, Belle
Plaine shall remain entitled to the reimbursement of fees and expenses under the terms and conditions described in Section 4 hereof, to the extent the same have been incurred on or prior to the
date of such termination and to the quarterly retainer fee under Section 3(A) to the extent payable prior to the termination date. Furthermore, the provisions of this Section 6, and
Sections 2, 5 (including Appendix A), 8, 10, 13, 14, and 15 shall survive any termination of this agreement. 

	7.
	In
order to coordinate our efforts with respect to any Transaction, during the period of our engagement hereunder neither the Company nor any representative thereof (other than Belle
Plaine) will initiate discussions regarding a Transaction except through Belle Plaine, unless the Company reasonable believes that the involvement of Belle Plaine is premature. If the Company or its
management receives an inquiry regarding a Transaction, they will promptly advise Belle Plaine of such inquiry in order that we can evaluate such prospective party and its interest and assist the
Company in any resulting negotiations.

	8.
	It
is understood and agreed that if the Company decides to pursue a financing or recapitalization Transaction for which Belle Plaine is to provide any of the financial advisory
services described above in Section 1 hereof, the Company and Belle Plaine shall negotiate in good faith acceptable compensation for Belle Plaine in consideration of such services, which
compensation will take into account, among other things, the results obtained and the custom and practice among investment bankers acting in similar situations. The compensation owed to Belle Plaine
in accordance with the fee structure agreed upon by the Company and Belle Plaine in respect of a financing or recapitalization Transaction shall be paid to Belle Plaine in cash upon the consummation
of any such Transaction.

	9.
	Except
as expressly provided herein, no fee paid or payable to Belle Plaine or any of its affiliates shall be used as an offset or credit against any other fee paid or payable to Belle
Plaine or any of its affiliates.

	10.
	This
agreement, including the indemnity in Appendix A, embodies the sole terms of the agreement between the Company and Belle Plaine with respect to the subject matter hereof
and supersedes all previous agreements, whether oral or written, between the Company and Belle Plaine with respect to the subject matter hereof. This letter agreement shall be governed by and
construed in accordance with the laws of the State of California without regard to principles of conflict of laws. Any right to trial by jury with respect to any claim or proceeding related to or
arising out of this engagement or any transaction or conduct in connection herewith, is waived. Any claim or dispute arising out of this agreement or the alleged breach thereof shall be submitted by
the parties to binding and nonappealable arbitration by the American Arbitration Association ("AAA") in San Diego, California, under the commercial rules then in effect for the AAA, except as provided
herein. The AAA shall recommend three arbitrators who are knowledgeable in the field of investment banking. The parties shall agree upon one of the three arbitrators or, if no arbitrator is mutually
agreed upon, the AAA shall appoint one of the three arbitrators within 30 days of such failure. The award rendered by the arbitrator shall include costs of arbitration, reasonable attorneys'
fees and fees of experts and other witnesses, but shall not include punitive damages against either party. Each party shall have the right to request the arbitrator to order reasonable and limited
discovery. Notwithstanding this provision, appropriate injunctive relief may be sought by either party. 

4

 
	11.
	This
agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall continue one and the same instrument.

	12.
	The
obligations of me Company hereunder shall be the joint and several obligations of the entities comprising the term Company.

	13.
	The
Company expressly acknowledges that Belle Plaine has been retained solely as an advisor to the Company, and not as an advisor to or agent of any other person, and that the
Company's engagement of Belle Plaine is not intended to confer rights upon any persons not a party hereto (including shareholders, employees or creditors of the Company) as against Belle Plaine, Belle
Plaine's affiliates or their respective directors, officers, agents and employees. Any advice provided to the Company by Belle Plaine pursuant to this agreement is solely for the information and
assistance of the Board of Directors of the Company. Such advice shall be treated as confidential information, shall not be disclosed publicly in any manner without Belle Plaine's prior written
approval unless required by law and shall not be relied upon by the Company's shareholders or any third party. Any reference to Belle Plaine or to any affiliate of Belle Plaine in any release or
communication to any party outside the Company is subject to Belle Plaine's prior written approval, which approval shall not be unreasonably withheld or delayed. If this agreement is terminated prior
to any release or communication, no reference shall be made to Belle Plaine without Belle Plaine's prior written approval.

