-----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, GCSfIzvUcInG4CocjhRFCTsRjRm71aavK0rdnvQaMnmZK0cU/1JayDTRAUNQcrLn v7SSwh+a/1UJPEbTxoUhWg== 0000899243-02-002593.txt : 20020927 0000899243-02-002593.hdr.sgml : 20020927 20020926183058 ACCESSION NUMBER: 0000899243-02-002593 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20020923 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020927 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERLING BANCSHARES INC CENTRAL INDEX KEY: 0000891098 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 742175590 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20750 FILM NUMBER: 02773698 BUSINESS ADDRESS: STREET 1: 15000 NORTHWEST FRWY STE 308 CITY: HOUSTON STATE: TX ZIP: 77040 BUSINESS PHONE: 7134668300 8-K 1 d8k.txt FORM 8-K FOR THE PERIOD 09/23/2002 ================================================================================ 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): September 23, 2002 STERLING BANCSHARES, INC. (Exact name of registrant as specified in its charter) Texas 0-20750 74-2175590 (State or other jurisdiction (Commission file number) (IRS employer of incorporation) identification no.) 2550 North Loop West, Suite 600 Houston, Texas 77092 (Address Of Principal Executive Office and Zip Code) (713) 466-8300 (Registrant's telephone number, including area code) ================================================================================ ITEM 5. OTHER EVENTS. On September 23, 2002, Sterling Bancshares, Inc. (the "Company") and Sterling Bancshares Capital Trust III (the "Trust") entered into an Underwriting Agreement with Legg Mason Wood Walker, Incorporated and Stifel, Nicolaus & Company, Incorporated, pursuant to which the Trust issued 1,250,000 8.30% Trust Preferred Securities (the "Trust Preferred Securities") with an aggregate liquidation value of $31,250,000. The proceeds of the issuance of the Trust Preferred Securities were invested in the Company's 8.30% Junior Subordinated Deferrable Interest Debentures due September 26, 2032 (the "Debentures"). ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) EXHIBITS. 1.1 Underwriting Agreement dated September 23, 2002. 4.1 Certificate of Trust of Sterling Bancshares Capital Trust III (filed as Exhibit 4.3 to Registration Statement on Form S-3 (File Nos. 333-55724, 333-55724-01 and 333-55724-02) and incorporated herein by reference). 4.2 Preferred Securities Guarantee Agreement dated September 26, 2002. 4.3 Amended and Restated Declaration of Trust of Sterling Bancshares Capital Trust III dated September 26, 2002. 4.4 Indenture dated March 21, 2001 (filed as Exhibit 4.4 to Form 8-K dated March 21, 2001 and incorporated herein by reference). 4.5 First Supplemental Indenture dated March 21, 2001 (filed as Exhibit 4.5 to Form 8-K dated March 21, 2001 and incorporated herein by reference). 4.6 Second Supplemental Indenture dated September 26, 2002. 4.7 Certificate of Trust Preferred Security. 4.8 8.30% Junior Subordinated Deferrable Interest Debenture due September 26, 2032. 5.1 Opinion of Andrews & Kurth L.L.P. with respect to legality of the Trust Preferred Securities, the 8.30% Junior Subordinated Deferrable Interest Debenture and the Trust Preferred Securities Guarantee. 8.1 Opinion of Andrews & Kurth L.L.P. as to federal income tax matters. 23.1 Consent of Andrews & Kurth L.L.P. (included as part of Exhibits 5.1 and 8.1) 25.1 Form T-1 Statement of Eligibility of Bankers Trust Company (now known as "Deutsche Bank Trust Company Americas") relating to the Declarations of Trust, Amended and Restated Declarations of Trust, Indenture, Supplemental Indentures and Trust Preferred Securities Guarantees relating to Sterling Bancshares Capital Trust II and Sterling Bancshares Capital Trust III (filed as Exhibit 25.1 to Registration Statement on Form S-3/A (File Nos. 333-55724, 333-55724-01 and 333-55724-02) and incorporated herein by reference). 99.1 Press Release issued by Sterling Bancshares on September 26, 2002 announcing the completion of the sale of the 8.30% Trust Preferred Securities. 2 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 thereunto duly authorized. Dated: September 26, 2002. STERLING BANCSHARES, INC. By: /s/ Eugene S. Putnam, Jr. ------------------------------------- Eugene S. Putnam, Jr. Chief Financial Officer 3 INDEX TO EXHIBITS Exhibit Number Description ------ ----------- 1.1 Underwriting Agreement dated September 23, 2002. 4.1 Certificate of Trust of Sterling Bancshares Capital Trust III (filed as Exhibit 4.3 to Registration Statement on Form S-3 (File Nos. 333-55724, 333-55724-01 and 333-55724-02) and incorporated herein by reference). 4.2 Preferred Securities Guarantee Agreement dated September 26, 2002. 4.3 Amended and Restated Declaration of Trust of Sterling Bancshares Capital Trust III dated September 26, 2002. 4.4 Indenture dated March 21, 2001 (filed as Exhibit 4.4 to Form 8-K dated March 21, 2001 and incorporated herein by reference). 4.5 First Supplemental Indenture dated March 21, 2001 (filed as Exhibit 4.5 to Form 8-K dated March 21, 2001 and incorporated herein by reference). 4.6 Second Supplemental Indenture dated September 26, 2002. 4.7 Certificate of Trust Preferred Security. 4.8 8.30% Junior Subordinated Deferrable Interest Debenture due September 26, 2032. 5.1 Opinion of Andrews & Kurth L.L.P. with respect to legality of the Trust Preferred Securities, the 8.30% Junior Subordinated Deferrable Interest Debenture and the Trust Preferred Securities Guarantee. 8.1 Opinion of Andrews & Kurth L.L.P. as to federal income tax matters. 23.1 Consent of Andrews & Kurth L.L.P. (included as part of Exhibits 5.1 and 8.1) 25.1 Form T-1 Statement of Eligibility of Bankers Trust Company (now known as "Deutsche Bank Trust Company Americas") relating to the Declarations of Trust, Amended and Restated Declarations of Trust, Indenture, Supplemental Indentures and Trust Preferred Securities Guarantees relating to Sterling Bancshares Capital Trust II and Sterling Bancshares Capital Trust III (filed as Exhibit 25.1 to Registration Statement on Form S-3/A (File Nos. 333-55724, 333-55724-01 and 333-55724-02) and incorporated herein by reference). 99.1 Press Release issued by Sterling Bancshares on September 26, 2002 announcing the completion of the sale of the 8.30% Trust Preferred Securities. 4 EX-1.1 3 dex11.txt UNDERWRITING AGREEMENT EXHIBIT 1.1 STERLING BANCSHARES, INC. (a Texas Corporation) and Sterling Bancshares Capital Trust III (a Delaware statutory business trust) $31,250,000 8.30% Cumulative Trust Preferred Securities UNDERWRITING AGREEMENT September 23, 2002 LEGG MASON WOOD WALKER, INCORPORATED STIFEL, NICOLAUS & COMPANY, INCORPORATED As the Underwriters, c/o Legg Mason Wood Walker Incorporated 100 Light Street, 31st Floor Baltimore, Maryland 21202 Attention: Mark C. Micklem, Managing Director Ladies and Gentlemen: Sterling Bancshares Capital Trust III (the "Trust"), a statutory business trust organized under the Delaware Statutory Trust Act, 12 Del. C. ss.ss. 3801 et seq. (the "Delaware Trust Act"), and Sterling Bancshares, Inc., a Texas corporation (the "Company" and together with the Trust, the "Offerors"), confirm their agreement (the "Agreement") with Legg Mason Wood Walker, Incorporated ("Legg Mason") and Stifel, Nicolaus & Company, Incorporated ("Stifel Nicolaus") (each, an "Underwriter", and together, the "Underwriters," which term shall also include any underwriter substituted as hereinafter provided in Section 10 of this Agreement), with respect to the issuance and sale by the Trust, of an aggregate of 1,250,000 8.30% Cumulative Trust Preferred Securities (liquidation amount $25 per preferred security) ("Preferred Securities"). The Preferred Securities will be guaranteed by the Company, to the extent set forth in the Prospectus (as defined below), with respect to distributions and amounts payable upon liquidation or redemption (the "Preferred Securities Guarantee") pursuant to the Preferred Securities Guarantee Agreement (the "Preferred Securities Guarantee Agreement") to be dated as of Closing Time (as defined below) executed and delivered by the Company and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company) (the "Guarantee Trustee"), a New York banking corporation, not in its individual capacity but solely as trustee for the benefit of the holders from time to time of the Preferred Securities. The Company and the Trust each understand that the Underwriters propose to make a public offering of the Preferred Securities as soon as they deem advisable after this Agreement has been executed and delivered, and the Declaration (as defined in this Agreement), the Indenture (as defined in this Agreement), and the Preferred Securities Guarantee Agreement have been qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act"). The entire proceeds from the sale of the Preferred Securities will be combined with the entire proceeds from the sale by the Trust to the Company of its common securities (the "Common Securities") guaranteed by the Company, to the extent set forth in the Prospectus, with respect to distributions and amounts payable upon liquidation or redemption (the "Common Securities Guarantee" and, together with the Preferred Securities Guarantee, the "Guarantees") pursuant to the Common Securities Guarantee Agreement (the "Common Securities Guarantee Agreement" and, together with the Preferred Securities Guarantee Agreement, the "Guarantee Agreements"), to be dated as of Closing Time, executed and delivered by the Company for the benefit of the holders from time to time of the Common Securities, and will be used by the Trust to purchase the 8.30% Junior Subordinated Deferrable Interest Debentures due 2032 (the "Subordinated Debentures") issued by the Company. The Preferred Securities and the Common Securities will be issued pursuant to the Amended and Restated Declaration of Trust, to be dated as of Closing Time (the "Declaration"), among the Company, as Sponsor, Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as property trustee (the "Property Trustee"), Deutsche Bank Trust Company (Delaware) (formerly known as Bankers Trust (Delaware)), as Delaware trustee (the "Delaware Trustee"), and George Martinez, J. Downey Bridgwater and Eugene S. Putnam, Jr., as administrative trustees (the "Administrative Trustees" and together with the Property Trustee and the Delaware Trustee, the "Trustees"), and the holders from time to time of undivided beneficial interests in the assets of the Trust. The Subordinated Debentures will be issued pursuant to that certain Indenture dated March 21, 2001, between the Company and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as debenture trustee (the "Debenture Trustee"), as supplemented by a supplemental indenture, to be dated as of the Closing Time (collectively, the "Indenture"), between the Company and the Debenture Trustee. The Preferred Securities, the Preferred Securities Guarantee and the Subordinated Debentures are collectively referred to in this Agreement as the "Securities." The Indenture, the Declaration and this Agreement are collectively referred to in this Agreement as the "Operative Documents." Capitalized terms used in this Agreement without definition have the respective meanings specified in the Prospectus. The Offerors have previously filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3, as amended (Nos. 333-55724, 333-55724-01 and 333-55724-02) covering the registration of the Securities under the Securities Act of 1933, as amended (the "1933 Act"), including the related preliminary prospectus. The Offerors have filed with the Commission a related preliminary prospectus supplement. Promptly after execution and delivery of this Agreement, the Offerors will either (i) prepare and file a prospectus in accordance with the provisions of Rule 430A ("Rule 430A") of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations, (ii) if the Offerors have elected to rely upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b) or (iii) a final prospectus in accordance with Rules 415 and 424(b). The information included in such prospectus or in such Term Sheet, as the case may be, that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective: (a) pursuant to paragraph (b) of Rule 430A is referred -2- to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information." Each prospectus used before such registration statement became effective, and any prospectus that omitted, as applicable, the Rule 430A Information or the Rule 434 Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is in this Agreement called a "preliminary prospectus." Such registration statement, including the exhibits thereto and schedules thereto, if any, at the time it became effective and including the Rule 430A Information and the Rule 434 Information, as applicable, is in this Agreement called the "Registration Statement." The final prospectus and prospectus supplement in the form first furnished to the Underwriters for use in connection with the offering of the Preferred Securities is in this Agreement called the "Prospectus." If Rule 434 is relied on, the term "Prospectus" shall refer to the preliminary prospectus dated September 17, 2002 together with the Term Sheet and all references in this Agreement to the date of the Prospectus shall mean the date of the Term Sheet. For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the Prospectus or any Term Sheet or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). All references to this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Registration Statement, any preliminary prospectus or the Prospectus (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which are incorporated by reference in the Registration Statement, any preliminary prospectus or the Prospectus, and all references in this Agreement to amendments or supplements to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934, as amended (the "1934 Act"), which is incorporated by reference in the Registration Statement, such preliminary prospectus or the Prospectus. SECTION 1. Representations and Warranties. (a) Offerors' Representations and Warranties. The Offerors jointly and severally represent and warrant to, and agree with, each Underwriter as of the date of this Agreement and as of the Closing Time: (i) Compliance with Registration Requirements. The Company meets the requirements for use of Form S-3 under the 1933 Act. The Registration Statement has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. a. At the respective times the Registration Statement and any post-effective amendments thereto became effective, the Registration Statement and any amendments and supplements thereto complied in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and did not and will not contain an untrue statement -3- of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and as of the date of this Agreement, the Registration Statement and any amendments or supplements thereto, as amended and supplemented, complies and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and does not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and b. At the time the Prospectus or any amendments or supplements were filed, neither the Prospectus nor any amendment or supplement thereto included an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and, as of the date of this Agreement, as amended and supplemented, neither the Prospectus nor any amendments or supplements thereto include or will include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If Rule 434 is used, the Company will comply with the requirements of Rule 434 and the Prospectus shall not be "materially different," as such term is used in Rule 434, from the prospectus included in the Registration Statement at the time it became effective. The representations and warranties in this subsection shall not apply to (A) statements in or omissions from the Registration Statement or Prospectus made in reliance upon and in conformity with information furnished to the Trust or the Company in writing by either of Legg Mason or Stifel Nicolaus expressly for use in the Registration Statement or Prospectus (or any supplement thereto) and (B) that part of the Registration Statement which shall constitute the Statements of Eligibility and Qualification (Forms T-1) under the 1939 Act. Each preliminary prospectus and the Prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so filed in all material respects with the 1933 Act Regulations and, each preliminary prospectus and the Prospectus delivered to the Underwriters for use in connection with this offering will, at the time of such delivery, be substantively identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (ii) Incorporated Documents. The documents incorporated or deemed to be incorporated by reference in the Registration Statement when it became effective and in the Registration Statement and Prospectus at the time they were or hereafter are filed with the Commission complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the "1934 Act Regulations"), and, when read together with the other information in the Prospectus, at the time the Registration Statement became effective, at the time the Prospectus was issued and at the Closing Time, do not and will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, not misleading. (iii) Independent Accountants. Deloitte & Touche LLP, which has certified the Company's historical consolidated financial statements included or incorporated by -4- reference in the Registration Statement and the Prospectus, are independent public accountants of the Company within the meaning of the 1933 Act and the 1933 Act Regulations. (iv) Financial Statements. The consolidated historical financial statements of the Company and its consolidated subsidiaries included in the Registration Statement and the Prospectus, together with the related schedules and notes, present fairly in all material respects, the consolidated financial position of the Company and its consolidated subsidiaries, at the dates indicated and the statements of income, changes in shareholders' equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; said financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") in the United States applied on a consistent basis throughout the periods involved, except as disclosed in the notes to such financial statements; the supporting schedules, if any, included in the Registration Statement and the Prospectus present fairly, in all material respects, the information required to be stated therein; and the summary consolidated financial data included in the Registration Statement and the Prospectus present fairly, in all material respects, the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included or incorporated by reference in the Registration Statement and the Prospectus. (v) No Material Adverse Change in Business. Since the date of the latest audited financial statements included in the Prospectus and except as otherwise stated therein or contemplated thereby, there has not been (A) any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Trust or of the Company and its subsidiaries, considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"), (B) any transaction entered into by the Trust, the Company or any of its subsidiaries, other than in the ordinary course of business, that is material to the Trust, or the Company and its subsidiaries, considered as one enterprise, or (C) any dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock, other than regular dividends on the Company's common stock and the Company's preferred stock. (vi) Good Standing of the Company. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Texas and each of the Company and Sterling Bancorporation, Inc., a Delaware corporation ("Bancorporation") is duly registered as a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended ("BHCA") and has full corporate power and authority under such laws to own, lease and operate its properties and to conduct its business as now being conducted and described in the Prospectus. Each of the Company and Bancorporation has full corporate power and authority to enter into and perform its obligations under each of the Operative Documents to which it is a party. (vii) Good Standing of the Bank. Sterling Bank (the "Bank") has been duly organized and is validly existing as a Texas state banking association and continues to do business as such and has full power and authority to conduct its business as such in each jurisdiction in which its banking business is conducted and as described in the Prospectus. -5- (viii) No Other Significant Subsidiaries. There are no "significant subsidiaries" of the Company (as such term is defined in Rule 1-102 of Regulation S-X) other than Bancorporation, the Bank and Sterling Capital Mortgage Company, a Texas corporation ("SCMC"). The subsidiaries of the Company other than the Bank or SCMC considered in the aggregate as a single subsidiary, do not constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X. (ix) Good Standing of the Subsidiaries. a. Each of the Company's subsidiaries other than the Bank, the Trust, Sterling Bancshares Capital Trust I ("Trust I"), Sterling Bancshares Capital Trust II ("Trust II") and Sterling Bancshares Statutory Trust One ("Trust One") has been duly organized and is validly existing as a corporation or limited partnership, as the case may be, in good standing under the laws of the jurisdiction of its incorporation or organization and has corporate or partnership power and authority to own, lease and operate its properties and to conduct its business as now being conducted and as described in the Prospectus; and the Company and each of its corporate subsidiaries is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect. b. Each of Trust I, Trust II and Trust One has been duly created and is validly existing and in good standing as a statutory trust under the laws of the jurisdiction of its organization and has the power and authority to own its properties and to conduct its business as now being conducted. (x) Capital Stock Duly Authorized and Validly Issued. All of the issued and outstanding capital stock of the Company's corporate subsidiaries has been duly authorized and validly issued, is fully paid and non-assessable and the shares owned by the Company, directly or indirectly, are held free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity of any kind; none of such outstanding shares of capital stock of the Company's corporate subsidiaries was issued in violation of any preemptive or similar rights arising by operation of law, or under the charter or by-laws of any such subsidiary or under any agreement to which the Company or any of its subsidiaries is a party. (xi) Capitalization. The authorized, issued and outstanding capital stock of the Company as of June 30, 2002 is as set forth in the Prospectus in the column entitled "Actual" under the caption "Capitalization" (and there have not been any subsequent issuances of capital stock of the Company except for subsequent issuances, if any, pursuant to any dividend reinvestment plan, reservations, agreements, conversions, stock dividends or employee or director benefit plans); the issued and outstanding capital stock of the Company has been duly authorized and validly issued and is fully paid and nonassessable and no shares were issued in violation of the preemptive rights of any holder thereof. (xii) Good Standing of the Trust. The Trust has been duly created and is validly existing in good standing as a statutory trust under the Delaware Trust Act with the power and authority to own its properties and to conduct its business as described in the -6- Prospectus and to enter into and perform its obligations under the Operative Documents, as applicable, and the Common and Preferred Securities. The Trust is not a party to or otherwise bound by any material agreement other than those described in the Prospectus and the Trust is and will be, under current law, classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation. (xiii) Authorization of Common Securities. At the Closing Time, the Common Securities will have been duly