Document:

EXHIBIT 10.31

                        Change in Control Severance Plan
                                       of
                         Warwick Community Bancorp, Inc.
                                 And Affiliates

         1. Definitions. Whenever used herein, the following terms shall have
the meanings set forth below:

                  a. "Affiliate" means any company, financial institution or
         other entity which is at least 50% owned, directly or indirectly, by
         Warwick Community Bancorp, Inc.

                  b. "Bank" means The Warwick Savings Bank, The Towne Center
         Bank, individually or collectively or any successor thereto.

                  c. "Change in Control" means the occurrence of any of the
         following events:

                           (i) the reorganization, merger or consolidation of
                  the Holding Company with one or more other persons, other than
                  a transaction following which:

                           (A)      at least 51% of the equity ownership
                                    interests of the entity resulting from such
                                    transaction are beneficially owned (within
                                    the meaning of Rule 13d-3 promulgated under
                                    the Securities Exchange Act of 1934, as
                                    amended ("Exchange Act")) in substantially
                                    the same relative proportions by persons
                                    who, immediately prior to such transaction,
                                    beneficially owned (within the meaning of
                                    Rule 13d-3 promulgated under the Exchange
                                    Act) at least 51% of the outstanding equity
                                    ownership interests in the Holding Company;
                                    and

                           (B)      at least 51% of the securities entitled to
                                    vote generally in the election of directors
                                    of the entity resulting from such
                                    transaction are beneficially owned (within
                                    the meaning of Rule 13d-3 promulgated under
                                    the Exchange Act) in substantially the same
                                    relative proportions by persons who,
                                    immediately prior to such transaction,
                                    beneficially owned (within the meaning of
                                    Rule 13d-3 promulgated under the Exchange
                                    Act) at least 51% of the securities entitled
                                    to vote generally in the election of
                                    directors of the Holding Company;

                           (ii) the acquisition of all or substantially all of
                  the assets of the Holding Company or beneficial ownership
                  (within the meaning of Rule 13d-3 promulgated under the
                  Exchange Act) of 25% or more of the outstanding securities of
                  the Holding Company entitled to vote generally in the election
                  of directors by any person or by any persons acting in
                  concert;

<PAGE>

                           (iii) a complete liquidation or dissolution of the
                  Holding Company;

                           (iv) the occurrence of any event if, immediately
                  following such event, at least 50% of the members of the Board
                  of Directors of the Holding Company do not belong to any of
                  the following groups:

                           (A)      individuals who were members of the Board of
                                    Directors of the Holding Company on the date
                                    of this plan; or

                           (B)      individuals who first became members of the
                                    Board of Directors of the Holding Company
                                    after the date of this plan either:

                                    (1)     upon election to serve as a member
                                            of the Board of Directors of the
                                            Holding Company by affirmative vote
                                            of three-quarters of the members of
                                            such board, or of a nominating
                                            committee thereof, in office at the
                                            time of such first election; or

                                    (2)     upon election by the shareholders of
                                            the Holding Company to serve as a
                                            member of the Board of Directors of
                                            the Holding Company, but only if
                                            nominated for election by
                                            affirmative vote of three-quarters
                                            of the members of the Board of
                                            Directors of the Holding Company, or
                                            of a nominating committee thereof,
                                            in office at the time of such first
                                            nomination;

                                    Provided, however, that such individual's
                                    election or nomination did not result from
                                    an actual or threatened election contest
                                    (within the meaning of Rule 14a-11 of
                                    Regulation 14A promulgated under the
                                    Exchange Act) or other actual or threatened
                                    solicitation of proxies or consents (within
                                    the meaning of Rule 14a-11 of Regulation 14A
                                    promulgated under the Exchange Act) other
                                    than by or on behalf of the Board of
                                    Directors of the Holding Company; or

                           (v) any event which would be described in this
                  definition under subparagraphs (i), (ii), (iii) or (iv) if the
                  term "Bank" were substituted for the term "Holding Company"
                  therein.

