-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NIPcWZ3ip12lGpLtbwMnh7xKvD9aUSWZdJXsrpvSsQ5cm84nJlithsJErYV+8Btn DwpZMKPaJ1ceCi346YDiTA== 0001104659-06-041998.txt : 20060615 0001104659-06-041998.hdr.sgml : 20060615 20060615170524 ACCESSION NUMBER: 0001104659-06-041998 CONFORMED SUBMISSION TYPE: DEFA14A PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20060615 DATE AS OF CHANGE: 20060615 EFFECTIVENESS DATE: 20060615 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEXAS REGIONAL BANCSHARES INC CENTRAL INDEX KEY: 0000787648 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 742294235 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEFA14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-14517 FILM NUMBER: 06907907 BUSINESS ADDRESS: STREET 1: 3700 N TENTH STE 301 STREET 2: PO BOX 5910 CITY: MCALLEN STATE: TX ZIP: 78501 BUSINESS PHONE: 9566315400 MAIL ADDRESS: STREET 1: P O BOX 5910 STREET 2: P O BOX 5910 CITY: MCALLEN STATE: TX ZIP: 78501-5910 DEFA14A 1 a06-13659_58k.htm CURRENT REPORT OF MATERIAL EVENTS OR CORPORATE CHANGES

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported)

June 12, 2006

TEXAS REGIONAL BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Texas	000-14517	74-2294235
(State or other jurisdiction	(Commission File	(IRS Employer
of incorporation)	Number)	Identification No.)

P. O. Box 5910
3900 North 10^th Street, 11^th Floor, McAllen, TX		78502-5910
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code

(956) 631-5400

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

x		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01

Entry into a Material Definitive Agreement.

As previously reported on Form 8-K, Texas Regional Bancshares, Inc. (Texas Regional), has signed a definitive merger agreement with Banco Bilbao Vizcaya Argentaria, S.A (BBVA). In connection with the merger agreement, BBVA indicated to Texas Regional that it would be in the best interests of BBVA to assure that the company will have the continued dedication and service of Texas Regional’s Chairman of the Board, Glen E. Roney, following the effective time of the merger. On June 12, 2006, Texas Regional entered into an Employment Agreement with Mr. Roney which will become effective at the effective time of the merger. A copy of the Employment Agreement and an Addendum to the Employment Agreement is attached as an exhibit to this Current Report on Form 8-K and is incorporated herein by reference.

In addition, also on June 12, 2006, Texas Regional entered into Employment Agreements with seven individuals who are either executive officers of the company and/or executive officers of the company’s subsidiary, Texas State Bank: Paul S. Moxley, John A. Martin, Douglas G. Bready, Craig A. Swann, Robert C. Norman, Stanley V. Grisham and Lois Ann Stanton. Each of these employment agreements is effective immediately and is attached as an exhibit to this Current Report on Form 8-K and is incorporated herein by reference.

Also on June 12, 2006, Texas Regional entered into employment agreements which are also effective immediately with 32 other officers and employees of subsidiaries of the company, including Texas State Bank. An example of the form of agreement used for each is attached as an exhibit to this Current Report on Form 8-K and is incorporated herein by reference.

Item 9.01		Financial Statements and Exhibits.

(d)		Exhibits.

2.1		Employment Agreement dated as of June 12, 2006, by and among Glen E. Roney and Texas Regional Bancshares, Inc. and Addendum to Employment Agreement dated as of June 13, 2006.
2.2		Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and Paul S. Moxley.
2.3		Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and John A. Martin.
2.4		Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and Douglas G. Bready.
2.5		Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and Craig A. Swann.
2.6		Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and Robert C. Norman.
2.7		Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and Stanley V. Grisham.
2.8		Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and Lois Ann Stanton.
2.9		Sample Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and Employee.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		TEXAS REGIONAL BANCSHARES, INC.
		(Registrant)

June 15, 2006		/s/ G.E. Roney
		Glen E. Roney
		Chairman of the Board, President
		& Chief Executive Officer

EXHIBIT INDEX

Exhibit No.		Description
2.1		Employment Agreement dated as of June 12, 2006, by and among Glen E. Roney and Texas Regional Bancshares, Inc. and Addendum to Employment Agreement dated as of June 13, 2006.
2.2		Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and Paul S. Moxley.
2.3		Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and John A. Martin.
2.4		Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and Douglas G. Bready.
2.5		Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and Craig A. Swann.
2.6		Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and Robert C. Norman.
2.7		Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and Stanley V. Grisham.
2.8		Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and Lois Ann Stanton.
2.9		Sample Employment Agreement dated as of June 12, 2006, by and among Texas Regional Bancshares, Inc., a Texas corporation and Employee.

EX-2.1 2 a06-13659_5ex2d1.htm EX-2

Exhibit 2.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT, dated as of June 12, 2006 (this “Agreement”), is entered into between Glen E. Roney (“Executive”) and Texas Regional Bancshares Inc., a Texas corporation (the “Company”).

WHEREAS

A. Banco Bilbao Vizcaya Argentaria SA, a private-law entity organized under the laws of Spain (“BBVA”, and together with the Company, the “Employer”) is entering into an Agreement and Plan of Merger, dated as of the date of this Agreement (the “Merger Agreement”), with the Company.

B. BBVA has determined that it is in the best interests of it and its shareholders to assure that the Company will have the continued dedication and service of Executive following the effective time of the merger provided for in the Merger Agreement (the “Effective Time”).

NOW, THEREFORE, as an inducement to and condition of BBVA’s willingness to enter into the Merger Agreement and in consideration of the mutual covenants contained in this Agreement, Executive and Employer agree as follows:

1. Title; Duties. Subject to Section 2(c), Executive shall serve as Chairman of the Board of the Company and/or its Texas State Bank (the “Bank”) as determined by Employer. The duties of Executive shall be those duties which are appropriate (including appropriate authority and responsibilities) to Executive’s position. Employer and Executive may hereafter mutually agree on specific duties in writing.

2. Term of Agreement.

(a) Contingent on Effective Time. If the Merger Agreement or Executive’s current employment with the Company and the Bank terminates for any reason before the Effective Time, all provisions of this Agreement will terminate and there will be no liability of any kind under this Agreement.

(b) Term of Employment. Unless terminated earlier pursuant to the provisions of this Agreement, Employer will employ Executive from the period beginning on the Effective Time and ending sixty (60) months thereafter, with automatic one (1) year extensions unless either Employer or Executive provides the other party with six (6) months’ prior written notice of non-renewal (the “Term of Employment”).

(c) Initial Term. At any time after the first twenty-four (24) months of the Term of Employment, Executive or Employer may, on reasonable notice to the other, choose to discontinue Executive’s position as full-time Chairman of the Board of the Company and/or the Bank, in which case and subject to Section 5 of this Agreement,

Executive will remain an employee of Employer or its affiliates for the remainder of the Term of Employment, with such duties as are reasonably acceptable to the Executive and Employer.

3. Performance. Executive will use good faith efforts to discharge his responsibilities to the best of his ability. During the Term of Employment, Executive will devote his entire business time, attention and efforts to the responsibilities of his employment under this Agreement.

4. Salary and Benefits.

(a) Base Salary. Employer shall, during the Term of Employment, pay Executive an annual base salary of $1,100,000. Such salary shall be paid in accordance with the Bank’s payroll practices as in effect from time to time less applicable withholding and salary deductions. Executive’s base salary shall be reviewed at least annually for possible increases but shall not be decreased during the Term of Employment.

(b) Incentive Compensation Plan Award. Until the earlier of the expiration of the Term of Employment or such date as Executive resigns or is removed as full-time Chairman of the Board of the Company and/or its Texas State Bank in accordance with Section 2(c) or Section 5 (and, in any event, through the date that is twenty-four (24) months from the date hereof unless (i) Executive terminates his employment in such position, (ii) Executive’s employment in such position is terminated for Cause or (iii) Executive’s employment is terminated because of death or Disability), Executive shall be eligible to participate in the incentive bonus plan attached as Annex A. However, Executive’s participation in the incentive bonus plan will not begin until January 1, 2007. For 2006, Executive will receive an annual bonus of $1,500,000 so long as Executive continues to be employed at the time the annual bonus is paid (which will be on or before March 31, 2007).

(c) Reimbursement of Business Expenses. The Bank shall reimburse Executive for all out-of-pocket business expenses incurred by Executive in the course of his duties, in accordance with, the Bank’s policies as in effect from time to time. Executive shall be required to submit to the Bank appropriate documentation supporting such out-of-pocket business expenses as a prerequisite to reimbursement in accordance with such policies.

(d) Executive Benefits. During the Employment Term, Executive shall be eligible to participate in the Executive benefit plans, programs, policies and arrangements generally available to Executives of the Bank and to receive the other perquisites provided to senior executive officers of the Bank (including health and life insurance benefits substantially similar to those provided by the Bank as of the date of this Agreement), in each case in accordance with the terms and conditions of such plans, programs, policies, arrangements and other perquisites as in effect from time to time.

Without limiting the foregoing, Executive will be provided with a Bank automobile consistent with current practice.

(e) Vacation. Executive will be entitled to paid annual vacation during the Term of Employment (totaling at least four weeks a year) on a basis that is at least as favorable as that provided to other senior executives of the Bank.

(f) Facilities. During the Term of Employment, Executive will be provided with office space, facilities, secretarial support and other business services consistent with Executive’s position on a basis that is at least as favorable as that provided to other senior executives of the Bank.

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

5. General Termination Provisions.

(a) Death or Disability. Employer may terminate Executive’s employment due to Disability. If employment is so terminated or terminates as a result of Executive’s death, Employer shall pay or provide for all Accrued Compensation and Other Benefits.

(b) Termination by Employer with Cause. Employer may terminate Executive’s employment immediately for Cause. Upon such termination, Employer shall pay or provide for all Accrued Compensation and Other Benefits. The Employer may place Executive on unpaid leave for up to thirty (30) consecutive days while it is determining whether there is a basis to terminate Executive’s employment for Cause.

(c) Termination by Employer without Cause. Employer may terminate Executive’s employment without Cause upon thirty (30) days prior written notice. Upon such termination, Employer shall pay or provide for amounts described in Section 6 below. Employer may elect to place Executive on paid leave for all or part of this advance notice period.

(d) Termination by Executive. Executive may terminate his employment at any time during the Term of Employment, upon ninety (90) days prior written notice. Upon such termination, Employer shall pay or provide for all Accrued Compensation and Other Benefits.

(e) Limits. On any termination in accordance with this Section 5, Employer shall have no further obligation to make payments under this Agreement other than as specifically provided for in this Section 5.

6. Special Termination Provisions.

(a) Termination Without Cause. If Employer terminates Executive’s employment other than for Cause during the Term of Employment, then Employer shall:

(i) pay to the Executive in one lump sum as soon as reasonably practicable following such termination an amount in cash equal to the remaining annual base salary to be paid to Executive over the Term of Employment; and

(ii) pay or provide for all Accrued Compensation and Other Benefits.

(b) Limits. Employer’s obligation to make any payments to Executive as described in this Section 6 (other than Accrued Compensation) is contingent upon Executive’s execution of a Waiver and Release of Claims, a form of which is attached to this Agreement as Annex B. On any termination in accordance with this Section 6, Employer and its affiliates shall have no further obligation to make payments under this Agreement other than as specifically provided for in this Section 6 and Executive shall not be eligible to receive any other severance benefits under any severance or termination plan, program, policy or arrangement maintained by Employer or its affiliates.

7. Covenants Not to Compete or Solicit Employer Clients and Executives; Confidential Information.

(a) Restricted Period. The “Restricted Period” is the period beginning on the Effective Date and ending on the earlier of (i) two (2) years after the date Executive’s employment terminates and (ii) the sixty-month anniversary of the Effective Time; provided that the Restricted Period shall end no earlier than the termination of Executive’s employment with Employer.

(b) Non-Compete. During the Restricted Period, Executive shall not (i) hold a 5% or greater equity, voting or profit participation interest in a Competitive Enterprise or (ii) directly or indirectly (without the prior written consent of Employer) both (y) associate (including as a director, officer, Executive, partner, consultant, agent or advisor) with a Competitive Enterprise in a Restricted Territory and (z) in connection with Executive’s association engage, or directly or indirectly manage or supervise personnel engaged, in any business activity:

(i) that is substantially related to any business activity that Executive was engaged in during the most recent 12 months of employment with the Employer or its affiliates,

(ii) that is substantially related to any business activity for which Executive had direct or indirect managerial or supervisory responsibility during the most recent 12 months of employment with the Employer or its affiliates, or

(iii) that calls for the application of specialized knowledge or skills substantially related to those used by Executive in his activities during the most recent 12 months of employment with the Employer or its affiliates.

For purposes of this Agreement, “Competitive Enterprise” means any business enterprise that either (A) engages in any activity closely associated with commercial banking or the operation of an institution, the deposits of which are insured by the Federal Deposit Insurance Corporation, in a Restricted Territory, or (B) holds a 5% or greater equity, voting or profit participation interest in any enterprise that engages in such a competitive activity, and “Restricted Territory” means the geographic area of the state of Texas.

(c) Non-Solicitation. During the Restricted Period, Executive shall not, in any manner, directly or indirectly (without the prior written consent of Employer): (i) Solicit any Client to transact business with a Competitive Enterprise in a Restricted Territory or to reduce or refrain from doing any business with Employer or its Affiliates, (ii) transact business with any Client that would cause Executive to be a Competitive Enterprise in a Restricted Territory, (iii) intentionally and adversely interfere with or damage any relationship between Employer or its affiliates and a Client or (iv) Solicit anyone who is then an Executive of Employer or its affiliates (or who was an Executive of Employer or its affiliates within the prior 12 months) to resign from Employer or its affiliates or to apply for or accept employment with any other business or enterprise.

For purposes of this Agreement, a “Client” means any client of Employer or its affiliates to whom Executive provided services, or for whom Executive transacted business, or whose identity became known to Executive in connection with his relationship with or employment by Employer or its affiliates, and “Solicit” means any direct or indirect communication of any kind, regardless of who initiates it, that in any way invites, advises, encourages or requests any person to take or refrain from taking any action.

(d) Confidential Information. Executive hereby acknowledges that, as an Executive of Employer and its affiliates, he will be making use of, acquiring and adding to confidential information of a special and unique nature and value relating to Employer and its affiliates and their strategic plans, operations, financial condition and performance and such confidential information constitutes trade secrets of Employer and its affiliates. Executive further recognizes and acknowledges that all confidential information is the exclusive property of Employer and its affiliates, is material and confidential, and is critical to the successful conduct of the business of Employer and its affiliates. Accordingly, Executive hereby covenants and agrees that he will use confidential information for the benefit of Employer and its affiliates only and shall not at any time, directly or indirectly, during the Term of Employment and thereafter divulge, reveal or communicate any confidential information to any person, firm, corporation or entity whatsoever, or use any confidential information for his own benefit or for the benefit of others. Notwithstanding the foregoing, Executive shall be authorized to disclose confidential information (i) as may be required by law or legal process after providing Employer with prior written notice and an opportunity to respond to such disclosure (unless such notice is prohibited by law), (ii) in any criminal proceeding against him after providing Employer with prior written notice and an opportunity to seek

protection for such confidential information and (iii) with the prior written consent of Employer.

(e) Survival. Any termination of Executive’s employment, of the Term of Employment or of this Agreement (or breach of this Agreement by Executive or Employer) shall have no effect on the continuing operation of this Section 7.

(f) Validity. The terms and provisions of this Section 7 are intended to be separate and divisible provisions and if, for any reason, any one or more of them is held to be invalid or unenforceable, neither the validity nor the enforceability of any other provision of this Agreement shall thereby be affected. The parties hereto acknowledge that the potential restrictions on Executive’s future employment imposed by this Section 7 are reasonable in both duration and geographic scope and in all other respects. If for any reason any court of competent jurisdiction shall find any provisions of this Section 7 unreasonable in duration or geographic scope or otherwise, Executive and Employer agree that the restrictions and prohibitions contained herein shall be effective to the fullest extent allowed under applicable law in such jurisdiction.

(g) Consideration. The parties acknowledge that this Agreement would not have been entered into and the benefits described herein would not have been promised in the absence of Executive’s promises under this Section 7.

(h) Specific Enforcement; Cessation of Payments. Employer is entitled to an action or proceeding, in addition to its rights under Section 13 and whether or not an arbitration proceeding has been or is ever initiated, to temporarily, preliminarily or permanently enforce any part of Section 7(b), (c) or (d). Executive agrees that (i) Executive violating any part of Section 7(b), (c) or (d) would cause damage to Employer and its affiliates that cannot be measured or repaired, (ii) Employer therefore is entitled to an injunction, restraining order or other equitable relief restraining any actual or threatened violation of such Sections, (iii) no bond will need to be posted for Employer to receive such an injunction, order or other relief and (iv) no proof will be required that monetary damages for violations of Section 7(b), (c) or (d) would be difficult to calculate and that remedies at law would be inadequate. In addition to the other rights provided for in this Section 7(h), it is agreed that, if Executive breaches Section 7(b), (c) or (d), Employer’s obligation to make or provide payments or benefits under Section 6 shall cease, to the extent not already paid or provided.

(i) Notice to New Employers. Before Executive either applies for or accepts employment with any other person or entity while any of Section 7(b), 7(c) or 7(d) is in effect, Executive will provide the prospective employer with written notice of the provisions of this Section 7 and will deliver a copy of the notice to Employer.

8. Definitions.

(a) Accrued Compensation. “Accrued Compensation” shall mean, as of Executive’s termination of Employment, (i) unpaid salary, (ii) salary for any accrued

vacation not taken and (iii) unpaid expense reimbursements. Accrued Compensation will be paid in one lump sum as soon as reasonably practicable following such termination.

(b) Cause. Termination of employment for “Cause” shall mean:

(i) Executive’s willful failure to perform substantially Executive’s responsibilities to Employer or its affiliates under this Agreement, after demand for substantial performance has been given by BBVA that specifically identifies how Executive has not substantially performed his responsibilities. Cause does not, however, include failure resulting from Executive’s incapacity due to mental or physical illness or injury or from any permitted leave required by law;

(ii) Executive’s engagement in illegal conduct or in gross misconduct, in either case, that in any material respect causes financial or reputational harm to Employer or its affiliates;

(iii) Executive’s conviction of, or plea of guilty or nolo contendere to, a felony or crime of moral turpitude; or

(iv) Executive’s disqualification or bar by any governmental or self-regulatory authority from serving in the capacity contemplated by this Agreement or Executive’s loss of any governmental or self-regulatory license that is reasonably necessary for Executive to perform Executive’s responsibilities under this Agreement.

Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause hereunder unless and until there shall have been delivered to Executive a termination notice that (x) states that Executive is being terminated for Cause, (y) indicates the subsection of this definition that Employer is relying on and (z) provides reasonable detail of the facts providing the basis for that reliance and during a reasonable time to cure thereafter the Executive has failed to cure in all material respects any default or other circumstance upon which the termination for Cause is proposed to be based. The failure to include any fact in a termination notice that contributes to a showing of Cause does not preclude Employer from asserting that fact in enforcing its rights under this Agreement.

(c) Disability. “Disability” shall occur if Executive 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 (which need not be consecutive) during any twelve (12) month period. Executive shall be entitled to the disability benefits generally available to Executives of the Bank, and the disability payment provided for in Section 5(a) hereof shall be apart from and in addition to any disability benefits generally available to Executives of the Bank.

(d) Other Benefits. “Other Benefits” shall mean, as of Executive’s termination of Employment, accrued amounts or benefits required to be paid or provided

to Executive under any other plan, program, policy or arrangement of the Bank. Other Benefits shall be paid or provided for in accordance with the terms of such other plan, program, policy or arrangement except as otherwise specifically provided in this Agreement.

9. Compliance with Section 409A of the Code. To the extent required to comply with Section 409A of the Code (and the regulations thereunder), any compensation to be paid or benefits to be provided in connection with Executive’s termination of employment will be delayed until the earliest day on which such payments could be made or benefits provided in compliance (at which point all payments so-delayed shall be provided in one lump sum).

10. Governing Law. This Agreement is made and entered into in the State of Texas, without regard to conflict of laws rules, and the laws of Texas shall govern its validity and interpretation in the performance by the parties of their respective duties and obligations.

11. Entire Agreement. This Agreement constitutes the entire agreement between the parties concerning the employment of Executive and supercedes any prior written agreements (other than the Glen E. Roney Deferred Compensation Plan of March 11, 1997), and there are no representations, warranties or commitments, other than those in writing executed by all of the parties.

12. 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 Executive’s right to receive indemnification from such corporation or bank.

13. Arbitration. Except as otherwise expressly provided herein, 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 Executive or the termination thereof, shall be submitted to binding arbitration in accordance with the Voluntary Labor Arbitration Rules of the American Arbitration Association. Judgment upon the award rendered by the 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 Executive’s discharge or termination, Executive shall be awarded his or her costs, including attorneys’ fees, provided Executive substantially prevails on at least one claim.

14. Assistance in Litigation. Executive 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, Executives, subsidiaries, or

parent corporations of either, at no additional cost during the term of this Agreement or at any time following the termination of Executive’s employment for any reason.

15. Notices. Any notice or communication required or permitted to be given to the parties shall be delivered personally or sent by 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:

Texas Regional Bancshares, Inc.

3900 North 10th Street, 11th Floor

McAllen, Texas 78501

Attention: Paul Moxley

with a copy to BBVA:

BBVA USA

10001 Woodloch Forest Drive, Suite 610,

The Woodlands, Texas 77380

Attention: Peter Paulsen and Joaquin Gortari

(b) If to Executive:

Glen E. Roney

300 Burns Drive

McAllen, Texas 78503

16. Binding Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devises and legatees. This Agreement shall inure to the benefit of and be enforceable by Employer and any of its successors and assigns.

17. No Mitigation of Amounts Payable Hereunder. Executive 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 Executive as the result of employment by another employer after the date of termination, or otherwise.

18. Advice of Counsel. EXECUTIVE ACKNOWLEDGES THAT, IN EXECUTING THIS AGREEMENT, HE HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT.

THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.

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

20. 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 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 therefore such other provision as will most nearly accomplish the intent of the parties to the extent permitted by the applicable law.

21. 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.

	EXECUTIVE:

	/s/ G.E. Roney
	Glen E. Roney


	Texas Regional Bancshares, Inc.:


	By: /s/Paul Moxley
	Name:	Paul Moxley
	Title:

Annex A

INCENTIVE COMPENSATION PLAN AWARD

Minimum

Performance Goal: The quarterly minimum performance goal shall be equal to an increase in net income before federal income taxes of the Bank and other banks for which Executive serves as Chairman of the Board (collectively, whether one or more, called the “Relevant Banks”) of at least 8% for the fiscal quarter for which the measurement is being made as compared to the net income before federal income taxes of the Relevant Banks the same fiscal quarter during the previous year and (in the event of acquisitions) including pro forma results from the predecessor for periods prior to acquisition (the “Quarterly Minimum Performance Goal”). Notwithstanding the foregoing, the Quarterly Minimum Performance Goal shall exclude any extraordinary income or expense items and shall exclude holding company expense allocations, accruals, charges and similar items (the “Required Exclusions”).

Incentive Payment: The amount to be paid shall be equal to the percentage increase in net income before federal income taxes of the Relevant Banks for the fiscal quarter for which the measurement is being made as compared to net income before federal income taxes of the Relevant Banks for the same fiscal quarter during the previous year (the “Plan Award Measurement”). Notwithstanding the foregoing, the Plan Award Measurement shall not include any amounts attributable to Required Exclusions for the periods being measured. If the Quarterly Minimum Performance Goal for a particular quarter is not met, no award payment will be made hereunder. If the Quarterly Minimum Performance Goal for a particular quarter is met, the amount to be paid hereunder (the “Bonus Award”) shall be determined by reference to the following:

Plan Award Measurement				Bonus Award: Percentage of Pre-Tax Income
At least		but less than		Bonus Award: Percentage of Pre-Tax Income

8	%	8.5	%	.25	%
8.5	%	9	%	.275	%
9	%	9.5	%	.3	%
9.5	%	10	%	.35	%
10	%	10.5	%	.4	%
10.5	%	11	%	.5	%
11	%	11.5	%	.6	%
11.5	%	12	%	.7	%
12	%	12.5	%	.8	%
12.5	%	13	%	.9	%
13	%	13.5	%	1.0	%
13.5	%	14	%	1.1	%
14	%	14.5	%	1.2	%
14.5	%	15	%	1.3	%
15	%	15.5	%	1.4	%
15.5	%	no limit		1.5	%

Notwithstanding the foregoing, the Bonus Award shall not exceed the following limitations:

(a) Executive shall not receive more than a maximum of 2.5% of the total income before income taxes of the Relevant Banks for the year under this Incentive Compensation Plan in any calendar year, excluding any amounts attributable to Required Exclusions for the year; and

(b) Payments to the Executive under this Incentive Compensation Plan shall not exceed $5,000,000 for any calendar year.

Certification: The Compensation Committee of the Board of Directors of the Bank (the “Committee”) will review the financial results of the Relevant Banks, calculate the Plan Award Measurement and determine if the Quarterly Minimum Performance Goal has been met for the immediately preceding fiscal quarter. Payment of the Bonus Award will not be made unless the Committee has certified that the Quarterly Minimum Performance Goal has been met. The Bonus Award shall be determined based on financial information prepared in accordance with generally accepted accounting principles, with appropriate adjustments for stock splits and stock dividends, subject to adjustment for any amounts attributable to Required Exclusions for the periods being measured.

Payment of Awards: Subject to satisfaction of the Quarterly Minimum Performance Goal, the Bonus Award will be paid in cash in an amount equal to product of the adjusted pre-tax income of the Relevant Banks for the fiscal quarter for which the measurement is being made (after adjustment for any Required Exclusions), multiplied by the Bonus Award Percentage of Pre-Tax Income determined according to the Plan Award Measurement for that period by reference to the chart above. The Bonus Award will be paid prior to the expiration of one month following expiration of the fiscal quarter for which the Plan Award Measurement is being made. The Relevant Banks will deduct from the award payment any taxes required by law to be withheld with respect to such Bonus Awards.

Funding of Plan: The Bonus Award shall be unfunded. Neither the Relevant Banks nor any affiliate thereof shall be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of a Bonus Award.

Annex B

WAIVER AND RELEASE OF CLAIMS

In consideration of the payments and arrangements set forth in the employment agreement between you and Texas Regional Bancshares Inc., a Texas corporation (the “Company” and together with Banco Bilbao Vizcaya Argentaria SA, a private-law entity organized under the laws of Spain, the “Employer”), dated June 12, 2006 (the “Employment Agreement”) and incorporated herein by reference, you agree knowingly and voluntarily as follows:

1. Except as otherwise expressly provided herein, you knowingly and voluntarily waive and release forever whatever claims you ever had, now have or hereafter may have against Employer and any subsidiary or affiliate of Employer, and any of its present and former Executives, directors, officers and agents (collectively referred to as “Releasees”), based upon any offer, agreement, matter, occurrence or event existing or occurring prior to the execution of this waiver and release of claims, including anything relating to your employment by Employer or to the termination of such employment or to your status as a shareholder or creditor of Employer.

This release and waiver includes but is not limited to any rights or claims under United States federal, state or local law and the national or local law of any foreign country (statutory or decisional), for wrongful or abusive discharge, for breach of any contract, for misrepresentation, for breach of any securities laws, or for discrimination based upon race, color, ethnicity, sex, age, national origin, religion, disability, sexual orientation, or any other unlawful criterion or circumstance, including rights or claims under the Age Discrimination in Employment Act of 1967 (“ADEA”) (except that you do not waive ADEA rights or claims that may arise after the date of this agreement).