authorized for issuance by the Trust pursuant to the Declaration and, when issued, executed and authenticated in accordance with the Declaration and delivered by the Trust to the Company against payment therefor in accordance with the Common Securities Subscription Agreement, will be validly issued and fully paid and nonassessable undivided beneficial interests in the assets of the Trust. The issuance of the Common Securities is not subject to preemptive or other similar rights; and at the Closing Time all of the issued and outstanding Common Securities of the Trust will be directly owned by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equitable right. (xiv) Authorization of Preferred Securities. At the Closing Time, the Preferred Securities will have been duly authorized for issuance by the Trust pursuant to the Declaration and, when issued, executed and authenticated in accordance with the Declaration and delivered against payment therefor as provided in this Agreement, will be validly issued and fully paid and nonassessable undivided beneficial interests in the assets of the Trust and will conform in all material respects to the description thereof in the Prospectus. The issuance of the Preferred Securities will not be subject to preemptive or other similar rights. (xv) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by the Offerors. (xvi) Authorization of Declaration. The Declaration has been qualified under the 1939 Act and has been duly authorized by the Company and, at the Closing Time, will have been duly executed and delivered by the Company and the Trustees and, assuming due authorization, execution and delivery of the Declaration by the Trustees, the Declaration will, at the Closing Time, be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability may be limited by (A) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting creditors' rights generally, and (B) general principles of equity, regardless of whether enforceability is considered in a proceeding at law or in equity (collectively, the "Enforceability Exceptions"). (xvii) Authorization of Guarantees. The Preferred Securities Guarantee has been qualified under the 1939 Act and has been duly authorized by the Company; at the Closing Time, each of the Guarantees will have been duly executed and delivered by the Company and will constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability may be limited by any of the Enforceability Exceptions; and the Preferred Securities Guarantee will conform in all material respects to the description thereof in the Prospectus. -7- (xviii) Authorization of Indenture. The Indenture has been qualified under the 1939 Act and has been duly authorized by the Company and, at the Closing Time, will have been duly executed and delivered by the Company and, assuming due authorization and delivery of the Indenture by the Debenture Trustee, will constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability thereof may be limited by any of the Enforceability Exceptions. (xix) Authorization of Subordinated Debentures. The Subordinated Debentures have been duly authorized by the Company; at the Closing Time, the Subordinated Debentures, will have been duly executed by the Company and, when authenticated in the manner provided for in the Indenture and delivered by the Company to the Trust against payment therefor as described in the Prospectus, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforceability thereof may be limited by any of the Enforceability Exceptions; and the Subordinated Debentures will be in the form contemplated by, and entitled to the benefits of, the Indenture and will conform in all material respects to the descriptions thereof in the Prospectus. (xx) Authorization of Trustees. Each of the Administrative Trustees of the Trust is an officer of the Company and has been duly authorized by the Company to act in such capacity. (xxi) Trust and Company Not Investment Company. Neither the Trust nor the Company is, and immediately following consummation of the transactions contemplated hereby and the application of the net proceeds as described in the Prospectus under the caption "Use of Proceeds" neither the Trust nor the Company will be, an "investment company" or a company "controlled" by an "investment company" which is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"). (xxii) Accuracy of Disclosure. The Operative Documents conform in all material respects to the descriptions thereof contained in the Prospectus. (xxiii) Absence of Defaults and Conflicts. The Trust is not in violation of the certificate of trust of the Trust filed with the State of Delaware (the "Trust Certificate") or the Declaration, and neither the Company nor any of its subsidiaries is in violation of its charter or bylaws; none of the Trust, the Company or any of its subsidiaries is in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which it is a party or by which it or any of them may be bound, or to which any of its property or assets is subject (collectively, "Agreements and Instruments") except for such defaults under Agreements and Instruments that would not result in a Material Adverse Effect; and (A) the execution, delivery and performance of the Operative Documents by the Trust or the Company, as the case may be, (B) the issuance, sale and delivery of the Preferred Securities, the Subordinated Debentures, the Preferred Securities Guarantee and the Common Securities Guarantee, (C) the consummation of the transactions contemplated by the Operative Documents and (D) compliance by the Offerors with the terms of the Operative Documents to which they are a party have been duly authorized by all necessary corporate action on the part of the Company and, with respect to the applicable matters described in sub-clauses (A), (B), (C) and (D) of this -8- Section 1(a)(xxiii), at the Closing Time, will have been duly authorized by all necessary action on the part of the Trust, and subject to such consents as have already been obtained, none of the actions referred to in sub-clauses (A) through (C) above violate, conflict with or constitute a breach of or, default or Repayment Event (as defined below), under and will not, whether with or without the giving of notice or passage of time or both, violate, conflict with or constitute a breach of, or default or Repayment Event under, or result in the creation or imposition of any security interest, mortgage, pledge, lien, charge, encumbrance or equitable right upon any property or assets of the Trust, the Company or any of the Company's subsidiaries pursuant to, the Agreements and Instruments (except for such conflicts, violations, breaches or defaults or liens, charges or encumbrances that would not result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or bylaws of the Company or any of its subsidiaries or the Declaration or the Trust Certificate or violation by the Company or any of its subsidiaries of any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government authority, agency or instrumentality or court, domestic or foreign, including, without limitation, the Board of Governors of the Federal Reserve System, the Texas Department of Banking, and the Federal Deposit Insurance Corporation (each, a "Governmental Entity"). As used in this Agreement, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Trust, the Company or any of the Company's subsidiaries. (xxiv) Absence of Labor Dispute. No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, has been threatened, which may reasonably be expected to result in a Material Adverse Effect. (xxv) Absence of Proceedings. Except as disclosed in the Prospectus, there is no action, suit, proceeding, inquiry or investigation before or brought by any Governmental Entity now pending, or, to the knowledge of the Trust or the Company, threatened, against the Trust the Company or any of its subsidiaries or of which any of their respective property or assets is the subject, which, individually or in the aggregate, in the reasonable judgment of the Trust or the Company might result in a Material Adverse Effect, or which in the reasonable judgment of the Company might materially and adversely affect the properties or assets thereof or the consummation of the transactions contemplated by the Operative Documents or the performance by the Trust or the Company of its obligations hereunder or thereunder. (xxvi) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any Governmental Entity, other than those that have been made or obtained, is necessary or required for the performance by the Company or the Trust of their respective obligations under each of the Operative Documents, as applicable, or the consummation by the Trust and the Company of the transactions contemplated by the Operative Documents. (xxvii) Possession of Licenses and Permits. The Trust, the Company and its subsidiaries possess all permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the businesses now operated by them; the -9- Trust, the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, and all of the Governmental Licenses are valid and in full force and effect, except, in each case, where the failure to possess or to so comply with such Governmental License or where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect, individually or in the aggregate; would not have a Material Adverse Effect; and neither the Trust, the Company nor any subsidiary of the Company has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, in the reasonable judgment of the Company, is likely to result in a Material Adverse Effect. (xxviii) Accuracy of Exhibits. There are no agreements, contracts or documents of a character described in Item 601 of Regulation S-K promulgated by the Commission which are required to be described in the Registration Statement, the Prospectus or the documents incorporated by reference therein or to be filed as exhibits thereto which have not been so described and filed as required, other than the agreements, contracts or documents to be filed following the Closing Time on the Company's Current Report on Form 8-K as contemplated by the Registration Statement. (xxix) Title to Property. The Company and its subsidiaries have good and marketable title to all of their respective fee owned properties, in each case free and clear of all liens, encumbrances and defects, except as stated in the Prospectus including the documents incorporated therein by reference or to the extent the failure to have such title or the existence of such liens, encumbrances or defects would not have a Material Adverse Effect; and all of the leases and subleases material to the business of the Trust, the Company and its subsidiaries considered as one enterprise, and under which the Offerors or any of the subsidiaries of the Company holds leasehold interests in any of the properties described in the Prospectus, are in full force and effect, and neither the Offerors nor any of the Company's subsidiaries has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Offerors or any of the Company's subsidiaries under any of the leases or subleases mentioned above, or affecting or questioning the rights of such corporation to the continued possession of the leased or subleased premises under any such lease or sublease. (xxx) Regulation M. The Company has not taken and will not take, directly or indirectly, any action designed to cause or result in, or which constitutes, or might be reasonably be expected to cause, result in, or constitute, stabilization or manipulation of the price of the Preferred Securities. (b) Certificates. Any certificate signed by any Trustee of the Trust or any duly authorized officer of the Company or any subsidiary of the Company in such person's capacity as such officer and delivered to the Underwriters or to counsel for the Underwriters shall be deemed a representation and warranty by the Trust or the Company, as the case may be, to the Underwriters as to the matters covered thereby. SECTION 2. Sale and Delivery to Underwriters; Closing. (a) Preferred Securities. On the basis of the representations and warranties contained in this Agreement and subject to the terms and conditions set forth in this Agreement, -10- the Trust agrees to sell to each Underwriter, severally and not jointly, and each Underwriter, severally and not jointly, agrees to purchase from the Trust, at the purchase price of $25 per Preferred Security, the number of Preferred Securities set forth in Schedule A opposite the name of that Underwriter, plus any additional number of Preferred Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 of this Agreement, subject, in each case, to such adjustments among the Underwriters as they in their sole discretion shall make to eliminate any sales or purchases of fractional securities. As compensation to the Underwriters for their commitments under this Agreement and because the proceeds of the sale of the Preferred Securities will be used to purchase the Subordinated Debentures, the Company hereby agrees to pay at the Closing Time to the Underwriters by wire transfer of immediately available funds a commission of $0.9375 per Preferred Security sold, other than sales aggregating no more than $250,000 to such persons identified by the Company and provided to the Underwriters in writing on or before the date hereof, with respect to which the Company hereby agrees to pay at the Closing Time by wire transfer of immediately available funds a commission of $0.4375 per Preferred Security. (b) Payment. Payment of the purchase price for, and delivery of certificates for the Preferred Securities shall be made at the offices of Andrews & Kurth, L.L.P., Houston, Texas, or at such other place as shall be agreed upon by the Underwriters and the Offerors, at 8:30 a.m., (Central time) on the third business day (or, if pricing occurs after 4:30 p.m. (Eastern time) on any given day, the fourth business day) after the date of this Agreement (unless postponed in accordance with the provisions of Section 10 of this Agreement), or such other time not later than ten (10) business days after such date as shall be agreed upon by the Underwriters and the Offerors (such time and date of payment and delivery being in this Agreement called the "Closing Time"). Payment shall be made to the Trust by wire transfer of immediately available funds, to the order of the Trust, to a bank designated by the Company, against delivery to the Underwriters of certificates for the Preferred Securities to be purchased by them. It is understood that each Underwriter has authorized Legg Mason, for its account, to accept delivery of, receipt for, and make payment of the Purchase Price for, the Preferred Securities which it has agreed to purchase. Legg Mason, individually and not as representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Preferred Securities to be purchased by any Underwriter whose funds have not been received by the Closing Time but such payment shall not relieve such Underwriter from its obligations hereunder. (c) The trust shall deliver the Preferred Securities against payment of the purchase price in the form of one or more global securities in such denominations and registered in such names as the Underwriters may request in writing at least one business day before the Closing Time. The global security to be deposited by the Trust with The Depository Trust Company ("DTC") will be available for examination by the Underwriters, and the list of purchasers of the Preferred Securities who will be recorded in the DTC book entry system will be available for examination in Houston, Texas by the Underwriters and the Company at least one (1) business day before the Closing Time. -11- SECTION 3. Covenants of the Offerors. The Offerors jointly and severally covenant and agree with each of the Underwriters as follows: (a) Compliance with Securities Regulations and Commission Requests. The Company and the Trust, subject to Section 3(b) of this Agreement, will comply with the requirements of Rule 430A or Rule 434, as applicable, under the 1933 Act, and will notify the Underwriters promptly, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective, or any supplement to the Prospectus or any amended Prospectus shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the Preferred Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes. The Company and the Trust will promptly effect the filings necessary pursuant to Rule 424(b) under the 1933 Act, and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company and the Trust will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (b) Filing of Amendments. The Company and the Trust will give the Underwriters notice of their intention to file or prepare any amendment to the Registration Statement, any Term Sheet or any amendment, supplement or revision to either the prospectus included in the Registration Statement at the time it became effective or to the Prospectus, whether pursuant to the 1933 Act or otherwise, will furnish the Underwriters with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the Underwriters or counsel for the Underwriters shall reasonably object. (c) Delivery of Registration Statements. The Offerors have delivered to the Underwriters and counsel for the Underwriters, without charge, two signed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also deliver to the Underwriters, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be substantively identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (d) Delivery of Prospectuses. The Offerors have delivered to each Underwriter, without charge, such number of copies of the preliminary prospectus, the Prospectus and any amendments and supplements thereto and documents incorporated by reference therein, as such Underwriter may reasonably request, and the Offerors hereby consent -12- to the use of such copies for purposes permitted by the 1933 Act. The Offerors will furnish to each Underwriter, without charge, as promptly as possible following the date of this Agreement and from time to time thereafter during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be substantively identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (e) Continued Compliance with Securities Laws. The Offerors will comply with the 1933 Act and the 1933 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Prospectus. If at any time when a prospectus is required by the 1933 Act to be delivered in connection with sales of the Preferred Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to amend the Registration Statement or amend or supplement the Prospectus in order that the Prospectus will not include any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any such time to amend the Registration Statement or amend or supplement the Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Offerors will promptly prepare and file with the Commission, subject to Section 3(b) of this Agreement, such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectus comply with such requirements, and the Offerors will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. (f) Blue Sky Qualifications. The Company and the Trust will each use its best efforts, in cooperation with the Underwriters, to qualify the Preferred Securities for offering and sale under the applicable securities laws of such states and other jurisdictions as the Underwriters may reasonably designate and to maintain such qualifications in effect for a period of not less than one year from the later of the effective date of the Registration Statement; provided, however, that neither the Company nor the Trust shall be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. (g) Rule 158. The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to provide the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act. (h) Notice and Effect of Material Events. The Offerors will immediately notify the Underwriters, and confirm such notice in writing, of (x) any filing made by the Offerors of information relating to the offering of the Preferred Securities with any securities exchange or any other regulatory body in the United States, and (y) prior to the completion of the distribution of the Preferred Securities by the Underwriters as evidenced by a notice in writing -13- from the Underwriters to the Offerors, any Material Adverse Effect, which (i) makes any statement in the Prospectus false or misleading or (ii) is not disclosed in the Prospectus. In such event or if during such time any event shall occur as a result of which it is necessary, in the reasonable opinion of the Company, its counsel or the Underwriters or counsel to the Underwriters, to amend or supplement the Prospectus in order that the Prospectus not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances then existing, the Company will forthwith amend or supplement the Prospectus by preparing and furnishing to the Underwriters an amendment or amendments of, or a supplement or supplements to, the Prospectus (in form and substance satisfactory in the reasonable opinion of counsel for the Underwriters) so that, as so amended or supplemented, or the Prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a Subsequent Purchaser, not misleading. (i) DTC. The Offerors will cooperate with the Underwriters and use their commercially reasonable efforts to permit the Preferred Securities to be eligible for clearance and settlement through the facilities of DTC. (j) Use of Proceeds. The Trust will use the net proceeds received by it from the sale of the Preferred Securities, and the Company will use the net proceeds received by it from the sale of the Subordinated Debentures, in the manners specified in the Prospectus under the heading, "Use of Proceeds." (k) The Nasdaq National Market. The Company will use its commercially reasonable efforts to effect the quotation of the Preferred Securities on the Nasdaq National Market and will file with the Nasdaq National Market all documents and notices required by the Nasdaq National Market of companies that have securities that are traded in the over-the-counter market and quotations for which are reported by the Nasdaq National Market. If the Subordinated Debentures are distributed in exchange for the Preferred Securities, the Company will use its commercially reasonable efforts to effect the quotation of the Subordinated Debentures on the Nasdaq National Market or such other automated quotation system or national securities exchange on which the Preferred Securities are then listed. (l) Restriction on Sale of Securities. During a period of 120 days from the date of the Prospectus, neither the Company nor the Trust will, without the prior written consent of Legg Mason, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any Preferred Securities or Subordinated Debentures (or any equity or debt securities, either of which is substantially similar to the Preferred Securities or Subordinated Debentures, respectively) of the Company, or any securities convertible into or exercisable or exchangeable for Preferred Securities or Subordinated Debentures (or any equity or debt securities, either of which is substantially similar to the Preferred Securities or Subordinated Debentures, respectively) or file any registration statement under the 1933 Act with respect to any of the foregoing, or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of Preferred Securities or Subordinated Debentures (or any -14- equity or debt securities, either of which is substantially similar to the Preferred Securities or Subordinated Debentures, respectively) of the Company, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Preferred Securities or Subordinated Debentures (or any equity or debt securities, either of which is substantially similar to the Preferred Securities or Subordinated Debentures, respectively) or such other securities, in cash or otherwise. The foregoing sentence shall not apply to the Preferred Securities or Subordinated Debentures to be sold hereunder. (m) Reporting Requirements. The Company and the Trust, during the period when the Prospectus is required to be delivered in connection with sales of the Preferred Securities under the 1933 Act