                  In no event, however, shall a Change of Control be deemed to
         have occurred as a result of any acquisition of securities or assets of
         the Holding Company, the Bank, or any Affiliate of either of them, by
         the Holding Company, the Bank, or any Affiliate of either of them, or
         by any employee benefit plan maintained by any of them. For purposes of
         this definition, the term "person" shall have the meaning assigned to
         it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.

                                        2
<PAGE>

                  d. "Eligible Employee" means any Employee whose employment,
         within three months prior to a Change in Control, or within one year
         thereafter, is either (i) involuntarily terminated by the Holding
         Company or any Affiliate, other than for Just Cause, or (ii)
         voluntarily terminated by an Eligible Employee following (A) a written
         demand from the employer to force the Eligible Employee, without his or
         her consent, to relocate his or her principal place of employment to a
         location that is more than thirty-five (35) miles from its location
         immediately prior to the Change in Control or (B) a reduction in the
         base salary of the Eligible Employee from the amount being paid as of
         October 1, 2001.

                  e. "Employee" means any person who has been employed by the
         Holding Company or any Affiliate for at least 120 days, on a full-time
         salaried basis, immediately prior to the Change in Control, excluding
         any person who is covered by an employment contract, change in control
         or severance agreement with the Holding Company or any Affiliate.
         Notwithstanding the above, an officer of the Holding Company or any
         Affiliate, excluding any person who is covered by an employment
         contract, change in control or severance agreement with the Holding
         Company or any Affiliate, shall be considered an Employee from his or
         her first day of full time employment.

                  f. "Holding Company" means Warwick Community Bancorp, Inc. or
         any successor thereto.

                  g. "Just Cause," with respect to termination of employment,
         means an act or acts of personal dishonesty, incompetence, willful
         misconduct, breach of fiduciary duty involving personal profit, failure
         to perform stated duties, willful violation of any law, rule, or
         regulation (other than traffic violations or similar offenses) or final
         cease-and-desist order. In determining incompetence, acts or omissions
         shall be measured against standards generally prevailing in the banking
         industry, as determined by the Board of Directors of the Holding
         Company or its appropriate Affiliate in its sole discretion.

         2. Severance Benefit to Eligible Employees. Each Eligible Employee
shall be entitled to receive a severance benefit in accordance with the
following schedule:

<TABLE>
<CAPTION>
                                       SEVERANCE PAY PERIOD         MINIMUM      MAXIMUM
             JOB                         (NUMBER OF WEEKS          SEVERANCE    SEVERANCE
       CLASSIFICATION                       EQUAL-TO)             PAY-PERIOD    PAY-PERIOD
-----------------------    ---------------------------------     ------------  ------------
<S>                        <C>                                     <C>           <C>
Non-officer Employee       Number of full years of service          4 weeks      26 weeks
                           with Holding Company or Affiliate
                           times 2

Officer- up to Assistant   Number of full years of service          4 weeks      52 weeks
Vice President             with Holding Company or Affiliate
                           times 2

Vice President             Number of full years of service         26 weeks      52 weeks
                           with Holding Company or Affiliate
                           times 2

Senior Vice President      Number of full years of service         52 weeks      52 weeks
or above                   with Holding Company or Affiliate
                           times 2
</TABLE>

                                       3
<PAGE>

All severance payments shall be made in accordance with the payroll schedule in
effect immediately prior to the Change in Control except that any Eligible
Employee entitled to receive a severance benefit of 26 weeks or less may elect,
in his or her sole discretion, to receive such benefit in a single lump sum
payment, without discount, payable within 10 days of termination of employment.
Each Eligible Employee shall also be entitled to receive continued coverage
under the Holding Company's or any Affiliate's group health plan following his
or her employment termination, with the employee cost of such coverage being
paid by the Holding Company or any Affiliate (the "Health Plan Coverage
Period"). Such Health Plan Coverage Period shall be equal to the severance pay
period of the Eligible Employee, with a minimum of 90 days from the date of the
Eligible Employee's termination of employment. The benefits provided pursuant to
this paragraph are subject to, and conditioned upon, compliance with the
provisions of paragraphs 3 and 4 below, and do not impact any statutory
obligation of the Holding Company or any Affiliate under COBRA or any other
laws.