2. The payments received by you pursuant to the Employment Agreement shall be in lieu of any and all other amounts to which you might be, are now or may become entitled from Employer and, without limiting the generality of the foregoing, you hereby expressly waive any right or claim that you may have or assert to payment for salary, bonuses, medical, dental or hospitalization benefits, life insurance benefits or attorneys’ fees; provided, however, that notwithstanding any other provision of this agreement, you do not waive any of your rights and Employer shall comply with its obligations with respect to (i) the payments and arrangements set forth in the Employment Agreement and the Glen E. Roney Deferred Compensation Plan of March 11, 1997, and (ii) continuation coverage requirements under Section 4980B of the Internal Revenue Code of 1986, as amended (commonly referred to as “COBRA”).

3. You agree that you will not knowingly orally or in writing criticize, disparage or undermine the reputation of any Releasee to the extent such criticism, disparagement or undermining would cause more than de minimis harm to such Releasee’s reputation.

You acknowledge that the confidentiality provisions of the Employment Agreement survive termination of the Employment Agreement and the execution of this Waiver and Release of Claims.

Notwithstanding anything herein to the contrary, you hereby expressly agree that the severance payment and arrangements set forth in the Employment Agreement may be offset by any amounts you owe to Employer or any of its subsidiaries or affiliates.

Your signature below will also constitute confirmation that you have (i) made such waivers, releases, agreements and confirmation in consideration for the severance payment and other arrangements set forth in the Employment Agreement, (ii) been given at least 21 days within which to consider this Settlement Agreement and its consequences, and (iii) been advised prior to signing this release and waiver of claims to consult, and have consulted, with an attorney of your choice. For a period of seven days following the execution of this release of claims, you may revoke this release, and forfeit any right you have to the severance payments and other arrangements described under the Employment Agreement.

This release and waiver of claims shall be governed by the laws of the State of Texas, without regard to principles of conflict of laws.

	AGREED AND CONFIRMED:





	Date: June 12, 2006

ADDENDUM TO

EMPLOYMENT AGREEMENT

This Addendum to Employment Agreement is executed to be effective as of June 13, 2006, by and between Glen E. Roney (“Executive”) and Texas Regional Bancshares, Inc. (the “Company”) dated June 12, 2006 (the “Employment Agreement”).

Pursuant to section 4(b) of the Employment Agreement, Executive is entitled to receive an incentive bonus under the terms of the incentive bonus plan attached to the Employment Agreement beginning January 1, 2007 and (with certain exceptions described in the Employment Agreement) until the later of the expiration of twenty-four months from the date of the Employment Agreement or the date that the Executive resigns or is removed as full-time Chairman of the Board of the Company and/or its Texas State Bank.

As an additional option, at the expiration of twenty-four months from the date of the Employment Agreement and thereafter for the Term of Employment, the Company may (but shall not be obligated to) present to the Executive alternative incentive programs as substitutes for the incentive bonus plan attached to the Employment Agreement. Upon presentation of the replacement incentive bonus plan to the Executive, the Executive, if remaining as full-time Chairman of the Board of the Company and/or its Texas State Bank, shall have the option to either continue the existing incentive bonus plan attached to the Employment Agreement as Annex A or accept the proposed substitute incentive bonus plan. Nothing herein shall be construed to limit or restrict the Employer’s right to remove the Executive as, or the Executive’s right to resign as, the full-time Chairman of the Board after the expiration of twenty-four months following the date of the Employment Agreement (as a result of which the incentive bonus plan attached to the Employment Agreement shall terminate), whether or not an alternative incentive bonus plan is presented.

Executed to be effective as of the date first written above.

Texas Regional Bancshares, Inc.

By:	/s/ Paul S. Moxley
		Paul S. Moxley,
		Executive Vice President


/s/ G.E. Roney
Glen E. Roney

EX-2.2 3 a06-13659_5ex2d2.htm EX-2

Exhibit 2.2

EMPLOYMENT AGREEMENT

between

TEXAS REGIONAL BANCSHARES, INC.

and

PAUL S. MOXLEY

This Employment Agreement (“Agreement”) is made and entered into by and between Texas Regional Bancshares, Inc., a Texas corporation (the “Company”) and Paul S. Moxley (“Employee”).

Recitals

A. Employee is an employee of the Company serving as a President — Texas State Bank.

B. The Company and Employee desire to enter into an agreement embodying the terms of Employee’s employment with the Company.

Agreement

NOW, THEREFORE, in consideration of the foregoing and the mutual promises set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Employee agree as follows:

1. Effective Date. This Agreement shall be effective as of June 12, 2006 (the “Effective Date”).

2. Term of Employment. Subject to earlier termination as provided in this Agreement, the original term of this Agreement shall begin on the Effective Date and shall end on June 11, 2009; provided, however, that this Agreement shall be automatically extended as of the end of the initial or any renewal Term hereof for successive terms of one (1) year each (the original term plus any extensions of the term are hereinafter referred to as the “Term”) unless either party provides written notice not to so extend to the other party at least sixty (60) calendar days before the scheduled expiration of the Term, in which case no further automatic extension shall occur and the Term shall end on the scheduled expiration date.

3. Position and Responsibilities. During the Term, Employee agrees to serve as President — Texas State Bank of the Company or in such other position as the Board of Directors and Chief Executive Officer of the Company (the “Board”) may designate. In this capacity the Employee shall have such duties, authorities and responsibilities as are designated from time to time by the Board of Directors and Chief Executive Officer of the Company.

4. Standard of Care. During the Term, Employee (a) will devote his or her full working time, attention, energies and skills exclusively to the business and affairs of the Company and its subsidiaries; (b) will exercise the highest degree of loyalty and the highest standards of conduct in the performance of his or her duties; (c) will not, except as noted herein, engage in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, without the express written consent of the Company; and (d) will not take any action that deprives the

Company of any business opportunities or otherwise act in a manner that conflicts with the best interests of the Company or that is detrimental to the business of the Company; provided, however, this Section 4 shall not be construed as preventing Employee (y) from investing his or her personal assets in such form or manner as will not require his or her services in the daily operations and affairs of the businesses in which such investments are made, or (z) from participating in charitable or other not-for-profit activities as long as such activities do not interfere with Employee’s work for the Company (or its affiliates).

5. Compensation and Benefits. As remuneration for all services to be rendered by Employee during the Term, and as consideration for complying with the covenants herein, the Company shall pay and provide to Employee the following:

5.1. Annual Base Salary. The Company shall pay Employee an annual base salary of Three Hundred Seventy Thousand and no/100 Dollars ($370,000.00) (the “Annual Base Salary”). The Company shall review the Annual Base Salary not less than approximately once each year during the Term to determine, at the discretion of the Company, whether the Annual Base Salary should be increased and, if so, the amount of such adjustment and the time at which the adjustment should take effect. The Annual Base Salary shall be paid to Employee in periodic installments consistent with the customary payroll practices of the Company.

5.2. Incentive Bonus. Employee shall be entitled to participate during the Term in any incentive bonus plan which the Company may adopt and implement from time to time during the Term for the benefit of persons serving in the Employee’s specific position. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any incentive bonus plan, so long as such changes are similarly applicable to other employees under such plan.

5.3. Employee Benefits. The Company shall provide to Employee all employee fringe benefits to which other employees of the Company are generally entitled, commensurate with his or her position with the Company and subject to the eligibility requirements and other terms and conditions of such plans, including health and life insurance coverage from time to time adopted as the life, health and disability insurance plans for employees of the Company generally. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any employee fringe benefit plan, so long as such changes are similarly applicable to other employees generally.

5.4. Vacation. The Employee shall be entitled to 20 business days of paid vacation in each calendar year in accordance with the Company’s personnel policies as in effect from time to time during the term hereof, which vacation days shall be taken at such times as are consistent with the Employee’s responsibilities.

5.5. Other Compensation Plans. The Employee shall be eligible to participate in any other compensation plan or program maintained by the Company from time for employees of the Company generally on terms and conditions that are comparable to those applicable to all other Employees.

6. Reimbursement of Business Expenses. The Company shall pay or reimburse Employee for all ordinary and necessary expenses, in a reasonable amount, which are approved as required by the Company’s policies, and which Employee incurs in performing his or her duties under this Agreement. Such expenses shall be paid or reimbursed to Employee consistent with the expense reimbursement

policies of the Company in effect from time to time and Employee agrees to abide by any such expense reimbursement policies.

7. Termination of Employment.

7.1. Termination Due to Death. If Employee dies during the Term, this Agreement shall terminate on the date of Employee’s death. Upon the death of Employee, the Company’s obligation to pay and provide to Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee or Employee’s legal representative that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee or Employee’s legal representative such other payments and benefits, if any, which had accrued hereunder before Employee’s death. Other than the foregoing, the Company shall have no further obligations to Employee (or Employee’s legal representatives, including Employee’s estate, heirs, executors, administrators and personal representatives) under this Agreement.

7.2. Termination Due to Disability.

a. If Employee suffers a Disability (as hereafter defined), the Company shall have the right to terminate this Agreement and Employee’s employment with the Company. The Company shall deliver written notice to Employee of the Company’s termination because of Disability, pursuant to this Section 7.2, specifying in such notice a termination date not less than fifteen (15) calendar days after the giving of the notice (the “Disability Notice Period”), and this Agreement, and Employee’s employment by the Company, shall terminate at the close of business on the last day of the Disability Notice Period.

b. Upon the termination of this Agreement because of Disability, the Company’s obligation to pay and provide to Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee such other payments and benefits, if any, which had accrued hereunder before the termination for Disability. Other than the foregoing, the Company shall have no further obligations to Employee under this Agreement.

c. The term “Disability” shall mean either (i) when Employee is deemed disabled in accordance with the long-term disability insurance policy or plan of the Company in effect at the time of the illness or injury causing the disability or (ii) the inability of Employee, because of injury, illness, disease or bodily or mental infirmity, to perform the essential functions of his or her job (with or without reasonable accommodation) for more than one hundred twenty (120) days during any period of twelve (12) consecutive months.

7.3. Termination by the Company Without Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company without cause for any reason or no reason by notifying Employee in writing of the Company’s intent to terminate, specifying in such notice the effective termination date, and this Agreement and Employee’s employment with the

Company shall terminate at the close of business on the termination date specified in the Company’s notice.

b. Upon termination of Employee’s employment by the Company without cause other than within six (6) months before or within two (2) years after a Change in Control (a “Window Period”), the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee severance compensation after the termination of employment equal to the Employee’s Annual Base Salary at the rate of Annual Base Salary in effect immediately prior to termination for a period of one year following the date of termination of employment; provided, however, if such severance compensation exceeds two times the maximum amount that may be taken into account under a qualified plan pursuant to section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) in the year of such termination, and Employee is a “specified employee” within the meaning of Internal Revenue Code section 409A(a)(2)(B)(i), the severance compensation shall be paid in a lump sum on the date that is six months following the termination of employment.

c. Upon termination of Employee’s employment by the Company without cause during a Window Period, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee within (30) days following such a termination or, if later, such a Change in Control, a lump sum severance payment in an amount equal to the product of three (3) multiplied by the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.4. Termination by the Company For Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company for Cause as provided in this Section.

b. For purposes of this Agreement, “Cause” shall mean the occurrence of one or more of the following events: (a) Employee’s conviction for a felony or of any crime involving moral turpitude; (b) Employee’s engaging in any illegal conduct or willful misconduct in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (c) Employee’s engaging in any fraudulent or dishonest conduct in his or her dealings with, or on behalf of, the Company (or its subsidiaries or affiliates); (d) Employee’s failure or refusal to follow the lawful instructions of the Company, if such failure or refusal continues for a period of five (5) calendar days after the Company delivers to Employee a written notice stating the instructions which Employee has failed or refused to follow; (e) Employee’s breach of any of Employee’s obligations under this Agreement; (f) Employee’s gross or habitual negligence in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (g) Employee’s engaging in any conduct tending to bring the Company into public disgrace or disrepute or to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates);

(h) Employee’s material violation of the Company’s business ethics or conflict-of-interest policies, as such policies currently exist or as they may be amended or implemented during Employee’s employment with the Company; (i) Employee’s misuse of alcohol or illegal drugs which interferes with the performance of Employee’s employment duties for the Company or which compromises the reputation or goodwill of the Company; (j) Employee’s intentional violation of any applicable banking law or regulation in the performance of Employee’s employment duties for the Company; or (k) Employee’s failure to abide by any employment rules or policies applicable to the Company’s employees generally that Company currently has or may adopt, amend or implement from time to time during Employee’s employment with the Company.

c. Upon the occurrence of any of the events specified as Cause above, the Company may terminate Employee’s employment for Cause by notifying Employee in writing of its decision to terminate his or her employment for Cause, and Employee’s employment and this Agreement shall terminate at the close of business on the date on which the Company gives such notice.

d. Upon termination of Employee’s employment by the Company for Cause, the Company’s obligation to pay or provide Employee compensation and benefits under this Agreement shall terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee such other payments or benefits, if any, which had accrued hereunder before the termination date. Other than the foregoing, the Company shall have no further obligations to Employee under this Agreement.

7.5. Termination by Employee For Good Reason.

a. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company by giving the Company written notice of termination for Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following:

(i) a material breach by the Company of any provision of this Agreement which is not cured by the Company within ten (10) days of receipt by the Company of written notice from Employee specifying with particularity the existence and nature of the breach; or

(ii) the occurrence of any one of the following events during a Window Period:

(A) A reduction by the Company in Employee’s salary from the level of such salary immediately prior to the Change in Control.

(B) The Company’s requiring Employee to be based anywhere other than the metropolitan area where the Company office at which he was based immediately prior to the earlier of the termination of employment or the Change in Control was located, except for required travel on the Company’s business in accordance with the Company’s past management practices.

b. If this Agreement and Employee’s employment are terminated by Employee for Good Reason other than during a Window Period, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee severance compensation after the termination of employment equal to the Employee’s Annual Base Salary at the rate of Annual Base Salary in effect immediately prior to termination for a period of one year following the date of termination of employment. Any payments of Annual Base Salary shall be made in accordance with the Company’s normal payroll policies and procedures, and shall be subject to withholding and other deductions as required by law.

c. If this Agreement and Employee’s employment are terminated by Employee for Good Reason during a Window Period, the Company’s obligation to pay or provide Employee compensation and benefits under this Agreement shall terminate, except (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments or benefits, if any, which had accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee within (30) days following such a termination or, if later, such a Change in Control, a lump sum severance payment in an amount equal to the product of three (3) multiplied by the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

d. Notwithstanding anything to the contrary in this Agreement, if Employee is a “specified employee” within the meaning of Internal Revenue Code section 409A(a)(2)(B)(i), the payments provided under Section 7.5b.(c) and 7.5c.(c) above that are to be paid upon a termination of employment shall not be paid until the date that is six months following the termination of employment, and the payment provided in Section 7.5b.(c) shall be paid in a lump sum. For purposes of determining whether Employee is a specified employee under this Agreement, the “identification date” as described in Proposed Treasury Regulation §1.409A-1(i) shall be June 12.

7.6. Termination By Employee Without Good Reason. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company for reasons other than Good Reason or for no reason by giving the Company written notice of termination, specifying in such notice a termination date not less than ten business days after the giving of the notice (the “Employee’s Notice Period”), and Employee’s employment with the Company shall terminate at the close of business on the last day of Employee’s Notice Period; provided, however, that in response to Employee’s notice of termination, the Company shall have the right to accelerate the Employee’s Notice Period as it deems advisable and it shall still be considered a termination of employment by Employee without Good Reason. Upon termination of Employee’s employment with the Company under this Section, whether at the end of Employee’s Notice Period or earlier as designated by the Company, the Company’s obligation to pay Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee such other payments and benefits, if any, which had

accrued hereunder before the termination date. Other than the foregoing, the Company shall have no further obligations to Employee under this Agreement.

7.7. Non-Renewal By Employee. In the event the Employee elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of Employee’s non-renewal of this Agreement, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Employee has elected to terminate his or her employment without Good Reason.

7.8. Non-Renewal by the Company. In the event the Company elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of the Company’s non-renewal of this Agreement, the Company shall be considered to have elected to terminate Employee’s employment without cause and the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Company has elected to terminate the Employee’s employment without cause hereunder.

7.9. Forfeiture of Compensation. In the event Employee breaches any of the non-disclosure or restrictive covenant provisions of this Agreement, Employee immediately shall (a) forfeit his or her right to receive (and the Company shall no longer be obligated to pay) any severance compensation under this Agreement, and (b) forfeit any unexercised stock options and/or other rights granted under any stock option or equity compensation plans of the Company, whether or not they are then exercisable, notwithstanding anything to the contrary in the agreements evidencing such stock options or other equity compensation rights. The Company and Employee acknowledge and agree that the foregoing remedies are in addition to, and not in lieu of, any and all other legal and/or equitable remedies that may be available to Company in connection with Employee’s breach or threatened breach, of any non-disclosure or restrictive covenant provision set forth in this Agreement.

7.10. Resignation as Officer and/or Director Upon Employment Termination. In the event Employee’s employment with the Company terminates for any reason (including, without limitation, pursuant to this Section 7), Employee agrees and covenants that he will immediately resign any and all positions, including, without limitation, as an officer and/or member of the Board of Directors, he may hold with the Company or any of its subsidiaries or affiliates.

7.11 Change in Control Definition. For purposes of this Agreement, “Change in Control” shall mean a Change in the Actual Control of the Company, as described in Section 7.11(a)(i), a Change in Effective Control, as described in Section 7.11(a)(ii), and a Change in the Ownership of the Company’s Assets, as described in Section 7.11(a)(iii).

(i) Change in Actual Control shall mean the acquisition by any one person, or more than one person acting as a group (as defined in Section (iv), below) of ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company. However, if any one person, or more than one person acting as a

group, is considered to own more than 50 percent of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the Company (or to cause a change in the effective control of the Company (within the meaning of Section 7.11(a)(ii)). An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this section.

(ii) Change in Effective Control shall mean: (A) The acquisition by any one person, or more than one person acting as a group (as defined in Section (iv), below), during any 12-month period of stock of the Company possessing 35 percent or more of the total voting power of the stock of the Company; or (B) The replacement, of a majority of members of the Company’s board of directors during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s board of directors prior to the date of the appointment or election in accordance with Treasury Regulation § 1.409A-1(g)(5)(iv)(A)(2). Notwithstanding the foregoing, if any one person, or more than one person acting as a group, is considered to effectively control the Company (within the meaning of this Section (ii)), the acquisition of additional control of the Company by the same person or persons is not considered to cause a Change in Control.

(iii) Change in the Ownership of the Company’s Assets shall mean the acquisition by any one person, or more than one person acting as a group (as defined in Section (iv), below), during any 12-month period of assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. Notwithstanding the foregoing, there is no change in control event under this section when there is a transfer to an entity that is controlled by the shareholders of the Company immediately after the transfer.

(iv) Persons acting as a group. For purposes of this Section 7.11(a), persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the corporation. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

7.12 Payroll Policies and Withholding. Any payments to be made under this Agreement shall be made in accordance with the Company’s normal payroll policies and procedures, and shall be subject to withholding and other deductions as required by law.

7.13 Severance Release. Employee acknowledges and agrees that the Company’s payment of the severance compensation pursuant to this Section 7 shall be deemed to constitute a full settlement and discharge of any and all obligations of the Company to Employee arising out

of this Agreement, Employee’s employment with the Company and/or the termination of Employee’s employment with the Company, except for any vested rights Employee may have under any insurance, stock option or equity compensation plan or any other employee benefit plans sponsored by the Company.

7.14 Stay-On Bonus. As an inducement to Employee to remain in the employ of the Company during and following a Change in Control, in the event that the Employee remains an employee of the Company or its subsidiary or affiliate for a period of at least one year following a Change in Control, in addition to Employee’s regular annual salary, bonus and other compensation to which the Employee may be entitled, the Company shall pay Employee at and as of the anniversary date of the Change in Control, as a special one-time stay-on bonus, a lump sum payment in an amount equal to the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.15 Retirement Benefits. In the event that the Employee’s employment and this Agreement are not terminated until at or following normal retirement age of at least sixty-five (65) years of age, and for so long thereafter that the Employee and members of Employee’s household do not accept full or part time employment with a company that provides competing products or services to those provided by the Company, Employee will be entitled to participate in Employer-sponsored or provided benefits available to Employer’s retirees generally including any retiree health insurance coverage made available to retirees from the Employer on the terms and subject to the conditions and requirements as may be imposed by the Employer on the Employer’s retired employees generally. Employee understands that while the Employer presently makes health insurance coverage available to retired employees, Employer is under no obligation to continue to make that coverage available, and such coverage is only available to a retired employee if the retiree makes timely payment of insurance premiums to continue the coverage.

7.16 Section 280G Excise Tax. If any benefit payable under this Agreement in the context of a Change in Control, when combined with other benefits payable to the Employee as a result of a Change in Control, is subject to an excise tax under Internal Revenue Code sections 280G and 4999, the Company shall pay to the Employee an additional amount (the “Gross-Up”) equal to the excise penalty tax amount divided by the sum of one minus the sum of the penalty tax rate plus the Employee’s marginal income tax rate. The Gross-Up shall be paid in a lump sum within 60 days of termination of employment following a Change in Control, or, if the termination of employment occurred prior to such Change in Control, within 60 days following such Change in Control.

7.17 Nondisparagement. It is a condition to the obligation of the Company to make any payments payable under this Agreement following termination of employment, whether such termination is at the election of the Employee or by the Company, that the Employee not make any statements, publicly or privately, orally or in writing or by electronic communication, that slander, defame or disparage the Company (or its subsidiaries or affiliates) and its reputation in the communities which it serves, or in the investment community at large, or which would tend to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates).

8. Non-Disclosure. Employee acknowledges that during the course of Employee’s employment by the Company Employee will be creating, making use of, acquiring, and/or adding to confidential information relating to the business and affairs of the Company, and its subsidiaries, affiliates

and customers, which information will include, without limitation, procedures, methods, manuals, lists of customers, suppliers and other contacts, marketing plans, business plans, financial data, and personnel information. Employee covenants and agrees that Employee shall not, at any time during Employee’s employment with the Company, or thereafter, directly or indirectly, use, divulge or disclose for any purpose whatsoever any of the Company’s, or its subsidiaries’, affiliates’ or customers’, confidential information or trade secrets, except in the course of Employee’s work for and on behalf of the Company and its subsidiaries and affiliates. Upon the termination of Employee’s employment with the Company, or at the Company’s request, Employee shall immediately deliver to the Company any and all records, documents, or electronic data (in whatever form or media), and all copies thereof, in Employee’s possession or under Employee’s control, whether prepared by Employee or others, containing confidential information or trade secrets relating to the Company, or its subsidiaries, affiliates or customers. Employee acknowledges and agrees that his or her obligations under this Section shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason. As used herein the term customer includes any other person to whom the Company owes a duty of confidentiality by law, bank regulatory requirement or internal policy.

9. Restrictive Covenants. Employee acknowledges that the following covenants are ancillary to the other agreements of the Company as herein contained, including the commitment to make certain payments to Employee and other enforceable covenants as herein provided, and are ancillary to the agreements pursuant to which the Company now or in the future may grant benefits to the Employee, including the grant of stock options and other equity rights, and that but for the agreements herein contained the Company would not extend such benefits or grant such options or other rights. Employee acknowledges that in connection with his or her employment with the Company he or she has provided and will continue to provide Employee-level services that are of a unique and special value and that he has been and will continue to be entrusted with confidential and proprietary information concerning the Company and its affiliates. Employee further acknowledges that the Company and its subsidiaries and affiliates are engaged in highly competitive businesses and that the Company and its subsidiaries and affiliates expend substantial amounts of time, money and effort to develop trade secrets, business strategies, customer relationships, employee relationships and goodwill, and Employee has benefited and will continue to benefit from these efforts. Therefore, as an essential part of this Agreement, Employee agrees and covenants to comply with the following restrictive covenants.

9.1. Non-Competition. During Employee’s employment with the Company and during the Noncompete Restrictive Period, Employee will not, in the Restricted Geographic Area, engage in any Competitive Business. For purposes of this Agreement, the term “Noncompete Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. For purposes of this Agreement, the term “Restricted Geographic Area” means and includes the following counties in Texas: Hidalgo, Starr, Cameron & Willacy. For purposes of this Agreement, the term “Competitive Business” means any business that is traditionally engaged in by a bank, a bank holding company or a financial holding company, or that provides products and services similar to and competitive with the products and services provided by the Company or any of its subsidiaries or affiliates. Notwithstanding the foregoing, Employee may make and retain investments equal to less than one percent of the equity of any entity engaged in a Competitive Business, if such equity is listed on a national securities exchange or regularly traded in a nationally-recognized over-the-counter market.

9.2. Non-Solicitation of Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not provide, sell,

market or endeavor to provide, sell or market any Competing Products/Services to any of the Company’s Customers, or otherwise solicit or communicate with any of the Company’s Customers for the purpose of selling or providing any Competing Products/Services. For purposes of this Agreement, the term “Non-Solicitation Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. Also for purposes of this Agreement, the term “Competing Products/Services” means any products or services the same as or similar to or competitive with the products or services offered by the Company or any of its subsidiaries, and the term “Company’s Customers” means any person or entity that has engaged in any banking services with, or has purchased any products or services from, the Company or any of its subsidiaries at any time during the twelve (12) months next preceding the commencement of the Non-Solicitation Restrictive Period.

9.3. Non-Interference With Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s Customers to terminate their business with the Company or any of its subsidiaries or affiliates or to cancel, reduce, limit or in any manner interfere with the Company’s Customers’ business with the Company.

9.4. Non-Interference With Contractors and Vendors. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s independent contractors, subcontractors, consultants, vendors or suppliers to terminate their relationship with, or representation of, the Company or to cancel, withdraw, reduce, limit, or in any manner modify any of such person’s or entity’s business with, or representation of, the Company or any of its subsidiaries or affiliates.

9.5. Non-Solicitation of Employees. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not solicit, recruit, hire, employ or attempt to hire or employ, or assist anyone in the recruitment or hiring of, any person who is an employee of the Company or who was an employee during the two year period next preceding the commencement of the Non-Solicitation Restrictive Period, or urge, influence, induce or seek to induce any employee of the Company to terminate his or her relationship with the Company.

9.6. Direct or Indirect Activities. Employee acknowledges and agrees that the covenants contained in this Section 9 prohibit Employee from engaging in certain activities directly or indirectly, whether on Employee’s own behalf or on behalf of any other person or entity, and regardless of the capacity in which Employee is acting, including without limitation as an employee, independent contractor, owner, partner, officer, agent, consultant, or advisor.

9.7. Survival of Restrictive Covenants. Employee acknowledges and agrees that his or her obligations under this Section 9 shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason.

9.8. Extension. In the event Employee violates any of the restrictive covenants contained in this Section 9, the duration of such restrictive covenant shall automatically be extended by the length of time during which Employee was in violation of such restriction.