or the 1934 Act, will file all documents required to be filed with the Commission pursuant to Sections 13, 14 or 15 of the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations. (n) Furnish Reports. For and during the period ending three years from the effective date of the Registration Statement, the Company will furnish, upon request, to the Underwriters copies of all reports and other communications (financial or other) furnished by the Company to its shareholders generally and copies of any reports or financial statements furnished to or filed by the Company with the Commission or any national securities exchange on which any class of securities of the Company may be listed. SECTION 4. Payment of Expenses. (a) Expenses. The Company, as borrower under the Subordinated Debentures, covenants and agrees with the Underwriters that, whether or not the transactions contemplated by this Agreement are consummated, the Company will pay or cause to be paid all expenses incident to the performance of its, and the Trust's, obligations under this Agreement, including (i) the preparation, printing and any filing of the Registration Statement (including financial statements and any schedules or exhibits and any document incorporated therein by reference) and of each amendment or supplement thereto; (ii) the preparation, printing and delivery to the Underwriters of this Agreement, the Operative Documents, closing documents (and any compilations thereof) and such other documents as may be required in connection with the offering, purchase, sale and delivery of the Preferred Securities; (iii) the preparation, issuance and delivery of the certificates for the Preferred Securities to the Underwriters, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance, or delivery of the Preferred Securities to the Underwriters; (iv) the fees and disbursements of the Company's counsel, accountants and other advisors; (v) rating agency fees, if any; -15- (vi) the fees and expenses of any trustee appointed under any of the Operative Documents, including the fees and disbursements of counsel for such trustees in connection with the Operative Documents; (vii) all expenses in connection with the qualification of the Preferred Securities under securities laws in accordance with the provisions of Section 3(f) of this Agreement, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky survey and any supplement thereto; (viii) the preparation, filing, printing and delivery to the Underwriters of copies of each preliminary prospectus, any Term Sheets and of the Prospectus and any amendments or supplements thereto; (ix) the fees and expenses of any transfer agent or registrar for the Preferred Securities; (x) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by the National Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Preferred Securities; (xi) the fees and expenses incurred in connection with the listing of the Preferred Securities and, if applicable, the Subordinated Debentures on the Nasdaq National Market; (xii) the fees and expenses of the Indenture Trustee, including the fees and disbursements of counsel for the Indenture Trustee in connection with the Indenture and the Subordinated Debentures; (xiii) the fees and expenses of the Delaware Trustee and the Property Trustee, including the fees and disbursements of counsel for the Delaware Trustee and Property Trustee in connection with the Declaration and the Certificate of Trust; (xiv) the fees and expenses of the Guarantee Trustee; (xv) any fees and expenses in connection with the rating of the Preferred Securities and the Subordinated Debentures; (xvi) the cost and charges of qualifying the Preferred Securities with the DTC; and (xvii) all travel and lodging expenses incurred by the Underwriters in connection with this Offering and any informational "road show" meetings held in connection with the Offering and all expenses related to the preparation of all materials used in connection with such meetings. -16- (b) Termination of Agreement. If this Agreement is terminated by the Underwriters in accordance with the provisions of Section 5 or Section 9(a)(i) or (iii) of this Agreement, the Company shall reimburse the Underwriters for all of their actual accountable out-of-pocket expenses, including all the reasonable fees and disbursements of Bracewell & Patterson, L.L.P., counsel for the Underwriters. If this Agreement is terminated by the Underwriters in accordance with the provisions of Section 9(a)(ii), (iv) or (v) of this Agreement, the Company shall reimburse the Underwriters for one-half (1/2) of their actual accountable out-of-pocket expenses, including one-half (1/2) of the reasonable fees and disbursements of Bracewell & Patterson, L.L.P., counsel for the Underwriters. SECTION 5. Conditions of Underwriters' Obligations. The several obligations of the Underwriters hereunder to purchase the Preferred Securities at the Closing Time are subject to the accuracy of the representations and warranties of the Offerors contained in Section 1 of this Agreement or in certificates of any Trustee of the Trust, officer of the Company or any of its subsidiaries delivered pursuant to the provisions of this Agreement, to the performance by the Offerors of their obligations hereunder, and to the following additional conditions: (a) Effectiveness of Registration Statement. The Registration Statement has become effective and at the Closing Time no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefore initiated or threatened by the Commission, and any request on the part of the Commission of additional information shall have been complied with to the reasonable satisfaction of counsel to the Underwriters. A prospectus containing the Rule 430A Information shall have been filed with the Commission in accordance with Rule 424(b) (or a post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A or, if the Company has elected to rely upon Rule 434, a Term Sheet shall have been filed with the Commission in accordance with Rule 424(b)). (b) Certificate of Executive Officers. At the Closing Time, there shall not have been, since the date of this Agreement or since the date of the latest audited financial statements incorporated by reference in the Prospectus, any Material Adverse Effect, and the Underwriters shall have received a certificate of the Chairman, the Chief Executive Officer, the President or any Vice President of the Company and of the Chief Financial Officer or the chief accounting officer of the Company, dated as of the Closing Time, to the effect that (i) there has been no such Material Adverse Effect with respect to the Company, (ii) the representations and warranties made by the Company in Section 1 this Agreement were true and correct when made and are true and correct with the same force and effect as though expressly made at and as of the Closing Time, and (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time. (c) Certificate of Administrative Trustee. At the Closing Time, there shall not have been, since the date of this Agreement or since the date of the latest audited financial statements incorporated by reference in the Prospectus, any Material Adverse Effect, and the Underwriters shall have received a certificate of an Administrative Trustee of the Trust, dated as of the Closing Time, to the effect that (i) there has been no such Material Adverse Effect with respect to the Trust, (ii) the representations and warranties made by the Trust in Section 1 this Agreement were true and correct when made and are true and correct with the same force and -17- effect as though expressly made at and as of the Closing Time, and (iii) the Trust has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time. (d) Opinion of In-house Counsel for the Company. At the Closing Time, the Underwriters shall have received the favorable opinion, dated as of the Closing Time, of Mr. James W. Goolsby, Esq., General Counsel and Secretary of the Company, in form and substance reasonably satisfactory to counsel for the Underwriters. (e) Opinion of Outside Counsel for Offerors. At the Closing Time, the Underwriters shall have received the favorable opinion, dated as of the Closing Time, of Andrews & Kurth L.L.P., Houston, Texas, counsel for the Offerors, substantially in the form of Exhibit A to this Agreement. Such counsel may state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of Trustees of the Trust, officers of the Company and its subsidiaries and certificates of public officials. (f) Opinion of Special Counsel for Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company). At the Closing Time, the Underwriters shall have received the favorable opinion, dated as of the Closing Time, of Seward & Kissel, counsel to Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as Property Trustee under the Declaration, Guarantee Trustee under the Preferred Securities Guarantee Agreement and Debenture Trustee under the Indenture in form and substance reasonably satisfactory to counsel for the Underwriters. (g) Opinion of Special Tax Counsel for the Offerors. At the Closing Time, the Underwriters shall have received the opinion, dated as of the Closing Time, of Andrews & Kurth L.L.P., Houston, Texas, special tax counsel to the Offerors, in form and substance reasonably satisfactory to counsel for the Underwriters and substantially to the effect that (i) the Trust will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation, and (ii) the statements set forth in the Prospectus under the caption "Material Federal Income Tax Consequences" constitute a fair and accurate summary of the anticipated United States federal income tax consequences of the ownership and disposition of the Preferred Securities under current law. Such opinion may be conditioned on, among other things, the initial and continuing accuracy of the facts, financial and other information, covenants and representations set forth in certificates of officers of the Company and other documents deemed necessary for such opinion. (h) Opinion of Counsel for Underwriters. At the Closing Time, the Underwriters shall have received the opinion, dated as of the Closing Time, of Bracewell & Patterson, L.L.P., special counsel for the Underwriters, in form and substance reasonably satisfactory to the Underwriters. Such counsel may state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of Trustees of the Trust, officers of the Company and its subsidiaries and certificates of public officials. (i) Accountant's Comfort Letter. At the time of the execution of this Agreement, the Underwriters shall have received from Deloitte & Touche LLP (the "Accountants"), a letter dated such date, in form and substance satisfactory to the Underwriters, -18- containing statements and information of the type customarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Prospectus. (j) Bring-down Comfort Letter. At the Closing Time, the Underwriters shall have received from the Accountants a letter dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (h) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time. (k) Approval of Listing. At the Closing Time, the Preferred Securities shall have been approved for quotation and inclusion on the Nasdaq National Market. (l) Additional Documents. At the Closing Time, counsel for the Underwriters shall have been furnished such documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Preferred Securities as in this Agreement contemplated, or in order to evidence the accuracy of any of the representations or warranties of the Offerors, or the fulfillment of any of the conditions, contained in this Agreement; and all proceedings taken by the Offerors in connection with the issuance and sale of the Preferred Securities as contemplated in this Agreement shall be satisfactory in form and substance to the Underwriters and counsel for the Underwriters. (m) Termination of Agreement. If any condition specified in this Section 5 shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Underwriters by notice to the Offerors at any time at or prior to the Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 4 this Agreement and except that Sections 6 and 7 of this Agreement shall survive any such termination and remain in full force and effect. SECTION 6. Indemnification. (a) Indemnification of Underwriters. The Offerors agree to jointly and severally indemnify and hold harmless: (1) each of the Underwriters; (2) each person, if any, who controls (within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act) any Underwriter (each such person, a "controlling person"); and (3) the respective partners, directors, officers, employees and agents of any Underwriter or any controlling person as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment or supplement thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or arising out of any untrue statement of a material fact contained in any preliminary prospectus or Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to -19- make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid by each such indemnified person in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission referred to in clause (i) of this Section 6(a), or any such alleged untrue statement or omission referred to in clause (i) of this Section 6(a); provided that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Offerors; and (iii) against any and all expense whatsoever, as incurred (including subject to Section 6(c), the fees and disbursements of counsel chosen by Legg Mason), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission referred to in clause (i) of this Section 6(a), or any such alleged untrue statement or omission referred to in clause (i) of this Section 6(a), to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that the indemnity agreement set forth in this Section 6(a) shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Offerors by any Underwriter through Legg Mason and its counsel expressly for use in the Registration Statement (or any supplement or amendment thereto), including the Rule 430A Information an the Rule 434 Information, if applicable, or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto). The foregoing indemnity with respect to any untrue statement or alleged untrue statement contained in or omission or alleged omission from a preliminary prospectus shall not inure to the benefit of the Underwriter (or any person controlling such Underwriter) from whom the person asserting any loss, liability, claim, damage or expense purchases any of the Preferred Securities which are the subject thereof if (A) the Company shall sustain the burden of proving that such person was not sent or given a copy of the Prospectus (or the Prospectus as amended or supplemented) at or prior to the written confirmation of the sale of such Preferred Securities to such person, and (B) the untrue statement contained in or omission from a preliminary prospectus was corrected in the Prospectus (or the Prospectus as amended or supplemented) and the Company has previously furnished copies thereof to such Underwriter. (b) Indemnification of Offerors, Directors and Officers. Each Underwriter severally and not jointly agrees to indemnify and hold harmless the Company, its directors, officers, the Trust, each of the Trustees and each person, if any, who controls the Trust, any of the Trustees or the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 6(a) above, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary prospectus, or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to -20- the Offerors by such Underwriter through Legg Mason (or its counsel) expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the Prospectus (or any amendment or supplement thereto). (c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. If an indemnifying party so elects within a reasonable time after receipt of such notice, an indemnifying party, severally or jointly with any other indemnifying parties receiving such notice, may assume the defense of such action with counsel chosen by it and reasonably acceptable to the indemnified parties defendant in such action, provided, however, that if (i) representation of such indemnified party by the same counsel would present a conflict of interest or (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and any such indemnified party reasonably determines that there may be legal defenses available to such indemnified party which are different from or in addition to those available to such indemnifying party, then in the case of clauses (i) and (ii) of this Section 6(c) such indemnifying party and counsel for each indemnifying party or parties shall not be entitled to assume such defense. If either (A) an indemnifying party is not entitled to assume the defense of such action as a result of the proviso to the preceding sentence or (B) an indemnifying party is entitled under the preceding sentence to assume the defense of such action but fails to do so in accordance with the provisions of this paragraph within a reasonable time after the indemnifying party was given notice of commencement of the action, then, in either case: (x) counsel selected by the indemnified party or parties shall be entitled to conduct such defense and (y) such indemnifying party or parties must reimburse all the fees and expenses of such counsel for the indemnified party or parties as they are incurred. Notwithstanding the preceding sentence, the indemnifying party or parties may participate, at its own expense, in the defense of any such action. If an indemnifying party assumes the defense of such action, in accordance with and as permitted by the provisions of this paragraph, such indemnifying parties shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action. In no event shall the indemnifying parties be liable for fees and expenses of more than one firm of attorneys (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. Such firm of attorneys shall be designated in writing, in the case where the indemnified parties are any of the parties indemnified pursuant to Section 6(a) above, by Legg Mason and, in the case where the indemnified parties are any of the parties indemnified pursuant to Section 6(b) above, by the Company. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 of this Agreement (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such -21- litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to the extent specified in this Section 6 to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) Settlement without Consent if Failure to Reimburse. Notwithstanding the last sentence of Section 6(c), if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement; provided that an indemnifying party shall not be liable for any such settlement effected without its consent if such indemnifying party (1) reimburses such indemnified party in accordance with such request to the extent it considers reasonable and (2) provides written notice to the indemnified party substantiating the unpaid balance as unreasonable, in each case prior to the date of such settlement. SECTION 7. Contribution. In order to provide for just and equitable contribution in circumstances under which the indemnification provided for in Section 6 of this Agreement is for any reason held to be unenforceable by an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Offerors on the one hand and the Underwriters on the other hand from the offering of the Preferred Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Offerors, on the one hand, and of the Underwriters, on the other hand, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Offerors on the one hand and the Underwriters on the other hand in connection with the offering of the Preferred Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Preferred Securities pursuant to this Agreement (before deducting expenses but after deducting the compensation paid to the Underwriters pursuant to Section 2(c) of this Agreement) received by the Offerors and the total commission received by the Underwriters, bear to the aggregate offering price of the Preferred Securities. The relative fault of the Offerors, on the one hand and the Underwriters on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statements of a material fact or omission or alleged omission to state a material fact relates to information -22- supplied by the Offerors or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Offerors and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 7, the Underwriters shall not be required to contribute any amount in excess of the amount by which the total price at which the Preferred Securities purchased by it and distributed to the public were offered to the public exceeds the amount of any damages which that Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each controlling person and the respective partners, directors, officers, employees and agents of any Underwriter or any controlling person of any Underwriter shall have the same rights to contribution as that Underwriter, and each officer and director of the Company, and each person, if any, who controls (within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act) the Company shall have the same rights to contribution as the Company. The Underwriters' respective obligations to contribute pursuant to this Section 7 are not joint but several in proportion to the number of Securities set forth against their respective names in Schedule A to this Agreement. SECTION 8. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company or trustees of the Trust submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or controlling person, or by or on behalf of the Trust or the Company, and shall survive delivery of the Preferred Securities to the Underwriters. SECTION 9. Termination of Agreement. (a) Termination; General. Notwithstanding anything herein contained, the Underwriters may terminate this Agreement, by notice to the Offerors, at any time at or prior to the Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the Prospectus, any Material Adverse Effect, or (ii) if, since the time of execution of this Agreement, there has occurred any material adverse change in the financial markets in the United States, any outbreak of hostilities or escalation -23- thereof or other calamity or crisis, or any change or development involving a prospective change in national political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Underwriters, impracticable to market the Preferred Securities or to enforce contracts for the sale of the Preferred Securities, or, (iii) if, since the time of execution of this Agreement, trading in any securities of the Company has been suspended or limited by the Commission or the Nasdaq National Market, or (iv) if, since the time of execution of this Agreement, trading generally on the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market has been suspended or limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority, or (v) if a banking moratorium has been declared by either Federal, Texas or New York authorities. (b) Liabilities. If this Agreement is terminated pursuant to this Section 9, such termination will be without liability of any party to any other party except as provided in Section 4 of this Agreement, and provided further that Sections 1, 6 and 7 of this Agreement shall survive such termination and remain in full force and effect. SECTION 10. Default by One or More of the Underwriters. If one of the Underwriters fails at the Closing Time to purchase the Preferred Securities which it or they are obligated to purchase under this Agreement (the "Defaulted Securities"), the non-defaulting Underwriter shall have the right, within 24 hours of the Closing Time, to make arrangements for it or any person(s) selected by it as substitute Underwriter(s) to purchase all or some of the Defaulted Securities in such amounts as may be agreed upon and upon the terms set forth in this Agreement; if, however, the non-defaulting Underwriter shall not have completed such arrangements within such 24-hour period, then this Agreement shall terminate without liability on the part of the non-defaulting Underwriter. No action taken pursuant to this Section 10 shall relieve the defaulting Underwriter from liability in respect of its default. If any such default does not result in a termination of this Agreement, either the Underwriters or the Company shall have the right to postpone the Closing Time or Date of Delivery for a period not exceeding five days in order to effect any required changes in the Registration Statement or Prospectus or in any other documents or arrangements. In this Agreement, the term "Underwriter" includes any person substituted for an Underwriter under this Section 10. SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to Legg Mason Wood Walker Incorporated, 100 Light Street, 31st Floor, Baltimore, Maryland 21202 (facsimile no.: 410-454-5299), Attention: Mark C. Micklem, Managing Director, with a copy to Bracewell & Patterson, L.L.P., 711 Louisiana, Suite 2900, Houston, Texas 77002 (facsimile no.: 713-221-1212), Attention: William T. Luedke IV, Esq. Notices to the Offerors shall be directed to Sterling Bancshares, Inc., 2550 North Loop, Suite 600, Houston, Texas 77092 (facsimile no.: 713-849-5498), Attention: J. Downey Bridgwater, with a copy to Andrews & Kurth L.L.P., Waterway Plaza Two, Suite 200, 10001 Woodloch Forest Drive, The Woodlands, Texas 77380 (facsimile no.: 713-238-7286), Attention: William C. McDonald, Esq. -24- SECTION 12. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Underwriters and the Offerors and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters and the Offerors and their respective successors and the controlling persons and officers and directors referred to in Sections 1, 6 and 7 of this Agreement and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained in this Agreement. This Agreement and all conditions and provisions of this Agreement are intended to be for the sole and exclusive benefit of the Underwriters and the Offerors and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Preferred Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase. SECTION 13. Counterparts. This Agreement may be signed in counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument. SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. SECTION 15. Effect of Headings. The Article and Section headings in this Agreement are for convenience only and shall not affect the construction of this Agreement. [SIGNATURE PAGE FOLLOWS] -25- If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart of this Agreement, whereupon this instrument, along with all counterparts, will become a binding agreement between the Underwriters and the Offerors in accordance with its terms. Very truly yours, STERLING BANCSHARES, INC. By /s/ J. Downey Bridgwater ______________________________________ Name: J. Downey Bridgwater Title: President and Chief Executive Officer STERLING BANCSHARES CAPITAL TRUST III By /s/ George Martinez ______________________________________ Name: George Martinez Title: Administrative Trustee By /s/ J. Downey Bridgwater ______________________________________ Name: J. Downey Bridgwater Title: Administrative Trustee By /s/ Eugene S. Putnam, Jr. ______________________________________ Name: Eugene S. Putnam, Jr. Title: Administrative Trustee CONFIRMED AND ACCEPTED, as of the date first above written: LEGG MASON WOOD WALKER, INCORPORATED For itself and as the Representative of the several Underwriters named in Schedule A hereto: By: /s/ Mark C. Micklem __________________________________ Name: Mark C. Micklem Title: Managing Director -26- SCHEDULE A Number of Preferred Name of Underwriter Securities to be Purchased - ------------------- -------------------------- Legg Mason Wood Walker, Incorporated 750,000 Stifel, Nicolaus & Company, Incorporated 500,000 ------- Total: 1,250,000 -27- EX-4.2 4 dex42.txt PREFERRED SECURITIES GUARANTEE AGREEMENT EXHIBIT 4.2 PREFERRED SECURITIES GUARANTEE AGREEMENT Sterling Bancshares, Inc. Dated as of September 26, 2002 CROSS-REFERENCE TABLE*/ - Section of Trust Indenture Act Section of of 1939, as amended Guarantee Agreement ------------------- ------------------- 310(a) ................................. 4.1(a) 310(b) ................................. 4.1(c), 2.8 310(c) ................................. Inapplicable 311(a) ................................. 2.2(b) 311(b) ................................. 2.2(b) 311(c) ................................. Inapplicable 312(a) ................................. 2.2(a) 312(b) ................................. 2.2(b) 313 ................................. 2.3 314(a) ................................. 2.4 314(b) ................................. Inapplicable 314(c) ................................. 2.5 314(d) ................................. Inapplicable 314(e) ................................. 1.1, 2.5, 3.2 314(f) ................................. 2.1, 3.2 315(a) ................................. 3.1(d) 315(b) ................................. 2.7 315(c) ................................. 3.1 315(d) ................................. 3.1(d) 316(a) ................................. 1.1, 2.6, 5.4 316(b) ................................. 5.3 316(c) ................................. Inapplicable 317(a) ................................. Inapplicable 317(b) ................................. Inapplicable 318(a) ................................. 2.1(b) _________________________ */ This Cross-Reference Table does not constitute part of the Preferred - - Securities Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND INTERPRETATION .................................................................... 1 Section 1.1 Definitions and Interpretation ........................................................... 1 ARTICLE II TRUST INDENTURE ACT .............................................................................. 5 Section 2.1 Trust Indenture Act; Application ......................................................... 5 Section 2.2 Lists of Holders of Securities ........................................................... 5 Section 2.3 Reports by the Preferred Securities Guarantee Trustee .................................... 5 Section 2.4 Periodic Reports to Preferred Securities Guarantee Trustee ............................... 5 Section 2.5 Evidence of Compliance with Conditions Precedent ......................................... 6 Section 2.6 Events of Default; Waiver ................................................................ 6 Section 2.7 Event of Default; Notice ................................................................. 6 Section 2.8 Conflicting Interests .................................................................... 6 ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED SECURITIES GUARANTEE TRUSTEE ........................... 7 Section 3.1 Powers and Duties of the Preferred Securities Guarantee Trustee .......................... 7 Section 3.2 Certain Rights of Preferred Securities Guarantee Trustee ................................. 8 Section 3.3 Not Responsible for Recitals or Issuance of Preferred Securities Guarantee .............. 10 ARTICLE IV PREFERRED SECURITIES GUARANTEE TRUSTEE ........................................................... 11 Section 4.1 Preferred Securities Guarantee Trustee; Eligibility ...................................... 11 Section 4.2 Appointment, Removal and Resignation of Preferred Securities Guarantee Trustee ........................................................................ 11 ARTICLE V GUARANTEE ......................................................................................... 12 Section 5.1 Guarantee ................................................................................ 12 Section 5.2 Waiver of Notice and Demand .............................................................. 12 Section 5.3 Obligations Not Affected ................................................................. 12 Section 5.4 Rights of Holders ........................................................................ 13 Section 5.5 Guarantee of Payment ..................................................................... 14 Section 5.6 Subrogation .............................................................................. 14 Section 5.7 Independent Obligations .................................................................. 14 ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION ........................................................ 14 Section 6.1 Limitation of Transactions ............................................................... 14 Section 6.2 Ranking .................................................................................. 15 ARTICLE VII TERMINATION ..................................................................................... 15 Section 7.1 Termination .............................................................................. 15
-i- ARTICLE VIII INDEMNIFICATION ................................. 15 Section 8.1 Exculpation ................................ 15 Section 8.2 Indemnification ............................ 16 Section 8.3 Fees and Expenses .......................... 16 ARTICLE IX MISCELLANEOUS ..................................... 16 Section 9.1 Successors and Assigns ..................... 16 Section 9.2 Amendments ................................. 16 Section 9.3 Notices .................................... 17 Section 9.4 Benefit .................................... 18 Section 9.5 Governing Law .............................. 18 -ii- PREFERRED SECURITIES GUARANTEE AGREEMENT This GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"), dated as of September 26, 2002, is executed and delivered by STERLING BANCSHARES, INC., a Texas corporation (the "Guarantor"), and DEUTSCHE BANK TRUST COMPANY AMERICAS (formerly known as "Bankers Trust Company"), a New York banking corporation, as trustee (the "Preferred Securities Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of STERLING BANCSHARES CAPITAL TRUST III, a Delaware statutory trust (the "Issuer"). RECITALS: WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of September 26, 2002, among the trustees of the Issuer, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof 1,250,000 preferred securities, having an aggregate liquidation amount of $31,250,000, such preferred securities being designated the 8.30% Preferred Securities (the "Preferred Securities"); and WHEREAS, as incentive for the Holders to purchase the Preferred Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Preferred Securities Guarantee, to pay to the Holders the Guarantee Payments (as defined below), and the Guarantor agrees to make certain other payments on the terms and conditions set forth herein; and WHEREAS, the Guarantor is executing and delivering a guarantee agreement (the "Common Securities Guarantee"), with substantially identical terms to this Preferred Securities Guarantee, for the benefit of the holders of the Common Securities (as defined herein), except that if an Event of Default (as defined in the Declaration) has occurred and is continuing, the rights of holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee are subordinated, to the extent and in the manner set forth in the Common Securities Guarantee, to the rights of holders of Preferred Securities to receive Guarantee Payments under this Preferred Securities Guarantee; NOW, THEREFORE, in consideration of the purchase by each Holder, which purchase the Guarantor hereby acknowledges shall benefit the Guarantor, the Guarantor executes and delivers this Preferred Securities Guarantee for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION Section 1.1 Definitions and Interpretation. In this Preferred Securities Guarantee, unless the context otherwise requires: (a) capitalized terms used in this Preferred Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) terms defined in the Declaration as in effect at the date of execution of this Preferred Securities Guarantee have the same meaning when used in this Preferred Securities Guarantee unless otherwise defined in this Preferred Securities Guarantee; (c) a term defined anywhere in this Preferred Securities Guarantee has the same meaning throughout; (d) all references to "the Preferred Securities Guarantee" or "this Preferred Securities Guarantee" are to this Preferred Securities Guarantee as modified, supplemented or amended from time to time; (e) all references in this Preferred Securities Guarantee to Articles and Sections are to Articles and Sections of this Preferred Securities Guarantee, unless otherwise specified; (f) a term defined in the Trust Indenture Act (as defined below) has the same meaning when used in this Preferred Securities Guarantee, unless otherwise defined in this Preferred Securities Guarantee or unless the context otherwise requires; and (g) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 under the Securities Act of 1933, as amended, or any successor rule thereunder. "Business Day" means any day other than a Saturday or a Sunday, or a day on which banking institutions in The City of New York or Houston, Texas are authorized or required by law or executive order to close. "Common Securities" means the securities representing common undivided beneficial interests in the assets of the Issuer. "Corporate Trust Office" means the office of the Preferred Securities Guarantee Trustee at which the corporate trust business of the Preferred Securities Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at 60 Wall Street, New York, New York 20005. "Covered Person" means any Holder of Preferred Securities. "Debentures" means the series of subordinated debt securities of the Guarantor designated the 8.30% Junior Subordinated Deferrable Interest Debentures due September 26, 2032 held by the Property Trustee (as defined in the Declaration) of the Issuer. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Preferred Securities Guarantee. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by the Issuer: (i) any accumulated and unpaid Distributions (as defined in the Declaration) that are required to -2- be paid on such Preferred Securities to the extent the Issuer has funds on hand legally available therefor at such time, (ii) the redemption price, including all accumulated and unpaid Distributions to the date of redemption (the "Redemption Price") to the extent the Issuer has funds on hand legally available therefor at such time, with respect to any Preferred Securities called for redemption by the Issuer, and (iii) upon a voluntary or involuntary termination and liquidation of the Issuer (other than in connection with the distribution of Debentures to the Holders in exchange for Preferred Securities as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accumulated and unpaid Distributions on the Preferred Securities to the date of payment, to the extent the Issuer has funds on hand legally available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer. If an Event of Default has occurred and is continuing, no Guarantee Payments under the Common Securities Guarantee with respect to the Common Securities or any guarantee payment under any Other Common Securities Guarantees shall be made until the Holders shall be paid in full the Guarantee Payments to which they are entitled under this Preferred Securities Guarantee. "Holder" shall mean any holder, as registered on the books and records of the Issuer, of any Preferred Securities; provided, however, that, in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Person known to a Responsible Officer of the Preferred Securities Guarantee Trustee to be an Affiliate of the Guarantor. "Indemnified Person" means the Preferred Securities Guarantee Trustee, any Affiliate of the Preferred Securities Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Preferred Securities Guarantee Trustee. "Indenture" means the Indenture dated as of March 21, 2001, among the Guarantor (the "Debenture Issuer") and Bankers Trust Company, as trustee (now known as "Deutsche Bank Trust Company Americas") (the "Indenture Trustee"), and any indenture supplemental thereto pursuant to which the Debentures are to be issued to the Property Trustee of the Issuer. "Indenture Event of Default" shall mean any event specified in Section 5.1 of the Indenture. "Majority in liquidation amount of the Preferred Securities" means, except as provided by the Declaration or by the Trust Indenture Act, a vote by Holder(s) of more than 50% of the aggregate liquidation amount of all Preferred Securities. "Officers' Certificate" means, with respect to the Guarantor, a certificate signed by the Chairman, a Vice Chairman, the Chief Executive Officer, the President, a Vice President, the Comptroller, the Secretary or an Assistant Secretary of the Guarantor. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Preferred Securities Guarantee (other than pursuant to Section 314(a)(4) of the Trust Indenture Act) shall include: -3- (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in the Officers' Certificate are based; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Other Common Securities Guarantees" shall have the same meaning as "Other Guarantees" as defined in the Common Securities Guarantee. "Other Debentures" means all junior subordinated debentures issued by the Guarantor from time to time and sold to trusts to be established by the Guarantor (if any), in each case similar to the Issuer. "Other Guarantees" means all guarantees to be issued by the Guarantor with respect to capital securities (if any) similar to the Preferred Securities issued by other trusts to be established by the Guarantor (if any), in each case similar to the Issuer. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Securities Guarantee Trustee" means Deutsche Bank Trust Company Americas (formerly known as "Bankers Trust Company"), a New York banking corporation, until a Successor Preferred Securities Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Preferred Securities Guarantee and thereafter means each such Successor Preferred Securities Guarantee Trustee. "Responsible Officer" means, with respect to the Preferred Securities Guarantee Trustee, any officer within the Corporate Trust Office of the Preferred Securities Guarantee Trustee with direct responsibility for the administration of this Preferred Securities Guarantee and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Preferred Securities Guarantee Trustee" means a successor Preferred Securities Guarantee Trustee possessing the qualifications to act as Preferred Securities Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. -4- "Trust Securities" means the Common Securities and the Preferred Securities. ARTICLE II TRUST INDENTURE ACT Section 2.1 Trust Indenture Act; Application. (a) This Preferred Securities Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Preferred Securities Guarantee and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Preferred Securities Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. Section 2.2 Lists of Holders of Securities. (a) The Guarantor shall provide the Preferred Securities Guarantee Trustee (unless the Preferred Securities Guarantee Trustee is otherwise the registrar of the Preferred Securities) with a list, in such form as the Preferred Securities Guarantee Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of such date, (i) within one Business Day after January 15 and July 15 of each year, and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Preferred Securities Guarantee Trustee, provided, that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Preferred Securities Guarantee Trustee by the Guarantor. The Preferred Securities Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Preferred Securities Guarantee Trustee shall comply with its obligations under Section 311(a) of the Trust Indenture Act. Section 2.3 Reports by the Preferred Securities Guarantee Trustee. Within 60 days after September 15 of each year, commencing September 15, 2003, the Preferred Securities Guarantee Trustee shall provide to the Holders such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Preferred Securities Guarantee Trustee shall also comply with the other requirements of Section 313 of the Trust Indenture Act. Section 2.4 Periodic Reports to Preferred Securities Guarantee Trustee. The Guarantor shall provide to the Preferred Securities Guarantee Trustee such documents, reports and information, (if any) and the compliance certificate, required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. Delivery of such reports, information and documents to the Preferred Securities Guarantee Trustee is for informational purposes only and the Preferred Securities Guarantee -5- Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Guarantor's compliance with any of its covenants hereunder (as to which the Preferred Securities Guarantee Trustee is entitled to rely exclusively on Officers' Certificates). Section 2.5 Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Preferred Securities Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Preferred Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) of the Trust Indenture Act may be given in the form of an Officers' Certificate. Section 2.6 Events of Default; Waiver. The Holders of a Majority in liquidation amount of Preferred Securities may, by vote, on behalf of all Holders, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Preferred Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Section 2.7 Event of Default; Notice. (a) The Preferred Securities Guarantee Trustee shall, within 90 days after the occurrence of a default with respect to this Preferred Securities Guarantee, mail by first class postage prepaid, to all Holders, notices of all defaults actually known to a Responsible Officer, unless such defaults have been cured before the giving of such notice, provided, that, except in the case of default in the payment of any Guarantee Payment, the Preferred Securities Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or a Responsible Officer in good faith determines that the withholding of such notice is in the interests of the Holders. (b) The Preferred Securities Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Preferred Securities Guarantee Trustee shall have received written notice from the Guarantor, or a Responsible Officer charged with the administration of this Preferred Securities Guarantee shall have obtained actual knowledge, of such Event of Default. Section 2.8 Conflicting Interests. The Declaration shall be deemed to be specifically described in this Preferred Securities Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. -6- ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED SECURITIES GUARANTEE TRUSTEE Section 3.1 Powers and Duties of the Preferred Securities Guarantee Trustee. (a) This Preferred Securities Guarantee shall be held by the Preferred Securities Guarantee Trustee for the benefit of the Holders, and the Preferred Securities Guarantee Trustee shall not transfer this Preferred Securities Guarantee to any Person except a Holder exercising his or her rights pursuant to Section 5.4(b) or to a Successor Preferred Securities Guarantee Trustee on acceptance by such Successor Preferred Securities Guarantee Trustee of its appointment to act as Successor Preferred Securities Guarantee Trustee. The right, title and interest of the Preferred Securities Guarantee Trustee shall automatically vest in any Successor Preferred Securities Guarantee Trustee, and such vesting and succession of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Preferred Securities Guarantee Trustee. (b) If an Event of Default actually known to a Responsible Officer charged with the administration of this Preferred Securities Guarantee has occurred and is continuing, the Preferred Securities Guarantee Trustee shall enforce this Preferred Securities Guarantee for the benefit of the Holders. (c) The Preferred Securities Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Preferred Securities Guarantee, and no implied covenants shall be read into this Preferred Securities Guarantee against the Preferred Securities Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer, the Preferred Securities Guarantee Trustee shall exercise such of the rights and powers