         3. Mitigation and Notification Requirements. If an Eligible Employee's
severance benefit exceeds 26 weeks, the provisions of this paragraph 3 are
applicable. All payments after week 26 are deemed to be an "Extended Severance
Pay Period." In order to continue to receive severance benefits during the
Extended Severance Pay Period, an Eligible Employee must provide the Holding
Company or the applicable Affiliate with a signed written certification within
14 days following the six-month anniversary of termination of employment with
the Holding Company or any Affiliate. Such certification must state:

         a) whether the Eligible Employee is employed as of the date of the
certification;
         b) the amount of the Eligible Employee's weekly base pay, if employed;
         c) a description of the type and cost to the Eligible Employee of any
health insurance benefits received, if any, from another employer;
         d) that the Eligible Employee agrees to notify the Holding Company or
applicable Affiliate of any future employment or change in the amount of weekly
base pay received from another employer during the Extended Severance Pay
Period.

         The amount of any severance benefit payable to an Eligible Employee
during the Extended Severance Pay Period will be reduced dollar for dollar by
the amount of any base pay received by such Eligible Employee from another
employer during the Extended Severance Pay Period. Except as described below,
any health insurance benefits received by the Eligible Employee from the Holding
Company or any Affiliate during the Extended Severance Pay Period will be
reduced or terminated to the extent similar benefits are provided by another
employer.

                                        4
<PAGE>

         If another employer provides health insurance benefits to an Eligible
Employee, the Holding Company or any Affiliate will nevertheless continue
providing health insurance benefits during the Extended Severance Pay Period if
the benefits available from the new employer do not cover the Eligible Employee
or his or her family members due to a preexisting condition that was covered
under the health insurance provided by the Holding Company or any Affiliate or
the benefits available from the new employer do not cover the Eligible Employee
or his or her family members until the expiration of a waiting period. In the
case of a waiting period, the Holding Company or any Affiliate must provide
benefits under the plan until the earlier of the expiration of the waiting
period or the end of the Health Plan Coverage Period.

         During the Health Plan Coverage Period, an Eligible Employee may change
the level of health insurance coverage or the coverage options with respect to
the benefits provided under the plans of the Holding Company or any Affiliate,
to the same extent that an active employee of the Holding Company or any
Affiliate may do so. The Eligible Employee will be responsible for any
additional costs associated with a change in coverage level or options.

         4. Written Acknowledgment and Release. As a condition to receiving any
payments or benefits pursuant to paragraphs 2 and 3 above, the Eligible Employee
shall deliver to the Holding Company or any applicable Affiliate on the date of
his or her employment termination a written Acknowledgment and Release signed by
the Eligible Employee stating (a) that the severance payment to be made and
health benefits to be provided to the Eligible Employee pursuant to Paragraphs 2
and 3 above are in full and complete satisfaction of all liabilities and
obligations of the Holding Company and its Affiliates, directors, officers,
employees and agents, except for any pension benefits that may be due and owing
and except for any liabilities or obligations that may be required by law, and
(ii) that the Holding Company or any Affiliate shall not have any other
liabilities or obligation to the Eligible Employee relating to the Eligible
Employee's employment by the Holding Company or any Affiliate.

         5. Governing Law. This plan shall be governed by the laws of the State
of New York.

         6. Termination or Amendment. This plan may be amended or terminated at
any time, in the full discretion of the Board of Directors of the Holding
Company, prior to the Change in Control. This plan may not be terminated or
amended at the time of or after the occurrence of the Change in Control.

                                       5<PAGE>

                               CREDIT AGREEMENT

     THIS AGREEMENT is entered into as of February 2, 2002, by and between
STERLING BANCSHARES, INC., a Texas Corporation ("Borrower"), and WELLS FARGO
BANK MINNESOTA, NATIONAL ASSOCIATION ("Bank").