	14.
	Belle
Plaine represents that it has the necessary expertise to provide the services contemplated by this agreement and that the compensation provided for herein is fair and reasonable
and comparable to the compensation which would be charged by an independent provider of such services with the same type, level and quality of expertise. The Company acknowledges that the services
contemplated herein will meet legitimate needs of the Company and that it is in the best interests of the Company to obtain such services.

	15.
	After
closing of a Transaction, Belle Plaine shall have the right to place advertisements in financial and other newspapers and other newspapers and journals at its own expense
describing its services to the Company under this agreement, provided that Belle Plaine shall have submitted a copy of any such proposed advertisements to the Company for its prior approval, which
approval shall not be unreasonably withheld or delayed. 

5

 

        Please
confirm that the foregoing is in accordance with your understanding by signing and returning to us the duplicates of this agreement and the related indemnification agreement which
shall thereupon constitute binding agreements. 

	 	 	 	 	Very truly yours,
	

 	
 	

 	
 	

Belle Plaine Financial LLC
	

 	
 	

 	
 	

/s/  JOHN M. EGGEMEYER      
 John M. Eggemeyer
 President
	

Accepted and agreed:	
 	

 
	

 
 on its behalf and on behalf of the Company, as defined above.	
 	

 
	

By:	
 	

/s/  TOM C. NICHOLS      
	
 	

 
	

Name:	
 	

TOM C. NICHOLS
	
 	

 
	

Title:	
 	
Chairman, President & CEO
	
 	

 
	

Date:	
 	

May 19, 1999
	
 	

 

6

[BELLE
PLAINE FINANCIAL LETTERHEAD] 

APPENDIX A  

        This Appendix A is a part of and is incorporated into that certain letter agreement dated May 19, 1999, between State National
Bancshares, Inc., (the "Company") and Belle Plaine Financial LLC. ("Belle Plaine") (the letter agreement and this Appendix A are referred to herein as the "Agreement"). Capitalized terms
used herein without definition shall have the meanings ascribed to them in such letter agreement. 

        The
Company agrees to indemnify and hold harmless Belle Plaine, any affiliates and the respective officers, directors, partners, representatives and agents and any other persons
controlling Belle Plaine or any of its affiliates (Belle Plaine and each such other person or entity each being referred to as an "Indemnified Person"), to the fullest extent lawful, from and against
all claims, liabilities, losses, damages, and expenses, (including without limitation and as incurred, reimbursement of all costs of investigating, preparing, pursuing, or defending any such claim or
action, including fees and expenses of counsel to, and the per diem costs and expenses of personnel of, the Indemnified Person, whether or not arising out of pending litigation, governmental
investigation, arbitration or other alternative dispute resolution, or other action or proceeding or threatened litigation, governmental investigation, arbitration or other alternative dispute
resolution, or other action or proceeding) directly or indirectly related to or arising out of, or in connection with (i) actions taken or omitted to be taken by the Company, its affiliates,
employees, directors, partners, representatives or agents in connection with any Transaction or activities contemplated by this Agreement; (ii) actions taken or omitted to be taken by any
Indemnified Person pursuant to the terms of, or in connection with services rendered pursuant to, this Agreement, provided that in the case of this subsection (ii), the Company shall not be
responsible for any claim, liability, loss, damage or expense arising primarily out of or based primarily upon the willful misconduct or gross negligence (as determined by the judgment of a court of
competent jurisdiction, no longer subject to appeal or further review) of or by such Indemnified Person; and (iii) any untrue statement or alleged untrue statement of a material fact contained
in any information provided to Belle Plaine by the Company under the Agreement or any omission or alleged omission to
state a material fact necessary to make the statements therein not misleading (other than untrue statements or alleged untrue statements in, or omissions or alleged omissions from, information
relating to an Indemnified Person furnished in writing by or on behalf of such Indemnified Person expressly for use by the Company). If multiple claims are brought against an Indemnified Person in an
arbitration with respect to at least one of which indemnification is permitted under applicable law and provided for under this Agreement, the Company agrees that any arbitration award shall be
conclusively deemed to be based on claims as to which indemnification is permitted and provided for, except to the extent that the arbitration award expressly states that the award, or any portion
thereof, is based solely on a claim as to which indemnification is not available. 