vested in it by this Preferred Securities Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Preferred Securities Guarantee shall be construed to relieve the Preferred Securities Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Preferred Securities Guarantee Trustee shall be determined solely by the express provisions of this Preferred Securities Guarantee, and the Preferred Securities Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Preferred Securities -7- Guarantee, and no implied covenants or obligations shall be read into this Preferred Securities Guarantee against the Preferred Securities Guarantee Trustee; and (B) in the absence of bad faith on the part of the Preferred Securities Guarantee Trustee, the Preferred Securities Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Preferred Securities Guarantee Trustee and conforming to the requirements of this Preferred Securities Guarantee; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Preferred Securities Guarantee Trustee, the Preferred Securities Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Preferred Securities Guarantee; (ii) the Preferred Securities Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Preferred Securities Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Preferred Securities Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a Majority in liquidation amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Preferred Securities Guarantee Trustee, or exercising any trust or power conferred upon the Preferred Securities Guarantee Trustee under this Preferred Securities Guarantee; and (iv) no provision of this Preferred Securities Guarantee shall require the Preferred Securities Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Preferred Securities Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Preferred Securities Guarantee or indemnity, reasonably satisfactory to the Preferred Securities Guarantee Trustee, against such risk or liability is not reasonably assured to it. Section 3.2 Certain Rights of Preferred Securities Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) The Preferred Securities Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or -8- other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Preferred Securities Guarantee may be sufficiently evidenced by an Officers' Certificate. (iii) Whenever, in the administration of this Preferred Securities Guarantee, the Preferred Securities Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Preferred Securities Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor. (iv) The Preferred Securities Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or registration thereof). (v) The Preferred Securities Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Preferred Securities Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Preferred Securities Guarantee from any court of competent jurisdiction. (vi) The Preferred Securities Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Preferred Securities Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Preferred Securities Guarantee Trustee such security and indemnity, reasonably satisfactory to the Preferred Securities Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Preferred Securities Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Preferred Securities Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Preferred Securities Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Preferred Securities Guarantee. (vii) The Preferred Securities Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other -9- paper or document, but the Preferred Securities Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (viii) The Preferred Securities Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Preferred Securities Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (ix) Any action taken by the Preferred Securities Guarantee Trustee or its agents hereunder shall bind the Holders, and the signature of the Preferred Securities Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Preferred Securities Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Preferred Securities Guarantee, both of which shall be conclusively evidenced by the Preferred Securities Guarantee Trustee's or its agent's taking such action. (x) Whenever in the administration of this Preferred Securities Guarantee the Preferred Securities Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Preferred Securities Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation amount of the Preferred Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions. (xi) The Preferred Securities Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence, and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Preferred Securities Guarantee. (b) No provision of this Preferred Securities Guarantee shall be deemed to impose any duty or obligation on the Preferred Securities Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Preferred Securities Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Preferred Securities Guarantee Trustee shall be construed to be a duty. Section 3.3 Not Responsible for Recitals or Issuance of Preferred Securities Guarantee. The recitals contained in this Preferred Securities Guarantee shall be taken as the statements of the Guarantor, and the Preferred Securities Guarantee Trustee does not assume any responsibility for their correctness. The Preferred Securities Guarantee Trustee makes no representation as to the validity or sufficiency of this Preferred Securities Guarantee. -10- ARTICLE IV PREFERRED SECURITIES GUARANTEE TRUSTEE Section 4.1 Preferred Securities Guarantee Trustee; Eligibility. (a) There shall at all times be a Preferred Securities Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Preferred Securities Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Preferred Securities Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Preferred Securities Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Preferred Securities Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. Section 4.2 Appointment, Removal and Resignation of Preferred Securities Guarantee Trustee. (a) Subject to Section 4.2(b), the Preferred Securities Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default. (b) The Preferred Securities Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Preferred Securities Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Preferred Securities Guarantee Trustee and delivered to the Guarantor. (c) The Preferred Securities Guarantee Trustee shall hold office until a Successor Preferred Securities Guarantee Trustee shall have been appointed or until its removal or resignation. The Preferred Securities Guarantee Trustee may resign from -11- office (without need for prior or subsequent accounting) by an instrument in writing executed by the Preferred Securities Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Preferred Securities Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Preferred Securities Guarantee Trustee and delivered to the Guarantor and the resigning Preferred Securities Guarantee Trustee. (d) If no Successor Preferred Securities Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery of an instrument of removal or resignation, the Preferred Securities Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Preferred Securities Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Preferred Securities Guarantee Trustee. (e) No Preferred Securities Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Preferred Securities Guarantee Trustee. (f) Upon termination of this Preferred Securities Guarantee or removal or resignation of the Preferred Securities Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Preferred Securities Guarantee Trustee all amounts due to the Preferred Securities Guarantee Trustee accrued to the date of such termination, removal or resignation. ARTICLE V GUARANTEE Section 5.1 Guarantee. The Guarantor irrevocably and unconditionally agrees with the Trustee, for the benefit of the Holders from time to time, to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. Section 5.2 Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Preferred Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. Section 5.3 Obligations Not Affected. To the fullest extent permitted by applicable law, the obligations, covenants, agreements and duties of the Guarantor under this Preferred Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: -12- (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures permitted by the Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor with respect to the Guarantee Payments shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. Section 5.4 Rights of Holders. (a) The Holders of a Majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Preferred Securities Guarantee Trustee in respect of this Preferred Securities Guarantee or exercising any trust or power conferred upon the Preferred Securities Guarantee Trustee under this Preferred Securities Guarantee. (b) If the Preferred Securities Guarantee Trustee fails to enforce this Preferred Securities Guarantee, any Holder may institute a legal proceeding directly against the Guarantor to enforce the Preferred Securities Guarantee Trustee's rights under this Preferred Securities Guarantee, without first instituting a legal proceeding against the -13- Issuer, the Preferred Securities Guarantee Trustee or any other person or entity. The Guarantor waives any right or remedy to require that any action be brought first against the Issuer or any other person or entity before proceeding directly against the Guarantor. Section 5.5 Guarantee of Payment. This Preferred Securities Guarantee creates a guarantee of payment and not of collection. Section 5.6 Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Preferred Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Preferred Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Preferred Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. Section 5.7 Independent Obligations. To the fullest extent permitted by law, the Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Preferred Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION Section 6.1 Limitation of Transactions. So long as any Preferred Securities remain outstanding, the Guarantor shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Guarantor's capital stock (which includes common and preferred stock) or (other than (a) dividends or distributions in shares of, or options, warrants, rights to subscribe for or purchase shares of, common stock of the Guarantor, (b) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) as a result of a reclassification of one class or series of the Guarantor's capital stock solely into another class or series of the Guarantor's capital stock, (d) the purchase of fractional interests in shares of the Guarantor's capital stock resulting from such a reclassification or pursuant to the conversion or exchange provisions of such capital stock or any security convertible into or exchangeable for shares of the Guarantor's capital stock, and (e) purchases of common stock related to the issuance of common stock or rights under any of the Guarantor's benefit plans for its directors, officers or employees or any of the Guarantor's dividend reinvestment plans), (ii) make any payment of principal of, or premium, if any, or interest on, or repay, repurchase or redeem any debt securities of the Guarantor (including any Other Debentures) that rank pari passu with or junior in right of payment to the Debentures or (iii) make any guarantee payments with respect to -14- any guarantee (other than payments under the Preferred Securities Guarantee or the Common Guarantee) by the Guarantor of the debt securities of any subsidiary of the Guarantor (including Other Guarantees) if such guarantee ranks pari passu with or junior in right of payment to the Debentures, if at such time (i) there shall have occurred any event of which the Guarantor has actual knowledge that (a) is, or with the giving of notice or the lapse of time, or both, would be an Indenture Event of Default and (b) in respect of which the Guarantor shall not have taken reasonable steps to cure, (ii) if such Debentures are held by the Property Trustee, the Guarantor shall be in default with respect to its payment of any obligations under this Preferred Securities Guarantee or (iii) the Guarantor shall have given notice of its election of the exercise of its right to extend the interest payment period pursuant to Article IV of the Second Supplemental Indenture to the Indenture and any such extension shall be continuing. Section 6.2 Ranking. This Preferred Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to Senior Indebtedness (as defined in the Indenture), to the same extent and in the same manner that the Debentures are subordinated to Senior Indebtedness pursuant to the Indenture, (ii) pari passu with the Debentures, the Other Debentures, the Common Securities Guarantee, any Other Common Securities Guarantee and any Other Guarantee, and (iii) senior to the Guarantor's capital stock. ARTICLE VII TERMINATION Section 7.1 Termination. This Preferred Securities Guarantee shall terminate (i) upon full payment of the Redemption Price (as defined in the Declaration) of all Preferred Securities or (ii) upon liquidation of the Issuer, the full payment of the amounts payable in accordance with the Declaration or the distribution of the Debentures to the Holders and the holders of the Common Securities. Notwithstanding the foregoing, this Preferred Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid under the Preferred Securities or under this Preferred Securities Guarantee. ARTICLE VIII INDEMNIFICATION Section 8.1 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, expense, liability, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Preferred Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Preferred Securities Guarantee or by law, except that an Indemnified Person shall be liable for any -15- such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders might properly be paid. Section 8.2 Indemnification. The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss, liability, damage, claim or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 8.2 shall survive the termination of this Preferred Securities Guarantee. Section 8.3 Fees and Expenses. The Guarantor covenants and agrees to pay to the Preferred Securities Guarantee Trustee from time to time, and the Preferred Securities Guarantee Trustee shall be entitled to, the fees and expenses agreed in writing between the Guarantor and the Preferred Securities Guarantee Trustee, and will further pay or reimburse the Preferred Securities Guarantee Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Preferred Securities Guarantee Trustee in accordance with any of the provisions hereof or any other documents executed in connection herewith (including the reasonable compensation and the reasonable expenses and disbursements of its counsel and of all persons not regularly in its employ). The obligations of the Guarantor under this Section 8.3 to compensate the preferred Securities Guarantee Trustee for reasonable expenses, disbursements and advances shall survive the satisfaction and discharge of this Preferred Securities Guarantee or the earlier resignation or removal of the Preferred Securities Guarantee Trustee. ARTICLE IX MISCELLANEOUS Section 9.1 Successors and Assigns. All guarantees and agreements contained in this Preferred Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders then outstanding. Section 9.2 Amendments. Except with respect to any changes that do not materially adversely affect the rights of Holders (in which case no consent of Holders will be required), this Preferred Securities Guarantee may only be amended with the prior approval of the Holders of a Majority in liquidation amount of the Preferred Securities (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to -16- the date upon which the voting percentages are determined). The provisions of the Declaration with respect to consents to amendments thereof (whether at a meeting or otherwise) shall apply to the giving of such approval. Prior to the execution of any amendment to this Preferred Securities Guarantee, the Preferred Securities Guarantee Trustee shall be entitled to receive and conclusively rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Preferred Securities Guarantee and that all conditions precedent to such execution and delivery have been satisfied. The Preferred Securities Guarantee Trustee may, but shall not be obligated to, enter into any such amendment which affects the Preferred Securities Guarantee Trustee's and the Holders' rights, duties or immunities under this Preferred Securities Guarantee. Section 9.3 Notices. All notices provided for in this Preferred Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) If given to the Issuer, in care of the Administrative Trustee at the Issuer's mailing address set forth below (or such other address as the Issuer may give notice of to the Holders and the Preferred Securities Guarantee Trustee): Sterling Bancshares Capital Trust III 2550 North Loop West, Suite 600 Houston, Texas 77092 Attention: Eugene S. Putnam, Jr. Administrative Trustee Telecopy: (713) 849-5498 (b) If given to the Preferred Securities Guarantee Trustee, at the Preferred Securities Guarantee Trustee's mailing address set forth below (or such other address as the Preferred Securities Guarantee Trustee may give notice of to the Holders and the Issuer): Deutsche Bank Trust Company Americas c/o Deutsche Bank Services NJ, Inc. 100 Plaza One Mail Stop JCY03-0604 Jersey City, New Jersey 07311 Attention: Corporate Trust and Agency Services Telecopy: (201) 593-6527 -17- (c) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders and the Preferred Securities Guarantee Trustee): Sterling Bancshares, Inc. 2550 North Loop West, Suite 600 Houston, Texas 77092 Attention: J. Downey Bridgwater President and Chief Executive Officer Telecopy: (713) 849-5498 (d) If given to any Holder, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. Section 9.4 Benefit. This Preferred Securities Guarantee is solely for the benefit of the Holders and, subject to Section 3.1(a), is not separately transferable from the Preferred Securities. Section 9.5 Governing Law. THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. -18- THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year first above written. STERLING BANCSHARES, INC., as Guarantor By: /s/ J. Downey Bridgwater ________________________________________ Name: J. Downey Bridgwater Title: President and Chief Executive Officer DEUTSCHE BANK TRUST COMPANY AMERICAS, as Preferred Securities Guarantee Trustee By: /s/ Susan Johnson ________________________________________ Name: Susan Johnson ________________________________________ Title: Vice President ________________________________________ -19- EX-4.3 5 dex43.txt AMENDED AND RESTATED DECLARATION OF TRUST EXHIBIT 4.3 AMENDED AND RESTATED DECLARATION OF TRUST STERLING BANCSHARES CAPITAL TRUST III Dated as of September 26, 2002 TABLE OF CONTENTS
Page ---- Article I Interpretation And Definitions .......................................... 1 Section 1.1 Definitions ............................................................. 1 Article II Trust Indenture Act ..................................................... 7 Section 2.1 Trust Indenture Act; Application ........................................ 7 Section 2.2 Lists Of Holders Of Securities .......................................... 7 Section 2.3 Reports By The Property Trustee ......................................... 8 Section 2.4 Periodic Reports To Property Trustee .................................... 8 Section 2.5 Evidence Of Compliance With Conditions Precedent ........................ 8 Section 2.6 Events Of Default; Waiver ............................................... 8 Section 2.7 Event Of Default; Notice ............................................... 11 Article III Organization ........................................................... 12 Section 3.1 Name ................................................................... 12 Section 3.2 Office ................................................................. 12 Section 3.3 Purpose ................................................................ 12 Section 3.4 Authority .............................................................. 12 Section 3.5 Title To Property Of The Trust ......................................... 13 Section 3.6 Powers And Duties Of The Administrative Trustees ....................... 13 Section 3.7 Prohibition Of Actions By The Trust And The Trustees ................... 15 Section 3.8 Powers And Duties Of The Property Trustee .............................. 16 Section 3.9 Certain Duties And Responsibilities Of The Property Trustee ............ 18 Section 3.10 Certain Rights Of Property Trustee ..................................... 20 Section 3.11 Delaware Trustee ....................................................... 22 Section 3.12 Execution Of Documents ................................................. 22 Section 3.13 Not Responsible For Recitals Or Issuance Of Securities ................. 22 Section 3.14 Duration Of Trust ...................................................... 22 Section 3.15 Mergers ................................................................ 23 Article IV Sponsor ................................................................ 24 Section 4.1 Sponsor's Purchase Of Common Securities ................................ 24 Section 4.2 Responsibilities Of The Sponsor ........................................ 24 Section 4.3 Right To Proceed ....................................................... 25 Article V Trustees ............................................................... 25 Section 5.1 Number Of Trustees: Appointment Of Co-Trustee .......................... 25 Section 5.2 Delaware Trustee ....................................................... 26 Section 5.3 Property Trustee; Eligibility .......................................... 27 Section 5.4 Certain Qualifications Of Administrative Trustees And Delaware Trustee Generally .............................................................. 27 Section 5.5 Administrative Trustees ................................................ 28 Section 5.6 Appointment, Removal And Resignation Of Trustees ....................... 28 Section 5.7 Vacancies Among Trustees ............................................... 30 Section 5.8 Effect Of Vacancies .................................................... 30 Section 5.9 Meetings ............................................................... 30