                                    RECITALS
                                    --------

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

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

                                   ARTICLE I
                                   ---------
                                  CREDIT TERMS
                                  ------------

SECTION 1.1. LINE OF CREDIT.

     (a) Line of Credit. Subject to the terms and conditions of this Agreement,
Bank hereby agrees to make advances to Borrower from time to time up to and
including February 2, 2003, not to exceed at any time the aggregate principal
amount of Twenty Million Dollars ($20,000,000.00) ("Line of Credit"), the
proceeds of which shall be used to finance future acquisitions and related
expenses. Borrower's obligation to repay advances under the Line of Credit shall
be evidenced by a promissory note substantially in the form of Exhibit A
attached hereto ("Line of Credit Note"), all terms of which are incorporated
herein by this reference.

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

SECTION 1.2. INTEREST/FEES.

     (a) Interest. The outstanding principal balance of each credit subject
hereto shall bear interest at the rate of interest set forth in each promissory
note or other instrument executed in connection therewith.

     (b) Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in each promissory note or other instrument required hereby.

     (c) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to one
eighth percent (0.125%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on the average daily unused amount of the Revolving Line of
Credit, which fee shall be calculated on a quarterly basis by Bank and shall be
due and payable by Borrower in arrears within ten (10) days after each billing
is sent by Bank.

                                       1
<PAGE>

     SECTION 1.3. GUARANTIES. All indebtedness of Borrower to Bank shall be
guaranteed by Sterling Bancorporation, Inc., a Delaware corporation
("Guarantor"), as evidenced by and subject to the terms of a guaranty in form
and substance satisfactory to Bank.

                                   ARTICLE II
                                   ----------
                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

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

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

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

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

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

     SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of
Borrower dated September 30, 2001, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the financial condition of Borrower, (b) discloses all
liabilities of Borrower that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.

                                       2
<PAGE>

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

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

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

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

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

     SECTION 2.11. BANK SUBSIDIARIES. As of the date of this Agreement there are
1,000 shares of issued and outstanding common voting stock in the Guarantor, of
which Borrower owns 1,000 shares. As of the date of this Agreement there are
12,753,500 shares of issued and outstanding common voting stock in Sterling
Bank, of which the Guarantor owns 12,753,500 shares. Each bank named herein (and
each bank hereafter acquired by Borrower) is referred to as a "Bank Subsidiary".

                                  ARTICLE III
                                  -----------
                                   CONDITIONS
                                   ----------

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

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

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

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

     (ii) Continuing Guaranty.

                                       3
<PAGE>

     (iii)  Such other documents as Bank may require under any other Section of
            this Agreement.

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

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

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

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

                                   ARTICLE IV
                                   ----------
                             AFFIRMATIVE COVENANTS
                             ---------------------

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

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

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

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

     (a) not later than 90 days after and as of the end of each fiscal year, an
annual audited financial statement of Borrower and an annual unaudited financial
statement of each Bank Subsidiary, prepared by a certified public accountant
acceptable to Bank, to include balance sheet and income statement;

                                       4
<PAGE>

     (b) not later than 90 days after and as of the end of each fiscal year, a
financial statement of the Guarantor, prepared by Guarantor, to include balance
sheet and income statement;

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

     (d) as soon as available, and in any event within 45 days after the end of
each calendar quarter, the complete Call Report prepared by Borrower each Bank
Subsidiary at the end of such calendar quarter in compliance with the
requirements of any federal or state regulatory agency which has authority to
examine Borrower any Bank Subsidiary, all prepared in accordance with the
requirements imposed by the applicable regulatory authorities and applied on a
basis consistent with the accounting practices reflected in any previous Call
Report(s) and similar statements delivered to Bank prior to the date of this
Agreement;

     (e) as soon as available, and in any event no later than 60 days after the
end of each fiscal quarter, the complete Parent Company Only Financial
Statements for Bank Holding Companies (FRY-9LP) required to be filed by Borrower
quarterly with the Federal Reserve Bank in the applicable Federal Reserve
District;