        If
the indemnification provided for herein is unavailable to an Indemnified Person in respect of any claims, liabilities, losses, damages or expenses, then the Company, in lieu of
indemnifying such Indemnified Person, shall contribute to the amount paid or payable by such Indemnified Person as a result of such claims, liabilities, losses, damages or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Indemnified Person on the other, as well as any other relevant equitable considerations.
It is further agreed that the relative benefits to the Company on the one hand and Belle Plaine on the other hand with respect to the services rendered under this Agreement shall be deemed to be in
the same proportion as (i) the aggregate Transaction Value bears to (ii) the fees actually paid to Belle Plaine with respect to the services provided pursuant to this Agreement in
connection with the Transaction. The Company also agrees that no Indemnified Person shall have any liability to the Company for or in connection with this Agreement and the engagement of Belle Plaine
hereunder, except for such claims, liabilities, losses, damages, or expenses incurred by the Company to the extent they are appropriately judicially determined (without possibility of appeal or
review) to have resulted primarily from such Indemnified Person's willful misconduct or gross negligence, and the Company agrees that in no event shall the 

Indemnified
Persons be required to contribute an amount in the aggregate greater than the fees actually received by Belle Plaine for its services performed under this Agreement. 

        If
any action or other proceeding or investigation is commenced as to which an Indemnified Person demands indemnification, the Indemnified Person shall have the right to retain counsel
of its own choice to represent it, the Company shall pay the reasonable fees and expenses of such counsel, and such counsel shall to the extent consistent with its professional responsibilities
cooperate with the Company and any counsel designated by the Company, provided, that in no event shall the Company be required to pay fees and expenses under this indemnity for more than one firm of
attorneys for the Indemnified Person in any jurisdiction in any one legal action or group or related legal actions. The Company shall be liable as provided herein for any settlement of any claim
against Belle Plaine or any Indemnified Person made with the Company's written consent, which consent shall not be unreasonably withheld. The Company agrees that it will not, without the prior written
consent of Belle Plaine, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by Belle Plaine's
engagement (whether or not any Indemnified Person is a party thereto) unless such settlement, compromise or consent includes an unconditional release of Belle Plaine and each other Indemnified Person
from all liability arising or that may arise out of such claim, action, or proceeding. 

        The
indemnity and contribution obligations of the Company set forth herein shall be in addition to any liability or obligation the Company may otherwise have to any Indemnified Person.
The Company hereby consents to personal jurisdiction, service and venue in any court in which any claim which is subject to this Agreement is brought against Belle Plaine or any other Indemnified
Person. 

        It
is understood that, in addition to Belle Plaine's engagement pursuant to this Agreement, Belle Plaine may also be engaged to act for the Company in one or more additional capacities,
and that the terms of such additional engagements may be embodied in one or more separate written agreements. The provisions of this Appendix A shall apply to any such separate agreements, any
modification so this Agreement, and any modifications of such separate agreements, and the provisions of this Appendix A shall remain in full force and effect following the completion,
expiration or termination of this Agreement or such additional agreements or modifications of any of the foregoing. 