i Section 5.10 Delegation Of Power .................................................. 31 Section 5.11 Merger, Conversion, Consolidation Or Succession To Business .......... 31 Article VI Distributions ........................................................ 31 Section 6.1 Distributions ........................................................ 31 Article VII Issuance Of Securities ............................................... 31 Section 7.1 General Provisions Regarding Securities .............................. 31 Section 7.2 Execution And Authentication ......................................... 32 Section 7.3 Form And Dating ...................................................... 32 Section 7.4 Registrar And Paying Agent ........................................... 34 Section 7.5 Paying Agent To Hold Money In Trust .................................. 34 Section 7.6 Replacement Securities ............................................... 34 Section 7.7 Outstanding Preferred Securities ..................................... 35 Section 7.8 Preferred Securities In Treasury ..................................... 35 Section 7.9 Temporary Securities ................................................. 35 Section 7.10 Cancellation ......................................................... 36 Section 7.11 Cusip Numbers ........................................................ 36 Article VIII Termination Of Trust ................................................. 37 Section 8.1 Termination Of Trust ................................................. 37 Article IX Transfer Of Interests ................................................ 38 Section 9.1 Transfer Of Securities ............................................... 38 Section 9.2 Transfer Procedures And Restrictions ................................. 39 Section 9.3 Deemed Security Holders .............................................. 42 Section 9.4 Book-Entry Interests ................................................. 42 Section 9.5 Notices To Clearing Agency ........................................... 43 Section 9.6 Appointment Of Successor Clearing Agency. ............................ 43 Article X Limitation Of Liability Of Holders Of Securities, Trustees Or Others ................................................... 43 Section 10.1 Liability ............................................................ 43 Section 10.2 Exculpation .......................................................... 44 Section 10.3 Fiduciary Duty ....................................................... 44 Section 10.4 Indemnification ...................................................... 45 Section 10.5 Outside Businesses ................................................... 48 Article XI Accounting ........................................................... 48 Section 11.1 Fiscal Year .......................................................... 48 Section 11.2 Certain Accounting Matters ........................................... 48 Section 11.3 Banking .............................................................. 49 Section 11.4 Withholding .......................................................... 49 Article XII Amendments And Meetings .............................................. 49 Section 12.1 Amendments ........................................................... 49 Section 12.2 Meetings Of The Holders; Action By Written Consent ................... 51 Article XIII Representations Of Property Trustee And Delaware Trustee ..................................................... 53 Section 13.1 Representations And Warranties Of Property Trustee ................... 53
ii Section 13.2 Representations And Warranties Of Delaware Trustee. ................................... 53 Article XIV Miscellaneous ................................................................................. 54 Section 14.1 Notices. .............................................................................. 54 Section 14.2 Governing Law. ........................................................................ 55 Section 14.3 Intention Of The Parties. ............................................................. 55 Section 14.4 Headings. ............................................................................. 55 Section 14.5 Successors And Assigns. ............................................................... 56 Section 14.6 Partial Enforceability. ............................................................... 56 Section 14.7 Counterparts. ......................................................................... 56 ANNEX I Terms Of Securities .................................................................. I-1 EXHIBIT A-1 Form Of Preferred Security Certificate .............................................. A1-1 EXHIBIT A-2 Form Of Common Security Certificate ................................................. A2-1 EXHIBIT B Specimen Of Debenture ................................................................ B-1 EXHIBIT C Underwriting Agreement ............................................................... C-1
iii CROSS-REFERENCE TABLE
Section of Trust Indenture Act Section of of 1939, as amended Declaration - ------------------- ----------- 310(a) .......................................................... 5.3 310(b) .......................................................... 5.3(c), 5.3(d) 311(a) .......................................................... 2.2(b) 311(b) .......................................................... 2.2(b) 312(a) .......................................................... 2.2(a) 312(b) .......................................................... 2.2(b) 313 ............................................................. 2.3 314(a) .......................................................... 2.4; 3.6(j) 314(c) .......................................................... 2.5 315(a) .......................................................... 3.9 315(b) .......................................................... 2.7(a) 315(c) .......................................................... 3.9(a) 315(d) .......................................................... 3.9(b) 316(a) .......................................................... 2.6 316(c) .......................................................... 3.6(e) 317(a) .......................................................... 3.8(e); 3.8(h) 317(b) .......................................................... 3.8(i); 7.5
__________________ * This Cross-Reference Table does not constitute part of the Declaration and shall not affect the interpretation of any of its terms or provisions. iv AMENDED AND RESTATED DECLARATION OF TRUST OF STERLING BANCSHARES CAPITAL TRUST III September 26, 2002 AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of September 26, 2002, by the Trustees (as defined herein), the Sponsor (as defined herein) and by the holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to this Declaration; RECITALS: WHEREAS, the Trustees (other than the Property Trustee (as defined herein)) and the Sponsor established Sterling Bancshares Capital Trust III (the "Trust"), a trust formed under the Delaware Statutory Trust Act pursuant to a Declaration of Trust dated as of February 13, 2001 (the "Original Declaration"), and a Certificate of Trust filed with the Secretary of State of the State of Delaware on February 13, 2001, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain Debentures of the Debenture Issuer (each as hereinafter defined), and engaging in only those other activities necessary, advisable or incidental thereto; and WHEREAS, as of the date hereof, no interests in the Trust have been issued; and WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration; NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a statutory trust under the Statutory Trust Act and that this Declaration constitute the governing instrument of such statutory trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 Definitions. Unless the context otherwise requires: (a) capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections and Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Administrative Trustee" has the meaning set forth in Section 5.1(b). "Affiliate" has the same meaning as given to that term in Rule 405 under the Securities Act or any successor rule thereunder. "Agent" means any Paying Agent or Registrar. "Authorized Officer" of a Person means any other Person that is authorized to legally bind such former Person. "Book-Entry Interest" means a beneficial interest in a Global Certificate registered in the name of a Clearing Agency or its nominee, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as described in Section 9.4. "Business Day" means any day other than a Saturday or a Sunday or a day on which banking institutions in New York, New York or Houston, Texas are authorized or required by law or executive order to close. "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary for the Preferred Securities and in whose name or in the name of a nominee of that organization shall be registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of the Preferred Securities. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Time" means the "Closing Time" under the Underwriting Agreement. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. "Commission" means the United States Securities and Exchange Commission as from time to time constituted, or if any time after the execution of this Declaration such Commission 2 is not existing and performing the duties now assigned to it under applicable Federal securities laws, then the body performing such duties at such time. "Common Securities" has the meaning specified in Section 7.1(a). "Common Securities Guarantee" means the guarantee agreement dated as of September 26, 2002 of the Sponsor in respect of the Common Securities. "Company Indemnified Person" means (a) any Administrative Trustee; (b) any Affiliate of any Administrative Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Administrative Trustee; or (d) any officer, employee or agent of the Trust or its Affiliates. "Corporate Trust Office" means the office of the Property Trustee at which the corporate trust business of the Property Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at Deutsche Bank Trust Company Americas (formerly known as "Bankers Trust Company"), 60 Wall Street, MS NYC60-2515, New York, New York 20005, Attention: Corporate Trust and Agency Services. "Covered Person" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Debenture Issuer" means Sterling Bancshares, Inc., a Texas corporation, or any successor entity resulting from any consolidation, amalgamation, merger or other business combination, in its capacity as issuer of the Debentures under the Indenture. "Debenture Trustee" means Deutsche Bank Trust Company Americas (formerly known as "Bankers Trust Company"), a New York banking corporation, as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "Debentures" means the 8.30% Junior Subordinated Deferrable Interest Debentures due September 26, 2032 of the Debenture Issuer issued pursuant to the Indenture. "Default" means an event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default. "Definitive Preferred Securities" has the meaning set forth in Section 7.3(c). "Delaware Trustee" has the meaning set forth in Section 5.1. "Direct Action" has the meaning set forth in Section 3.8(e). "Distribution" means a distribution payable to Holders in accordance with Section 6.1. "DTC" means The Depository Trust Company, the initial Clearing Agency. 3 "Event of Default" shall mean any event specified in Section 2.6(a), continued for the period of time, if any, and after giving of the notice, if any, therein designated. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System. "Fiduciary Indemnified Person" has the meaning set forth in Section 10.4(b). "Fiscal Year" has the meaning set forth in Section 11.1. "Global Preferred Security" has the meaning set forth in Section 7.3(a). "Holder" means a Person in whose name a Security is registered, such Person being a beneficial owner within the meaning of the Statutory Trust Act. "Indemnified Person" means a Company Indemnified Person or a Fiduciary Indemnified Person. "Indenture" means the Indenture dated as of March 21, 2001, among the Debenture Issuer and the Debenture Trustee, and any indenture supplemental thereto pursuant to which the Debentures are issued. "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Legal Action" has the meaning set forth in Section 3.6(g). "List of Holders" has the meaning set forth in Section 2.2(a). "Majority in liquidation amount" means, with respect to the Trust Securities, except as provided in the terms of the Preferred Securities or by the Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together as a single class or, as the context may require, Holders of outstanding Preferred Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount of all outstanding Securities of the relevant class. "Officers' Certificate" means, with respect to any Person, a certificate signed by the Chairman, the Chief Executive Officer, the President, a Vice President, the Chief Financial Officer, the Secretary or an Assistant Secretary of such Person. Any Officers' Certificate delivered by the Trust shall be signed by at least one Administrative Trustee. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: 4 (a) a statement that each officer signing the Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement or summary of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Opinion of Counsel" means a written opinion of counsel, who may be the general counsel of the Sponsor. "Paying Agent" has the meaning specified in Section 7.4. "Payment Amount" has the meaning specified in Section 6.1. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Securities" has the meaning specified in Section 7.1(a). "Preferred Securities Guarantee" means the guarantee agreement dated as of September 26, 2002 of the Sponsor in respect of the Preferred Securities. "Preferred Security Beneficial Owner" means, with respect to a Book-Entry Interest, a Person who is the beneficial owner of such Book-Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Property Trustee" has the meaning set forth in Section 5.3(a). "Property Trustee Account" has the meaning set forth in Section 3.8(c)(i). "Prospectus" has the meaning set forth in Section 3.6(b)(i). "Quorum" means a majority of the Administrative Trustees or, if there are only two Administrative Trustees,both of them, or, if there is only a single Administrative Trustee, such Administrative Trustee. "Registrar" has the meaning set forth in Section 7.4. "Registration Statement" has the meaning set forth in Section 3.6(b)(i). 5 "Related Party" means, with respect to the Sponsor, any direct or indirect wholly owned subsidiary of the Sponsor or any other Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Responsible Officer" means with respect to the Trustee, any officer assigned to the Corporate Trust Office, including any managing director, vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of this Declaration and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. "Rule 3a-5" means Rule 3a-5 under the Investment Company Act, or any successor rule or regulation. "Securities" or "Trust Securities" means the Common Securities and the Preferred Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation. "Securities Guarantees" means the Common Securities Guarantee and the Preferred Securities Guarantee. "Special Event" has the meaning set forth in Section 4(c) of Annex I hereto. "Sponsor" means Sterling Bancshares, Inc., a Texas corporation, or any successor entity resulting from any merger, consolidation, amalgamation or other business combination, in its capacity as sponsor of the Trust. "Statutory Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to time, or any successor legislation. "Successor Delaware Trustee" has the meaning set forth in Section 5.6(b)(ii). "Successor Entity" has the meaning set forth in Section 3.15(b)(i). "Successor Property Trustee" has the meaning set forth in Section 3.8(f)(ii). "Super Majority" has the meaning set forth in Section 2.6(b)(ii). "10% in liquidation amount" means, with respect to the Trust Securities, except as provided in the terms of the Preferred Securities or by the Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together as a single class or, as the context may require, Holders of outstanding Preferred Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of 10% or more of the aggregate liquidation amount of all outstanding Securities of the relevant class. 6 "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue as a trustee in accordance with the terms of this Declaration, and all other Persons who may from time to time be duly appointed, qualified and serving as trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Underwriting Agreement" means the Underwriting Agreement dated September 23, 2002, between the Sponsor, the Trust and the underwriters named therein for the initial offering and sale of Preferred Securities, providing for the sale of the Preferred Securities. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration in order for this Declaration to be qualified under the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Trustee which is a Trustee for the purposes of the Trust Indenture Act. (c) If and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control and to such extent such provision shall be deemed appropriately modified or amended. (d) The application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.2 Lists of Holders of Securities. (a) Each of the Sponsor and the Administrative Trustees on behalf of the Trust shall provide (or cause to be provided) the Property Trustee, unless the Property Trustee is Registrar for the Securities, (i) not later than 14 days after each record date for payment of Distributions, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of such record date, provided that neither the Sponsor nor the Administrative Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time that the List of Holders does not differ from the most recent List of Holders given to 7 the Property Trustee by or on behalf of the Sponsor and the Administrative Trustees on behalf of the Trust, and (ii) at any other time, not later than 30 days after receipt by the Trust of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Property Trustee. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in the Lists of Holders given to it or which it receives in the capacity as Paying Agent (if acting in such capacity), provided that the Property Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Property Trustee shall comply with its obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Property Trustee. Within 60 days after September 15 of each year, commencing September 15, 2003, the Property Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Property Trustee. Each of the Sponsor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as are required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent. Each of the Sponsor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent provided for in this Declaration that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) of the Trust Indenture Act may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver. (a) One or more of the following events of default shall constitute an Event of Default hereunder (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of an administrative or governmental body): (i) an Event of Default (as defined in the Indenture) that has occurred and is continuing in respect of the Debentures; or (ii) default in the payment of any Distribution (including Compounded Interest or Additional Sums, if any) when it becomes due and payable, and continuance of such default for a period of 30 days; provided, however, that a valid deferral of 8 Distributions during an Extension Period (as defined in Section 2(b) of Annex I) in accordance with the terms of the Securities shall not constitute a default in the payment of Distributions for this purpose; or (iii) default by the Trust in the payment of all or any part of the liquidation amount of any Security as and when the same shall become due and payable either at maturity, upon prepayment or redemption, by declaration of acceleration of maturity or otherwise; or (iv) default in the performance, or breach, of any covenant or warranty of the Trustees or the Trust in this Declaration (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section 2.6(a) specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the defaulting Trustee by the holders of at least 25% in aggregate liquidation amount of the outstanding securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (v) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Property Trustee in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Property Trustee or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or (vi) the Property Trustee shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Property Trustee or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due. (b) The Holders of a Majority in liquidation amount of Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default in respect of the Preferred Securities and its consequences, provided that, if the underlying Event of Default under the Indenture: (i) is not waivable under the Indenture, the Event of Default under the Declaration shall also not be waivable; or (ii) requires the consent or vote of greater than a majority in aggregate principal amount of the holders of the Debentures (a "Super Majority") to be waived under the Indenture, the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in aggregate liquidation amount of the 9 Preferred Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding; or (iii) requires the consent or vote of each holder of the Debentures to be waived under the Indenture, then the Event of Default under the Declaration may only be waived by each holder of the Preferred Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Preferred Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or an Event of Default with respect to the Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of the Preferred Securities of an Event of Default with respect to the Preferred Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Common Securities. (c) The Holders of a Majority in liquidation amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided that, if the underlying Event of Default under the Indenture: (i) is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(c), the Event of Default under the Declaration shall also not be waivable except to the extent so provided below in this Section 2.6(c); or (ii) requires the consent or vote of (A) a Super Majority to be waived, the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in aggregate liquidation amount of the Common Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding or (B) each holder of the Debentures to be waived, then the Event of Default under the Declaration may only be waived by each Holder of the Preferred Securities, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(c); provided further, the Holders of Common Securities will be deemed to have waived any such Event of Default and all Events of Default with respect to the Common Securities and their consequences if all Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated, and until such Events of Default have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Preferred Securities and only the Holders of the Preferred Securities will have the right to direct the Property Trustee in accordance with the terms of the Securities. If any Event 10 of Default with respect to the Preferred Securities is waived by the Holders of the Preferred Securities as provided in this Declaration, the Holders of Common Securities agree that such waiver shall also constitute the waiver of such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote or consent of the Holders of the Common Securities. The foregoing provisions of this Section 2.6(c) shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Subject to the foregoing provisions of this Section 2.6(c), upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (d) A waiver of an Event of Default under the Indenture by the Property Trustee, at the direction of the Holders of the Preferred Securities, constitutes a waiver of the corresponding Event of Default under this Declaration. The foregoing provisions of this Section 2.6(d) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. SECTION 2.7 Event of Default; Notice. (a) The Property Trustee shall, within 90 days after the occurrence of a default actually known to a Responsible Officer, transmit by mail, first class postage prepaid, to the Holders, notices of all defaults with respect to the Securities actually known to a Responsible Officer, unless such defaults have been cured before the giving of such notice (the term "default(s)" for the purposes of this Section 2.7(a) and Section 2.7(b) being hereby defined to be an Event of Default, not including any periods of grace provided for therein and irrespective of the giving of any notice provided therein); provided that, except for (i) a default in the payment of principal of or interest (including Compounded Interest and Additional Sums (as such terms are defined in the Indenture)), if any, on any of the Debentures, or (ii) a default under Section 2.6(a)(ii) and (iii) of this Declaration, the Property Trustee shall be protected in withholding such notice if and so long as a Responsible Officer in good faith determines that the withholding of such notice is in the interests of the Holders. (b) The Property Trustee shall not be deemed to have knowledge of any default except: (i) a default under Sections 5.1(a) (other than the payment of Compounded Interest and Additional Sums) and 5.1(b) of the Indenture; (ii) a default under Section 2.6(a)(ii) and (iii) of this Declaration; or (iii) any default as to which the Property Trustee shall have received written notice or of which a Responsible Officer charged with the administration of the Declaration shall have actual knowledge. 