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

     (g) as soon as available, and in any event within 60 days after each fiscal
quarter of Borrower, the complete Consolidated Report for Bank Holding Companies
(FRY-9C) required by to be filed by the Borrower with the Federal Reserve
District;

     (h) as soon as available, and in any event no later than 60 days after the
end of each fiscal quarter of the Guarantor, the complete Parent Company Only
Financial Statements for Bank Holding Companies (FRY-9LP) required to be filed
by Guarantor quarterly with the Federal Reserve Bank in the applicable Federal
Reserve District;

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

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

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

     SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its

                                       5
<PAGE>

business; and comply with the provisions of all documents pursuant to which
Borrower is organized and/or which govern Borrower's continued existence and
with the requirements of all laws, rules, regulations and orders of any
governmental authority applicable to Borrower and/or its business.

     SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types
and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.

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

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

     SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower.

     SECTION 4.9. BORROWER'S FINANCIAL CONDITION. Maintain Borrower's
consolidated financial condition as follows using generally accepted accounting
principles consistently applied and used consistently with prior practices
(except to the extent modified by the definitions herein):

     (a) ROE not less than 15% as of the end of each fiscal quarter calculated
on a four quarter moving average including the current quarter reported plus the
three immediately preceding quarters. For purposes herein, "Return on Equity"
shall be determined by dividing net income after taxed by total tangible equity
on an annualized basis.

     (b) Ratio of its Tier 1 Core Capital to total average assets (minus
intangible assets and all goodwill) at a level equal to the greater of (i) seven
percent (7.00%) as of the end of each fiscal quarter, or (ii) the minimum ratio
required by any regulatory agency having authority over the Bank. For purposes
herein, "Tier 1 Core Capital" shall mean the core capital elements set forth by
the Federal Reserve Board in 12 CFR Parts 208 and 225, which provided for the
inclusion of trust preferred stock (to the extent that such trust preferred
stock together with other cumulative preferred stock does not exceed 25% of Tier
1 Core Capital);

     (c) Allowance for loan and lease losses not less than 100% of the total
amount of Non-Performing Assets, determined as of each fiscal quarter end, with
"Non-Performing Assets" defined as the sum of: (i) all loans classified as past
due 90 days or more and still accruing interest; (ii) all loans classified as
'non-accrual' and no longer accruing interest; (iii) all loans classified as
'restructured loans and leases'; and (iv) all other 'non-performing assets',

                                       6
<PAGE>

including those classified as 'other real estate owned' and 'repossessed
property', as reported in the then most recent Call Report.

     (d) Non-Performing Assets not greater than 10% of Primary Equity Capital,
determined as of each fiscal quarter end, with "Non-Performing Assets" as
defined above, and with "Primary Equity Capital" defined as the aggregate of
allowance for loan and lease losses, as reported in the then most recent Call
Report, plus Equity Capital (defined as the aggregate of perpetual preferred
stock (and related surplus), common stock, surplus (excluding all surplus
related to perpetual preferred stock), undivided profits and capital reserves,
plus the net unrealized holding gains (or less the net realized holding losses)
on available-for-sale securities, less goodwill and other disallowed intangible
assets).

     (e) Aggregate book value of each Bank Subsidiary's securities portfolios
classified in the held-to-maturity category, less the aggregate market value of
those securities portfolios, when expressed as an unrealized securities loss,
not to exceed at any time 15% of the Equity Capital of such Bank Subsidiary,
with "Equity Capital" as defined above.

     SECTION 4.10. BANK SUBSIDIARY FINANCIAL CONDITION. Cause each Bank
Subsidiary, Sterling Bank, to maintain its financial condition as follows using
generally accepted accounting principles consistently applied and used
consistently with prior practices (except to the extent modified by the
definitions herein):

     (a) ROA not less than 1.0%, determined as of each fiscal year end, with
"ROA" defined as the percentage arrived at by dividing net income by Total
Assets, as reported in the most recent Call Report.