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Exhibit 10.5QuickLinks
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Exhibit 10.6    
    

 
 

EMPLOYMENT AGREEMENT    
    

        This employment agreement ("Agreement") is dated as of June 30, 1999, and is entered into by and between TOM C NICHOLS ("Employee") and STATE NATIONAL
BANCSHARES, INC., a Texas corporation ("Employer"). As an inducement to render services and superior performance to Employer, Employee and Employer agree as follows: 

        1.    Employment.    Upon the terms and subject to the conditions contained in this Agreement, Employee agrees to
provide full-time services for Employer during the term of this Agreement. Employee agrees to devote his best efforts to the business of Employer, and shall perform his duties in a
diligent, trustworthy, and business-like manner, all for the purpose of advancing the business of Employer. 

        2.    Duties.    The duties of Employee shall be those duties which can reasonably be expected to be and have been
performed by a person with the title of Chairman and Chief Executive Officer of a major financial organization, and to which Employer and Employee may hereafter mutually agree in writing. Employee's
duties may, from time to time, be changed or modified at the discretion of the Board, subject to the terms of this Agreement. 

        3.    Salary and Benefits.    

        (a)    Base Salary.    Employer shall, during the term of this Agreement, pay Employee an annual base salary of
$250,000.00 beginning July 1, 1999. Such salary shall be paid in semi-monthly installments less applicable withholding and salary deductions. Base salary shall be reviewed and
adjusted at least annually. 

        (b)    Bonus.    Employee shall be eligible to receive an annual bonus for each year during the term of this Agreement
as shall be determined by the Board. 

        (c)    Reimbursement of Expenses.    Employer shall reimburse Employee for all out-of-pocket
expenses incurred by Employee in the course of his duties, in accordance with normal policies. Employee shall be required to submit to Employer appropriate documentation supporting such
out-of-pocket expenses as a prerequisite to reimbursement in accordance with normal policies. 

        (d)    Employee Benefits.    Employee shall be entitled to participate in the employee benefit programs generally
available to employees of Employer, and to all normal perquisites provided to senior executive officers of Employer and all such benefits and perquisites shall be consistent with those customarily
received. 

        (e)    Automobile Allowance.    During the term of this Agreement, Employer shall provide to Employee an automobile or
pay the Employee an automobile allowance of at least $600.00 per month. Except for this automobile allowance, the Employer shall not be obligated to pay any other expenditure with respect to the
ownership, operations, insurance or maintenance of the Employee's automobile. The Employee shall procure and maintain in force automobile liability insurance on such automobile with comprehensive
coverage with extended coverage, collision coverage for the actual cash value of the vehicle with no more than a Five Hundred and No/100 Dollar ($500) deductible and for bodily injury, death, or
property damage in limits no less than Three Hundred Thousand and No/100 Dollars ($300,000) for property damage and Three Hundred Thousand and No/100 Dollars ($300,000) for  public liability. 

        (f)    Benefits Not in Lieu of Compensation.    No benefit or perquisite provided to Employee shall be deemed to be in
lieu of base salary or other compensation. 

1

 

        4.    Term of Agreement.    This Agreement shall become effective and binding immediately upon its execution, and
shall remain in effect until July 1, 2002, or until later termination if this Agreement is renewed under this Section 4. After July 1, 2002, this Agreement shall be automatically
and continually renewed for an eighteen (18) month term at the end of each eighteen (18) month term, unless either Employer or Employee provides written notice of election not to renew
at least ninety (90) days before the applicable renewal date. If Employer elects not to renew the term of this Agreement at any time after July 1, 2002, Employer shall pay as a service
award to Employee, on or before the first day of the last eighteen (18) month period of this Agreement (including both the initial term and all renewal terms), the benefits described in
Section 6 of this Agreement. 

        5.    General Termination Provisions.    If either Employer or Employee terminates this Agreement under the provisions
of this Section 5, Employer will be liable to Employee for all payments (if any) as described in Section 5, as follows: 

        (a)    Termination by Employer.    The Board may terminate this Agreement under this Section 5 only upon the
occurrence of one or more of the following events, and under the conditions described below. 