9.9. Severability; Modification of Restrictions. Although Employee and the Company consider the restrictions contained in this Section 9 to be reasonable, particularly given the competitive nature of the Company’s business and Employee’s position with the Company, Employee and the Company acknowledge and agree that: (a) if any covenant, subsection, portion or clause of this Section 9 is determined to be unenforceable or invalid for any reason, such unenforceability or invalidity shall not affect the enforceability or validity of the remainder of the Agreement; and (b) if any particular covenant, subsection, provision or clause of this Section 9 is determined to be unreasonable or unenforceable for any reason, including, without limitation, the time period, geographic area, and/or scope of activity covered by any restrictive covenant, such covenant, subsection, provision or clause shall automatically be deemed reformed such that the contested covenant, subsection, provision or clause shall have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so reformed to whatever extent would be reasonable and enforceable under applicable law.

10. Remedies. Employee recognizes that a breach or threatened breach by Employee of this Agreement, including the covenants in Section 8 and Section 9 hereof, will give rise to irreparable injury to the Company and that money damages will not be adequate relief for such injury. Employee agrees that the Company shall be entitled to obtain injunctive relief, including, but not limited to, temporary restraining orders, preliminary injunctions and/or permanent injunctions, without having to post any bond or other security, to restrain or prohibit such breach or threatened breach, in addition to any other legal remedies which may be available, including the recovery of money damages.

11. Assignment.

11.1. Assignment by Company. The rights and obligations of the Company under this Agreement shall inure to the benefit of and be binding upon any and all successors and assigns of the Company, including without limitation by asset assignment, stock sale, merger, consolidation or other corporate reorganization.

11.2. Non-Assignment by Employee. The services to be provided by Employee to the Company hereunder are personal to Employee, and Employee’s duties may not be assigned by Employee.

12. Notice. Any notice required or permitted under this Agreement shall be in writing and either delivered personally or sent by nationally recognized overnight courier, express mail, or certified or registered mail, postage prepaid, return receipt requested, at the following respective address unless the party notifies the other party in writing of a change of address:

If to the Company:

Texas Regional Bancshares, Inc.

3900 North 10th Street, 11th Floor

McAllen, Texas 78502

Attention: Glen E. Roney, Chief Executive Officer

With a copy to:

William A. Rogers, Jr.

Rogers & Whitley, LLP

2210 San Gabriel

Austin, Texas 78705

If to Employee:

Paul S. Moxley

605 Xanthisma

McAllen, Texas 78504

A notice delivered personally shall be deemed delivered and effective as of the date of delivery. A notice sent by overnight courier or express mail shall be deemed delivered and effective one (1) day after it is deposited with the postal authority or commercial carrier, with delivery costs prepaid. A notice sent by certified or registered United States mail, with return receipt requested and postage prepaid, shall be deemed delivered and effective two (2) days after it is deposited with the United States Postal Service.

13. Miscellaneous.

13.1. Entire Agreement. This Agreement supersedes any prior agreements or understandings, oral or written, between the parties hereto, with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto.

13.2. Modification. This Agreement shall not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement of the parties in a written instrument executed by Employee and a duly authorized officer of the Company.

13.3. Counterparts. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

13.4. Tax Withholding. The Company may withhold from any compensation or benefits payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

13.5. Contractual Rights to Benefits. Nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder.

13.6. No Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions of this Agreement shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.

13.7. Governing Law; Choice of Forum. To the extent not preempted by federal law, the provisions of this Agreement shall be construed and enforced in accordance with the laws of the State of Texas, notwithstanding any state’s choice-of-law or conflicts-of-law rules to the contrary. The Company and Employee further acknowledge and agree that this Agreement is intended, among other things, to supplement and add to, and not to substitute for, the obligations of the Employee under the provisions of the Uniform Trade Secrets Act, as amended from time to time, and the duties Employee owes to the Company under the common law, including, but not limited to, the duty of loyalty. The parties agree that any legal action pursuant to Section 10 of this Agreement shall be commenced and maintained exclusively before any court of competent jurisdiction in Hidalgo County, Texas, and the parties hereby submit to the jurisdiction and venue of such courts and waive any right to challenge or otherwise object to personal jurisdiction or venue in any action commenced or maintained in such courts.

[Remainder of page left blank intentionally;

Signature lines follow.]

IN WITNESS WHEREOF, Employee and the Company have executed this Agreement, intending it to be effective as of the Effective Date.

	TEXAS REGIONAL BANCSHARES, INC.



	By:	/s/ G.E. Roney
		Glen E. Roney, Chairman of the Board



	/s/ Paul S. Moxley
	Paul S. Moxley, President — Texas State Bank

EX-2.3 4 a06-13659_5ex2d3.htm EX-2

Exhibit 2.3

EMPLOYMENT AGREEMENT

between

TEXAS REGIONAL BANCSHARES, INC.

and

JOHN A. MARTIN

This Employment Agreement (“Agreement”) is made and entered into by and between Texas Regional Bancshares, Inc., a Texas corporation (the “Company”) and John A. Martin (“Employee”).

Recitals

A. Employee is an employee of the Company serving as a Executive Vice President & Chief Financial Officer — Texas Regional Bancshares, Inc. and Texas State Bank.

B. The Company and Employee desire to enter into an agreement embodying the terms of Employee’s employment with the Company.

Agreement

1. Effective Date. This Agreement shall be effective as of June 12, 2006 (the “Effective Date”).

2. Term of Employment. Subject to earlier termination as provided in this Agreement, the original term of this Agreement shall begin on the Effective Date and shall end on June 11, 2009; provided, however, that this Agreement shall be automatically extended as of the end of the initial or any renewal Term hereof for successive terms of one (1) year each (the original term plus any extensions of the term are hereinafter referred to as the “Term”) unless either party provides written notice not to so extend to the other party at least sixty (60) calendar days before the scheduled expiration of the Term, in which case no further automatic extension shall occur and the Term shall end on the scheduled expiration date.

3. Position and Responsibilities. During the Term, Employee agrees to serve as Executive Vice President & Chief Financial Officer — Texas Regional Bancshares, Inc. and Texas State Bank of the Company or in such other position as the Board of Directors and Chief Executive Officer of the Company (the “Board”) may designate. In this capacity the Employee shall have such duties, authorities and responsibilities as are designated from time to time by the Board of Directors and Chief Executive Officer of the Company.

4. Standard of Care. During the Term, Employee (a) will devote his or her full working time, attention, energies and skills exclusively to the business and affairs of the Company and its subsidiaries; (b) will exercise the highest degree of loyalty and the highest standards of conduct in the performance of his or her duties; (c) will not, except as noted herein, engage in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, without the express written consent of the Company; and (d) will not take any action that deprives the

Company of any business opportunities or otherwise act in a manner that conflicts with the best interests of the Company or that is detrimental to the business of the Company; provided, however, this Section 4 shall not be construed as preventing Employee (y) from investing his or her personal assets in such form or manner as will not require his or her services in the daily operations and affairs of the businesses in which such investments are made, or (z) from participating in charitable or other not-for-profit activities as long as such activities do not interfere with Employee’s work for the Company (or its affiliates).

5. Compensation and Benefits. As remuneration for all services to be rendered by Employee during the Term, and as consideration for complying with the covenants herein, the Company shall pay and provide to Employee the following:

5.1. Annual Base Salary. The Company shall pay Employee an annual base salary of Two Hundred Fifty-Five Thousand and no/100 Dollars ($255,000.00) (the “Annual Base Salary”). The Company shall review the Annual Base Salary not less than approximately once each year during the Term to determine, at the discretion of the Company, whether the Annual Base Salary should be increased and, if so, the amount of such adjustment and the time at which the adjustment should take effect. The Annual Base Salary shall be paid to Employee in periodic installments consistent with the customary payroll practices of the Company.

5.2. Incentive Bonus. Employee shall be entitled to participate during the Term in any incentive bonus plan which the Company may adopt and implement from time to time during the Term for the benefit of persons serving in the Employee’s specific position. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any incentive bonus plan, so long as such changes are similarly applicable to other employees under such plan.

5.3. Employee Benefits. The Company shall provide to Employee all employee fringe benefits to which other employees of the Company are generally entitled, commensurate with his or her position with the Company and subject to the eligibility requirements and other terms and conditions of such plans, including health and life insurance coverage from time to time adopted as the life, health and disability insurance plans for employees of the Company generally. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any employee fringe benefit plan, so long as such changes are similarly applicable to other employees generally.

5.4. Vacation. The Employee shall be entitled to 20 business days of paid vacation in each calendar year in accordance with the Company’s personnel policies as in effect from time to time during the term hereof, which vacation days shall be taken at such times as are consistent with the Employee’s responsibilities.

5.5. Other Compensation Plans. The Employee shall be eligible to participate in any other compensation plan or program maintained by the Company from time for employees of the Company generally on terms and conditions that are comparable to those applicable to all other Employees.

6. Reimbursement of Business Expenses. The Company shall pay or reimburse Employee for all ordinary and necessary expenses, in a reasonable amount, which are approved as required by the Company’s policies, and which Employee incurs in performing his or her duties under this Agreement. Such expenses shall be paid or reimbursed to Employee consistent with the expense reimbursement

policies of the Company in effect from time to time and Employee agrees to abide by any such expense reimbursement policies.

7. Termination of Employment.

7.1. Termination Due to Death. If Employee dies during the Term, this Agreement shall terminate on the date of Employee’s death. Upon the death of Employee, the Company’s obligation to pay and provide to Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee or Employee’s legal representative that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee or Employee’s legal representative such other payments and benefits, if any, which had accrued hereunder before Employee’s death. Other than the foregoing, the Company shall have no further obligations to Employee (or Employee’s legal representatives, including Employee’s estate, heirs, executors, administrators and personal representatives) under this Agreement.

7.2. Termination Due to Disability.

a. If Employee suffers a Disability (as hereafter defined), the Company shall have the right to terminate this Agreement and Employee’s employment with the Company. The Company shall deliver written notice to Employee of the Company’s termination because of Disability, pursuant to this Section 7.2, specifying in such notice a termination date not less than fifteen (15) calendar days after the giving of the notice (the “Disability Notice Period”), and this Agreement, and Employee’s employment by the Company, shall terminate at the close of business on the last day of the Disability Notice Period.

7.3. Termination by the Company Without Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company without cause for any reason or no reason by notifying Employee in writing of the Company’s intent to terminate, specifying in such notice the effective termination date, and this Agreement and Employee’s employment with the

Company shall terminate at the close of business on the termination date specified in the Company’s notice.

b. Upon termination of Employee’s employment by the Company without cause other than within six (6) months before or within two (2) years after a Change in Control (a “Window Period”), the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee severance compensation after the termination of employment equal to the Employee’s Annual Base Salary at the rate of Annual Base Salary in effect immediately prior to termination for a period of one year following the date of termination of employment; provided, however, if such severance compensation exceeds two times the maximum amount that may be taken into account under a qualified plan pursuant to section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) in the year of such termination, and Employee is a “specified employee” within the meaning of Internal Revenue Code section 409A(a)(2)(B)(i), the severance compensation shall be paid in a lump sum on the date that is six months following the termination of employment.

c. Upon termination of Employee’s employment by the Company without cause during a Window Period, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee within (30) days following such a termination or, if later, such a Change in Control, a lump sum severance payment in an amount equal to the product of three (3) multiplied by the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.4. Termination by the Company For Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company for Cause as provided in this Section.

b. For purposes of this Agreement, “Cause” shall mean the occurrence of one or more of the following events: (a) Employee’s conviction for a felony or of any crime involving moral turpitude; (b) Employee’s engaging in any illegal conduct or willful misconduct in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (c) Employee’s engaging in any fraudulent or dishonest conduct in his or her dealings with, or on behalf of, the Company (or its subsidiaries or affiliates); (d) Employee’s failure or refusal to follow the lawful instructions of the Company, if such failure or refusal continues for a period of five (5) calendar days after the Company delivers to Employee a written notice stating the instructions which Employee has failed or refused to follow; (e) Employee’s breach of any of Employee’s obligations under this Agreement; (f) Employee’s gross or habitual negligence in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (g) Employee’s engaging in any conduct tending to bring the Company into public disgrace or disrepute or to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates);

(h) Employee’s material violation of the Company’s business ethics or conflict-of-interest policies, as such policies currently exist or as they may be amended or implemented during Employee’s employment with the Company; (i) Employee’s misuse of alcohol or illegal drugs which interferes with the performance of Employee’s employment duties for the Company or which compromises the reputation or goodwill of the Company; (j) Employee’s intentional violation of any applicable banking law or regulation in the performance of Employee’s employment duties for the Company; or (k) Employee’s failure to abide by any employment rules or policies applicable to the Company’s employees generally that Company currently has or may adopt, amend or implement from time to time during Employee’s employment with the Company.

7.5. Termination by Employee For Good Reason.

a. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company by giving the Company written notice of termination for Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following:

(ii) the occurrence of any one of the following events during a Window Period:

(A) A reduction by the Company in Employee’s salary from the level of such salary immediately prior to the Change in Control.

7.6. Termination By Employee Without Good Reason. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company for reasons other than Good Reason or for no reason by giving the Company written notice of termination, specifying in such notice a termination date not less than ten business days after the giving of the notice (the “Employee’s Notice Period”), and Employee’s employment with the Company shall terminate at the close of business on the last day of Employee’s Notice Period; provided, however, that in response to Employee’s notice of termination, the Company shall have the right to accelerate the Employee’s Notice Period as it deems advisable and it shall still be considered a termination of employment by Employee without Good Reason. Upon termination of Employee’s employment with the Company under this Section, whether at the end of Employee’s Notice Period or earlier as designated by the Company, the Company’s obligation to pay Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee such other payments and benefits, if any, which had

accrued hereunder before the termination date. Other than the foregoing, the Company shall have no further obligations to Employee under this Agreement.

7.7. Non-Renewal By Employee. In the event the Employee elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of Employee’s non-renewal of this Agreement, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Employee has elected to terminate his or her employment without Good Reason.

7.8. Non-Renewal by the Company. In the event the Company elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of the Company’s non-renewal of this Agreement, the Company shall be considered to have elected to terminate Employee’s employment without cause and the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Company has elected to terminate the Employee’s employment without cause hereunder.

7.9. Forfeiture of Compensation. In the event Employee breaches any of the non-disclosure or restrictive covenant provisions of this Agreement, Employee immediately shall (a) forfeit his or her right to receive (and the Company shall no longer be obligated to pay) any severance compensation under this Agreement, and (b) forfeit any unexercised stock options and/or other rights granted under any stock option or equity compensation plans of the Company, whether or not they are then exercisable, notwithstanding anything to the contrary in the agreements evidencing such stock options or other equity compensation rights. The Company and Employee acknowledge and agree that the foregoing remedies are in addition to, and not in lieu of, any and all other legal and/or equitable remedies that may be available to Company in connection with Employee’s breach or threatened breach, of any non-disclosure or restrictive covenant provision set forth in this Agreement.

7.10. Resignation as Officer and/or Director Upon Employment Termination. In the event Employee’s employment with the Company terminates for any reason (including, without limitation, pursuant to this Section 7), Employee agrees and covenants that he will immediately resign any and all positions, including, without limitation, as an officer and/or member of the Board of Directors, he may hold with the Company or any of its subsidiaries or affiliates.

7.12 Payroll Policies and Withholding. Any payments to be made under this Agreement shall be made in accordance with the Company’s normal payroll policies and procedures, and shall be subject to withholding and other deductions as required by law.

7.13 Severance Release. Employee acknowledges and agrees that the Company’s payment of the severance compensation pursuant to this Section 7 shall be deemed to constitute a full settlement and discharge of any and all obligations of the Company to Employee arising out

of this Agreement, Employee’s employment with the Company and/or the termination of Employee’s employment with the Company, except for any vested rights Employee may have under any insurance, stock option or equity compensation plan or any other employee benefit plans sponsored by the Company.

7.14 Stay-On Bonus. As an inducement to Employee to remain in the employ of the Company during and following a Change in Control, in the event that the Employee remains an employee of the Company or its subsidiary or affiliate for a period of at least one year following a Change in Control, in addition to Employee’s regular annual salary, bonus and other compensation to which the Employee may be entitled, the Company shall pay Employee at and as of the anniversary date of the Change in Control, as a special one-time stay-on bonus, a lump sum payment in an amount equal to the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.15 Retirement Benefits. In the event that the Employee’s employment and this Agreement are not terminated until at or following normal retirement age of at least sixty-five (65) years of age, and for so long thereafter that the Employee and members of Employee’s household do not accept full or part time employment with a company that provides competing products or services to those provided by the Company, Employee will be entitled to participate in Employer-sponsored or provided benefits available to Employer’s retirees generally including any retiree health insurance coverage made available to retirees from the Employer on the terms and subject to the conditions and requirements as may be imposed by the Employer on the Employer’s retired employees generally. Employee understands that while the Employer presently makes health insurance coverage available to retired employees, Employer is under no obligation to continue to make that coverage available, and such coverage is only available to a retired employee if the retiree makes timely payment of insurance premiums to continue the coverage.

7.16 Section 280G Excise Tax. If any benefit payable under this Agreement in the context of a Change in Control, when combined with other benefits payable to the Employee as a result of a Change in Control, is subject to an excise tax under Internal Revenue Code sections 280G and 4999, the Company shall pay to the Employee an additional amount (the “Gross-Up”) equal to the excise penalty tax amount divided by the sum of one minus the sum of the penalty tax rate plus the Employee’s marginal income tax rate. The Gross-Up shall be paid in a lump sum within 60 days of termination of employment following a Change in Control, or, if the termination of employment occurred prior to such Change in Control, within 60 days following such Change in Control.

7.17 Nondisparagement. It is a condition to the obligation of the Company to make any payments payable under this Agreement following termination of employment, whether such termination is at the election of the Employee or by the Company, that the Employee not make any statements, publicly or privately, orally or in writing or by electronic communication, that slander, defame or disparage the Company (or its subsidiaries or affiliates) and its reputation in the communities which it serves, or in the investment community at large, or which would tend to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates).

8. Non-Disclosure. Employee acknowledges that during the course of Employee’s employment by the Company Employee will be creating, making use of, acquiring, and/or adding to confidential information relating to the business and affairs of the Company, and its subsidiaries, affiliates

and customers, which information will include, without limitation, procedures, methods, manuals, lists of customers, suppliers and other contacts, marketing plans, business plans, financial data, and personnel information. Employee covenants and agrees that Employee shall not, at any time during Employee’s employment with the Company, or thereafter, directly or indirectly, use, divulge or disclose for any purpose whatsoever any of the Company’s, or its subsidiaries’, affiliates’ or customers’, confidential information or trade secrets, except in the course of Employee’s work for and on behalf of the Company and its subsidiaries and affiliates. Upon the termination of Employee’s employment with the Company, or at the Company’s request, Employee shall immediately deliver to the Company any and all records, documents, or electronic data (in whatever form or media), and all copies thereof, in Employee’s possession or under Employee’s control, whether prepared by Employee or others, containing confidential information or trade secrets relating to the Company, or its subsidiaries, affiliates or customers. Employee acknowledges and agrees that his or her obligations under this Section shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason. As used herein the term customer includes any other person to whom the Company owes a duty of confidentiality by law, bank regulatory requirement or internal policy.

9. Restrictive Covenants. Employee acknowledges that the following covenants are ancillary to the other agreements of the Company as herein contained, including the commitment to make certain payments to Employee and other enforceable covenants as herein provided, and are ancillary to the agreements pursuant to which the Company now or in the future may grant benefits to the Employee, including the grant of stock options and other equity rights, and that but for the agreements herein contained the Company would not extend such benefits or grant such options or other rights. Employee acknowledges that in connection with his or her employment with the Company he or she has provided and will continue to provide Employee-level services that are of a unique and special value and that he has been and will continue to be entrusted with confidential and proprietary information concerning the Company and its affiliates. Employee further acknowledges that the Company and its subsidiaries and affiliates are engaged in highly competitive businesses and that the Company and its subsidiaries and affiliates expend substantial amounts of time, money and effort to develop trade secrets, business strategies, customer relationships, employee relationships and goodwill, and Employee has benefited and will continue to benefit from these efforts. Therefore, as an essential part of this Agreement, Employee agrees and covenants to comply with the following restrictive covenants.

9.1. Non-Competition. During Employee’s employment with the Company and during the Noncompete Restrictive Period, Employee will not, in the Restricted Geographic Area, engage in any Competitive Business. For purposes of this Agreement, the term “Noncompete Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. For purposes of this Agreement, the term “Restricted Geographic Area” means and includes the following counties in Texas: Hidalgo, Starr, Cameron & Willacy. For purposes of this Agreement, the term “Competitive Business” means any business that is traditionally engaged in by a bank, a bank holding company or a financial holding company, or that provides products and services similar to and competitive with the products and services provided by the Company or any of its subsidiaries or affiliates. Notwithstanding the foregoing, Employee may make and retain investments equal to less than one percent of the equity of any entity engaged in a Competitive Business, if such equity is listed on a national securities exchange or regularly traded in a nationally-recognized over-the-counter market.

9.2. Non-Solicitation of Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not provide, sell,

market or endeavor to provide, sell or market any Competing Products/Services to any of the Company’s Customers, or otherwise solicit or communicate with any of the Company’s Customers for the purpose of selling or providing any Competing Products/Services. For purposes of this Agreement, the term “Non-Solicitation Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. Also for purposes of this Agreement, the term “Competing Products/Services” means any products or services the same as or similar to or competitive with the products or services offered by the Company or any of its subsidiaries, and the term “Company’s Customers” means any person or entity that has engaged in any banking services with, or has purchased any products or services from, the Company or any of its subsidiaries at any time during the twelve (12) months next preceding the commencement of the Non-Solicitation Restrictive Period.

9.3. Non-Interference With Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s Customers to terminate their business with the Company or any of its subsidiaries or affiliates or to cancel, reduce, limit or in any manner interfere with the Company’s Customers’ business with the Company.

9.4. Non-Interference With Contractors and Vendors. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s independent contractors, subcontractors, consultants, vendors or suppliers to terminate their relationship with, or representation of, the Company or to cancel, withdraw, reduce, limit, or in any manner modify any of such person’s or entity’s business with, or representation of, the Company or any of its subsidiaries or affiliates.

9.5. Non-Solicitation of Employees. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not solicit, recruit, hire, employ or attempt to hire or employ, or assist anyone in the recruitment or hiring of, any person who is an employee of the Company or who was an employee during the two year period next preceding the commencement of the Non-Solicitation Restrictive Period, or urge, influence, induce or seek to induce any employee of the Company to terminate his or her relationship with the Company.

9.6. Direct or Indirect Activities. Employee acknowledges and agrees that the covenants contained in this Section 9 prohibit Employee from engaging in certain activities directly or indirectly, whether on Employee’s own behalf or on behalf of any other person or entity, and regardless of the capacity in which Employee is acting, including without limitation as an employee, independent contractor, owner, partner, officer, agent, consultant, or advisor.

9.7. Survival of Restrictive Covenants. Employee acknowledges and agrees that his or her obligations under this Section 9 shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason.

9.8. Extension. In the event Employee violates any of the restrictive covenants contained in this Section 9, the duration of such restrictive covenant shall automatically be extended by the length of time during which Employee was in violation of such restriction.

9.9. Severability; Modification of Restrictions. Although Employee and the Company consider the restrictions contained in this Section 9 to be reasonable, particularly given the competitive nature of the Company’s business and Employee’s position with the Company, Employee and the Company acknowledge and agree that: (a) if any covenant, subsection, portion or clause of this Section 9 is determined to be unenforceable or invalid for any reason, such unenforceability or invalidity shall not affect the enforceability or validity of the remainder of the Agreement; and (b) if any particular covenant, subsection, provision or clause of this Section 9 is determined to be unreasonable or unenforceable for any reason, including, without limitation, the time period, geographic area, and/or scope of activity covered by any restrictive covenant, such covenant, subsection, provision or clause shall automatically be deemed reformed such that the contested covenant, subsection, provision or clause shall have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so reformed to whatever extent would be reasonable and enforceable under applicable law.

10. Remedies. Employee recognizes that a breach or threatened breach by Employee of this Agreement, including the covenants in Section 8 and Section 9 hereof, will give rise to irreparable injury to the Company and that money damages will not be adequate relief for such injury. Employee agrees that the Company shall be entitled to obtain injunctive relief, including, but not limited to, temporary restraining orders, preliminary injunctions and/or permanent injunctions, without having to post any bond or other security, to restrain or prohibit such breach or threatened breach, in addition to any other legal remedies which may be available, including the recovery of money damages.

11. Assignment.

11.1. Assignment by Company. The rights and obligations of the Company under this Agreement shall inure to the benefit of and be binding upon any and all successors and assigns of the Company, including without limitation by asset assignment, stock sale, merger, consolidation or other corporate reorganization.

11.2. Non-Assignment by Employee. The services to be provided by Employee to the Company hereunder are personal to Employee, and Employee’s duties may not be assigned by Employee.

12. Notice. Any notice required or permitted under this Agreement shall be in writing and either delivered personally or sent by nationally recognized overnight courier, express mail, or certified or registered mail, postage prepaid, return receipt requested, at the following respective address unless the party notifies the other party in writing of a change of address:

If to the Company:

Texas Regional Bancshares, Inc.

3900 North 10^th Street, 11^th Floor

McAllen, Texas 78502

Attention: Glen E. Roney, Chief Executive Officer

With a copy to:

William A. Rogers, Jr.

Rogers & Whitley, LLP

2210 San Gabriel

Austin, Texas 78705

If to Employee:

John A. Martin

P. O. Box 2871

McAllen, Texas 78502

13. Miscellaneous.

13.1. Entire Agreement. This Agreement supersedes any prior agreements or understandings, oral or written, between the parties hereto, with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto.

13.2. Modification. This Agreement shall not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement of the parties in a written instrument executed by Employee and a duly authorized officer of the Company.

13.3. Counterparts. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

13.4. Tax Withholding. The Company may withhold from any compensation or benefits payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

13.5. Contractual Rights to Benefits. Nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder.

13.6. No Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions of this Agreement shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.

13.7. Governing Law; Choice of Forum. To the extent not preempted by federal law, the provisions of this Agreement shall be construed and enforced in accordance with the laws of the State of Texas, notwithstanding any state’s choice-of-law or conflicts-of-law rules to the contrary. The Company and Employee further acknowledge and agree that this Agreement is intended, among other things, to supplement and add to, and not to substitute for, the obligations of the Employee under the provisions of the Uniform Trade Secrets Act, as amended from time to time, and the duties Employee owes to the Company under the common law, including, but not limited to, the duty of loyalty. The parties agree that any legal action pursuant to Section 10 of this Agreement shall be commenced and maintained exclusively before any court of competent jurisdiction in Hidalgo County, Texas, and the parties hereby submit to the jurisdiction and venue of such courts and waive any right to challenge or otherwise object to personal jurisdiction or venue in any action commenced or maintained in such courts.

[Remainder of page left blank intentionally;

Signature lines follow.]

IN WITNESS WHEREOF, Employee and the Company have executed this Agreement, intending it to be effective as of the Effective Date.

	TEXAS REGIONAL BANCSHARES, INC.



	By:	/s/ G.E. Roney
		Glen E. Roney, Chairman of the Board



	/s/ John A. Martin
	John A. Martin, Executive Vice President &
	Chief Financial Officer

EX-2.4 5 a06-13659_5ex2d4.htm EX-2

Exhibit 2.4

EMPLOYMENT AGREEMENT

between

TEXAS REGIONAL BANCSHARES, INC.

and

DOUGLAS G. BREADY

This Employment Agreement (“Agreement”) is made and entered into by and between Texas Regional Bancshares, Inc., a Texas corporation (the “Company”) and Douglas G. Bready (“Employee”).