11 (c) Within five Business Days after the occurrence of any Event of Default actually known to the Property Trustee, the Property Trustee shall transmit notice of such Event of Default to the Holders of the Preferred Securities, the Administrative Trustees and the Sponsor, unless such Event of Default shall have been cured or waived. The Sponsor and the Administrative Trustees shall file annually with the Property Trustee a certificate as to whether or not they are in compliance with all the conditions and covenants applicable to them under this Declaration. ARTICLE III ORGANIZATION SECTION 3.1 Name. The Trust continued by this Declaration is named "Sterling Bancshares Capital Trust III" as such name may be modified from time to time by the Administrative Trustees following written notice to the Delaware Trustee, the Property Trustee and the Holders. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Administrative Trustees. SECTION 3.2 Office. The address of the principal office of the Trust is c/o Sterling Bancshares, Inc., 2550 North Loop, Suite 600, Houston, Texas 77092. On 10 Business Days' advance written notice to the Delaware Trustee, the Property Trustee and the Holders of Securities, the Administrative Trustees may designate another principal office. SECTION 3.3 Purpose. The exclusive purposes and functions of the Trust are (a) to issue and sell Securities, (b) use the proceeds from the sale of the Securities to acquire the Debentures, and (c) except as otherwise limited herein, to engage in only those other activities necessary, advisable or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, mortgage or pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States Federal income tax purposes as a grantor trust. SECTION 3.4 Authority. Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Administrative Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Administrative Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Property Trustee on behalf of the Trust in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. 12 SECTION 3.5 Title to Property of the Trust. Except as provided in Section 3.8 with respect to the Debentures and the Property Trustee Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION 3.6 Powers and Duties of the Administrative Trustees. The Administrative Trustees shall have the exclusive power, duty and authority to cause the Trust to engage in the following activities: (a) to issue and sell the Securities in accordance with this Declaration; provided, however, that (i) the Trust may issue no more than one series of Preferred Securities and no more than one series of Common Securities, (ii) there shall be no interests in the Trust other than the Securities, and (iii) the issuance of Securities shall be limited to a simultaneous issuance of both Preferred Securities and Common Securities at the Closing Time; (b) in connection with the issue and sale of the Preferred Securities at the direction of the Sponsor, to: (i) prepare and execute, as necessary, a prospectus and prospectus supplement (the "Prospectus") in preliminary and final form prepared by the Sponsor, in relation to the offering and sale of Preferred Securities and to execute and file with the Commission a registration statement (the "Registration Statement"), including any amendments thereto, for the offering and sale of Preferred Securities; (ii) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary or appropriate in order to qualify or register all or part of the Preferred Securities for offer and sale in any State in which the Sponsor has determined to qualify or register such Preferred Securities for sale; (iii) execute and file an application, prepared by the Sponsor, to permit the Preferred Securities to trade or be quoted on or included in The Nasdaq National Market or any other automated quotation system or listed on any national securities exchange; (iv) execute and deliver letters, documents, or instruments with DTC and other Clearing Agencies relating to the Preferred Securities; (v) execute and file with the Commission a registration statement on Form 8-A, including any amendments thereto, prepared by the Sponsor, relating to the registration of the Preferred Securities under Section 12(b) or (g) of the Exchange Act; and (vi) execute, enter into and perform the Trust's obligations under the Underwriting Agreement; 13 (c) to acquire the Debentures with the proceeds of the sale of the Preferred Securities and the Common Securities; provided, however, that the Administrative Trustees shall cause legal title to the Debentures to be held of record in the name of the Property Trustee for the benefit of the Holders; (d) to give the Sponsor and the Property Trustee prompt written notice of the occurrence of a Special Event; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including and with respect to, for the purposes of Section 316(c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Preferred Securities and Holders of Common Securities as to such actions and applicable record dates; (f) to take all actions and perform such duties as may be required of the Administrative Trustees pursuant to the terms of the Securities; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (j) to give the certificate required by Section 314(a)(4) of the Trust Indenture Act to the Property Trustee, which certificate may be executed by any Administrative Trustee; (k) to incur expenses that are necessary or incidental to carry out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as, Registrar for the Securities or to appoint a Paying Agent for the Securities as provided in Section 7.4 except for such time as such power to appoint a Paying Agent is vested in the Property Trustee; (m) to give prompt written notice to the Property Trustee and to Holders of any notice received from the Debenture Issuer of its election to defer payments of interest on the Debentures by extending the interest payment period under the Indenture; (n) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders or to enable the Trust to effect the purposes for which the Trust was created; 14 (o) to take any action, not inconsistent with this Declaration or with applicable law, that the Administrative Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.6, including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) causing the Trust to be classified for United States Federal income tax purposes as a grantor trust; and (iii) cooperating with the Debenture Issuer to ensure that the Debentures will be treated as indebtedness of the Debenture Issuer for United States Federal income tax purposes; (p) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Administrative Trustees, on behalf of the Trust; and (q) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing. The Administrative Trustees must exercise the powers set forth in this Section 3.6 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Administrative Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. Subject to this Section 3.6, the Administrative Trustees shall have none of the powers or the authority of the Property Trustee set forth in Section 3.8. Any expenses incurred by the Administrative Trustees pursuant to this Section 3.6 shall be reimbursed by the Debenture Issuer. SECTION 3.7 Prohibition of Actions by the Trust and the Trustees. (a) The Trust shall not, and the Trustees (including the Property Trustee and the Delaware Trustee) shall cause the Trust not to engage in any activity other than as required or authorized by this Declaration. The Trust shall not: (i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust property for other than a Trust purpose; (iv) make any investments other than investments represented by the Debentures; 15 (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; (vii) incur any indebtedness for borrowed money; (viii) other than as provided in this Declaration or Annex I, (A) direct the time, method and place of conducting any proceeding with respect to any remedy available to the Debenture Trustee, or exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under the Indenture, or (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable; or (ix) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received an opinion of independent tax counsel experienced in such matters to the effect that such amendment, modification or termination will not cause more than an insubstantial risk that for United States Federal income tax purposes the Trust will not be classified as a grantor trust. SECTION 3.8 Powers and Duties of the Property Trustee. (a) The legal title to the Debentures shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Holders. The right, title and interest of the Property Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with Section 5.6. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered. (b) The Property Trustee shall not transfer its right, title and interest in the Debentures to the Administrative Trustees or to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee). (c) The Property Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Property Trustee Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders and, upon the receipt of payments of funds made in respect of the Debentures held by the Property Trustee, deposit such funds into the Property Trustee Account and make payments or cause the Paying Agent to make payments to the Holders from the Property Trustee Account in accordance with Section 6.1. Funds in the Property Trustee Account shall be held uninvested until disbursed in accordance with this Declaration. The Property Trustee Account shall be an account that is maintained with a banking institution the rating on whose long-term unsecured indebtedness by a "nationally recognized statistical rating organization," as that term is 16 defined for purposes of Rule 436(g)(2) under the Securities Act, is at least investment grade; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Trust Securities to the extent the Debentures are redeemed or mature; and (iii) upon written notice of distribution issued by the Administrative Trustees in accordance with the terms of the Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Debentures to Holders upon the occurrence of certain events. (d) The Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of the Securities. (e) Subject to Section 3.9(a), the Property Trustee shall take any Legal Action which arises out of or in connection with (i) an Event of Default of which a Responsible Officer has actual knowledge or (ii) the Property Trustee's duties and obligations under this Declaration or the Trust Indenture Act. If the Property Trustee shall have failed to take such Legal Action, the Holders of the Preferred Securities may take such Legal Action, to the same extent as if such Holders of Preferred Securities held an aggregate principal amount of Debentures equal to the aggregate liquidation amount of such Preferred Securities, without first proceeding against the Property Trustee or the Trust; provided however, that if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay the principal of or interest (including Compounded Interest and Additional Sums, if any) on the Debentures on the date such principal or interest (including Compounded Interest and Additional Sums, if any) is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of Preferred Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest (including Compounded Interest and Additional Sums, if any) on the Debentures having a principal amount equal to the aggregate liquidation amount of the Preferred Securities of such Holder (a "Direct Action") on or after the respective due date specified in the Debentures. In connection with such Direct Action, the rights of the Holders of the Common Securities will be subrogated to the rights of such Holder of Preferred Securities to the extent of any payment made by the Debenture Issuer to such Holder of Preferred Securities in such Direct Action. Except as provided in the preceding sentences of this Section 3.8(e), the Holders of Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Debentures. (f) The Property Trustee shall not resign as a Trustee unless either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders pursuant to the terms of the Securities; or (ii) a Successor Property Trustee has been appointed and has accepted that appointment in accordance with Section 5.6 (a "Successor Property Trustee"). (g) The Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Debentures under the Indenture and, if an Event of Default 17 actually known to a Responsible Officer occurs and is continuing, the Property Trustee shall, for the benefit of Holders, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to the terms of such Securities. (h) The Property Trustee shall be authorized to undertake any actions set forth in Section 317(a) of the Trust Indenture Act. (i) For such time as the Property Trustee is the Paying Agent, the Property Trustee may authorize one or more Persons to act as additional Paying Agents and to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to all Securities and any such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any such additional Paying Agent may be removed by the Property Trustee at any time the Property Trustee remains as Paying Agent and a successor Paying Agent or additional Paying Agents may be (but are not required to be) appointed at any time by the Property Trustee while the Property Trustee is so acting as Paying Agent. (j) The Property Trustee shall give prompt written notice to Holders of the Securities of any notice received by it from the Debenture Issuer of the Debenture Issuer's election to defer payments of interest on the Debentures by extending the interest payment period with respect thereto. (k) Subject to this Section 3.8, the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Administrative Trustees set forth in Section 3.6. Notwithstanding anything expressed or implied to the contrary in this Declaration or any Annex or Exhibit hereto, (i) the Property Trustee must exercise the powers set forth in this Section 3.8 and in Sections 3.9 and 3.10 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, (ii) the Property Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 3.3, and (iii) the Property Trustee shall not be bound, obligated or required to take any action at the request or direction of any Holder pursuant to this Declaration if such Holder shall not have made available to the Property Trustee, security or indemnity reasonably acceptable to the Property Trustee against the costs, expenses and liabilities (including fees and expenses of its agents and counsel) which might be incurred by it in compliance with the written request or direction. SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee. (a) The Property Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and in the Securities and no implied covenants shall be read into this Declaration against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) of which a Responsible Officer has actual knowledge, the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. 18 (b) No provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration and in the Securities and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration and in the Securities, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Declaration; provided, however, that in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration; (iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or indemnity reasonably satisfactory to the Property Trustee against such risk or liability is not reasonably assured to it; (v) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Property Trustee Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar 19 property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Declaration and the Trust Indenture Act; (vi) the Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Debentures or the payment of any taxes or assessments levied thereon or in connection therewith; (vii) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor. Money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Property Trustee Account maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except to the extent otherwise required by law; and (viii) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Sponsor with their respective duties under this Declaration, nor shall the Property Trustee be liable for any default or misconduct of the Administrative Trustees or the Sponsor. SECTION 3.10 Certain Rights of Property Trustee. (a) Subject to the provisions of Section 3.9: (i) the Property Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Administrative Trustees contemplated by this Declaration may be sufficiently evidenced by an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Administrative Trustees; (iv) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or registration thereof; (v) the Property Trustee may consult with counsel or other experts of its selection and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion, such counsel 20 may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees. The Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Property Trustee security and indemnity, reasonably satisfactory to the Property Trustee, against the costs, expenses (including reasonable attorneys' fees and expenses and the expenses of the Property Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Property Trustee provided, that, nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the Property Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may determine in its sole discretion to be appropriate; (viii) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians, nominees or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders, and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Property Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Property Trustee (i) may request instructions from the Holders which instructions may only be given by the Holders of the same proportion in liquidation amount of the Securities as would be entitled to direct the Property Trustee under the terms of the Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in or accordance with such instructions; 21 (xi) except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration; and (xii) the Property Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence, and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Declaration. (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 3.11 Delaware Trustee. Notwithstanding any other provision of this Declaration other than Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Administrative Trustees or the Property Trustee described in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Statutory Trust Act. In the event the Delaware Trustee shall at any time be required to take any action or perform any duty hereunder, the Delaware Trustee shall be entitled to the benefits of Section 3.9(b)(ii)-(viii) and Section 3.10. SECTION 3.12 Execution of Documents. Unless otherwise determined by the Administrative Trustees, and except as otherwise required by the Statutory Trust Act, a majority of the Administrative Trustees or, if there are only two, any Administrative Trustee or, if there is only one, such Administrative Trustee is authorized to execute on behalf of the Trust any documents that the Administrative Trustees have the power and authority to execute pursuant to Section 3.6. SECTION 3.13 Not Responsible for Recitals or Issuance of Securities. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. SECTION 3.14 Duration of Trust. The Trust, unless terminated pursuant to the provisions of Article VIII hereof, shall continue in existence until 5:00 p.m., Houston, Texas time on the thirtieth (30th) anniversary of the effective date of this Declaration. 22 SECTION 3.15 Mergers. (a) The Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to any Person, except as described in Sections 3.15(b) and (c). (b) The Trust may, at the request of the Sponsor, with the consent of the Administrative Trustees or, if there are more than two, a majority of the Administrative Trustees and without the consent of the Holders, the Delaware Trustee or the Property Trustee, merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to, a trust organized as such under the laws of any State; provided that: (i) such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Securities; or (B) substitutes for the Securities other securities having substantially the same terms as the Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Securities rank with respect to Distributions and payments upon liquidation, redemption and otherwise; (ii) the Sponsor expressly appoints a trustee of the Successor Entity that possesses the same powers and duties as the Property Trustee as the holder of the Debentures; (iii) the Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or with another organization on which the Preferred Securities are then listed or quoted; (iv) if the Preferred Securities (including any Successor Securities) are rated by any nationally recognized statistical rating organization prior to such transaction, such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Preferred Securities (including any Successor Securities), or if the Debentures are so rated, the Debentures, to be downgraded by any nationally recognized statistical rating organization within 120 days after such transaction; (v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders (including the holders of any Successor Securities) in any material respect (other than with respect to any dilution of such Holders' interests in the Successor Entity); (vi) such Successor Entity has a purpose identical to that of the Trust; (vii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Sponsor has received an opinion of an independent counsel to the Trust experienced in such matters to the effect that: 23 (A) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders (including the holders of any Successor Securities) in any material respect (other than with respect to any dilution of the Holders' interest in the Successor Entity); (B) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and (C) following such merger, consolidation, amalgamation, replacement, conveyance transfer or lease, the Trust (or the Successor Entity) will be treated as a grantor trust for United States federal income tax purposes; (viii) the Sponsor or any permitted successor or assignee owns all of the common securities of such Successor Entity and guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Preferred Securities Guarantee and the Common Securities Guarantee; and (ix) there shall have been furnished to the Property Trustee an Officer's Certificate and an Opinion of Counsel, each to the effect that all conditions precedent in this Declaration to such transaction have been satisfied. (c) Notwithstanding Section 3.15(b), the Trust shall not, except with the consent of Holders of 100% in liquidation amount of the Securities, consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to, any other Person or permit any other Person to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or the Successor Entity not to be classified as a grantor trust for United States Federal income tax purposes. ARTICLE IV SPONSOR SECTION 4.1 Sponsor's Purchase of Common Securities. At the Closing Time, the Sponsor will purchase all of the Common Securities then issued by the