        (i)    Disability.    If, during the term of this Agreement, Employee's employment terminates due to Disability,
Employer shall pay to Employee all amounts payable under Section 3(a) above during the remaining term of this Agreement (as provided in Section 4 above). From and after the date of
termination of this Agreement due to Disability, Employer shall pay to Employee until his death, an amount equal to 50% of the amount paid to Employee under Section 3(a) during the last
calendar year of the term of this Agreement. All amounts payable under this Section 5(a) shall be paid in semi-monthly installments, less applicable withholdings for income taxes
and employment taxes. 

        (ii)   Termination for Cause.    Employer may discharge Employee for Cause, and, upon such termination, this
Agreement shall terminate immediately and Employer shall have no further obligation to make payments under this Agreement which have not already become payable, but have not yet been paid. 

        (b)    Termination by Employee.    Employee may voluntarily terminate this Agreement at any time following its
execution. If Employee, however, shall voluntarily terminate his employment for other than Good Reason, this Agreement shall terminate immediately and Employer shall have no further obligation to make
payments under this Agreement which have not already become payable, but have not yet been paid. Employee may terminate this Agreement for Good Reason under the provisions of Section 6. 

        6.    Special Termination Provisions.    If Employer or Employee terminate this Agreement under the provisions of this
Section 6, Employer shall be liable to Employee for all payments as described in this Section 6, as follows: 

        (a)    Termination Without Cause and Termination for Good Reason.    If Employer shall discharge Employee without
Cause or not renew the term of this Agreement at any time after July 1, 2002, or if Employee shall terminate his employment for Good Reason, then Employer shall pay to Employee in one lump sum
within five (5) days of any such event, the following benefit: 

        (i)    a
monetary award payable in one lump sum in recognition of Employee's past service to Employer equal to (x) 125% of the Employee's base salary in effect at the
time of termination or discharge combined with the greater of the bonus paid to the Employee for the previous year or the maximum bonus that would be paid under Employer's bonus award methodology for
the year in which the termination or discharge of Employee occurred if 

2

 

Employee
was employed at year end, multiplied by (y) three (all of which is further shown by the formula on Exhibit A attached hereto). 

        7.    Excess Payments.    Notwithstanding any provision of this Agreement to the contrary, the termination and
severance payments and non-cash benefits to which Employee is entitled (whether pursuant to the terms of this Agreement or otherwise), shall be reduced (unless prior shareholder approval
that meets the requirements of Section 280G(b)(5)(B) of the Internal Revenue Code of 1986, as amended ("Code") is obtained) to the maximum amount that can be paid to Employee so that the
aggregate present value of all payments that can be considered "parachute payments" (as defined in Section 280G of the Code), to which Employee is entitled does not equal or exceed 300% of
Employee's "annualized includible compensation for the base period" as defined in the Code. In determining the amount of Employee's termination and severance payment and non-cash benefits
pursuant to this Agreement, Employer shall first take into account any other payments or benefits to which Employee is entitled under any other agreement or understanding, which payments or benefits
constitute parachute payments under the Code. 

        8.    Definitions.    

        (a)    Board.    "Board" shall mean the Board of Directors of the Employer. 

        (b)    Cause.    Termination of employment for "Cause" shall mean that, prior to any termination pursuant to
Section 5(a)(ii) hereof, Employee shall have committed: 

        (i)    an
intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with Employer; 

        (ii)   intentional
wrongful damage to property of Employer; 

        (iii)  intentional
wrongful disclosure of trade secrets of Employer; 

        (iv)  willful
violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease and desist order; or 

        (v)   intentional
breach of corporate fiduciary duty involving personal profit. 