Recitals

A. Employee is an employee of the Company serving as a President — Texas State Bank, McAllen Region.

B. The Company and Employee desire to enter into an agreement embodying the terms of Employee’s employment with the Company.

Agreement

1. Effective Date. This Agreement shall be effective as of June 12, 2006 (the “Effective Date”).

2. Term of Employment. Subject to earlier termination as provided in this Agreement, the original term of this Agreement shall begin on the Effective Date and shall end on June 11, 2009; provided, however, that this Agreement shall be automatically extended as of the end of the initial or any renewal Term hereof for successive terms of one (1) year each (the original term plus any extensions of the term are hereinafter referred to as the “Term”) unless either party provides written notice not to so extend to the other party at least sixty (60) calendar days before the scheduled expiration of the Term, in which case no further automatic extension shall occur and the Term shall end on the scheduled expiration date.

3. Position and Responsibilities. During the Term, Employee agrees to serve as President — Texas State Bank, McAllen Region of the Company or in such other position as the Board of Directors and Chief Executive Officer of the Company (the “Board”) may designate. In this capacity the Employee shall have such duties, authorities and responsibilities as are designated from time to time by the Board of Directors and Chief Executive Officer of the Company.

4. Standard of Care. During the Term, Employee (a) will devote his or her full working time, attention, energies and skills exclusively to the business and affairs of the Company and its subsidiaries; (b) will exercise the highest degree of loyalty and the highest standards of conduct in the performance of his or her duties; (c) will not, except as noted herein, engage in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, without the express written consent of the Company; and (d) will not take any action that deprives the

Company of any business opportunities or otherwise act in a manner that conflicts with the best interests of the Company or that is detrimental to the business of the Company; provided, however, this Section 4 shall not be construed as preventing Employee (y) from investing his or her personal assets in such form or manner as will not require his or her services in the daily operations and affairs of the businesses in which such investments are made, or (z) from participating in charitable or other not-for-profit activities as long as such activities do not interfere with Employee’s work for the Company (or its affiliates).

5. Compensation and Benefits. As remuneration for all services to be rendered by Employee during the Term, and as consideration for complying with the covenants herein, the Company shall pay and provide to Employee the following:

5.1. Annual Base Salary. The Company shall pay Employee an annual base salary of Two Hundred Ninety-Five Thousand and no/100 Dollars ($295,000.00) (the “Annual Base Salary”). The Company shall review the Annual Base Salary not less than approximately once each year during the Term to determine, at the discretion of the Company, whether the Annual Base Salary should be increased and, if so, the amount of such adjustment and the time at which the adjustment should take effect. The Annual Base Salary shall be paid to Employee in periodic installments consistent with the customary payroll practices of the Company.

5.2. Incentive Bonus. Employee shall be entitled to participate during the Term in any incentive bonus plan which the Company may adopt and implement from time to time during the Term for the benefit of persons serving in the Employee’s specific position. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any incentive bonus plan, so long as such changes are similarly applicable to other employees under such plan.

5.3. Employee Benefits. The Company shall provide to Employee all employee fringe benefits to which other employees of the Company are generally entitled, commensurate with his or her position with the Company and subject to the eligibility requirements and other terms and conditions of such plans, including health and life insurance coverage from time to time adopted as the life, health and disability insurance plans for employees of the Company generally. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any employee fringe benefit plan, so long as such changes are similarly applicable to other employees generally.

5.4. Vacation. The Employee shall be entitled to 20 business days of paid vacation in each calendar year in accordance with the Company’s personnel policies as in effect from time to time during the term hereof, which vacation days shall be taken at such times as are consistent with the Employee’s responsibilities.

5.5. Other Compensation Plans. The Employee shall be eligible to participate in any other compensation plan or program maintained by the Company from time for employees of the Company generally on terms and conditions that are comparable to those applicable to all other Employees.

6. Reimbursement of Business Expenses. The Company shall pay or reimburse Employee for all ordinary and necessary expenses, in a reasonable amount, which are approved as required by the Company’s policies, and which Employee incurs in performing his or her duties under this Agreement. Such expenses shall be paid or reimbursed to Employee consistent with the expense reimbursement

policies of the Company in effect from time to time and Employee agrees to abide by any such expense reimbursement policies.

7. Termination of Employment.

7.1. Termination Due to Death. If Employee dies during the Term, this Agreement shall terminate on the date of Employee’s death. Upon the death of Employee, the Company’s obligation to pay and provide to Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee or Employee’s legal representative that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee or Employee’s legal representative such other payments and benefits, if any, which had accrued hereunder before Employee’s death. Other than the foregoing, the Company shall have no further obligations to Employee (or Employee’s legal representatives, including Employee’s estate, heirs, executors, administrators and personal representatives) under this Agreement.

7.2. Termination Due to Disability.

a. If Employee suffers a Disability (as hereafter defined), the Company shall have the right to terminate this Agreement and Employee’s employment with the Company. The Company shall deliver written notice to Employee of the Company’s termination because of Disability, pursuant to this Section 7.2, specifying in such notice a termination date not less than fifteen (15) calendar days after the giving of the notice (the “Disability Notice Period”), and this Agreement, and Employee’s employment by the Company, shall terminate at the close of business on the last day of the Disability Notice Period.

7.3. Termination by the Company Without Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company without cause for any reason or no reason by notifying Employee in writing of the Company’s intent to terminate, specifying in such notice the effective termination date, and this Agreement and Employee’s employment with the

Company shall terminate at the close of business on the termination date specified in the Company’s notice.

b. Upon termination of Employee’s employment by the Company without cause other than within six (6) months before or within two (2) years after a Change in Control (a “Window Period”), the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee severance compensation after the termination of employment equal to the Employee’s Annual Base Salary at the rate of Annual Base Salary in effect immediately prior to termination for a period of one year following the date of termination of employment; provided, however, if such severance compensation exceeds two times the maximum amount that may be taken into account under a qualified plan pursuant to section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) in the year of such termination, and Employee is a “specified employee” within the meaning of Internal Revenue Code section 409A(a)(2)(B)(i), the severance compensation shall be paid in a lump sum on the date that is six months following the termination of employment.

c. Upon termination of Employee’s employment by the Company without cause during a Window Period, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee within (30) days following such a termination or, if later, such a Change in Control, a lump sum severance payment in an amount equal to the product of three (3) multiplied by the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.4. Termination by the Company For Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company for Cause as provided in this Section.

b. For purposes of this Agreement, “Cause” shall mean the occurrence of one or more of the following events: (a) Employee’s conviction for a felony or of any crime involving moral turpitude; (b) Employee’s engaging in any illegal conduct or willful misconduct in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (c) Employee’s engaging in any fraudulent or dishonest conduct in his or her dealings with, or on behalf of, the Company (or its subsidiaries or affiliates); (d) Employee’s failure or refusal to follow the lawful instructions of the Company, if such failure or refusal continues for a period of five (5) calendar days after the Company delivers to Employee a written notice stating the instructions which Employee has failed or refused to follow; (e) Employee’s breach of any of Employee’s obligations under this Agreement; (f) Employee’s gross or habitual negligence in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (g) Employee’s engaging in any conduct tending to bring the Company into public disgrace or disrepute or to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates);

(h) Employee’s material violation of the Company’s business ethics or conflict-of-interest policies, as such policies currently exist or as they may be amended or implemented during Employee’s employment with the Company; (i) Employee’s misuse of alcohol or illegal drugs which interferes with the performance of Employee’s employment duties for the Company or which compromises the reputation or goodwill of the Company; (j) Employee’s intentional violation of any applicable banking law or regulation in the performance of Employee’s employment duties for the Company; or (k) Employee’s failure to abide by any employment rules or policies applicable to the Company’s employees generally that Company currently has or may adopt, amend or implement from time to time during Employee’s employment with the Company.

7.5. Termination by Employee For Good Reason.

a. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company by giving the Company written notice of termination for Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following:

(ii) the occurrence of any one of the following events during a Window Period:

(A) A reduction by the Company in Employee’s salary from the level of such salary immediately prior to the Change in Control.

7.6. Termination By Employee Without Good Reason. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company for reasons other than Good Reason or for no reason by giving the Company written notice of termination, specifying in such notice a termination date not less than ten business days after the giving of the notice (the “Employee’s Notice Period”), and Employee’s employment with the Company shall terminate at the close of business on the last day of Employee’s Notice Period; provided, however, that in response to Employee’s notice of termination, the Company shall have the right to accelerate the Employee’s Notice Period as it deems advisable and it shall still be considered a termination of employment by Employee without Good Reason. Upon termination of Employee’s employment with the Company under this Section, whether at the end of Employee’s Notice Period or earlier as designated by the Company, the Company’s obligation to pay Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee such other payments and benefits, if any, which had

accrued hereunder before the termination date. Other than the foregoing, the Company shall have no further obligations to Employee under this Agreement.

7.7. Non-Renewal By Employee. In the event the Employee elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of Employee’s non-renewal of this Agreement, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Employee has elected to terminate his or her employment without Good Reason.

7.8. Non-Renewal by the Company. In the event the Company elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of the Company’s non-renewal of this Agreement, the Company shall be considered to have elected to terminate Employee’s employment without cause and the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Company has elected to terminate the Employee’s employment without cause hereunder.

7.9. Forfeiture of Compensation. In the event Employee breaches any of the non-disclosure or restrictive covenant provisions of this Agreement, Employee immediately shall (a) forfeit his or her right to receive (and the Company shall no longer be obligated to pay) any severance compensation under this Agreement, and (b) forfeit any unexercised stock options and/or other rights granted under any stock option or equity compensation plans of the Company, whether or not they are then exercisable, notwithstanding anything to the contrary in the agreements evidencing such stock options or other equity compensation rights. The Company and Employee acknowledge and agree that the foregoing remedies are in addition to, and not in lieu of, any and all other legal and/or equitable remedies that may be available to Company in connection with Employee’s breach or threatened breach, of any non-disclosure or restrictive covenant provision set forth in this Agreement.

7.10. Resignation as Officer and/or Director Upon Employment Termination. In the event Employee’s employment with the Company terminates for any reason (including, without limitation, pursuant to this Section 7), Employee agrees and covenants that he will immediately resign any and all positions, including, without limitation, as an officer and/or member of the Board of Directors, he may hold with the Company or any of its subsidiaries or affiliates.

7.12 Payroll Policies and Withholding. Any payments to be made under this Agreement shall be made in accordance with the Company’s normal payroll policies and procedures, and shall be subject to withholding and other deductions as required by law.

7.13 Severance Release. Employee acknowledges and agrees that the Company’s payment of the severance compensation pursuant to this Section 7 shall be deemed to constitute a full settlement and discharge of any and all obligations of the Company to Employee arising out

of this Agreement, Employee’s employment with the Company and/or the termination of Employee’s employment with the Company, except for any vested rights Employee may have under any insurance, stock option or equity compensation plan or any other employee benefit plans sponsored by the Company.

7.14 Stay-On Bonus. As an inducement to Employee to remain in the employ of the Company during and following a Change in Control, in the event that the Employee remains an employee of the Company or its subsidiary or affiliate for a period of at least one year following a Change in Control, in addition to Employee’s regular annual salary, bonus and other compensation to which the Employee may be entitled, the Company shall pay Employee at and as of the anniversary date of the Change in Control, as a special one-time stay-on bonus, a lump sum payment in an amount equal to the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.15 Retirement Benefits. In the event that the Employee’s employment and this Agreement are not terminated until at or following normal retirement age of at least sixty-five (65) years of age, and for so long thereafter that the Employee and members of Employee’s household do not accept full or part time employment with a company that provides competing products or services to those provided by the Company, Employee will be entitled to participate in Employer-sponsored or provided benefits available to Employer’s retirees generally including any retiree health insurance coverage made available to retirees from the Employer on the terms and subject to the conditions and requirements as may be imposed by the Employer on the Employer’s retired employees generally. Employee understands that while the Employer presently makes health insurance coverage available to retired employees, Employer is under no obligation to continue to make that coverage available, and such coverage is only available to a retired employee if the retiree makes timely payment of insurance premiums to continue the coverage.

7.16 Section 280G Excise Tax. If any benefit payable under this Agreement in the context of a Change in Control, when combined with other benefits payable to the Employee as a result of a Change in Control, is subject to an excise tax under Internal Revenue Code sections 280G and 4999, the Company shall pay to the Employee an additional amount (the “Gross-Up”) equal to the excise penalty tax amount divided by the sum of one minus the sum of the penalty tax rate plus the Employee’s marginal income tax rate. The Gross-Up shall be paid in a lump sum within 60 days of termination of employment following a Change in Control, or, if the termination of employment occurred prior to such Change in Control, within 60 days following such Change in Control.

7.17 Nondisparagement. It is a condition to the obligation of the Company to make any payments payable under this Agreement following termination of employment, whether such termination is at the election of the Employee or by the Company, that the Employee not make any statements, publicly or privately, orally or in writing or by electronic communication, that slander, defame or disparage the Company (or its subsidiaries or affiliates) and its reputation in the communities which it serves, or in the investment community at large, or which would tend to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates).

8. Non-Disclosure. Employee acknowledges that during the course of Employee’s employment by the Company Employee will be creating, making use of, acquiring, and/or adding to confidential information relating to the business and affairs of the Company, and its subsidiaries, affiliates

and customers, which information will include, without limitation, procedures, methods, manuals, lists of customers, suppliers and other contacts, marketing plans, business plans, financial data, and personnel information. Employee covenants and agrees that Employee shall not, at any time during Employee’s employment with the Company, or thereafter, directly or indirectly, use, divulge or disclose for any purpose whatsoever any of the Company’s, or its subsidiaries’, affiliates’ or customers’, confidential information or trade secrets, except in the course of Employee’s work for and on behalf of the Company and its subsidiaries and affiliates. Upon the termination of Employee’s employment with the Company, or at the Company’s request, Employee shall immediately deliver to the Company any and all records, documents, or electronic data (in whatever form or media), and all copies thereof, in Employee’s possession or under Employee’s control, whether prepared by Employee or others, containing confidential information or trade secrets relating to the Company, or its subsidiaries, affiliates or customers. Employee acknowledges and agrees that his or her obligations under this Section shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason. As used herein the term customer includes any other person to whom the Company owes a duty of confidentiality by law, bank regulatory requirement or internal policy.

9. Restrictive Covenants. Employee acknowledges that the following covenants are ancillary to the other agreements of the Company as herein contained, including the commitment to make certain payments to Employee and other enforceable covenants as herein provided, and are ancillary to the agreements pursuant to which the Company now or in the future may grant benefits to the Employee, including the grant of stock options and other equity rights, and that but for the agreements herein contained the Company would not extend such benefits or grant such options or other rights. Employee acknowledges that in connection with his or her employment with the Company he or she has provided and will continue to provide Employee-level services that are of a unique and special value and that he has been and will continue to be entrusted with confidential and proprietary information concerning the Company and its affiliates. Employee further acknowledges that the Company and its subsidiaries and affiliates are engaged in highly competitive businesses and that the Company and its subsidiaries and affiliates expend substantial amounts of time, money and effort to develop trade secrets, business strategies, customer relationships, employee relationships and goodwill, and Employee has benefited and will continue to benefit from these efforts. Therefore, as an essential part of this Agreement, Employee agrees and covenants to comply with the following restrictive covenants.

9.1. Non-Competition. During Employee’s employment with the Company and during the Noncompete Restrictive Period, Employee will not, in the Restricted Geographic Area, engage in any Competitive Business. For purposes of this Agreement, the term “Noncompete Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. For purposes of this Agreement, the term “Restricted Geographic Area” means and includes the following counties in Texas: Hidalgo, Starr, Cameron & Willacy. For purposes of this Agreement, the term “Competitive Business” means any business that is traditionally engaged in by a bank, a bank holding company or a financial holding company, or that provides products and services similar to and competitive with the products and services provided by the Company or any of its subsidiaries or affiliates. Notwithstanding the foregoing, Employee may make and retain investments equal to less than one percent of the equity of any entity engaged in a Competitive Business, if such equity is listed on a national securities exchange or regularly traded in a nationally-recognized over-the-counter market.

9.2. Non-Solicitation of Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not provide, sell,

market or endeavor to provide, sell or market any Competing Products/Services to any of the Company’s Customers, or otherwise solicit or communicate with any of the Company’s Customers for the purpose of selling or providing any Competing Products/Services. For purposes of this Agreement, the term “Non-Solicitation Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. Also for purposes of this Agreement, the term “Competing Products/Services” means any products or services the same as or similar to or competitive with the products or services offered by the Company or any of its subsidiaries, and the term “Company’s Customers” means any person or entity that has engaged in any banking services with, or has purchased any products or services from, the Company or any of its subsidiaries at any time during the twelve (12) months next preceding the commencement of the Non-Solicitation Restrictive Period.

9.3. Non-Interference With Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s Customers to terminate their business with the Company or any of its subsidiaries or affiliates or to cancel, reduce, limit or in any manner interfere with the Company’s Customers’ business with the Company.

9.4. Non-Interference With Contractors and Vendors. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s independent contractors, subcontractors, consultants, vendors or suppliers to terminate their relationship with, or representation of, the Company or to cancel, withdraw, reduce, limit, or in any manner modify any of such person’s or entity’s business with, or representation of, the Company or any of its subsidiaries or affiliates.

9.5. Non-Solicitation of Employees. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not solicit, recruit, hire, employ or attempt to hire or employ, or assist anyone in the recruitment or hiring of, any person who is an employee of the Company or who was an employee during the two year period next preceding the commencement of the Non-Solicitation Restrictive Period, or urge, influence, induce or seek to induce any employee of the Company to terminate his or her relationship with the Company.

9.6. Direct or Indirect Activities. Employee acknowledges and agrees that the covenants contained in this Section 9 prohibit Employee from engaging in certain activities directly or indirectly, whether on Employee’s own behalf or on behalf of any other person or entity, and regardless of the capacity in which Employee is acting, including without limitation as an employee, independent contractor, owner, partner, officer, agent, consultant, or advisor.

9.7. Survival of Restrictive Covenants. Employee acknowledges and agrees that his or her obligations under this Section 9 shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason.

9.8. Extension. In the event Employee violates any of the restrictive covenants contained in this Section 9, the duration of such restrictive covenant shall automatically be extended by the length of time during which Employee was in violation of such restriction.

9.9. Severability; Modification of Restrictions. Although Employee and the Company consider the restrictions contained in this Section 9 to be reasonable, particularly given the competitive nature of the Company’s business and Employee’s position with the Company, Employee and the Company acknowledge and agree that: (a) if any covenant, subsection, portion or clause of this Section 9 is determined to be unenforceable or invalid for any reason, such unenforceability or invalidity shall not affect the enforceability or validity of the remainder of the Agreement; and (b) if any particular covenant, subsection, provision or clause of this Section 9 is determined to be unreasonable or unenforceable for any reason, including, without limitation, the time period, geographic area, and/or scope of activity covered by any restrictive covenant, such covenant, subsection, provision or clause shall automatically be deemed reformed such that the contested covenant, subsection, provision or clause shall have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so reformed to whatever extent would be reasonable and enforceable under applicable law.

10. Remedies. Employee recognizes that a breach or threatened breach by Employee of this Agreement, including the covenants in Section 8 and Section 9 hereof, will give rise to irreparable injury to the Company and that money damages will not be adequate relief for such injury. Employee agrees that the Company shall be entitled to obtain injunctive relief, including, but not limited to, temporary restraining orders, preliminary injunctions and/or permanent injunctions, without having to post any bond or other security, to restrain or prohibit such breach or threatened breach, in addition to any other legal remedies which may be available, including the recovery of money damages.

11. Assignment.

11.1. Assignment by Company. The rights and obligations of the Company under this Agreement shall inure to the benefit of and be binding upon any and all successors and assigns of the Company, including without limitation by asset assignment, stock sale, merger, consolidation or other corporate reorganization.

11.2. Non-Assignment by Employee. The services to be provided by Employee to the Company hereunder are personal to Employee, and Employee’s duties may not be assigned by Employee.

12. Notice. Any notice required or permitted under this Agreement shall be in writing and either delivered personally or sent by nationally recognized overnight courier, express mail, or certified or registered mail, postage prepaid, return receipt requested, at the following respective address unless the party notifies the other party in writing of a change of address:

If to the Company:

Texas Regional Bancshares, Inc.

3900 North 10th Street, 11th Floor

McAllen, Texas 78502

Attention: Glen E. Roney, Chief Executive Officer

With a copy to:

William A. Rogers, Jr.

Rogers & Whitley, LLP

2210 San Gabriel

Austin, Texas 78705

If to Employee:

Douglas G. Bready

704 Yucca

McAllen, Texas 78504

13. Miscellaneous.

13.1. Entire Agreement. This Agreement supersedes any prior agreements or understandings, oral or written, between the parties hereto, with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto.

13.2. Modification. This Agreement shall not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement of the parties in a written instrument executed by Employee and a duly authorized officer of the Company.

13.3. Counterparts. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

13.4. Tax Withholding. The Company may withhold from any compensation or benefits payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

13.5. Contractual Rights to Benefits. Nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder.

13.6. No Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions of this Agreement shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.

13.7. Governing Law; Choice of Forum. To the extent not preempted by federal law, the provisions of this Agreement shall be construed and enforced in accordance with the laws of the State of Texas, notwithstanding any state’s choice-of-law or conflicts-of-law rules to the contrary. The Company and Employee further acknowledge and agree that this Agreement is intended, among other things, to supplement and add to, and not to substitute for, the obligations of the Employee under the provisions of the Uniform Trade Secrets Act, as amended from time to time, and the duties Employee owes to the Company under the common law, including, but not limited to, the duty of loyalty. The parties agree that any legal action pursuant to Section 10 of this Agreement shall be commenced and maintained exclusively before any court of competent jurisdiction in Hidalgo County, Texas, and the parties hereby submit to the jurisdiction and venue of such courts and waive any right to challenge or otherwise object to personal jurisdiction or venue in any action commenced or maintained in such courts.

[Remainder of page left blank intentionally;

Signature lines follow.]

IN WITNESS WHEREOF, Employee and the Company have executed this Agreement, intending it to be effective as of the Effective Date.

	TEXAS REGIONAL BANCSHARES, INC.



	By:	/s/ G.E. Roney
		Glen E. Roney, Chairman of the Board



	/s/ Douglas G. Bready
	Douglas G. Bready, President — McAllen Region

EX-2.5 6 a06-13659_5ex2d5.htm EX-2

Exhibit 2.5

EMPLOYMENT AGREEMENT

between

TEXAS REGIONAL BANCSHARES, INC.

and

CRAIG A. SWANN

This Employment Agreement (“Agreement”) is made and entered into by and between Texas Regional Bancshares, Inc., a Texas corporation (the “Company”) and Craig A. Swann (“Employee”).

Recitals

A. Employee is an employee of the Company serving as a President — Texas State Bank Data Center.

B. The Company and Employee desire to enter into an agreement embodying the terms of Employee’s employment with the Company.

Agreement

1. Effective Date. This Agreement shall be effective as of June 12, 2006 (the “Effective Date”).

2. Term of Employment. Subject to earlier termination as provided in this Agreement, the original term of this Agreement shall begin on the Effective Date and shall end on June 11, 2009; provided, however, that this Agreement shall be automatically extended as of the end of the initial or any renewal Term hereof for successive terms of one (1) year each (the original term plus any extensions of the term are hereinafter referred to as the “Term”) unless either party provides written notice not to so extend to the other party at least sixty (60) calendar days before the scheduled expiration of the Term, in which case no further automatic extension shall occur and the Term shall end on the scheduled expiration date.

3. Position and Responsibilities. During the Term, Employee agrees to serve as President — Texas State Bank Data Center of the Company or in such other position as the Board of Directors and Chief Executive Officer of the Company (the “Board”) may designate. In this capacity the Employee shall have such duties, authorities and responsibilities as are designated from time to time by the Board of Directors and Chief Executive Officer of the Company.

4. Standard of Care. During the Term, Employee (a) will devote his or her full working time, attention, energies and skills exclusively to the business and affairs of the Company and its subsidiaries; (b) will exercise the highest degree of loyalty and the highest standards of conduct in the performance of his or her duties; (c) will not, except as noted herein, engage in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, without the express written consent of the Company; and (d) will not take any action that deprives the

Company of any business opportunities or otherwise act in a manner that conflicts with the best interests of the Company or that is detrimental to the business of the Company; provided, however, this Section 4 shall not be construed as preventing Employee (y) from investing his or her personal assets in such form or manner as will not require his or her services in the daily operations and affairs of the businesses in which such investments are made, or (z) from participating in charitable or other not-for-profit activities as long as such activities do not interfere with Employee’s work for the Company (or its affiliates).

5. Compensation and Benefits. As remuneration for all services to be rendered by Employee during the Term, and as consideration for complying with the covenants herein, the Company shall pay and provide to Employee the following:

5.1. Annual Base Salary. The Company shall pay Employee an annual base salary of Two Hundred Twenty-Five Thousand and no/100 Dollars ($225,000.00) (the “Annual Base Salary”). The Company shall review the Annual Base Salary not less than approximately once each year during the Term to determine, at the discretion of the Company, whether the Annual Base Salary should be increased and, if so, the amount of such adjustment and the time at which the adjustment should take effect. The Annual Base Salary shall be paid to Employee in periodic installments consistent with the customary payroll practices of the Company.

5.2. Incentive Bonus. Employee shall be entitled to participate during the Term in any incentive bonus plan which the Company may adopt and implement from time to time during the Term for the benefit of persons serving in the Employee’s specific position. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any incentive bonus plan, so long as such changes are similarly applicable to other employees under such plan.

5.3. Employee Benefits. The Company shall provide to Employee all employee fringe benefits to which other employees of the Company are generally entitled, commensurate with his or her position with the Company and subject to the eligibility requirements and other terms and conditions of such plans, including health and life insurance coverage from time to time adopted as the life, health and disability insurance plans for employees of the Company generally. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any employee fringe benefit plan, so long as such changes are similarly applicable to other employees generally.

5.4. Vacation. The Employee shall be entitled to 20 business days of paid vacation in each calendar year in accordance with the Company’s personnel policies as in effect from time to time during the term hereof, which vacation days shall be taken at such times as are consistent with the Employee’s responsibilities.

5.5. Other Compensation Plans. The Employee shall be eligible to participate in any other compensation plan or program maintained by the Company from time for employees of the Company generally on terms and conditions that are comparable to those applicable to all other Employees.

6. Reimbursement of Business Expenses. The Company shall pay or reimburse Employee for all ordinary and necessary expenses, in a reasonable amount, which are approved as required by the Company’s policies, and which Employee incurs in performing his or her duties under this Agreement. Such expenses shall be paid or reimbursed to Employee consistent with the expense reimbursement

policies of the Company in effect from time to time and Employee agrees to abide by any such expense reimbursement policies.

7. Termination of Employment.

7.1. Termination Due to Death. If Employee dies during the Term, this Agreement shall terminate on the date of Employee’s death. Upon the death of Employee, the Company’s obligation to pay and provide to Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee or Employee’s legal representative that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee or Employee’s legal representative such other payments and benefits, if any, which had accrued hereunder before Employee’s death. Other than the foregoing, the Company shall have no further obligations to Employee (or Employee’s legal representatives, including Employee’s estate, heirs, executors, administrators and personal representatives) under this Agreement.