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

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

                                       7
<PAGE>

                                   ARTICLE V
                                   ---------
                               NEGATIVE COVENANTS
                               ------------------

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

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

     SECTION 5.2. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Bank, and (b) any
other liabilities of Borrower existing as of, and disclosed to Bank prior to,
the date hereof.

     SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity; nor sell, lease, transfer
or otherwise dispose of all or a substantial or material portion of Borrower's
assets except in the ordinary course of its business.

     SECTION 5.4. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank.

     SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or
investments in any person or entity, except any of the foregoing existing as of,
and disclosed to Bank prior to, the date hereof.

     SECTION 5.6. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower's stock now or hereafter outstanding,
specifically excluding payments of dividends to allow payment of Borrower's
indebtedness to Bank, and payment of shareholder dividends or repurchases
pursuant to a share repurchase program so long as such program has been approved
in writing by the Bank and no Event of Default has occurred under this
Agreement.

                                   ARTICLE VI
                                   ----------
                               EVENTS OF DEFAULT
                               -----------------

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

                                       8
<PAGE>

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

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

     (c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of twenty (20) days from its occurrence.

     (d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower or any Bank
Subsidiary or any guarantor hereunder has incurred any debt or other liability
to any person or entity, including Bank.

     (e) The filing of a notice of judgment lien against Borrower or any Bank
Subsidiary or any guarantor hereunder; or the recording of any abstract of
judgment against Borrower or any Bank Subsidiary or any guarantor hereunder in
any county in which Borrower or such Bank Subsidiary or such guarantor has an
interest in real property; or the service of a notice of levy and/or of a writ
of attachment or execution, or other like process, against the assets of
Borrower or any Bank Subsidiary or any guarantor hereunder; or the entry of a
judgment against Borrower or any Bank Subsidiary or any guarantor hereunder.

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

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

     (h) The death or incapacity of any guarantor hereunder. The dissolution or
liquidation of Borrower or any Bank Subsidiary or any guarantor hereunder; or
Borrower or any

                                       9
<PAGE>

Bank Subsidiary or any such guarantor, or any of their directors, stockholders
or members, shall take action seeking to effect the dissolution or liquidation
of Borrower or such Bank Subsidiary or such guarantor.

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

     SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank's option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by each Borrower; (b) the
obligation, if any, of Bank to extend any further credit under any of the Loan
Documents shall immediately cease and terminate; and (c) Bank shall have all
rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit subject hereto and to exercise any or all of the rights
of a beneficiary or secured party pursuant to applicable law. All rights, powers
and remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity.

                                  ARTICLE VII
                                  -----------
                                 MISCELLANEOUS
                                 -------------

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

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

BORROWER:   STERLING BANCSHARES, INC
            15000 NORTHWEST FWY
            HOUSTON, TEXAS 77040-3220

                                       10
<PAGE>

BANK:   WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
        MAC # N9305-071
        6TH AND MARQUETTE
        MINNEAPOLIS, MINNESOTA 55479

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

     SECTION 7.3. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit subject hereto, Borrower, any Bank Subsidiary,
any guarantor hereunder or any collateral required hereunder.

     SECTION 7.4. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by each
party hereto.

     SECTION 7.5. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.

     SECTION 7.6. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.

     SECTION 7.7. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

     SECTION 7.8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.

     SECTION 7.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota.

                                       11
<PAGE>

     SECTION 7.10. ARBITRATION,

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

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

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

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

                                       12
<PAGE>

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

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

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

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

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

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

STERLING BANCSHARES, INC              WELLS FARGO BANK MINNESOTA,
                                        NATIONAL ASSOCIATION

By: /s/ Eugene S. Putnam, Jr.         By: /s/ William Klein
   -------------------------------        ----------------------------------
   Eugene S. Putnam, Jr.,                 William Klein
   Executive Vice President & CFO         Title: Vice President

                                       13

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