For
the purposes of this Agreement, no act, or failure to act, on the part of the Employee shall be deemed "intentional" unless done, or omitted to be done, by the Employee not in good faith and
without reasonable belief that his action or omission was in the best interest of Employer. Notwithstanding the foregoing the Employee shall not be deemed to have been terminated for Cause hereunder
unless and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the members of the Board then in office
at a meeting of the Board called and held for such purpose (after reasonable notice to the Employee and an opportunity for the Employee, together with his counsel to be heard before the Board),
finding that in the good faith opinion of the Board the Employee had committed an act set forth above in this Section 8(b) and specifying the particulars thereof in detail. Nothing herein shall
limit the right of the Employee or his beneficiaries to contest the validity or propriety of any such determination. 

        (c)    Disability.    "Disability" shall occur if Employee is incapacitated and absent from his duties hereunder on a
full-time basis for four (4) consecutive months or for at least one hundred eighty (180) days during any twelve (12) month period. Employee shall be entitled to the
disability benefits generally available to employees of Employer, and the disability payment provided for in this Section 5(a) shall be apart from and in addition to any disability benefits
generally available to employees of Employer. 

3

 

        (d)    Good Reason.    "Good Reason" shall mean: 

        (i)    Without
his express written consent, the assignment to Employee of any duties inconsistent with his positions, duties, responsibilities and status with Employer as of
July 1, 1999, or a change in his reporting responsibilities, titles or offices as in effect on July 1, 1999, or any removal of Employee from or any failures to re-elect
Employee to any of such positions, except in connection with the termination of his employment for Cause or as a result of his Disability or death, or termination by Employee other than for Good
Reason; 

        (ii)   A
significant adverse change in the nature or scope of the authorities, powers, functions or duties attached to Employee's position with Employer, a reduction in the
aggregate of Base Salary and bonus
from the Employer, or the termination of the Employee's rights to any employee benefit plan, or the reduction in scope or value thereof without the prior written consent of the Employee, any of which
is not remedied within ten (10) calendar days after receipt by Employer of written notice from the Employee of such change, reduction or termination, as the case may be; 

        (iii)  A
determination by the Employee made in good faith that he has been rendered substantially unable to carry out, or has been substantially hindered in the performance
of, any of the authorities, powers, functions, responsibilities or duties attached to his position, which situation is not remedied within thirty (30) calendar days after receipt by the
Employer of written notice from the Employee of such determination; 

        (iv)  The
Employer shall relocate its principal executive offices or require Employee to have as his principal location of work any location which is in excess of fifty
(50) miles from the current location thereof or to travel away from his office in the course of discharging his responsibilities or duties hereunder more than thirty (30) consecutive
calendar days or an aggregate of more than one hundred twenty (120) calendar days in any consecutive three hundred sixty-five (365) calendar-day period without in
either case his prior consent; 

        (v)   Failure
by Employer to require any successor (whether direct or indirect, by purchase, merger consolidation or otherwise) to all or substantially all of the business
and/or assets of Employer, by agreement in form and substance satisfactory to Employee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that Employer
would be required to perform it if no such succession had taken place; or 

        (vi)  Any
material breach of this Agreement by Employer. 

        9.    Governing Law.    This Agreement is made and entered into in the State of Texas, and the laws of Texas shall
govern its validity and interpretation in the performance by the parties of their respective duties and obligations. 

        10.    Entire Agreement.    This Agreement constitutes the entire agreement between the parties concerning the
employment of Employee, and there are no representations, warranties or commitments, other than those in writing executed by all of the parties. This is an integrated agreement. 

        11.    Indemnification.    Following the date of this Agreement, Employer shall not take any action to amend
Employer's Articles of Incorporation, or to amend any articles of incorporation or association of any corporation or bank, respectively, that is an affiliate of Employer, if such amendment would
adversely affect Employee's right to receive indemnification from such corporation or bank. 