7.2. Termination Due to Disability.

a. If Employee suffers a Disability (as hereafter defined), the Company shall have the right to terminate this Agreement and Employee’s employment with the Company. The Company shall deliver written notice to Employee of the Company’s termination because of Disability, pursuant to this Section 7.2, specifying in such notice a termination date not less than fifteen (15) calendar days after the giving of the notice (the “Disability Notice Period”), and this Agreement, and Employee’s employment by the Company, shall terminate at the close of business on the last day of the Disability Notice Period.

7.3. Termination by the Company Without Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company without cause for any reason or no reason by notifying Employee in writing of the Company’s intent to terminate, specifying in such notice the effective termination date, and this Agreement and Employee’s employment with the

Company shall terminate at the close of business on the termination date specified in the Company’s notice.

b. Upon termination of Employee’s employment by the Company without cause other than within six (6) months before or within two (2) years after a Change in Control (a “Window Period”), the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee severance compensation after the termination of employment equal to the Employee’s Annual Base Salary at the rate of Annual Base Salary in effect immediately prior to termination for a period of one year following the date of termination of employment; provided, however, if such severance compensation exceeds two times the maximum amount that may be taken into account under a qualified plan pursuant to section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) in the year of such termination, and Employee is a “specified employee” within the meaning of Internal Revenue Code section 409A(a)(2)(B)(i), the severance compensation shall be paid in a lump sum on the date that is six months following the termination of employment.

c. Upon termination of Employee’s employment by the Company without cause during a Window Period, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee within (30) days following such a termination or, if later, such a Change in Control, a lump sum severance payment in an amount equal to the product of three (3) multiplied by the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.4. Termination by the Company For Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company for Cause as provided in this Section.

b. For purposes of this Agreement, “Cause” shall mean the occurrence of one or more of the following events: (a) Employee’s conviction for a felony or of any crime involving moral turpitude; (b) Employee’s engaging in any illegal conduct or willful misconduct in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (c) Employee’s engaging in any fraudulent or dishonest conduct in his or her dealings with, or on behalf of, the Company (or its subsidiaries or affiliates); (d) Employee’s failure or refusal to follow the lawful instructions of the Company, if such failure or refusal continues for a period of five (5) calendar days after the Company delivers to Employee a written notice stating the instructions which Employee has failed or refused to follow; (e) Employee’s breach of any of Employee’s obligations under this Agreement; (f) Employee’s gross or habitual negligence in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (g) Employee’s engaging in any conduct tending to bring the Company into public disgrace or disrepute or to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates);

(h) Employee’s material violation of the Company’s business ethics or conflict-of-interest policies, as such policies currently exist or as they may be amended or implemented during Employee’s employment with the Company; (i) Employee’s misuse of alcohol or illegal drugs which interferes with the performance of Employee’s employment duties for the Company or which compromises the reputation or goodwill of the Company; (j) Employee’s intentional violation of any applicable banking law or regulation in the performance of Employee’s employment duties for the Company; or (k) Employee’s failure to abide by any employment rules or policies applicable to the Company’s employees generally that Company currently has or may adopt, amend or implement from time to time during Employee’s employment with the Company.

7.5. Termination by Employee For Good Reason.

a. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company by giving the Company written notice of termination for Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following:

(ii) the occurrence of any one of the following events during a Window Period:

(A) A reduction by the Company in Employee’s salary from the level of such salary immediately prior to the Change in Control.

7.6. Termination By Employee Without Good Reason. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company for reasons other than Good Reason or for no reason by giving the Company written notice of termination, specifying in such notice a termination date not less than ten business days after the giving of the notice (the “Employee’s Notice Period”), and Employee’s employment with the Company shall terminate at the close of business on the last day of Employee’s Notice Period; provided, however, that in response to Employee’s notice of termination, the Company shall have the right to accelerate the Employee’s Notice Period as it deems advisable and it shall still be considered a termination of employment by Employee without Good Reason. Upon termination of Employee’s employment with the Company under this Section, whether at the end of Employee’s Notice Period or earlier as designated by the Company, the Company’s obligation to pay Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee such other payments and benefits, if any, which had

accrued hereunder before the termination date. Other than the foregoing, the Company shall have no further obligations to Employee under this Agreement.

7.7. Non-Renewal By Employee. In the event the Employee elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of Employee’s non-renewal of this Agreement, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Employee has elected to terminate his or her employment without Good Reason.

7.8. Non-Renewal by the Company. In the event the Company elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of the Company’s non-renewal of this Agreement, the Company shall be considered to have elected to terminate Employee’s employment without cause and the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Company has elected to terminate the Employee’s employment without cause hereunder.

7.9. Forfeiture of Compensation. In the event Employee breaches any of the non-disclosure or restrictive covenant provisions of this Agreement, Employee immediately shall (a) forfeit his or her right to receive (and the Company shall no longer be obligated to pay) any severance compensation under this Agreement, and (b) forfeit any unexercised stock options and/or other rights granted under any stock option or equity compensation plans of the Company, whether or not they are then exercisable, notwithstanding anything to the contrary in the agreements evidencing such stock options or other equity compensation rights. The Company and Employee acknowledge and agree that the foregoing remedies are in addition to, and not in lieu of, any and all other legal and/or equitable remedies that may be available to Company in connection with Employee’s breach or threatened breach, of any non-disclosure or restrictive covenant provision set forth in this Agreement.

7.10. Resignation as Officer and/or Director Upon Employment Termination. In the event Employee’s employment with the Company terminates for any reason (including, without limitation, pursuant to this Section 7), Employee agrees and covenants that he will immediately resign any and all positions, including, without limitation, as an officer and/or member of the Board of Directors, he may hold with the Company or any of its subsidiaries or affiliates.

7.12 Payroll Policies and Withholding. Any payments to be made under this Agreement shall be made in accordance with the Company’s normal payroll policies and procedures, and shall be subject to withholding and other deductions as required by law.

7.13 Severance Release. Employee acknowledges and agrees that the Company’s payment of the severance compensation pursuant to this Section 7 shall be deemed to constitute a full settlement and discharge of any and all obligations of the Company to Employee arising out

of this Agreement, Employee’s employment with the Company and/or the termination of Employee’s employment with the Company, except for any vested rights Employee may have under any insurance, stock option or equity compensation plan or any other employee benefit plans sponsored by the Company.

7.14 Stay-On Bonus. As an inducement to Employee to remain in the employ of the Company during and following a Change in Control, in the event that the Employee remains an employee of the Company or its subsidiary or affiliate for a period of at least one year following a Change in Control, in addition to Employee’s regular annual salary, bonus and other compensation to which the Employee may be entitled, the Company shall pay Employee at and as of the anniversary date of the Change in Control, as a special one-time stay-on bonus, a lump sum payment in an amount equal to the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.15 Retirement Benefits. In the event that the Employee’s employment and this Agreement are not terminated until at or following normal retirement age of at least sixty-five (65) years of age, and for so long thereafter that the Employee and members of Employee’s household do not accept full or part time employment with a company that provides competing products or services to those provided by the Company, Employee will be entitled to participate in Employer-sponsored or provided benefits available to Employer’s retirees generally including any retiree health insurance coverage made available to retirees from the Employer on the terms and subject to the conditions and requirements as may be imposed by the Employer on the Employer’s retired employees generally. Employee understands that while the Employer presently makes health insurance coverage available to retired employees, Employer is under no obligation to continue to make that coverage available, and such coverage is only available to a retired employee if the retiree makes timely payment of insurance premiums to continue the coverage.

7.16 Section 280G Excise Tax. If any benefit payable under this Agreement in the context of a Change in Control, when combined with other benefits payable to the Employee as a result of a Change in Control, is subject to an excise tax under Internal Revenue Code sections 280G and 4999, the Company shall pay to the Employee an additional amount (the “Gross-Up”) equal to the excise penalty tax amount divided by the sum of one minus the sum of the penalty tax rate plus the Employee’s marginal income tax rate. The Gross-Up shall be paid in a lump sum within 60 days of termination of employment following a Change in Control, or, if the termination of employment occurred prior to such Change in Control, within 60 days following such Change in Control.

7.17 Nondisparagement. It is a condition to the obligation of the Company to make any payments payable under this Agreement following termination of employment, whether such termination is at the election of the Employee or by the Company, that the Employee not make any statements, publicly or privately, orally or in writing or by electronic communication, that slander, defame or disparage the Company (or its subsidiaries or affiliates) and its reputation in the communities which it serves, or in the investment community at large, or which would tend to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates).

8. Non-Disclosure. Employee acknowledges that during the course of Employee’s employment by the Company Employee will be creating, making use of, acquiring, and/or adding to confidential information relating to the business and affairs of the Company, and its subsidiaries, affiliates

and customers, which information will include, without limitation, procedures, methods, manuals, lists of customers, suppliers and other contacts, marketing plans, business plans, financial data, and personnel information. Employee covenants and agrees that Employee shall not, at any time during Employee’s employment with the Company, or thereafter, directly or indirectly, use, divulge or disclose for any purpose whatsoever any of the Company’s, or its subsidiaries’, affiliates’ or customers’, confidential information or trade secrets, except in the course of Employee’s work for and on behalf of the Company and its subsidiaries and affiliates. Upon the termination of Employee’s employment with the Company, or at the Company’s request, Employee shall immediately deliver to the Company any and all records, documents, or electronic data (in whatever form or media), and all copies thereof, in Employee’s possession or under Employee’s control, whether prepared by Employee or others, containing confidential information or trade secrets relating to the Company, or its subsidiaries, affiliates or customers. Employee acknowledges and agrees that his or her obligations under this Section shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason. As used herein the term customer includes any other person to whom the Company owes a duty of confidentiality by law, bank regulatory requirement or internal policy.

9. Restrictive Covenants. Employee acknowledges that the following covenants are ancillary to the other agreements of the Company as herein contained, including the commitment to make certain payments to Employee and other enforceable covenants as herein provided, and are ancillary to the agreements pursuant to which the Company now or in the future may grant benefits to the Employee, including the grant of stock options and other equity rights, and that but for the agreements herein contained the Company would not extend such benefits or grant such options or other rights. Employee acknowledges that in connection with his or her employment with the Company he or she has provided and will continue to provide Employee-level services that are of a unique and special value and that he has been and will continue to be entrusted with confidential and proprietary information concerning the Company and its affiliates. Employee further acknowledges that the Company and its subsidiaries and affiliates are engaged in highly competitive businesses and that the Company and its subsidiaries and affiliates expend substantial amounts of time, money and effort to develop trade secrets, business strategies, customer relationships, employee relationships and goodwill, and Employee has benefited and will continue to benefit from these efforts. Therefore, as an essential part of this Agreement, Employee agrees and covenants to comply with the following restrictive covenants.

9.1. Non-Competition. During Employee’s employment with the Company and during the Noncompete Restrictive Period, Employee will not, in the Restricted Geographic Area, engage in any Competitive Business. For purposes of this Agreement, the term “Noncompete Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. For purposes of this Agreement, the term “Restricted Geographic Area” means and includes the following counties in Texas: Hidalgo, Starr, Cameron & Willacy. For purposes of this Agreement, the term “Competitive Business” means any business that is traditionally engaged in by a bank, a bank holding company or a financial holding company, or that provides products and services similar to and competitive with the products and services provided by the Company or any of its subsidiaries or affiliates. Notwithstanding the foregoing, Employee may make and retain investments equal to less than one percent of the equity of any entity engaged in a Competitive Business, if such equity is listed on a national securities exchange or regularly traded in a nationally-recognized over-the-counter market.

9.2. Non-Solicitation of Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not provide, sell,

market or endeavor to provide, sell or market any Competing Products/Services to any of the Company’s Customers, or otherwise solicit or communicate with any of the Company’s Customers for the purpose of selling or providing any Competing Products/Services. For purposes of this Agreement, the term “Non-Solicitation Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. Also for purposes of this Agreement, the term “Competing Products/Services” means any products or services the same as or similar to or competitive with the products or services offered by the Company or any of its subsidiaries, and the term “Company’s Customers” means any person or entity that has engaged in any banking services with, or has purchased any products or services from, the Company or any of its subsidiaries at any time during the twelve (12) months next preceding the commencement of the Non-Solicitation Restrictive Period.

9.3. Non-Interference With Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s Customers to terminate their business with the Company or any of its subsidiaries or affiliates or to cancel, reduce, limit or in any manner interfere with the Company’s Customers’ business with the Company.

9.4. Non-Interference With Contractors and Vendors. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s independent contractors, subcontractors, consultants, vendors or suppliers to terminate their relationship with, or representation of, the Company or to cancel, withdraw, reduce, limit, or in any manner modify any of such person’s or entity’s business with, or representation of, the Company or any of its subsidiaries or affiliates.

9.5. Non-Solicitation of Employees. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not solicit, recruit, hire, employ or attempt to hire or employ, or assist anyone in the recruitment or hiring of, any person who is an employee of the Company or who was an employee during the two year period next preceding the commencement of the Non-Solicitation Restrictive Period, or urge, influence, induce or seek to induce any employee of the Company to terminate his or her relationship with the Company.

9.6. Direct or Indirect Activities. Employee acknowledges and agrees that the covenants contained in this Section 9 prohibit Employee from engaging in certain activities directly or indirectly, whether on Employee’s own behalf or on behalf of any other person or entity, and regardless of the capacity in which Employee is acting, including without limitation as an employee, independent contractor, owner, partner, officer, agent, consultant, or advisor.

9.7. Survival of Restrictive Covenants. Employee acknowledges and agrees that his or her obligations under this Section 9 shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason.

9.8. Extension. In the event Employee violates any of the restrictive covenants contained in this Section 9, the duration of such restrictive covenant shall automatically be extended by the length of time during which Employee was in violation of such restriction.

9.9. Severability; Modification of Restrictions. Although Employee and the Company consider the restrictions contained in this Section 9 to be reasonable, particularly given the competitive nature of the Company’s business and Employee’s position with the Company, Employee and the Company acknowledge and agree that: (a) if any covenant, subsection, portion or clause of this Section 9 is determined to be unenforceable or invalid for any reason, such unenforceability or invalidity shall not affect the enforceability or validity of the remainder of the Agreement; and (b) if any particular covenant, subsection, provision or clause of this Section 9 is determined to be unreasonable or unenforceable for any reason, including, without limitation, the time period, geographic area, and/or scope of activity covered by any restrictive covenant, such covenant, subsection, provision or clause shall automatically be deemed reformed such that the contested covenant, subsection, provision or clause shall have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so reformed to whatever extent would be reasonable and enforceable under applicable law.

10. Remedies. Employee recognizes that a breach or threatened breach by Employee of this Agreement, including the covenants in Section 8 and Section 9 hereof, will give rise to irreparable injury to the Company and that money damages will not be adequate relief for such injury. Employee agrees that the Company shall be entitled to obtain injunctive relief, including, but not limited to, temporary restraining orders, preliminary injunctions and/or permanent injunctions, without having to post any bond or other security, to restrain or prohibit such breach or threatened breach, in addition to any other legal remedies which may be available, including the recovery of money damages.

11. Assignment.

11.1. Assignment by Company. The rights and obligations of the Company under this Agreement shall inure to the benefit of and be binding upon any and all successors and assigns of the Company, including without limitation by asset assignment, stock sale, merger, consolidation or other corporate reorganization.

11.2. Non-Assignment by Employee. The services to be provided by Employee to the Company hereunder are personal to Employee, and Employee’s duties may not be assigned by Employee.

12. Notice. Any notice required or permitted under this Agreement shall be in writing and either delivered personally or sent by nationally recognized overnight courier, express mail, or certified or registered mail, postage prepaid, return receipt requested, at the following respective address unless the party notifies the other party in writing of a change of address:

If to the Company:

Texas Regional Bancshares, Inc.

3900 North 10^th Street, 11^th Floor

McAllen, Texas 78502

Attention: Glen E. Roney, Chief Executive Officer

With a copy to:

William A. Rogers, Jr.

Rogers & Whitley, LLP

2210 San Gabriel

Austin, Texas 78705

If to Employee:

Craig A. Swann

7408 N. 1^st Street

McAllen, Texas 78504

13. Miscellaneous.

13.1. Entire Agreement. This Agreement supersedes any prior agreements or understandings, oral or written, between the parties hereto, with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto.

13.2. Modification. This Agreement shall not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement of the parties in a written instrument executed by Employee and a duly authorized officer of the Company.

13.3. Counterparts. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

13.4. Tax Withholding. The Company may withhold from any compensation or benefits payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

13.5. Contractual Rights to Benefits. Nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder.

13.6. No Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions of this Agreement shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.

13.7. Governing Law; Choice of Forum. To the extent not preempted by federal law, the provisions of this Agreement shall be construed and enforced in accordance with the laws of the State of Texas, notwithstanding any state’s choice-of-law or conflicts-of-law rules to the contrary. The Company and Employee further acknowledge and agree that this Agreement is intended, among other things, to supplement and add to, and not to substitute for, the obligations of the Employee under the provisions of the Uniform Trade Secrets Act, as amended from time to time, and the duties Employee owes to the Company under the common law, including, but not limited to, the duty of loyalty. The parties agree that any legal action pursuant to Section 10 of this Agreement shall be commenced and maintained exclusively before any court of competent jurisdiction in Hidalgo County, Texas, and the parties hereby submit to the jurisdiction and venue of such courts and waive any right to challenge or otherwise object to personal jurisdiction or venue in any action commenced or maintained in such courts.

[Remainder of page left blank intentionally;

Signature lines follow.]

IN WITNESS WHEREOF, Employee and the Company have executed this Agreement, intending it to be effective as of the Effective Date.

	TEXAS REGIONAL BANCSHARES, INC.



	By:	/s/ G.E. Roney
		Glen E. Roney, Chairman of the Board

\

	/s/ Craig A. Swann
	Craig A. Swann, President —
	Texas State Bank Data Center

EX-2.6 7 a06-13659_5ex2d6.htm EX-2

Exhibit 2.6

EMPLOYMENT AGREEMENT

between

TEXAS REGIONAL BANCSHARES, INC.

and

ROBERT C. NORMAN

This Employment Agreement (“Agreement”) is made and entered into by and between Texas Regional Bancshares, Inc., a Texas corporation (the “Company”) and Robert C. Norman (“Employee”).

Recitals

A. Employee is an employee of the Company serving as a President — Texas State Bank, Mission Region.

B. The Company and Employee desire to enter into an agreement embodying the terms of Employee’s employment with the Company.

Agreement

1. Effective Date. This Agreement shall be effective as of June 12, 2006 (the “Effective Date”).

2. Term of Employment. Subject to earlier termination as provided in this Agreement, the original term of this Agreement shall begin on the Effective Date and shall end on June 11, 2009; provided, however, that this Agreement shall be automatically extended as of the end of the initial or any renewal Term hereof for successive terms of one (1) year each (the original term plus any extensions of the term are hereinafter referred to as the “Term”) unless either party provides written notice not to so extend to the other party at least sixty (60) calendar days before the scheduled expiration of the Term, in which case no further automatic extension shall occur and the Term shall end on the scheduled expiration date.

3. Position and Responsibilities. During the Term, Employee agrees to serve as President — Texas State Bank, Mission Region of the Company or in such other position as the Board of Directors and Chief Executive Officer of the Company (the “Board”) may designate. In this capacity the Employee shall have such duties, authorities and responsibilities as are designated from time to time by the Board of Directors and Chief Executive Officer of the Company.

4. Standard of Care. During the Term, Employee (a) will devote his or her full working time, attention, energies and skills exclusively to the business and affairs of the Company and its subsidiaries; (b) will exercise the highest degree of loyalty and the highest standards of conduct in the performance of his or her duties; (c) will not, except as noted herein, engage in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, without the express written consent of the Company; and (d) will not take any action that deprives the

Company of any business opportunities or otherwise act in a manner that conflicts with the best interests of the Company or that is detrimental to the business of the Company; provided, however, this Section 4 shall not be construed as preventing Employee (y) from investing his or her personal assets in such form or manner as will not require his or her services in the daily operations and affairs of the businesses in which such investments are made, or (z) from participating in charitable or other not-for-profit activities as long as such activities do not interfere with Employee’s work for the Company (or its affiliates).

5. Compensation and Benefits. As remuneration for all services to be rendered by Employee during the Term, and as consideration for complying with the covenants herein, the Company shall pay and provide to Employee the following:

5.1. Annual Base Salary. The Company shall pay Employee an annual base salary of Two Hundred Fifty-Five Thousand and no/100 Dollars ($255,000.00) (the “Annual Base Salary”). The Company shall review the Annual Base Salary not less than approximately once each year during the Term to determine, at the discretion of the Company, whether the Annual Base Salary should be increased and, if so, the amount of such adjustment and the time at which the adjustment should take effect. The Annual Base Salary shall be paid to Employee in periodic installments consistent with the customary payroll practices of the Company.

5.2. Incentive Bonus. Employee shall be entitled to participate during the Term in any incentive bonus plan which the Company may adopt and implement from time to time during the Term for the benefit of persons serving in the Employee’s specific position. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any incentive bonus plan, so long as such changes are similarly applicable to other employees under such plan.

5.3. Employee Benefits. The Company shall provide to Employee all employee fringe benefits to which other employees of the Company are generally entitled, commensurate with his or her position with the Company and subject to the eligibility requirements and other terms and conditions of such plans, including health and life insurance coverage from time to time adopted as the life, health and disability insurance plans for employees of the Company generally. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any employee fringe benefit plan, so long as such changes are similarly applicable to other employees generally.

5.4. Vacation. The Employee shall be entitled to 20 business days of paid vacation in each calendar year in accordance with the Company’s personnel policies as in effect from time to time during the term hereof, which vacation days shall be taken at such times as are consistent with the Employee’s responsibilities.

5.5. Other Compensation Plans. The Employee shall be eligible to participate in any other compensation plan or program maintained by the Company from time for employees of the Company generally on terms and conditions that are comparable to those applicable to all other Employees.

6. Reimbursement of Business Expenses. The Company shall pay or reimburse Employee for all ordinary and necessary expenses, in a reasonable amount, which are approved as required by the Company’s policies, and which Employee incurs in performing his or her duties under this Agreement. Such expenses shall be paid or reimbursed to Employee consistent with the expense reimbursement

policies of the Company in effect from time to time and Employee agrees to abide by any such expense reimbursement policies.

7. Termination of Employment.

7.1. Termination Due to Death. If Employee dies during the Term, this Agreement shall terminate on the date of Employee’s death. Upon the death of Employee, the Company’s obligation to pay and provide to Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee or Employee’s legal representative that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee or Employee’s legal representative such other payments and benefits, if any, which had accrued hereunder before Employee’s death. Other than the foregoing, the Company shall have no further obligations to Employee (or Employee’s legal representatives, including Employee’s estate, heirs, executors, administrators and personal representatives) under this Agreement.

7.2. Termination Due to Disability.

a. If Employee suffers a Disability (as hereafter defined), the Company shall have the right to terminate this Agreement and Employee’s employment with the Company. The Company shall deliver written notice to Employee of the Company’s termination because of Disability, pursuant to this Section 7.2, specifying in such notice a termination date not less than fifteen (15) calendar days after the giving of the notice (the “Disability Notice Period”), and this Agreement, and Employee’s employment by the Company, shall terminate at the close of business on the last day of the Disability Notice Period.

7.3. Termination by the Company Without Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company without cause for any reason or no reason by notifying Employee in writing of the Company’s intent to terminate, specifying in such notice the effective termination date, and this Agreement and Employee’s employment with the

Company shall terminate at the close of business on the termination date specified in the Company’s notice.

b. Upon termination of Employee’s employment by the Company without cause other than within six (6) months before or within two (2) years after a Change in Control (a “Window Period”), the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee severance compensation after the termination of employment equal to the Employee’s Annual Base Salary at the rate of Annual Base Salary in effect immediately prior to termination for a period of one year following the date of termination of employment; provided, however, if such severance compensation exceeds two times the maximum amount that may be taken into account under a qualified plan pursuant to section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) in the year of such termination, and Employee is a “specified employee” within the meaning of Internal Revenue Code section 409A(a)(2)(B)(i), the severance compensation shall be paid in a lump sum on the date that is six months following the termination of employment.

c. Upon termination of Employee’s employment by the Company without cause during a Window Period, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee within (30) days following such a termination or, if later, such a Change in Control, a lump sum severance payment in an amount equal to the product of three (3) multiplied by the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.4. Termination by the Company For Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company for Cause as provided in this Section.

b. For purposes of this Agreement, “Cause” shall mean the occurrence of one or more of the following events: (a) Employee’s conviction for a felony or of any crime involving moral turpitude; (b) Employee’s engaging in any illegal conduct or willful misconduct in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (c) Employee’s engaging in any fraudulent or dishonest conduct in his or her dealings with, or on behalf of, the Company (or its subsidiaries or affiliates); (d) Employee’s failure or refusal to follow the lawful instructions of the Company, if such failure or refusal continues for a period of five (5) calendar days after the Company delivers to Employee a written notice stating the instructions which Employee has failed or refused to follow; (e) Employee’s breach of any of Employee’s obligations under this Agreement; (f) Employee’s gross or habitual negligence in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (g) Employee’s engaging in any conduct tending to bring the Company into public disgrace or disrepute or to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates);

(h) Employee’s material violation of the Company’s business ethics or conflict-of-interest policies, as such policies currently exist or as they may be amended or implemented during Employee’s employment with the Company; (i) Employee’s misuse of alcohol or illegal drugs which interferes with the performance of Employee’s employment duties for the Company or which compromises the reputation or goodwill of the Company; (j) Employee’s intentional violation of any applicable banking law or regulation in the performance of Employee’s employment duties for the Company; or (k) Employee’s failure to abide by any employment rules or policies applicable to the Company’s employees generally that Company currently has or may adopt, amend or implement from time to time during Employee’s employment with the Company.

7.5. Termination by Employee For Good Reason.

a. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company by giving the Company written notice of termination for Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following:

(ii) the occurrence of any one of the following events during a Window Period:

(A) A reduction by the Company in Employee’s salary from the level of such salary immediately prior to the Change in Control.

7.6. Termination By Employee Without Good Reason. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company for reasons other than Good Reason or for no reason by giving the Company written notice of termination, specifying in such notice a termination date not less than ten business days after the giving of the notice (the “Employee’s Notice Period”), and Employee’s employment with the Company shall terminate at the close of business on the last day of Employee’s Notice Period; provided, however, that in response to Employee’s notice of termination, the Company shall have the right to accelerate the Employee’s Notice Period as it deems advisable and it shall still be considered a termination of employment by Employee without Good Reason. Upon termination of Employee’s employment with the Company under this Section, whether at the end of Employee’s Notice Period or earlier as designated by the Company, the Company’s obligation to pay Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee such other payments and benefits, if any, which had

accrued hereunder before the termination date. Other than the foregoing, the Company shall have no further obligations to Employee under this Agreement.

7.7. Non-Renewal By Employee. In the event the Employee elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of Employee’s non-renewal of this Agreement, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Employee has elected to terminate his or her employment without Good Reason.

7.8. Non-Renewal by the Company. In the event the Company elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of the Company’s non-renewal of this Agreement, the Company shall be considered to have elected to terminate Employee’s employment without cause and the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Company has elected to terminate the Employee’s employment without cause hereunder.

7.9. Forfeiture of Compensation. In the event Employee breaches any of the non-disclosure or restrictive covenant provisions of this Agreement, Employee immediately shall (a) forfeit his or her right to receive (and the Company shall no longer be obligated to pay) any severance compensation under this Agreement, and (b) forfeit any unexercised stock options and/or other rights granted under any stock option or equity compensation plans of the Company, whether or not they are then exercisable, notwithstanding anything to the contrary in the agreements evidencing such stock options or other equity compensation rights. The Company and Employee acknowledge and agree that the foregoing remedies are in addition to, and not in lieu of, any and all other legal and/or equitable remedies that may be available to Company in connection with Employee’s breach or threatened breach, of any non-disclosure or restrictive covenant provision set forth in this Agreement.

7.10. Resignation as Officer and/or Director Upon Employment Termination. In the event Employee’s employment with the Company terminates for any reason (including, without limitation, pursuant to this Section 7), Employee agrees and covenants that he will immediately resign any and all positions, including, without limitation, as an officer and/or member of the Board of Directors, he may hold with the Company or any of its subsidiaries or affiliates.

7.12 Payroll Policies and Withholding. Any payments to be made under this Agreement shall be made in accordance with the Company’s normal payroll policies and procedures, and shall be subject to withholding and other deductions as required by law.

7.13 Severance Release. Employee acknowledges and agrees that the Company’s payment of the severance compensation pursuant to this Section 7 shall be deemed to constitute a full settlement and discharge of any and all obligations of the Company to Employee arising out

of this Agreement, Employee’s employment with the Company and/or the termination of Employee’s employment with the Company, except for any vested rights Employee may have under any insurance, stock option or equity compensation plan or any other employee benefit plans sponsored by the Company.

7.14 Stay-On Bonus. As an inducement to Employee to remain in the employ of the Company during and following a Change in Control, in the event that the Employee remains an employee of the Company or its subsidiary or affiliate for a period of at least one year following a Change in Control, in addition to Employee’s regular annual salary, bonus and other compensation to which the Employee may be entitled, the Company shall pay Employee at and as of the anniversary date of the Change in Control, as a special one-time stay-on bonus, a lump sum payment in an amount equal to the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.15 Retirement Benefits. In the event that the Employee’s employment and this Agreement are not terminated until at or following normal retirement age of at least sixty-five (65) years of age, and for so long thereafter that the Employee and members of Employee’s household do not accept full or part time employment with a company that provides competing products or services to those provided by the Company, Employee will be entitled to participate in Employer-sponsored or provided benefits available to Employer’s retirees generally including any retiree health insurance coverage made available to retirees from the Employer on the terms and subject to the conditions and requirements as may be imposed by the Employer on the Employer’s retired employees generally. Employee understands that while the Employer presently makes health insurance coverage available to retired employees, Employer is under no obligation to continue to make that coverage available, and such coverage is only available to a retired employee if the retiree makes timely payment of insurance premiums to continue the coverage.

7.16 Section 280G Excise Tax. If any benefit payable under this Agreement in the context of a Change in Control, when combined with other benefits payable to the Employee as a result of a Change in Control, is subject to an excise tax under Internal Revenue Code sections 280G and 4999, the Company shall pay to the Employee an additional amount (the “Gross-Up”) equal to the excise penalty tax amount divided by the sum of one minus the sum of the penalty tax rate plus the Employee’s marginal income tax rate. The Gross-Up shall be paid in a lump sum within 60 days of termination of employment following a Change in Control, or, if the termination of employment occurred prior to such Change in Control, within 60 days following such Change in Control.

7.17 Nondisparagement. It is a condition to the obligation of the Company to make any payments payable under this Agreement following termination of employment, whether such termination is at the election of the Employee or by the Company, that the Employee not make any statements, publicly or privately, orally or in writing or by electronic communication, that slander, defame or disparage the Company (or its subsidiaries or affiliates) and its reputation in the communities which it serves, or in the investment community at large, or which would tend to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates).

8. Non-Disclosure. Employee acknowledges that during the course of Employee’s employment by the Company Employee will be creating, making use of, acquiring, and/or adding to confidential information relating to the business and affairs of the Company, and its subsidiaries, affiliates

and customers, which information will include, without limitation, procedures, methods, manuals, lists of customers, suppliers and other contacts, marketing plans, business plans, financial data, and personnel information. Employee covenants and agrees that Employee shall not, at any time during Employee’s employment with the Company, or thereafter, directly or indirectly, use, divulge or disclose for any purpose whatsoever any of the Company’s, or its subsidiaries’, affiliates’ or customers’, confidential information or trade secrets, except in the course of Employee’s work for and on behalf of the Company and its subsidiaries and affiliates. Upon the termination of Employee’s employment with the Company, or at the Company’s request, Employee shall immediately deliver to the Company any and all records, documents, or electronic data (in whatever form or media), and all copies thereof, in Employee’s possession or under Employee’s control, whether prepared by Employee or others, containing confidential information or trade secrets relating to the Company, or its subsidiaries, affiliates or customers. Employee acknowledges and agrees that his or her obligations under this Section shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason. As used herein the term customer includes any other person to whom the Company owes a duty of confidentiality by law, bank regulatory requirement or internal policy.

9. Restrictive Covenants. Employee acknowledges that the following covenants are ancillary to the other agreements of the Company as herein contained, including the commitment to make certain payments to Employee and other enforceable covenants as herein provided, and are ancillary to the agreements pursuant to which the Company now or in the future may grant benefits to the Employee, including the grant of stock options and other equity rights, and that but for the agreements herein contained the Company would not extend such benefits or grant such options or other rights. Employee acknowledges that in connection with his or her employment with the Company he or she has provided and will continue to provide Employee-level services that are of a unique and special value and that he has been and will continue to be entrusted with confidential and proprietary information concerning the Company and its affiliates. Employee further acknowledges that the Company and its subsidiaries and affiliates are engaged in highly competitive businesses and that the Company and its subsidiaries and affiliates expend substantial amounts of time, money and effort to develop trade secrets, business strategies, customer relationships, employee relationships and goodwill, and Employee has benefited and will continue to benefit from these efforts. Therefore, as an essential part of this Agreement, Employee agrees and covenants to comply with the following restrictive covenants.

9.1. Non-Competition. During Employee’s employment with the Company and during the Noncompete Restrictive Period, Employee will not, in the Restricted Geographic Area, engage in any Competitive Business. For purposes of this Agreement, the term “Noncompete Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. For purposes of this Agreement, the term “Restricted Geographic Area” means and includes the following counties in Texas: Hidalgo, Starr, Cameron & Willacy. For purposes of this Agreement, the term “Competitive Business” means any business that is traditionally engaged in by a bank, a bank holding company or a financial holding company, or that provides products and services similar to and competitive with the products and services provided by the Company or any of its subsidiaries or affiliates. Notwithstanding the foregoing, Employee may make and retain investments equal to less than one percent of the equity of any entity engaged in a Competitive Business, if such equity is listed on a national securities exchange or regularly traded in a nationally-recognized over-the-counter market.

9.2. Non-Solicitation of Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not provide, sell,

market or endeavor to provide, sell or market any Competing Products/Services to any of the Company’s Customers, or otherwise solicit or communicate with any of the Company’s Customers for the purpose of selling or providing any Competing Products/Services. For purposes of this Agreement, the term “Non-Solicitation Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. Also for purposes of this Agreement, the term “Competing Products/Services” means any products or services the same as or similar to or competitive with the products or services offered by the Company or any of its subsidiaries, and the term “Company’s Customers” means any person or entity that has engaged in any banking services with, or has purchased any products or services from, the Company or any of its subsidiaries at any time during the twelve (12) months next preceding the commencement of the Non-Solicitation Restrictive Period.

9.3. Non-Interference With Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s Customers to terminate their business with the Company or any of its subsidiaries or affiliates or to cancel, reduce, limit or in any manner interfere with the Company’s Customers’ business with the Company.

9.4. Non-Interference With Contractors and Vendors. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s independent contractors, subcontractors, consultants, vendors or suppliers to terminate their relationship with, or representation of, the Company or to cancel, withdraw, reduce, limit, or in any manner modify any of such person’s or entity’s business with, or representation of, the Company or any of its subsidiaries or affiliates.

9.5. Non-Solicitation of Employees. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not solicit, recruit, hire, employ or attempt to hire or employ, or assist anyone in the recruitment or hiring of, any person who is an employee of the Company or who was an employee during the two year period next preceding the commencement of the Non-Solicitation Restrictive Period, or urge, influence, induce or seek to induce any employee of the Company to terminate his or her relationship with the Company.

9.6. Direct or Indirect Activities. Employee acknowledges and agrees that the covenants contained in this Section 9 prohibit Employee from engaging in certain activities directly or indirectly, whether on Employee’s own behalf or on behalf of any other person or entity, and regardless of the capacity in which Employee is acting, including without limitation as an employee, independent contractor, owner, partner, officer, agent, consultant, or advisor.

9.7. Survival of Restrictive Covenants. Employee acknowledges and agrees that his or her obligations under this Section 9 shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason.

9.8. Extension. In the event Employee violates any of the restrictive covenants contained in this Section 9, the duration of such restrictive covenant shall automatically be extended by the length of time during which Employee was in violation of such restriction.

9.9. Severability; Modification of Restrictions. Although Employee and the Company consider the restrictions contained in this Section 9 to be reasonable, particularly given the competitive nature of the Company’s business and Employee’s position with the Company, Employee and the Company acknowledge and agree that: (a) if any covenant, subsection, portion or clause of this Section 9 is determined to be unenforceable or invalid for any reason, such unenforceability or invalidity shall not affect the enforceability or validity of the remainder of the Agreement; and (b) if any particular covenant, subsection, provision or clause of this Section 9 is determined to be unreasonable or unenforceable for any reason, including, without limitation, the time period, geographic area, and/or scope of activity covered by any restrictive covenant, such covenant, subsection, provision or clause shall automatically be deemed reformed such that the contested covenant, subsection, provision or clause shall have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so reformed to whatever extent would be reasonable and enforceable under applicable law.

10. Remedies. Employee recognizes that a breach or threatened breach by Employee of this Agreement, including the covenants in Section 8 and Section 9 hereof, will give rise to irreparable injury to the Company and that money damages will not be adequate relief for such injury. Employee agrees that the Company shall be entitled to obtain injunctive relief, including, but not limited to, temporary restraining orders, preliminary injunctions and/or permanent injunctions, without having to post any bond or other security, to restrain or prohibit such breach or threatened breach, in addition to any other legal remedies which may be available, including the recovery of money damages.

11. Assignment.

11.1. Assignment by Company. The rights and obligations of the Company under this Agreement shall inure to the benefit of and be binding upon any and all successors and assigns of the Company, including without limitation by asset assignment, stock sale, merger, consolidation or other corporate reorganization.

11.2. Non-Assignment by Employee. The services to be provided by Employee to the Company hereunder are personal to Employee, and Employee’s duties may not be assigned by Employee.

12. Notice. Any notice required or permitted under this Agreement shall be in writing and either delivered personally or sent by nationally recognized overnight courier, express mail, or certified or registered mail, postage prepaid, return receipt requested, at the following respective address unless the party notifies the other party in writing of a change of address:

If to the Company:

Texas Regional Bancshares, Inc.

3900 North 10th Street, 11th Floor

McAllen, Texas 78502

Attention: Glen E. Roney, Chief Executive Officer

With a copy to:

William A. Rogers, Jr.

Rogers & Whitley, LLP

2210 San Gabriel

Austin, Texas 78705

If to Employee:

Robert C. Norman

P. O. Box 311

Mission, Texas 78573

13. Miscellaneous.

13.1. Entire Agreement. This Agreement supersedes any prior agreements or understandings, oral or written, between the parties hereto, with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto.

13.2. Modification. This Agreement shall not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement of the parties in a written instrument executed by Employee and a duly authorized officer of the Company.

13.3. Counterparts. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

13.4. Tax Withholding. The Company may withhold from any compensation or benefits payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

13.5. Contractual Rights to Benefits. Nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder.

13.6. No Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions of this Agreement shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.

13.7. Governing Law; Choice of Forum. To the extent not preempted by federal law, the provisions of this Agreement shall be construed and enforced in accordance with the laws of the State of Texas, notwithstanding any state’s choice-of-law or conflicts-of-law rules to the contrary. The Company and Employee further acknowledge and agree that this Agreement is intended, among other things, to supplement and add to, and not to substitute for, the obligations of the Employee under the provisions of the Uniform Trade Secrets Act, as amended from time to time, and the duties Employee owes to the Company under the common law, including, but not limited to, the duty of loyalty. The parties agree that any legal action pursuant to Section 10 of this Agreement shall be commenced and maintained exclusively before any court of competent jurisdiction in Hidalgo County, Texas, and the parties hereby submit to the jurisdiction and venue of such courts and waive any right to challenge or otherwise object to personal jurisdiction or venue in any action commenced or maintained in such courts.

[Remainder of page left blank intentionally;

Signature lines follow.]

IN WITNESS WHEREOF, Employee and the Company have executed this Agreement, intending it to be effective as of the Effective Date.

	TEXAS REGIONAL BANCSHARES, INC.



	By:	/s/ G.E. Roney
		Glen E. Roney, Chairman of the Board



	/s/ Robert C. Norman
	Robert C. Norman, President — Mission Region

EX-2.7 8 a06-13659_5ex2d7.htm EX-2

Exhibit 2.7

EMPLOYMENT AGREEMENT

between

TEXAS REGIONAL BANCSHARES, INC.

and

STANLEY V. GRISHAM

This Employment Agreement (“Agreement”) is made and entered into by and between Texas Regional Bancshares, Inc., a Texas corporation (the “Company”) and Stanley V. Grisham (“Employee”).

Recitals

A. Employee is an employee of the Company serving as a President — Texas State Bank, Houston Region.

B. The Company and Employee desire to enter into an agreement embodying the terms of Employee’s employment with the Company.

Agreement

1. Effective Date. This Agreement shall be effective as of June 12, 2006 (the “Effective Date”).

2. Term of Employment. Subject to earlier termination as provided in this Agreement, the original term of this Agreement shall begin on the Effective Date and shall end on June 11, 2009; provided, however, that this Agreement shall be automatically extended as of the end of the initial or any renewal Term hereof for successive terms of one (1) year each (the original term plus any extensions of the term are hereinafter referred to as the “Term”) unless either party provides written notice not to so extend to the other party at least sixty (60) calendar days before the scheduled expiration of the Term, in which case no further automatic extension shall occur and the Term shall end on the scheduled expiration date.

3. Position and Responsibilities. During the Term, Employee agrees to serve as President — Texas State Bank, Houston Region of the Company or in such other position as the Board of Directors and Chief Executive Officer of the Company (the “Board”) may designate. In this capacity the Employee shall have such duties, authorities and responsibilities as are designated from time to time by the Board of Directors and Chief Executive Officer of the Company.

4. Standard of Care. During the Term, Employee (a) will devote his or her full working time, attention, energies and skills exclusively to the business and affairs of the Company and its subsidiaries; (b) will exercise the highest degree of loyalty and the highest standards of conduct in the performance of his or her duties; (c) will not, except as noted herein, engage in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, without the express written consent of the Company; and (d) will not take any action that deprives the

Company of any business opportunities or otherwise act in a manner that conflicts with the best interests of the Company or that is detrimental to the business of the Company; provided, however, this Section 4 shall not be construed as preventing Employee (y) from investing his or her personal assets in such form or manner as will not require his or her services in the daily operations and affairs of the businesses in which such investments are made, or (z) from participating in charitable or other not-for-profit activities as long as such activities do not interfere with Employee’s work for the Company (or its affiliates).

5. Compensation and Benefits. As remuneration for all services to be rendered by Employee during the Term, and as consideration for complying with the covenants herein, the Company shall pay and provide to Employee the following:

5.1. Annual Base Salary. The Company shall pay Employee an annual base salary of Two Hundred Forty Thousand and no/100 Dollars ($240,000.00) (the “Annual Base Salary”). The Company shall review the Annual Base Salary not less than approximately once each year during the Term to determine, at the discretion of the Company, whether the Annual Base Salary should be increased and, if so, the amount of such adjustment and the time at which the adjustment should take effect. The Annual Base Salary shall be paid to Employee in periodic installments consistent with the customary payroll practices of the Company.

5.2. Incentive Bonus. Employee shall be entitled to participate during the Term in any incentive bonus plan which the Company may adopt and implement from time to time during the Term for the benefit of persons serving in the Employee’s specific position. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any incentive bonus plan, so long as such changes are similarly applicable to other employees under such plan.

5.3. Employee Benefits. The Company shall provide to Employee all employee fringe benefits to which other employees of the Company are generally entitled, commensurate with his or her position with the Company and subject to the eligibility requirements and other terms and conditions of such plans, including health and life insurance coverage from time to time adopted as the life, health and disability insurance plans for employees of the Company generally. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any employee fringe benefit plan, so long as such changes are similarly applicable to other employees generally.

5.4. Vacation. The Employee shall be entitled to 20 business days of paid vacation in each calendar year in accordance with the Company’s personnel policies as in effect from time to time during the term hereof, which vacation days shall be taken at such times as are consistent with the Employee’s responsibilities.

5.5. Other Compensation Plans. The Employee shall be eligible to participate in any other compensation plan or program maintained by the Company from time for employees of the Company generally on terms and conditions that are comparable to those applicable to all other Employees.

6. Reimbursement of Business Expenses. The Company shall pay or reimburse Employee for all ordinary and necessary expenses, in a reasonable amount, which are approved as required by the Company’s policies, and which Employee incurs in performing his or her duties under this Agreement. Such expenses shall be paid or reimbursed to Employee consistent with the expense reimbursement

policies of the Company in effect from time to time and Employee agrees to abide by any such expense reimbursement policies.

7. Termination of Employment.

7.1. Termination Due to Death. If Employee dies during the Term, this Agreement shall terminate on the date of Employee’s death. Upon the death of Employee, the Company’s obligation to pay and provide to Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee or Employee’s legal representative that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee or Employee’s legal representative such other payments and benefits, if any, which had accrued hereunder before Employee’s death. Other than the foregoing, the Company shall have no further obligations to Employee (or Employee’s legal representatives, including Employee’s estate, heirs, executors, administrators and personal representatives) under this Agreement.

7.2. Termination Due to Disability.

a. If Employee suffers a Disability (as hereafter defined), the Company shall have the right to terminate this Agreement and Employee’s employment with the Company. The Company shall deliver written notice to Employee of the Company’s termination because of Disability, pursuant to this Section 7.2, specifying in such notice a termination date not less than fifteen (15) calendar days after the giving of the notice (the “Disability Notice Period”), and this Agreement, and Employee’s employment by the Company, shall terminate at the close of business on the last day of the Disability Notice Period.

7.3. Termination by the Company Without Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company without cause for any reason or no reason by notifying Employee in writing of the Company’s intent to terminate, specifying in such notice the effective termination date, and this Agreement and Employee’s employment with the

Company shall terminate at the close of business on the termination date specified in the Company’s notice.

b. Upon termination of Employee’s employment by the Company without cause other than within six (6) months before or within two (2) years after a Change in Control (a “Window Period”), the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee severance compensation after the termination of employment equal to the Employee’s Annual Base Salary at the rate of Annual Base Salary in effect immediately prior to termination for a period of one year following the date of termination of employment; provided, however, if such severance compensation exceeds two times the maximum amount that may be taken into account under a qualified plan pursuant to section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) in the year of such termination, and Employee is a “specified employee” within the meaning of Internal Revenue Code section 409A(a)(2)(B)(i), the severance compensation shall be paid in a lump sum on the date that is six months following the termination of employment.

c. Upon termination of Employee’s employment by the Company without cause during a Window Period, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee within (30) days following such a termination or, if later, such a Change in Control, a lump sum severance payment in an amount equal to the product of three (3) multiplied by the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.4. Termination by the Company For Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company for Cause as provided in this Section.

b. For purposes of this Agreement, “Cause” shall mean the occurrence of one or more of the following events: (a) Employee’s conviction for a felony or of any crime involving moral turpitude; (b) Employee’s engaging in any illegal conduct or willful misconduct in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (c) Employee’s engaging in any fraudulent or dishonest conduct in his or her dealings with, or on behalf of, the Company (or its subsidiaries or affiliates); (d) Employee’s failure or refusal to follow the lawful instructions of the Company, if such failure or refusal continues for a period of five (5) calendar days after the Company delivers to Employee a written notice stating the instructions which Employee has failed or refused to follow; (e) Employee’s breach of any of Employee’s obligations under this Agreement; (f) Employee’s gross or habitual negligence in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (g) Employee’s engaging in any conduct tending to bring the Company into public disgrace or disrepute or to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates);

(h) Employee’s material violation of the Company’s business ethics or conflict-of-interest policies, as such policies currently exist or as they may be amended or implemented during Employee’s employment with the Company; (i) Employee’s misuse of alcohol or illegal drugs which interferes with the performance of Employee’s employment duties for the Company or which compromises the reputation or goodwill of the Company; (j) Employee’s intentional violation of any applicable banking law or regulation in the performance of Employee’s employment duties for the Company; or (k) Employee’s failure to abide by any employment rules or policies applicable to the Company’s employees generally that Company currently has or may adopt, amend or implement from time to time during Employee’s employment with the Company.

7.5. Termination by Employee For Good Reason.

a. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company by giving the Company written notice of termination for Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following:

(ii) the occurrence of any one of the following events during a Window Period:

(A) A reduction by the Company in Employee’s salary from the level of such salary immediately prior to the Change in Control.

7.6. Termination By Employee Without Good Reason. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company for reasons other than Good Reason or for no reason by giving the Company written notice of termination, specifying in such notice a termination date not less than ten business days after the giving of the notice (the “Employee’s Notice Period”), and Employee’s employment with the Company shall terminate at the close of business on the last day of Employee’s Notice Period; provided, however, that in response to Employee’s notice of termination, the Company shall have the right to accelerate the Employee’s Notice Period as it deems advisable and it shall still be considered a termination of employment by Employee without Good Reason. Upon termination of Employee’s employment with the Company under this Section, whether at the end of Employee’s Notice Period or earlier as designated by the Company, the Company’s obligation to pay Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee such other payments and benefits, if any, which had

accrued hereunder before the termination date. Other than the foregoing, the Company shall have no further obligations to Employee under this Agreement.

7.7. Non-Renewal By Employee. In the event the Employee elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of Employee’s non-renewal of this Agreement, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Employee has elected to terminate his or her employment without Good Reason.

7.8. Non-Renewal by the Company. In the event the Company elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of the Company’s non-renewal of this Agreement, the Company shall be considered to have elected to terminate Employee’s employment without cause and the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Company has elected to terminate the Employee’s employment without cause hereunder.

7.9. Forfeiture of Compensation. In the event Employee breaches any of the non-disclosure or restrictive covenant provisions of this Agreement, Employee immediately shall (a) forfeit his or her right to receive (and the Company shall no longer be obligated to pay) any severance compensation under this Agreement, and (b) forfeit any unexercised stock options and/or other rights granted under any stock option or equity compensation plans of the Company, whether or not they are then exercisable, notwithstanding anything to the contrary in the agreements evidencing such stock options or other equity compensation rights. The Company and Employee acknowledge and agree that the foregoing remedies are in addition to, and not in lieu of, any and all other legal and/or equitable remedies that may be available to Company in connection with Employee’s breach or threatened breach, of any non-disclosure or restrictive covenant provision set forth in this Agreement.

7.10. Resignation as Officer and/or Director Upon Employment Termination. In the event Employee’s employment with the Company terminates for any reason (including, without limitation, pursuant to this Section 7), Employee agrees and covenants that he will immediately resign any and all positions, including, without limitation, as an officer and/or member of the Board of Directors, he may hold with the Company or any of its subsidiaries or affiliates.

7.12 Payroll Policies and Withholding. Any payments to be made under this Agreement shall be made in accordance with the Company’s normal payroll policies and procedures, and shall be subject to withholding and other deductions as required by law.

7.13 Severance Release. Employee acknowledges and agrees that the Company’s payment of the severance compensation pursuant to this Section 7 shall be deemed to constitute a full settlement and discharge of any and all obligations of the Company to Employee arising out

of this Agreement, Employee’s employment with the Company and/or the termination of Employee’s employment with the Company, except for any vested rights Employee may have under any insurance, stock option or equity compensation plan or any other employee benefit plans sponsored by the Company.

7.14 Stay-On Bonus. As an inducement to Employee to remain in the employ of the Company during and following a Change in Control, in the event that the Employee remains an employee of the Company or its subsidiary or affiliate for a period of at least one year following a Change in Control, in addition to Employee’s regular annual salary, bonus and other compensation to which the Employee may be entitled, the Company shall pay Employee at and as of the anniversary date of the Change in Control, as a special one-time stay-on bonus, a lump sum payment in an amount equal to the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.15 Retirement Benefits. In the event that the Employee’s employment and this Agreement are not terminated until at or following normal retirement age of at least sixty-five (65) years of age, and for so long thereafter that the Employee and members of Employee’s household do not accept full or part time employment with a company that provides competing products or services to those provided by the Company, Employee will be entitled to participate in Employer-sponsored or provided benefits available to Employer’s retirees generally including any retiree health insurance coverage made available to retirees from the Employer on the terms and subject to the conditions and requirements as may be imposed by the Employer on the Employer’s retired employees generally. Employee understands that while the Employer presently makes health insurance coverage available to retired employees, Employer is under no obligation to continue to make that coverage available, and such coverage is only available to a retired employee if the retiree makes timely payment of insurance premiums to continue the coverage.

7.16 Section 280G Excise Tax. If any benefit payable under this Agreement in the context of a Change in Control, when combined with other benefits payable to the Employee as a result of a Change in Control, is subject to an excise tax under Internal Revenue Code sections 280G and 4999, the Company shall pay to the Employee an additional amount (the “Gross-Up”) equal to the excise penalty tax amount divided by the sum of one minus the sum of the penalty tax rate plus the Employee’s marginal income tax rate. The Gross-Up shall be paid in a lump sum within 60 days of termination of employment following a Change in Control, or, if the termination of employment occurred prior to such Change in Control, within 60 days following such Change in Control.

7.17 Nondisparagement. It is a condition to the obligation of the Company to make any payments payable under this Agreement following termination of employment, whether such termination is at the election of the Employee or by the Company, that the Employee not make any statements, publicly or privately, orally or in writing or by electronic communication, that slander, defame or disparage the Company (or its subsidiaries or affiliates) and its reputation in the communities which it serves, or in the investment community at large, or which would tend to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates).

8. Non-Disclosure. Employee acknowledges that during the course of Employee’s employment by the Company Employee will be creating, making use of, acquiring, and/or adding to confidential information relating to the business and affairs of the Company, and its subsidiaries, affiliates

and customers, which information will include, without limitation, procedures, methods, manuals, lists of customers, suppliers and other contacts, marketing plans, business plans, financial data, and personnel information. Employee covenants and agrees that Employee shall not, at any time during Employee’s employment with the Company, or thereafter, directly or indirectly, use, divulge or disclose for any purpose whatsoever any of the Company’s, or its subsidiaries’, affiliates’ or customers’, confidential information or trade secrets, except in the course of Employee’s work for and on behalf of the Company and its subsidiaries and affiliates. Upon the termination of Employee’s employment with the Company, or at the Company’s request, Employee shall immediately deliver to the Company any and all records, documents, or electronic data (in whatever form or media), and all copies thereof, in Employee’s possession or under Employee’s control, whether prepared by Employee or others, containing confidential information or trade secrets relating to the Company, or its subsidiaries, affiliates or customers. Employee acknowledges and agrees that his or her obligations under this Section shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason. As used herein the term customer includes any other person to whom the Company owes a duty of confidentiality by law, bank regulatory requirement or internal policy.