        12.    Arbitration.    Any dispute, controversy, or claim arising out of or relating to this Agreement or breach
thereof, or arising out of or relating in any way to the employment of the Employee or the termination thereof, shall be submitted to arbitration in accordance with the Voluntary Labor Arbitration
Rules of the American Arbitration Association. Judgment upon the award rendered by the 

4

 

arbitrator
may be entered in any court of competent jurisdiction. In reaching his or her decision, the arbitrator shall have no authority to ignore, change, modify, add to or delete from any provision
of this Agreement, but instead is limited to interpreting this Agreement. In the case of any arbitration or subsequent judicial proceeding arising after Employee's discharge or termination, Employee
shall be awarded his or her costs, including attorneys' fees. 

        13.    Assistance in Litigation.    Employee shall make himself available, upon the request of Employer, to testify or
otherwise assist in litigation, arbitration, or other disputes involving Employer, or any of the directors, officers, employees, subsidiaries, or parent corporations of either, at no additional cost
during the term of this Agreement and at any time following the termination of this Agreement; provided, however, that following termination of this Agreement Employer shall be paid One Thousand and
No/100 Dollars ($1,000) per day or portion thereof, plus all associated out-of-pocket expenses for complying with this Section 14. 

        14.    Notices.    Any notice or communication required or permitted to be given to the parties shall be delivered
personally or sent by United States registered or certified mail, postage prepaid and return receipt requested, and addressed or delivered as follows, or to such other address as the party addressed
may have substituted by notice pursuant to this Section. 

        (a)   If
to Employer: 

State
National Bancshares, Inc.

P.O. Box 5240

Lubbock, Texas 79408

ATTENTION: Don E. Cosby 

        (b)   If
to Employee: 

Tom
C. Nichols

c/o State National Bancshares, Inc.

P.O. Box 5240

Lubbock, Texas 79408 

        15.    Nondisclosure of Confidential Information.    Employee agrees that during the term of this Agreement and
thereafter, Employee will not disclose any information or data concerning the business or customers of Employer that is disclosed to Employee or acquired by Employee in confidence at any time during
the period of his employment. 

        16.    Binding Agreement.    This Agreement shall inure to the benefit of and be enforceable by Employee's personal or
legal representatives, executors, administrators, successors, heirs, distributees, devises and legatees. If Employee should die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee, or other designee, or, if there be no such
designee, to his estate. 

        17.    No Mitigation of Amounts Payable Hereunder.    Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Agreement be reduced by any compensation earned by Employee as
the result of employment by another employer after the date of termination, or otherwise. 

        18.    Captions.    The captions of this Agreement are inserted for convenience and are not part of the Agreement. 

        19.    Severability.    In case any one or more of the provisions contained in this Agreement shall for any reason be
held to be invalid, illegal, or unenforceable in any other respect, such invalidity, illegality 

5

 

or
unenforceability shall not affect any other provision of this Agreement. This Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been a part of the
Agreement and there shall be deemed substituted therefor such other provision as will most nearly accomplish the intent of the parties to the extent permitted by the applicable law. In case this
Agreement, or anyone or more of its provisions, shall be held to be invalid, illegal or unenforceable within any governmental jurisdiction or subdivision. 

        20.    Counterparts.    This Agreement may be executed simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which shall together constitute one in the same Agreement. 

6

DATED:
June 30, 1999 

	 	 	EMPLOYEE:
	

 	
 	

/s/  TOM C. NICHOLS      
 Tom C. Nichols
	

 	
 	

STATE NATIONAL BANCSHARES, INC.
	

 	
 	

By:	

/s/  DON E. COSBY      
 Don E. Cosby, Executive Vice President and Chief Financial Officer
	

 	
 	

By:	

/s/  MARK MERLO      
 Mark Merlo,

Member of Compensation Committee
	

 	
 	

By:	

/s/  JACK CARDWELL      
 Jack Cardwell

Member of Compensation Committee

 
 

EXHIBIT A    
    

125% × (base
salary in effect + greater

of bonus paid for previous year or maximum bonus for current year) × 3 

QuickLinks

Exhibit 10.6

EMPLOYMENT AGREEMENT

EXHIBIT A

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