9. Restrictive Covenants. Employee acknowledges that the following covenants are ancillary to the other agreements of the Company as herein contained, including the commitment to make certain payments to Employee and other enforceable covenants as herein provided, and are ancillary to the agreements pursuant to which the Company now or in the future may grant benefits to the Employee, including the grant of stock options and other equity rights, and that but for the agreements herein contained the Company would not extend such benefits or grant such options or other rights. Employee acknowledges that in connection with his or her employment with the Company he or she has provided and will continue to provide Employee-level services that are of a unique and special value and that he has been and will continue to be entrusted with confidential and proprietary information concerning the Company and its affiliates. Employee further acknowledges that the Company and its subsidiaries and affiliates are engaged in highly competitive businesses and that the Company and its subsidiaries and affiliates expend substantial amounts of time, money and effort to develop trade secrets, business strategies, customer relationships, employee relationships and goodwill, and Employee has benefited and will continue to benefit from these efforts. Therefore, as an essential part of this Agreement, Employee agrees and covenants to comply with the following restrictive covenants.

9.1. Non-Competition. During Employee’s employment with the Company and during the Noncompete Restrictive Period, Employee will not, in the Restricted Geographic Area, engage in any Competitive Business. For purposes of this Agreement, the term “Noncompete Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. For purposes of this Agreement, the term “Restricted Geographic Area” means and includes the following counties in Texas: Fort Bend, Harris, & Montgomery. For purposes of this Agreement, the term “Competitive Business” means any business that is traditionally engaged in by a bank, a bank holding company or a financial holding company, or that provides products and services similar to and competitive with the products and services provided by the Company or any of its subsidiaries or affiliates. Notwithstanding the foregoing, Employee may make and retain investments equal to less than one percent of the equity of any entity engaged in a Competitive Business, if such equity is listed on a national securities exchange or regularly traded in a nationally-recognized over-the-counter market.

9.2. Non-Solicitation of Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not provide, sell, market or endeavor to provide, sell or market any Competing Products/Services to any of the

Company’s Customers, or otherwise solicit or communicate with any of the Company’s Customers for the purpose of selling or providing any Competing Products/Services. For purposes of this Agreement, the term “Non-Solicitation Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. Also for purposes of this Agreement, the term “Competing Products/Services” means any products or services the same as or similar to or competitive with the products or services offered by the Company or any of its subsidiaries, and the term “Company’s Customers” means any person or entity that has engaged in any banking services with, or has purchased any products or services from, the Company or any of its subsidiaries at any time during the twelve (12) months next preceding the commencement of the Non-Solicitation Restrictive Period.

9.3. Non-Interference With Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s Customers to terminate their business with the Company or any of its subsidiaries or affiliates or to cancel, reduce, limit or in any manner interfere with the Company’s Customers’ business with the Company.

9.4. Non-Interference With Contractors and Vendors. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s independent contractors, subcontractors, consultants, vendors or suppliers to terminate their relationship with, or representation of, the Company or to cancel, withdraw, reduce, limit, or in any manner modify any of such person’s or entity’s business with, or representation of, the Company or any of its subsidiaries or affiliates.

9.5. Non-Solicitation of Employees. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not solicit, recruit, hire, employ or attempt to hire or employ, or assist anyone in the recruitment or hiring of, any person who is an employee of the Company or who was an employee during the two year period next preceding the commencement of the Non-Solicitation Restrictive Period, or urge, influence, induce or seek to induce any employee of the Company to terminate his or her relationship with the Company.

9.6. Direct or Indirect Activities. Employee acknowledges and agrees that the covenants contained in this Section 9 prohibit Employee from engaging in certain activities directly or indirectly, whether on Employee’s own behalf or on behalf of any other person or entity, and regardless of the capacity in which Employee is acting, including without limitation as an employee, independent contractor, owner, partner, officer, agent, consultant, or advisor.

9.7. Survival of Restrictive Covenants. Employee acknowledges and agrees that his or her obligations under this Section 9 shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason.

9.8. Extension. In the event Employee violates any of the restrictive covenants contained in this Section 9, the duration of such restrictive covenant shall automatically be extended by the length of time during which Employee was in violation of such restriction.

9.9. Severability; Modification of Restrictions. Although Employee and the Company consider the restrictions contained in this Section 9 to be reasonable, particularly given

the competitive nature of the Company’s business and Employee’s position with the Company, Employee and the Company acknowledge and agree that: (a) if any covenant, subsection, portion or clause of this Section 9 is determined to be unenforceable or invalid for any reason, such unenforceability or invalidity shall not affect the enforceability or validity of the remainder of the Agreement; and (b) if any particular covenant, subsection, provision or clause of this Section 9 is determined to be unreasonable or unenforceable for any reason, including, without limitation, the time period, geographic area, and/or scope of activity covered by any restrictive covenant, such covenant, subsection, provision or clause shall automatically be deemed reformed such that the contested covenant, subsection, provision or clause shall have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so reformed to whatever extent would be reasonable and enforceable under applicable law.

10. Remedies. Employee recognizes that a breach or threatened breach by Employee of this Agreement, including the covenants in Section 8 and Section 9 hereof, will give rise to irreparable injury to the Company and that money damages will not be adequate relief for such injury. Employee agrees that the Company shall be entitled to obtain injunctive relief, including, but not limited to, temporary restraining orders, preliminary injunctions and/or permanent injunctions, without having to post any bond or other security, to restrain or prohibit such breach or threatened breach, in addition to any other legal remedies which may be available, including the recovery of money damages.

11. Assignment.

11.1. Assignment by Company. The rights and obligations of the Company under this Agreement shall inure to the benefit of and be binding upon any and all successors and assigns of the Company, including without limitation by asset assignment, stock sale, merger, consolidation or other corporate reorganization.

11.2. Non-Assignment by Employee. The services to be provided by Employee to the Company hereunder are personal to Employee, and Employee’s duties may not be assigned by Employee.

12. Notice. Any notice required or permitted under this Agreement shall be in writing and either delivered personally or sent by nationally recognized overnight courier, express mail, or certified or registered mail, postage prepaid, return receipt requested, at the following respective address unless the party notifies the other party in writing of a change of address:

If to the Company:

Texas Regional Bancshares, Inc.

3900 North 10th Street, 11th Floor

McAllen, Texas 78502

Attention: Glen E. Roney, Chief Executive Officer

With a copy to:

William A. Rogers, Jr.

Rogers & Whitley, LLP

2210 San Gabriel

Austin, Texas 78705

If to Employee:

Stanley V. Grisham

2 Crested Cloud Court

The Woodlands, Texas 77380

13. Miscellaneous.

13.1. Entire Agreement. This Agreement supersedes any prior agreements or understandings, oral or written, between the parties hereto, with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto.

13.2. Modification. This Agreement shall not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement of the parties in a written instrument executed by Employee and a duly authorized officer of the Company.

13.3. Counterparts. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

13.4. Tax Withholding. The Company may withhold from any compensation or benefits payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

13.5. Contractual Rights to Benefits. Nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder.

13.6. No Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions of this Agreement shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.

13.7. Governing Law; Choice of Forum. To the extent not preempted by federal law, the provisions of this Agreement shall be construed and enforced in accordance with the laws of the State of Texas, notwithstanding any state’s choice-of-law or conflicts-of-law rules to the contrary. The Company and Employee further acknowledge and agree that this Agreement is intended, among other things, to supplement and add to, and not to substitute for, the obligations of the Employee under the provisions of the Uniform Trade Secrets Act, as amended from time to time, and the duties Employee owes to the Company under the common law, including, but not limited to, the duty of loyalty. The parties agree that any legal action pursuant to Section 10 of this Agreement shall be commenced and maintained exclusively before any court of competent jurisdiction in Hidalgo County, Texas, and the parties hereby submit to the jurisdiction and venue of such courts and waive any right to challenge or otherwise object to personal jurisdiction or venue in any action commenced or maintained in such courts.

[Remainder of page left blank intentionally;

Signature lines follow.]

IN WITNESS WHEREOF, Employee and the Company have executed this Agreement, intending it to be effective as of the Effective Date.

	TEXAS REGIONAL BANCSHARES, INC.



	By:	/s/ G.E. Roney
		Glen E. Roney, Chairman of the Board



	/s/ Stanley V. Grisham
	Stanley V. Grisham, President — Houston Region

EX-2.8 9 a06-13659_5ex2d8.htm EX-2

Exhibit 2.8

EMPLOYMENT AGREEMENT

between

TEXAS REGIONAL BANCSHARES, INC.

and

LOIS ANN STANTON

This Employment Agreement (“Agreement”) is made and entered into by and between Texas Regional Bancshares, Inc., a Texas corporation (the “Company”) and Lois Ann Stanton (“Employee”).

Recitals

A. Employee is an employee of the Company serving as a Executive Vice President & Director of Trust Services, Southeast Texas Region — Texas State Bank.

B. The Company and Employee desire to enter into an agreement embodying the terms of Employee’s employment with the Company.

Agreement

1. Effective Date. This Agreement shall be effective as of June 12, 2006 (the “Effective Date”).

2. Term of Employment. Subject to earlier termination as provided in this Agreement, the original term of this Agreement shall begin on the Effective Date and shall end on June 11, 2009; provided, however, that this Agreement shall be automatically extended as of the end of the initial or any renewal Term hereof for successive terms of one (1) year each (the original term plus any extensions of the term are hereinafter referred to as the “Term”) unless either party provides written notice not to so extend to the other party at least sixty (60) calendar days before the scheduled expiration of the Term, in which case no further automatic extension shall occur and the Term shall end on the scheduled expiration date.

3. Position and Responsibilities. During the Term, Employee agrees to serve as Executive Vice President & Director of Trust Services, Southeast Texas Region — Texas State Bank of the Company or in such other position as the Board of Directors and Chief Executive Officer of the Company (the “Board”) may designate. In this capacity the Employee shall have such duties, authorities and responsibilities as are designated from time to time by the Board of Directors and Chief Executive Officer of the Company.

4. Standard of Care. During the Term, Employee (a) will devote his or her full working time, attention, energies and skills exclusively to the business and affairs of the Company and its subsidiaries; (b) will exercise the highest degree of loyalty and the highest standards of conduct in the performance of his or her duties; (c) will not, except as noted herein, engage in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, without the express written consent of the Company; and (d) will not take any action that deprives the

Company of any business opportunities or otherwise act in a manner that conflicts with the best interests of the Company or that is detrimental to the business of the Company; provided, however, this Section 4 shall not be construed as preventing Employee (y) from investing his or her personal assets in such form or manner as will not require his or her services in the daily operations and affairs of the businesses in which such investments are made, or (z) from participating in charitable or other not-for-profit activities as long as such activities do not interfere with Employee’s work for the Company (or its affiliates).

5. Compensation and Benefits. As remuneration for all services to be rendered by Employee during the Term, and as consideration for complying with the covenants herein, the Company shall pay and provide to Employee the following:

5.1. Annual Base Salary. The Company shall pay Employee an annual base salary of Two Hundred Twenty-Five Thousand and no/100 Dollars ($225,000.00) (the “Annual Base Salary”). The Company shall review the Annual Base Salary not less than approximately once each year during the Term to determine, at the discretion of the Company, whether the Annual Base Salary should be increased and, if so, the amount of such adjustment and the time at which the adjustment should take effect. The Annual Base Salary shall be paid to Employee in periodic installments consistent with the customary payroll practices of the Company.

5.2. Incentive Bonus. Employee shall be entitled to participate during the Term in any incentive bonus plan which the Company may adopt and implement from time to time during the Term for the benefit of persons serving in the Employee’s specific position. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any incentive bonus plan, so long as such changes are similarly applicable to other employees under such plan.

5.3. Employee Benefits. The Company shall provide to Employee all employee fringe benefits to which other employees of the Company are generally entitled, commensurate with his or her position with the Company and subject to the eligibility requirements and other terms and conditions of such plans, including health and life insurance coverage from time to time adopted as the life, health and disability insurance plans for employees of the Company generally. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any employee fringe benefit plan, so long as such changes are similarly applicable to other employees generally.

5.4. Vacation. The Employee shall be entitled to 20 business days of paid vacation in each calendar year in accordance with the Company’s personnel policies as in effect from time to time during the term hereof, which vacation days shall be taken at such times as are consistent with the Employee’s responsibilities.

5.5. Other Compensation Plans. The Employee shall be eligible to participate in any other compensation plan or program maintained by the Company from time for employees of the Company generally on terms and conditions that are comparable to those applicable to all other Employees.

6. Reimbursement of Business Expenses. The Company shall pay or reimburse Employee for all ordinary and necessary expenses, in a reasonable amount, which are approved as required by the Company’s policies, and which Employee incurs in performing his or her duties under this Agreement. Such expenses shall be paid or reimbursed to Employee consistent with the expense reimbursement

policies of the Company in effect from time to time and Employee agrees to abide by any such expense reimbursement policies.

7. Termination of Employment.

7.1. Termination Due to Death. If Employee dies during the Term, this Agreement shall terminate on the date of Employee’s death. Upon the death of Employee, the Company’s obligation to pay and provide to Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee or Employee’s legal representative that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee or Employee’s legal representative such other payments and benefits, if any, which had accrued hereunder before Employee’s death. Other than the foregoing, the Company shall have no further obligations to Employee (or Employee’s legal representatives, including Employee’s estate, heirs, executors, administrators and personal representatives) under this Agreement.

7.2. Termination Due to Disability.

a. If Employee suffers a Disability (as hereafter defined), the Company shall have the right to terminate this Agreement and Employee’s employment with the Company. The Company shall deliver written notice to Employee of the Company’s termination because of Disability, pursuant to this Section 7.2, specifying in such notice a termination date not less than fifteen (15) calendar days after the giving of the notice (the “Disability Notice Period”), and this Agreement, and Employee’s employment by the Company, shall terminate at the close of business on the last day of the Disability Notice Period.

7.3. Termination by the Company Without Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company without cause for any reason or no reason by notifying Employee in writing of the Company’s intent to terminate, specifying in such notice the effective termination date, and this Agreement and Employee’s employment with the

Company shall terminate at the close of business on the termination date specified in the Company’s notice.

b. Upon termination of Employee’s employment by the Company without cause other than within six (6) months before or within two (2) years after a Change in Control (a “Window Period”), the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee severance compensation after the termination of employment equal to the Employee’s Annual Base Salary at the rate of Annual Base Salary in effect immediately prior to termination for a period of one year following the date of termination of employment; provided, however, if such severance compensation exceeds two times the maximum amount that may be taken into account under a qualified plan pursuant to section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) in the year of such termination, and Employee is a “specified employee” within the meaning of Internal Revenue Code section 409A(a)(2)(B)(i), the severance compensation shall be paid in a lump sum on the date that is six months following the termination of employment.

c. Upon termination of Employee’s employment by the Company without cause during a Window Period, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee within (30) days following such a termination or, if later, such a Change in Control, a lump sum severance payment in an amount equal to the product of three (3) multiplied by the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.4. Termination by the Company For Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company for Cause as provided in this Section.

b. For purposes of this Agreement, “Cause” shall mean the occurrence of one or more of the following events: (a) Employee’s conviction for a felony or of any crime involving moral turpitude; (b) Employee’s engaging in any illegal conduct or willful misconduct in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (c) Employee’s engaging in any fraudulent or dishonest conduct in his or her dealings with, or on behalf of, the Company (or its subsidiaries or affiliates); (d) Employee’s failure or refusal to follow the lawful instructions of the Company, if such failure or refusal continues for a period of five (5) calendar days after the Company delivers to Employee a written notice stating the instructions which Employee has failed or refused to follow; (e) Employee’s breach of any of Employee’s obligations under this Agreement; (f) Employee’s gross or habitual negligence in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (g) Employee’s engaging in any conduct tending to bring the Company into public disgrace or disrepute or to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates);

(h) Employee’s material violation of the Company’s business ethics or conflict-of-interest policies, as such policies currently exist or as they may be amended or implemented during Employee’s employment with the Company; (i) Employee’s misuse of alcohol or illegal drugs which interferes with the performance of Employee’s employment duties for the Company or which compromises the reputation or goodwill of the Company; (j) Employee’s intentional violation of any applicable banking law or regulation in the performance of Employee’s employment duties for the Company; or (k) Employee’s failure to abide by any employment rules or policies applicable to the Company’s employees generally that Company currently has or may adopt, amend or implement from time to time during Employee’s employment with the Company.

7.5. Termination by Employee For Good Reason.

a. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company by giving the Company written notice of termination for Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following:

(ii) the occurrence of any one of the following events during a Window Period:

(A) A reduction by the Company in Employee’s salary from the level of such salary immediately prior to the Change in Control.

7.6. Termination By Employee Without Good Reason. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company for reasons other than Good Reason or for no reason by giving the Company written notice of termination, specifying in such notice a termination date not less than ten business days after the giving of the notice (the “Employee’s Notice Period”), and Employee’s employment with the Company shall terminate at the close of business on the last day of Employee’s Notice Period; provided, however, that in response to Employee’s notice of termination, the Company shall have the right to accelerate the Employee’s Notice Period as it deems advisable and it shall still be considered a termination of employment by Employee without Good Reason. Upon termination of Employee’s employment with the Company under this Section, whether at the end of Employee’s Notice Period or earlier as designated by the Company, the Company’s obligation to pay Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee such other payments and benefits, if any, which had

accrued hereunder before the termination date. Other than the foregoing, the Company shall have no further obligations to Employee under this Agreement.

7.7. Non-Renewal By Employee. In the event the Employee elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of Employee’s non-renewal of this Agreement, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Employee has elected to terminate his or her employment without Good Reason.

7.8. Non-Renewal by the Company. In the event the Company elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of the Company’s non-renewal of this Agreement, the Company shall be considered to have elected to terminate Employee’s employment without cause and the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Company has elected to terminate the Employee’s employment without cause hereunder.

7.9. Forfeiture of Compensation. In the event Employee breaches any of the non-disclosure or restrictive covenant provisions of this Agreement, Employee immediately shall (a) forfeit his or her right to receive (and the Company shall no longer be obligated to pay) any severance compensation under this Agreement, and (b) forfeit any unexercised stock options and/or other rights granted under any stock option or equity compensation plans of the Company, whether or not they are then exercisable, notwithstanding anything to the contrary in the agreements evidencing such stock options or other equity compensation rights. The Company and Employee acknowledge and agree that the foregoing remedies are in addition to, and not in lieu of, any and all other legal and/or equitable remedies that may be available to Company in connection with Employee’s breach or threatened breach, of any non-disclosure or restrictive covenant provision set forth in this Agreement.

7.10. Resignation as Officer and/or Director Upon Employment Termination. In the event Employee’s employment with the Company terminates for any reason (including, without limitation, pursuant to this Section 7), Employee agrees and covenants that he will immediately resign any and all positions, including, without limitation, as an officer and/or member of the Board of Directors, he may hold with the Company or any of its subsidiaries or affiliates.

7.12 Payroll Policies and Withholding. Any payments to be made under this Agreement shall be made in accordance with the Company’s normal payroll policies and procedures, and shall be subject to withholding and other deductions as required by law.

7.13 Severance Release. Employee acknowledges and agrees that the Company’s payment of the severance compensation pursuant to this Section 7 shall be deemed to constitute a full settlement and discharge of any and all obligations of the Company to Employee arising out

of this Agreement, Employee’s employment with the Company and/or the termination of Employee’s employment with the Company, except for any vested rights Employee may have under any insurance, stock option or equity compensation plan or any other employee benefit plans sponsored by the Company.

7.14 Stay-On Bonus. As an inducement to Employee to remain in the employ of the Company during and following a Change in Control, in the event that the Employee remains an employee of the Company or its subsidiary or affiliate for a period of at least one year following a Change in Control, in addition to Employee’s regular annual salary, bonus and other compensation to which the Employee may be entitled, the Company shall pay Employee at and as of the anniversary date of the Change in Control, as a special one-time stay-on bonus, a lump sum payment in an amount equal to the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.15 Retirement Benefits. In the event that the Employee’s employment and this Agreement are not terminated until at or following normal retirement age of at least sixty-five (65) years of age, and for so long thereafter that the Employee and members of Employee’s household do not accept full or part time employment with a company that provides competing products or services to those provided by the Company, Employee will be entitled to participate in Employer-sponsored or provided benefits available to Employer’s retirees generally including any retiree health insurance coverage made available to retirees from the Employer on the terms and subject to the conditions and requirements as may be imposed by the Employer on the Employer’s retired employees generally. Employee understands that while the Employer presently makes health insurance coverage available to retired employees, Employer is under no obligation to continue to make that coverage available, and such coverage is only available to a retired employee if the retiree makes timely payment of insurance premiums to continue the coverage.

7.16 Section 280G Excise Tax. If any benefit payable under this Agreement in the context of a Change in Control, when combined with other benefits payable to the Employee as a result of a Change in Control, is subject to an excise tax under Internal Revenue Code sections 280G and 4999, the Company shall pay to the Employee an additional amount (the “Gross-Up”) equal to the excise penalty tax amount divided by the sum of one minus the sum of the penalty tax rate plus the Employee’s marginal income tax rate. The Gross-Up shall be paid in a lump sum within 60 days of termination of employment following a Change in Control, or, if the termination of employment occurred prior to such Change in Control, within 60 days following such Change in Control.

7.17 Nondisparagement. It is a condition to the obligation of the Company to make any payments payable under this Agreement following termination of employment, whether such termination is at the election of the Employee or by the Company, that the Employee not make any statements, publicly or privately, orally or in writing or by electronic communication, that slander, defame or disparage the Company (or its subsidiaries or affiliates) and its reputation in the communities which it serves, or in the investment community at large, or which would tend to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates).

8. Non-Disclosure. Employee acknowledges that during the course of Employee’s employment by the Company Employee will be creating, making use of, acquiring, and/or adding to confidential information relating to the business and affairs of the Company, and its subsidiaries, affiliates

and customers, which information will include, without limitation, procedures, methods, manuals, lists of customers, suppliers and other contacts, marketing plans, business plans, financial data, and personnel information. Employee covenants and agrees that Employee shall not, at any time during Employee’s employment with the Company, or thereafter, directly or indirectly, use, divulge or disclose for any purpose whatsoever any of the Company’s, or its subsidiaries’, affiliates’ or customers’, confidential information or trade secrets, except in the course of Employee’s work for and on behalf of the Company and its subsidiaries and affiliates. Upon the termination of Employee’s employment with the Company, or at the Company’s request, Employee shall immediately deliver to the Company any and all records, documents, or electronic data (in whatever form or media), and all copies thereof, in Employee’s possession or under Employee’s control, whether prepared by Employee or others, containing confidential information or trade secrets relating to the Company, or its subsidiaries, affiliates or customers. Employee acknowledges and agrees that his or her obligations under this Section shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason. As used herein the term customer includes any other person to whom the Company owes a duty of confidentiality by law, bank regulatory requirement or internal policy.

9. Restrictive Covenants. Employee acknowledges that the following covenants are ancillary to the other agreements of the Company as herein contained, including the commitment to make certain payments to Employee and other enforceable covenants as herein provided, and are ancillary to the agreements pursuant to which the Company now or in the future may grant benefits to the Employee, including the grant of stock options and other equity rights, and that but for the agreements herein contained the Company would not extend such benefits or grant such options or other rights. Employee acknowledges that in connection with his or her employment with the Company he or she has provided and will continue to provide Employee-level services that are of a unique and special value and that he has been and will continue to be entrusted with confidential and proprietary information concerning the Company and its affiliates. Employee further acknowledges that the Company and its subsidiaries and affiliates are engaged in highly competitive businesses and that the Company and its subsidiaries and affiliates expend substantial amounts of time, money and effort to develop trade secrets, business strategies, customer relationships, employee relationships and goodwill, and Employee has benefited and will continue to benefit from these efforts. Therefore, as an essential part of this Agreement, Employee agrees and covenants to comply with the following restrictive covenants.

9.1. Non-Competition. During Employee’s employment with the Company and during the Noncompete Restrictive Period, Employee will not, in the Restricted Geographic Area, engage in any Competitive Business. For purposes of this Agreement, the term “Noncompete Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. For purposes of this Agreement, the term “Restricted Geographic Area” means and includes the following counties in Texas: Hardin, Jefferson & Orange. For purposes of this Agreement, the term “Competitive Business” means any business that is traditionally engaged in by a bank, a bank holding company or a financial holding company, or that provides products and services similar to and competitive with the products and services provided by the Company or any of its subsidiaries or affiliates. Notwithstanding the foregoing, Employee may make and retain investments equal to less than one percent of the equity of any entity engaged in a Competitive Business, if such equity is listed on a national securities exchange or regularly traded in a nationally-recognized over-the-counter market.

9.2. Non-Solicitation of Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not provide, sell, market or endeavor to provide, sell or market any Competing Products/Services to any of the

Company’s Customers, or otherwise solicit or communicate with any of the Company’s Customers for the purpose of selling or providing any Competing Products/Services. For purposes of this Agreement, the term “Non-Solicitation Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. Also for purposes of this Agreement, the term “Competing Products/Services” means any products or services the same as or similar to or competitive with the products or services offered by the Company or any of its subsidiaries, and the term “Company’s Customers” means any person or entity that has engaged in any banking services with, or has purchased any products or services from, the Company or any of its subsidiaries at any time during the twelve (12) months next preceding the commencement of the Non-Solicitation Restrictive Period.

9.3. Non-Interference With Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s Customers to terminate their business with the Company or any of its subsidiaries or affiliates or to cancel, reduce, limit or in any manner interfere with the Company’s Customers’ business with the Company.

9.4. Non-Interference With Contractors and Vendors. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s independent contractors, subcontractors, consultants, vendors or suppliers to terminate their relationship with, or representation of, the Company or to cancel, withdraw, reduce, limit, or in any manner modify any of such person’s or entity’s business with, or representation of, the Company or any of its subsidiaries or affiliates.

9.5. Non-Solicitation of Employees. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not solicit, recruit, hire, employ or attempt to hire or employ, or assist anyone in the recruitment or hiring of, any person who is an employee of the Company or who was an employee during the two year period next preceding the commencement of the Non-Solicitation Restrictive Period, or urge, influence, induce or seek to induce any employee of the Company to terminate his or her relationship with the Company.

9.6. Direct or Indirect Activities. Employee acknowledges and agrees that the covenants contained in this Section 9 prohibit Employee from engaging in certain activities directly or indirectly, whether on Employee’s own behalf or on behalf of any other person or entity, and regardless of the capacity in which Employee is acting, including without limitation as an employee, independent contractor, owner, partner, officer, agent, consultant, or advisor.

9.7. Survival of Restrictive Covenants. Employee acknowledges and agrees that his or her obligations under this Section 9 shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason.

9.8. Extension. In the event Employee violates any of the restrictive covenants contained in this Section 9, the duration of such restrictive covenant shall automatically be extended by the length of time during which Employee was in violation of such restriction.

9.9. Severability; Modification of Restrictions. Although Employee and the Company consider the restrictions contained in this Section 9 to be reasonable, particularly given

the competitive nature of the Company’s business and Employee’s position with the Company, Employee and the Company acknowledge and agree that: (a) if any covenant, subsection, portion or clause of this Section 9 is determined to be unenforceable or invalid for any reason, such unenforceability or invalidity shall not affect the enforceability or validity of the remainder of the Agreement; and (b) if any particular covenant, subsection, provision or clause of this Section 9 is determined to be unreasonable or unenforceable for any reason, including, without limitation, the time period, geographic area, and/or scope of activity covered by any restrictive covenant, such covenant, subsection, provision or clause shall automatically be deemed reformed such that the contested covenant, subsection, provision or clause shall have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so reformed to whatever extent would be reasonable and enforceable under applicable law.

10. Remedies. Employee recognizes that a breach or threatened breach by Employee of this Agreement, including the covenants in Section 8 and Section 9 hereof, will give rise to irreparable injury to the Company and that money damages will not be adequate relief for such injury. Employee agrees that the Company shall be entitled to obtain injunctive relief, including, but not limited to, temporary restraining orders, preliminary injunctions and/or permanent injunctions, without having to post any bond or other security, to restrain or prohibit such breach or threatened breach, in addition to any other legal remedies which may be available, including the recovery of money damages.

11. Assignment.

11.1. Assignment by Company. The rights and obligations of the Company under this Agreement shall inure to the benefit of and be binding upon any and all successors and assigns of the Company, including without limitation by asset assignment, stock sale, merger, consolidation or other corporate reorganization.

11.2. Non-Assignment by Employee. The services to be provided by Employee to the Company hereunder are personal to Employee, and Employee’s duties may not be assigned by Employee.

12. Notice. Any notice required or permitted under this Agreement shall be in writing and either delivered personally or sent by nationally recognized overnight courier, express mail, or certified or registered mail, postage prepaid, return receipt requested, at the following respective address unless the party notifies the other party in writing of a change of address:

If to the Company:

Texas Regional Bancshares, Inc.

3900 North 10th Street, 11th Floor

McAllen, Texas 78502

Attention: Glen E. Roney, Chief Executive Officer

With a copy to:

William A. Rogers, Jr.

Rogers & Whitley, LLP

2210 San Gabriel

Austin, Texas 78705

If to Employee:

Lois Ann Stanton

P. O. Box 909

Woodville, Texas 75979

13. Miscellaneous.

13.1. Entire Agreement. This Agreement supersedes any prior agreements or understandings, oral or written, between the parties hereto, with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto.

13.2. Modification. This Agreement shall not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement of the parties in a written instrument executed by Employee and a duly authorized officer of the Company.

13.3. Counterparts. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

13.4. Tax Withholding. The Company may withhold from any compensation or benefits payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

13.5. Contractual Rights to Benefits. Nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder.

13.6. No Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions of this Agreement shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.

13.7. Governing Law; Choice of Forum. To the extent not preempted by federal law, the provisions of this Agreement shall be construed and enforced in accordance with the laws of the State of Texas, notwithstanding any state’s choice-of-law or conflicts-of-law rules to the contrary. The Company and Employee further acknowledge and agree that this Agreement is intended, among other things, to supplement and add to, and not to substitute for, the obligations of the Employee under the provisions of the Uniform Trade Secrets Act, as amended from time to time, and the duties Employee owes to the Company under the common law, including, but not limited to, the duty of loyalty. The parties agree that any legal action pursuant to Section 10 of this Agreement shall be commenced and maintained exclusively before any court of competent jurisdiction in Hidalgo County, Texas, and the parties hereby submit to the jurisdiction and venue of such courts and waive any right to challenge or otherwise object to personal jurisdiction or venue in any action commenced or maintained in such courts.

[Remainder of page left blank intentionally;

Signature lines follow.]

IN WITNESS WHEREOF, Employee and the Company have executed this Agreement, intending it to be effective as of the Effective Date.

	TEXAS REGIONAL BANCSHARES, INC.



	By:	/s/ G.E. Roney
		Glen E. Roney, Chairman of the Board



	/s/ Lois Ann Stanton
	Lois Ann Stanton

EX-2.9 10 a06-13659_5ex2d9.htm EX-2

Exhibit 2.9

EMPLOYMENT AGREEMENT

between

TEXAS REGIONAL BANCSHARES, INC.

and

This Employment Agreement (“Agreement”) is made and entered into by and between Texas Regional Bancshares, Inc., a Texas corporation (the “Company”) and (“Employee”).

Recitals

A. Employee is an employee of the Company serving as a .

B. The Company and Employee desire to enter into an agreement embodying the terms of Employee’s employment with the Company.

Agreement

1. Effective Date. This Agreement shall be effective as of June 12, 2006 (the “Effective Date”).

2. Term of Employment. Subject to earlier termination as provided in this Agreement, the original term of this Agreement shall begin on the Effective Date and shall end on June 11, 2009; provided, however, that this Agreement shall be automatically extended as of the end of the initial or any renewal Term hereof for successive terms of one (1) year each (the original term plus any extensions of the term are hereinafter referred to as the “Term”) unless either party provides written notice not to so extend to the other party at least sixty (60) calendar days before the scheduled expiration of the Term, in which case no further automatic extension shall occur and the Term shall end on the scheduled expiration date.

3. Position and Responsibilities. During the Term, Employee agrees to serve as of the Company or in such other position as the Board of Directors and Chief Executive Officer of the Company (the “Board”) may designate. In this capacity the Employee shall have such duties, authorities and responsibilities as are designated from time to time by the Board of Directors and Chief Executive Officer of the Company.

4. Standard of Care. During the Term, Employee (a) will devote his or her full working time, attention, energies and skills exclusively to the business and affairs of the Company and its subsidiaries; (b) will exercise the highest degree of loyalty and the highest standards of conduct in the performance of his or her duties; (c) will not, except as noted herein, engage in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage,

without the express written consent of the Company; and (d) will not take any action that deprives the Company of any business opportunities or otherwise act in a manner that conflicts with the best interests of the Company or that is detrimental to the business of the Company; provided, however, this Section 4 shall not be construed as preventing Employee (y) from investing his or her personal assets in such form or manner as will not require his or her services in the daily operations and affairs of the businesses in which such investments are made, or (z) from participating in charitable or other not-for-profit activities as long as such activities do not interfere with Employee’s work for the Company (or its affiliates).

5. Compensation and Benefits. As remuneration for all services to be rendered by Employee during the Term, and as consideration for complying with the covenants herein, the Company shall pay and provide to Employee the following:

5.1. Annual Base Salary. The Company shall pay Employee an annual base salary of Dollars ($ ) (the “Annual Base Salary”). The Company shall review the Annual Base Salary not less than approximately once each year during the Term to determine, at the discretion of the Company, whether the Annual Base Salary should be increased and, if so, the amount of such adjustment and the time at which the adjustment should take effect. The Annual Base Salary shall be paid to Employee in periodic installments consistent with the customary payroll practices of the Company.

5.2. Incentive Bonus. Employee shall be entitled to participate during the Term in any incentive bonus plan which the Company may adopt and implement from time to time during the Term for the benefit of persons serving in the Employee’s specific position. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any incentive bonus plan, so long as such changes are similarly applicable to other employees under such plan.

5.3. Employee Benefits. The Company shall provide to Employee all employee fringe benefits to which other employees of the Company are generally entitled, commensurate with his or her position with the Company and subject to the eligibility requirements and other terms and conditions of such plans, including health and life insurance coverage from time to time adopted as the life, health and disability insurance plans for employees of the Company generally. Nothing contained in this Section shall obligate the Company to institute, maintain or refrain from changing, amending or discontinuing any employee fringe benefit plan, so long as such changes are similarly applicable to other employees generally.

5.4. Vacation. The Employee shall be entitled to business days of paid vacation in each calendar year in accordance with the Company’s personnel policies as in effect from time to time during the term hereof, which vacation days shall be taken at such times as are consistent with the Employee’s responsibilities.

5.5. Other Compensation Plans. The Employee shall be eligible to participate in any other compensation plan or program maintained by the Company from time for employees of the Company generally on terms and conditions that are comparable to those applicable to all other Employees.

6. Reimbursement of Business Expenses. The Company shall pay or reimburse Employee for all ordinary and necessary expenses, in a reasonable amount, which are approved as required by the Company’s policies, and which Employee incurs in performing his or her duties under this Agreement.

Such expenses shall be paid or reimbursed to Employee consistent with the expense reimbursement policies of the Company in effect from time to time and Employee agrees to abide by any such expense reimbursement policies.

7. Termination of Employment.

7.1. Termination Due to Death. If Employee dies during the Term, this Agreement shall terminate on the date of Employee’s death. Upon the death of Employee, the Company’s obligation to pay and provide to Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee or Employee’s legal representative that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee or Employee’s legal representative such other payments and benefits, if any, which had accrued hereunder before Employee’s death. Other than the foregoing, the Company shall have no further obligations to Employee (or Employee’s legal representatives, including Employee’s estate, heirs, executors, administrators and personal representatives) under this Agreement.

7.2. Termination Due to Disability.

a. If Employee suffers a Disability (as hereafter defined), the Company shall have the right to terminate this Agreement and Employee’s employment with the Company. The Company shall deliver written notice to Employee of the Company’s termination because of Disability, pursuant to this Section 7.2, specifying in such notice a termination date not less than fifteen (15) calendar days after the giving of the notice (the “Disability Notice Period”), and this Agreement, and Employee’s employment by the Company, shall terminate at the close of business on the last day of the Disability Notice Period.

7.3. Termination by the Company Without Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company without cause for any reason or no reason by notifying Employee in writing of the Company’s intent to terminate, specifying in such notice the effective termination date, and this Agreement and Employee’s employment with the

Company shall terminate at the close of business on the termination date specified in the Company’s notice.

b. Upon termination of Employee’s employment by the Company without cause other than within six (6) months before or within two (2) years after a Change in Control (a “Window Period”), the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee severance compensation after the termination of employment equal to the Employee’s Annual Base Salary at the rate of Annual Base Salary in effect immediately prior to termination for a period of one year following the date of termination of employment; provided, however, if such severance compensation exceeds two times the maximum amount that may be taken into account under a qualified plan pursuant to section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) in the year of such termination, and Employee is a “specified employee” within the meaning of Internal Revenue Code section 409A(a)(2)(B)(i), the severance compensation shall be paid in a lump sum on the date that is six months following the termination of employment.

c. Upon termination of Employee’s employment by the Company without cause during a Window Period, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments and benefits, if any, which have accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee within (30) days following such a termination or, if later, such a Change in Control, a lump sum severance payment in an amount equal to the product of two (2) multiplied by the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.4. Termination by the Company For Cause.

a. At any time during the Term, the Company may terminate this Agreement and Employee’s employment with the Company for Cause as provided in this Section.

b. For purposes of this Agreement, “Cause” shall mean the occurrence of one or more of the following events: (a) Employee’s conviction for a felony or of any crime involving moral turpitude; (b) Employee’s engaging in any illegal conduct or willful misconduct in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (c) Employee’s engaging in any fraudulent or dishonest conduct in his or her dealings with, or on behalf of, the Company (or its subsidiaries or affiliates); (d) Employee’s failure or refusal to follow the lawful instructions of the Company, if such failure or refusal continues for a period of five (5) calendar days after the Company delivers to Employee a written notice stating the instructions which Employee has failed or refused to follow; (e) Employee’s breach of any of Employee’s obligations under this Agreement; (f) Employee’s gross or habitual negligence in the performance of his or her employment duties for the Company (or its subsidiaries or affiliates); (g) Employee’s engaging in any conduct tending to bring the Company into public disgrace or disrepute or to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates);

(h) Employee’s material violation of the Company’s business ethics or conflict-of-interest policies, as such policies currently exist or as they may be amended or implemented during Employee’s employment with the Company; (i) Employee’s misuse of alcohol or illegal drugs which interferes with the performance of Employee’s employment duties for the Company or which compromises the reputation or goodwill of the Company; (j) Employee’s intentional violation of any applicable banking law or regulation in the performance of Employee’s employment duties for the Company; or (k) Employee’s failure to abide by any employment rules or policies applicable to the Company’s employees generally that Company currently has or may adopt, amend or implement from time to time during Employee’s employment with the Company.

7.5. Termination by Employee For Good Reason.

a. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company by giving the Company written notice of termination for Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following:

(ii) the occurrence of any one of the following events during a Window Period:

(A) A reduction by the Company in Employee’s salary from the level of such salary immediately prior to the Change in Control.

c. If this Agreement and Employee’s employment are terminated by Employee for Good Reason during a Window Period, the Company’s obligation to pay or provide Employee compensation and benefits under this Agreement shall terminate, except (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; (b) the Company shall pay or provide Employee such other payments or benefits, if any, which had accrued hereunder before the termination date; and (c) in addition, the Company shall pay Employee within (30) days following such a termination or, if later, such a Change in Control, a lump sum severance payment in an amount equal to the product of two (2) multiplied by the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.6. Termination By Employee Without Good Reason. At any time during the Term, Employee may terminate this Agreement and his or her employment with the Company for reasons other than Good Reason or for no reason by giving the Company written notice of termination, specifying in such notice a termination date not less than ten business days after the giving of the notice (the “Employee’s Notice Period”), and Employee’s employment with the Company shall terminate at the close of business on the last day of Employee’s Notice Period; provided, however, that in response to Employee’s notice of termination, the Company shall have the right to accelerate the Employee’s Notice Period as it deems advisable and it shall still be considered a termination of employment by Employee without Good Reason. Upon termination of Employee’s employment with the Company under this Section, whether at the end of Employee’s Notice Period or earlier as designated by the Company, the Company’s obligation to pay Employee compensation and benefits under this Agreement shall immediately terminate, except: (a) the Company shall pay Employee that portion of his or her Annual Base Salary, at the rate then in effect, which shall have been earned through the termination date; and (b) the Company shall pay or provide Employee such other payments and benefits, if any, which had

accrued hereunder before the termination date. Other than the foregoing, the Company shall have no further obligations to Employee under this Agreement.

7.7. Non-Renewal By Employee. In the event the Employee elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of Employee’s non-renewal of this Agreement, the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Employee has elected to terminate his or her employment without Good Reason.

7.8. Non-Renewal by the Company. In the event the Company elects not to renew this Agreement by giving notice of non-renewal as herein provided, this Agreement and Employee’s employment shall terminate at the end of the then current Term. Upon termination of Employee’s employment as a result of the Company’s non-renewal of this Agreement, the Company shall be considered to have elected to terminate Employee’s employment without cause and the Company’s obligation to pay and provide Employee compensation and benefits under this Agreement shall be determined as if the Company has elected to terminate the Employee’s employment without cause hereunder.

7.9. Forfeiture of Compensation. In the event Employee breaches any of the non-disclosure or restrictive covenant provisions of this Agreement, Employee immediately shall (a) forfeit his or her right to receive (and the Company shall no longer be obligated to pay) any severance compensation under this Agreement, and (b) forfeit any unexercised stock options and/or other rights granted under any stock option or equity compensation plans of the Company, whether or not they are then exercisable, notwithstanding anything to the contrary in the agreements evidencing such stock options or other equity compensation rights. The Company and Employee acknowledge and agree that the foregoing remedies are in addition to, and not in lieu of, any and all other legal and/or equitable remedies that may be available to Company in connection with Employee’s breach or threatened breach, of any non-disclosure or restrictive covenant provision set forth in this Agreement.

7.10. Resignation as Officer and/or Director Upon Employment Termination. In the event Employee’s employment with the Company terminates for any reason (including, without limitation, pursuant to this Section 7), Employee agrees and covenants that he will immediately resign any and all positions, including, without limitation, as an officer and/or member of the Board of Directors, he may hold with the Company or any of its subsidiaries or affiliates.

7.12 Payroll Policies and Withholding. Any payments to be made under this Agreement shall be made in accordance with the Company’s normal payroll policies and procedures, and shall be subject to withholding and other deductions as required by law.

7.13 Severance Release. Employee acknowledges and agrees that the Company’s payment of the severance compensation pursuant to this Section 7 shall be deemed to constitute a full settlement and discharge of any and all obligations of the Company to Employee arising out

of this Agreement, Employee’s employment with the Company and/or the termination of Employee’s employment with the Company, except for any vested rights Employee may have under any insurance, stock option or equity compensation plan or any other employee benefit plans sponsored by the Company.

7.14 Stay-On Bonus. As an inducement to Employee to remain in the employ of the Company during and following a Change in Control, in the event that the Employee remains an employee of the Company or its subsidiary or affiliate for a period of at least one year following a Change in Control, in addition to Employee’s regular annual salary, bonus and other compensation to which the Employee may be entitled, the Company shall pay Employee at and as of the anniversary date of the Change in Control, as a special one-time stay-on bonus, a lump sum payment in an amount equal to one-half of the Employee’s Annual Base Salary in effect immediately prior to the date on which the Change in Control occurs.

7.15 Retirement Benefits. In the event that the Employee’s employment and this Agreement are not terminated until at or following normal retirement age of at least sixty-five (65) years of age, and for so long thereafter that the Employee and members of Employee’s household do not accept full or part time employment with a company that provides competing products or services to those provided by the Company, Employee will be entitled to participate in Employer-sponsored or provided benefits available to Employer’s retirees generally including any retiree health insurance coverage made available to retirees from the Employer on the terms and subject to the conditions and requirements as may be imposed by the Employer on the Employer’s retired employees generally. Employee understands that while the Employer presently makes health insurance coverage available to retired employees, Employer is under no obligation to continue to make that coverage available, and such coverage is only available to a retired employee if the retiree makes timely payment of insurance premiums to continue the coverage.

7.16 Section 280G Excise Tax. If any benefit payable under this Agreement in the context of a Change in Control, when combined with other benefits payable to the Employee as a result of a Change in Control, is subject to an excise tax under Internal Revenue Code sections 280G and 4999, the Company shall pay to the Employee an additional amount (the “Gross-Up”) equal to the excise penalty tax amount divided by the sum of one minus the sum of the penalty tax rate plus the Employee’s marginal income tax rate. The Gross-Up shall be paid in a lump sum within 60 days of termination of employment following a Change in Control, or, if the termination of employment occurred prior to such Change in Control, within 60 days following such Change in Control.

7.17 Nondisparagement. It is a condition to the obligation of the Company to make any payments payable under this Agreement following termination of employment, whether such termination is at the election of the Employee or by the Company, that the Employee not make any statements, publicly or privately, orally or in writing or by electronic communication, that slander, defame or disparage the Company (or its subsidiaries or affiliates) and its reputation in the communities which it serves, or in the investment community at large, or which would tend to injure the reputation or goodwill of the Company (or its subsidiaries or affiliates).

8. Non-Disclosure. Employee acknowledges that during the course of Employee’s employment by the Company Employee will be creating, making use of, acquiring, and/or adding to confidential information relating to the business and affairs of the Company, and its subsidiaries, affiliates

and customers, which information will include, without limitation, procedures, methods, manuals, lists of customers, suppliers and other contacts, marketing plans, business plans, financial data, and personnel information. Employee covenants and agrees that Employee shall not, at any time during Employee’s employment with the Company, or thereafter, directly or indirectly, use, divulge or disclose for any purpose whatsoever any of the Company’s, or its subsidiaries’, affiliates’ or customers’, confidential information or trade secrets, except in the course of Employee’s work for and on behalf of the Company and its subsidiaries and affiliates. Upon the termination of Employee’s employment with the Company, or at the Company’s request, Employee shall immediately deliver to the Company any and all records, documents, or electronic data (in whatever form or media), and all copies thereof, in Employee’s possession or under Employee’s control, whether prepared by Employee or others, containing confidential information or trade secrets relating to the Company, or its subsidiaries, affiliates or customers. Employee acknowledges and agrees that his or her obligations under this Section shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason. As used herein the term customer includes any other person to whom the Company owes a duty of confidentiality by law, bank regulatory requirement or internal policy.

9. Restrictive Covenants. Employee acknowledges that the following covenants are ancillary to the other agreements of the Company as herein contained, including the commitment to make certain payments to Employee and other enforceable covenants as herein provided, and are ancillary to the agreements pursuant to which the Company now or in the future may grant benefits to the Employee, including the grant of stock options and other equity rights, and that but for the agreements herein contained the Company would not extend such benefits or grant such options or other rights. Employee acknowledges that in connection with his or her employment with the Company he or she has provided and will continue to provide Employee-level services that are of a unique and special value and that he has been and will continue to be entrusted with confidential and proprietary information concerning the Company and its affiliates. Employee further acknowledges that the Company and its subsidiaries and affiliates are engaged in highly competitive businesses and that the Company and its subsidiaries and affiliates expend substantial amounts of time, money and effort to develop trade secrets, business strategies, customer relationships, employee relationships and goodwill, and Employee has benefited and will continue to benefit from these efforts. Therefore, as an essential part of this Agreement, Employee agrees and covenants to comply with the following restrictive covenants.

9.1. Non-Competition. During Employee’s employment with the Company and during the Noncompete Restrictive Period, Employee will not, in the Restricted Geographic Area, engage in any Competitive Business. For purposes of this Agreement, the term “Noncompete Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. For purposes of this Agreement, the term “Restricted Geographic Area” means and includes the following counties in Texas: . For purposes of this Agreement, the term “Competitive Business” means any business that is traditionally engaged in by a bank, a bank holding company or a financial holding company, or that provides products and services similar to and competitive with the products and services provided by the Company or any of its subsidiaries or affiliates. Notwithstanding the foregoing, Employee may make and retain investments equal to less than one percent of the equity of any entity engaged in a Competitive Business, if such equity is listed on a national securities exchange or regularly traded in a nationally-recognized over-the-counter market.

9.2. Non-Solicitation of Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not provide, sell,

market or endeavor to provide, sell or market any Competing Products/Services to any of the Company’s Customers, or otherwise solicit or communicate with any of the Company’s Customers for the purpose of selling or providing any Competing Products/Services. For purposes of this Agreement, the term “Non-Solicitation Restrictive Period” means a period of one (1) year from the date of termination of Employee’s employment with the Company. Also for purposes of this Agreement, the term “Competing Products/Services” means any products or services the same as or similar to or competitive with the products or services offered by the Company or any of its subsidiaries, and the term “Company’s Customers” means any person or entity that has engaged in any banking services with, or has purchased any products or services from, the Company or any of its subsidiaries at any time during the twelve (12) months next preceding the commencement of the Non-Solicitation Restrictive Period.

9.3. Non-Interference With Customers. During Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s Customers to terminate their business with the Company or any of its subsidiaries or affiliates or to cancel, reduce, limit or in any manner interfere with the Company’s Customers’ business with the Company.

9.4. Non-Interference With Contractors and Vendors. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not urge, induce or seek to induce any of the Company’s independent contractors, subcontractors, consultants, vendors or suppliers to terminate their relationship with, or representation of, the Company or to cancel, withdraw, reduce, limit, or in any manner modify any of such person’s or entity’s business with, or representation of, the Company or any of its subsidiaries or affiliates.

9.5. Non-Solicitation of Employees. During the term of Employee’s employment with the Company and during the Non-Solicitation Restrictive Period, Employee will not solicit, recruit, hire, employ or attempt to hire or employ, or assist anyone in the recruitment or hiring of, any person who is an employee of the Company or who was an employee during the two year period next preceding the commencement of the Non-Solicitation Restrictive Period, or urge, influence, induce or seek to induce any employee of the Company to terminate his or her relationship with the Company.

9.6. Direct or Indirect Activities. Employee acknowledges and agrees that the covenants contained in this Section 9 prohibit Employee from engaging in certain activities directly or indirectly, whether on Employee’s own behalf or on behalf of any other person or entity, and regardless of the capacity in which Employee is acting, including without limitation as an employee, independent contractor, owner, partner, officer, agent, consultant, or advisor.

9.7. Survival of Restrictive Covenants. Employee acknowledges and agrees that his or her obligations under this Section 9 shall survive the expiration or termination of this Agreement and the cessation of his or her employment with the Company for whatever reason.

9.8. Extension. In the event Employee violates any of the restrictive covenants contained in this Section 9, the duration of such restrictive covenant shall automatically be extended by the length of time during which Employee was in violation of such restriction.

9.9. Severability; Modification of Restrictions. Although Employee and the Company consider the restrictions contained in this Section 9 to be reasonable, particularly given the competitive nature of the Company’s business and Employee’s position with the Company, Employee and the Company acknowledge and agree that: (a) if any covenant, subsection, portion or clause of this Section 9 is determined to be unenforceable or invalid for any reason, such unenforceability or invalidity shall not affect the enforceability or validity of the remainder of the Agreement; and (b) if any particular covenant, subsection, provision or clause of this Section 9 is determined to be unreasonable or unenforceable for any reason, including, without limitation, the time period, geographic area, and/or scope of activity covered by any restrictive covenant, such covenant, subsection, provision or clause shall automatically be deemed reformed such that the contested covenant, subsection, provision or clause shall have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so reformed to whatever extent would be reasonable and enforceable under applicable law.

10. Remedies. Employee recognizes that a breach or threatened breach by Employee of this Agreement, including the covenants in Section 8 and Section 9 hereof, will give rise to irreparable injury to the Company and that money damages will not be adequate relief for such injury. Employee agrees that the Company shall be entitled to obtain injunctive relief, including, but not limited to, temporary restraining orders, preliminary injunctions and/or permanent injunctions, without having to post any bond or other security, to restrain or prohibit such breach or threatened breach, in addition to any other legal remedies which may be available, including the recovery of money damages.

11. Assignment.

11.1. Assignment by Company. The rights and obligations of the Company under this Agreement shall inure to the benefit of and be binding upon any and all successors and assigns of the Company, including without limitation by asset assignment, stock sale, merger, consolidation or other corporate reorganization.

11.2. Non-Assignment by Employee. The services to be provided by Employee to the Company hereunder are personal to Employee, and Employee’s duties may not be assigned by Employee.

12. Notice. Any notice required or permitted under this Agreement shall be in writing and either delivered personally or sent by nationally recognized overnight courier, express mail, or certified or registered mail, postage prepaid, return receipt requested, at the following respective address unless the party notifies the other party in writing of a change of address:

If to the Company:

Texas Regional Bancshares, Inc.

3900 North 10th Street, 11th Floor

McAllen, Texas 78502

Attention: Glen E. Roney, Chief Executive Officer

With a copy to:

William A. Rogers, Jr.

Rogers & Whitley, LLP

2210 San Gabriel

Austin, Texas 78705

If to Employee:

13. Miscellaneous.

13.1. Entire Agreement. This Agreement supersedes any prior agreements or understandings, oral or written, between the parties hereto, with respect to the subject matter hereof, and constitutes the entire agreement of the parties with respect thereto.

13.2. Modification. This Agreement shall not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement of the parties in a written instrument executed by Employee and a duly authorized officer of the Company.

13.3. Counterparts. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

13.4. Tax Withholding. The Company may withhold from any compensation or benefits payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

13.5. Contractual Rights to Benefits. Nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder.

13.6. No Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions of this Agreement shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.

13.7. Governing Law; Choice of Forum. To the extent not preempted by federal law, the provisions of this Agreement shall be construed and enforced in accordance with the laws of the State of Texas, notwithstanding any state’s choice-of-law or conflicts-of-law rules to the contrary. The Company and Employee further acknowledge and agree that this Agreement is intended, among other things, to supplement and add to, and not to substitute for, the obligations of the Employee under the provisions of the Uniform Trade Secrets Act, as amended from time to time, and the duties Employee owes to the Company under the common law, including, but not limited to, the duty of loyalty. The parties agree that any legal action pursuant to Section 10 of this Agreement shall be commenced and maintained exclusively before any court of competent jurisdiction in Hidalgo County, Texas, and the parties hereby submit to the jurisdiction and venue of such courts and waive any right to challenge or otherwise object to personal jurisdiction or venue in any action commenced or maintained in such courts.

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Signature lines follow.]

IN WITNESS WHEREOF, Employee and the Company have executed this Agreement, intending it to be effective as of the Effective Date.

	TEXAS REGIONAL BANCSHARES, INC.



	By:	/s/ G.E. Roney
		Glen E. Roney, Chairman of the Board




	Employee

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