Trust, in an amount equal to at least 3% of the total capital of the Trust, at the same time as the Preferred Securities are issued and sold pursuant to the Underwriting Agreement. SECTION 4.2 Responsibilities of the Sponsor. In connection with the issue and sale of the Preferred Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: (a) to prepare the Prospectus and Registration Statement for filing by the Trust with the Commission, including any amendments thereto; 24 (b) to determine the states in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such states; (c) if deemed necessary or advisable by the Sponsor, to prepare for filing by the Trust an application to permit the Preferred Securities to trade or be quoted on or included in the Nasdaq National Market or any other automated quotation system or listed on any national securities exchange; (d) to prepare for filing by the Trust with the Commission a registration statement on Form 8-A, including any amendments thereto, relating to the registration of the Preferred Securities under Section 12(b) or (g) of the Exchange Act; and (e) to negotiate the terms of the Underwriting Agreement providing for the sale of the Preferred Securities. SECTION 4.3 Right to Proceed. The Sponsor acknowledges the rights of the Holders of Preferred Securities, in the event that a failure of the Trust to pay Distributions on the Preferred Securities is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures, to institute a proceeding directly against the Debenture Issuer for enforcement of its payment obligations on the Debentures. ARTICLE V TRUSTEES SECTION 5.1 Number of Trustees: Appointment of Co-Trustee. The number of Trustees initially shall be five (5), and: (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Securities, the number of Trustees may be increased or decreased by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities or pursuant to written consent; provided, however, that, the number of Trustees shall in no event be less than two (2); provided further that (1) one Trustee, in the case of a natural person, shall be a person who is a resident of the State of Delaware or that, if not a natural person, is an entity which has its principal place of business in the State of Delaware (the "Delaware Trustee"); (2) there shall be at least one Trustee who is an officer of the Sponsor (an "Administrative Trustee"); and (3) one Trustee shall be the Property Trustee for so long as this Declaration is required to qualify as an indenture under the Trust Indenture Act, and such Trustee may also serve as Delaware Trustee if it meets the 25 applicable requirements. Notwithstanding the above, unless an Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust's property may at the time be located, the Holders of a Majority in liquidation amount of the Common Securities acting as a class at a meeting of the Holders of the Common Securities or pursuant to written consent, and the Administrative Trustees shall have power to appoint one or more Persons either to act as a co-trustee, jointly with the Property Trustee, of all or any part of the Trust's property, or to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in such capacity any property, title, right or power deemed necessary or desirable, subject to the provisions of this Declaration. In case an Event of Default has occurred and is continuing, the Property Trustee alone shall have power to make any such appointment of a co-trustee. Whenever in this Declaration it is provided that the Holders of a specified percentage in aggregate liquidation amount of the Common Securities may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action the holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Holders in person or by agent or proxy appointed in writing, or (b) by the record of such holders of Securities voting in favor thereof at any meeting of such Holders duly called and held in accordance with the provisions of Article XII, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Holders. SECTION 5.2 Delaware Trustee. If required by the Statutory Trust Act, the Delaware Trustee shall be: (a) a natural person who is a resident of the State of Delaware; or (b) if not a natural person, an entity which has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law, provided that, if the Property Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Property Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. The initial Delaware Trustee shall be: Deutsche Bank Trust Company Delaware (formerly known as "Bankers Trust (Delaware)") 1011 Centre Road Wilmington, Delaware 19805 Attention: Corporate Trustee, Administration Department 26 SECTION 5.3 Property Trustee; Eligibility. (a) There shall at all times be one Trustee (the "Property Trustee") which shall act as Property Trustee which shall: (i) not be an Affiliate of the Sponsor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, and subject to supervision or examination by Federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Property Trustee shall cease to be eligible to so act under Section 5.3(a), the Property Trustee shall immediately resign in the manner and with the effect set forth in Section 5.6(c). (c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Property Trustee and the Holder of the Common Securities (as if it were the obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. (d) The Preferred Securities Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first provision contained in Section 310(b) of the Trust Indenture Act. (e) The initial Property Trustee shall be: Deutsche Bank Trust Company Americas (formerly known as "Bankers Trust Company") 60 Wall Street New York, New York 20005 Attention: Corporate Trust and Agency Services SECTION 5.4 Certain Qualifications of Administrative Trustees and Delaware Trustee Generally. Each Administrative Trustee and the Delaware Trustee (unless the Property Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. 27 SECTION 5.5 Administrative Trustees. The initial Administrative Trustees of the Trust as set forth in the Original Declaration were: George Martinez J. Downey Bridgwater Michael A. Roy Since the date of the Original Declaration, Michael A. Roy has resigned as Administrative Trustee and the Sponsor, pursuant to the terms of the Original Declaration, has appointed Eugene S. Putnam, Jr. as an Administrative Trustee. (a) Except as expressly set forth in this Declaration and except if a meeting of the Administrative Trustees is called with respect to any matter over which the Administrative Trustees have power to act, any power of the Administrative Trustees may be exercised by, or with the consent of, any one such Administrative Trustee. (b) Unless otherwise determined by the Administrative Trustees, and except as otherwise required by the Statutory Trust Act or applicable law, any Administrative Trustee is authorized to execute on behalf of the Trust any documents which the Administrative Trustees have the power and authority to cause the Trust to execute pursuant to Section 3.6. (c) An Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purposes of signing any documents which the Administrative Trustees have power and authority to cause the Trust to execute pursuant to Section 3.6. SECTION 5.6 Appointment, Removal and Resignation of Trustees. (a) Subject to Section 5.6(b) and to Section 6(b) of Annex I hereto, Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; (ii) unless an Event of Default shall have occurred and be continuing after the issuance of any Securities, by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; and (iii) if an Event of Default shall have occurred and be continuing after the issuance of the Securities, with respect to the Property Trustee or the Delaware Trustee, by vote of Holders of a Majority in liquidation amount of the Preferred Securities voting as a class at a meeting of Holders of the Preferred Securities. (b) (i) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 5.6(a) until a Successor Property Trustee has been appointed and has 28 accepted such appointment by written instrument executed by such Successor Property Trustee and delivered to the Administrative Trustees and the Sponsor. (ii) The Trustee that acts as Delaware Trustee shall not be removed in accordance with Section 5.6(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Administrative Trustees and the Sponsor. (c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, removal or resignation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: (i) no such resignation of the Trustee that acts as the Property Trustee shall be effective: (A) until a Successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Sponsor and the resigning Property Trustee; or (B) until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the Holders; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee. (d) The Holders of the Common Securities or, if an Event of Default shall have occurred and be continuing after the issuance of the Securities, the Holders of the Preferred Securities shall use their best efforts to promptly appoint a Successor Delaware Trustee or Successor Property Trustee, as the case may be, if the Property Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with this Section 5.6. (e) If no Successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.6 within 60 days after delivery of an instrument of resignation or removal, the Property Trustee or Delaware Trustee resigning or being removed, as applicable, may petition any court of competent jurisdiction for appointment of a Successor Property Trustee or Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper and prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be. (f) No Property Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Property Trustee or Successor Delaware Trustee, as the case may be. 29 (g) At the time of resignation or removal of the Property Trustee or the Delaware Trustee, the Debenture Issuer shall pay to such Trustee any amounts that may be owed to such Trustee pursuant to Section 10.4. SECTION 5.7 Vacancies among Trustees. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by the Administrative Trustees or, if there are more than two, a majority of the Administrative Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.6. SECTION 5.8 Effect of Vacancies. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to dissolve, terminate or annul the Trust. Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with Section 5.6, the Administrative Trustees in office, regardless of their number, shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Declaration. SECTION 5.9 Meetings. If there is more than one Administrative Trustee, meetings of the Administrative Trustees shall be held from time to time upon the call of any Administrative Trustee. Regular meetings of the Administrative Trustees may be held at a time and place fixed by resolution of the Administrative Trustees. Notice of any in-person meetings of the Administrative Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before such meeting. Notice of any telephonic meetings of the Administrative Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of an Administrative Trustee at a meeting shall constitute a waiver of notice of such meeting except where an Administrative Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Administrative Trustees may be taken at a meeting by vote of a majority of the Administrative Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Administrative Trustees. In the event there is only one Administrative Trustee, any and all action of such Administrative Trustee shall be evidenced by a written consent of such Administrative Trustee. 30 SECTION 5.10 Delegation of Power. (a) Any Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 3.6, including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) the Administrative Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Property Trustee or the Delaware Trustee or any Administrative Trustee that is not a natural person, as the case may be, may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Property Trustee or the Delaware Trustee, as the case may be, shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Property Trustee or the Delaware Trustee, as the case may be, shall be the successor of the Property Trustee or the Delaware Trustee, as the case may be, hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. ARTICLE VI DISTRIBUTIONS SECTION 6.1 Distributions. Holders shall receive Distributions in accordance with the applicable terms of the relevant Holder's Securities. If and to the extent that the Debenture Issuer makes a payment of interest (including Compounded Interest and Additional Sums, if any) or principal on the Debentures held by the Property Trustee or any other payments with respect to the Debentures held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a "Distribution") of the Payment Amount to Holders. ARTICLE VII ISSUANCE OF SECURITIES SECTION 7.1 General Provisions Regarding Securities. (a) The Administrative Trustees shall on behalf of the Trust issue one class of Preferred Securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I (the "Preferred Securities") and one class of common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I (the "Common Securities"). The Trust shall issue no securities or 31 other interests in the assets of the Trust other than the Preferred Securities and the Common Securities. (b) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (c) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and non-assessable. (d) Every Person, by virtue of having become a Holder or a Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration. SECTION 7.2 Execution and Authentication. (a) The Securities shall be signed on behalf of the Trust by an Administrative Trustee by manual or facsimile signature. In case any Administrative Trustee of the Trust who shall have signed any of the Securities shall cease to be such Administrative Trustee before the Securities so signed shall be delivered by the Trust, such Securities nevertheless may be delivered as though the person who signed such Securities had not ceased to be such Administrative Trustee; and any Securities may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Security, shall be the Administrative Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such a Administrative Trustee. (b) One Administrative Trustee shall sign the Preferred Securities for the Trust by manual or facsimile signature. Unless otherwise determined by the Trust, such signature shall, in the case of Common Securities, be a manual signature. A Preferred Security shall not be valid until authenticated by the manual signature of an authorized officer of the Property Trustee. The signature shall be conclusive evidence that the Preferred Security has been authenticated under this Declaration. Upon a written order of the Trust signed by one Administrative Trustee, the Property Trustee shall authenticate the Preferred Securities for original issue. The aggregate number of Preferred Securities outstanding at any time shall not exceed the number set forth in the Terms in Annex I hereto except as provided in Section 7.6. The Property Trustee may appoint an authenticating agent acceptable to the Trust to authenticate Preferred Securities. An authenticating agent may authenticate Preferred Securities whenever the Property Trustee may do so. Each reference in this Declaration to authentication by the Property Trustee includes authentication by such agent. An authenticating agent has the same rights as the Property Trustee to deal with the Sponsor or an Affiliate. SECTION 7.3 Form and Dating. The Preferred Securities and the Property Trustee's certificate of authentication shall be substantially in the form of Exhibit A-1 and the Common Securities shall be substantially in the 32 form of Exhibit A-2, each of which is hereby incorporated in and expressly made a part of this Declaration. Certificates representing the Securities may be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrative Trustees, as evidenced by their execution thereof. The Securities may have letters, CUSIP or other numbers, notations or other marks of identification or designation and such legends or endorsements required by law, stock exchange rule, agreements to which the Trust is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Trust). The Trust at the direction of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the Property Trustee in writing. Each Preferred Security shall be dated the date of its authentication. The terms and provisions of the Securities set forth in Annex I and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the terms of this Declaration and to the extent applicable, the Property Trustee and the Sponsor, by their execution and delivery of this Declaration, expressly agree to such terms and provisions and to be bound thereby. (a) Global Securities. Securities shall be issued in the form of one or more permanent global Securities in definitive, fully registered form without distribution coupons with the appropriate global legends set forth in Exhibit A-1 hereto (a "Global Preferred Security"), which shall be deposited on behalf of the purchasers of the Preferred Securities represented thereby with the Property Trustee, at its New York office, as custodian for the Clearing Agency, and registered in the name of the Clearing Agency or a nominee of the Clearing Agency, duly executed by the Trust and authenticated by the Property Trustee as hereinafter provided. The number of Preferred Securities represented by a Global Preferred Security may from time to time be increased or decreased by adjustments made on the records of the Property Trustee and the Clearing Agency or its nominee as hereinafter provided. (b) Book-Entry Provisions. This Section 7.3(b) shall apply only to the Global Preferred Securities and such other Preferred Securities in global form as may be authorized by the Trust to be deposited with or on behalf of the Clearing Agency. The Trust shall execute and the Property Trustee shall, in accordance with this Section 7.3, authenticate and make available for delivery initially one or more Global Preferred Securities that (i) shall be registered in the name of Cede & Co. or other nominee of such Clearing Agency and (ii) shall be delivered by the Trustee to such Clearing Agency or pursuant to such Clearing Agency's written instructions or held by the Property Trustee as custodian for the Clearing Agency. Members of, or participants in, the Clearing Agency ("Participants") shall have no rights under this Declaration with respect to any Global Preferred Security held on their behalf by the Clearing Agency or by the Property Trustee as the custodian of the Clearing Agency or under such Global Preferred Security, and the Clearing Agency may be treated by the Trust, the Property Trustee and any agent of the Trust or the Property Trustee as the absolute owner of such Global Preferred Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Trust, the Property Trustee or any agent of the Trust or the Property Trustee from giving effect to any written certification, proxy or other authorization furnished by the Clearing Agency or impair, as between the Clearing Agency and its Participants, the operation of customary practices of such Clearing Agency governing the exercise of the rights of a holder of a beneficial interest in any Global Preferred Security. 33 (c) Definitive Preferred Securities. Except as provided in Section 7.9 or 9.2(d)(i), owners of beneficial interests in a Global Preferred Security will not be entitled to receive physical delivery of certificated Preferred Securities ("Definitive Preferred Securities"). (d) Authorized Denominations. The Preferred Securities are issuable only in denominations having a liquidation preference of $25 and any integral multiple thereof. SECTION 7.4 Registrar and Paying Agent. The Trust shall maintain in the Borough of Manhattan, The City of New York, (i) an office or agency where Preferred Securities may be presented for registration of transfer ("Registrar") and (ii) an office or agency where Preferred Securities may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Preferred Securities and of their transfer. The Trust may appoint the Registrar and the Paying Agent and may appoint one or more co-registrars and one or more additional paying agents in such other locations as it shall determine. The term "Registrar" includes any additional registrar and the term "Paying Agent" includes any additional paying agent. The Trust may change any Paying Agent, Registrar or co-registrar without prior notice to any Holder. The Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Administrative Trustees. The Trust shall notify the Property Trustee of the name and address of any Agent not a party to this Declaration. If the Trust fails to appoint or maintain another entity as Registrar or Paying Agent, the Property Trustee shall act as such. The Trust or any of its Affiliates may act as Paying Agent or Registrar. The Trust shall act as Paying Agent and Registrar and Exchange Agent for the Common Securities. The Trust initially appoints the Property Trustee as Registrar and Paying Agent for the Preferred Securities. SECTION 7.5 Paying Agent to Hold Money in Trust. The Trust shall require each Paying Agent other than the Property Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Property Trustee all money held by the Paying Agent for the payment of liquidation amounts or Distributions, and will notify the Property Trustee if there are insufficient funds for such purpose. While any such insufficiency continues, the Property Trustee may require a Paying Agent to pay all money held by it to the Property Trustee. The Trust at any time may require a Paying Agent to pay all money held by it to the Property Trustee and to account for any money disbursed by it. Upon payment over to the Property Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust) shall have no further liability for the money. If the Trust or the Sponsor or an Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. SECTION 7.6 Replacement Securities. If a Holder claims that a Security owned by it has been lost, destroyed or wrongfully taken or if such Security is mutilated and is surrendered to the Trust or in the case of the Preferred Securities to the Property Trustee, the Trust shall issue and the Property Trustee shall, upon written order of the Trust, authenticate a replacement Security if the Property Trustee's and 34 the Trust's requirements, as the case may be, are met. An indemnity bond must be provided by the Holder which, in the judgment of the Property Trustee, is sufficient to protect the Trustees, the Sponsor, the Trust or any authenticating agent from any loss which any of them may suffer if a Security is replaced. The Trust may charge such Holder for its expenses in replacing a Security. Every replacement Security is an additional beneficial interest in the Trust. SECTION 7.7 Outstanding Preferred Securities. The Preferred Securities outstanding at any time are all the Preferred Securities authenticated by the Property Trustee except for those cancelled by it, those delivered to it for cancellation, and those described in this Section as not outstanding. If a Preferred Security is replaced, paid or purchased pursuant to Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee receives proof satisfactory to it that the replaced, paid or purchased Preferred Security is held by a bona fide purchaser. If Preferred Securities are considered paid in accordance with the terms of this Declaration, they cease to be outstanding and Distributions on them shall cease to accumulate. A Preferred Security does not cease to be outstanding because any of the Trust, the Sponsor or an Affiliate of the Sponsor holds the Security. SECTION 7.8 Preferred Securities in Treasury. In determining whether the Holders of the required amount of Securities have concurred in any direction, waiver or consent, Preferred Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as the case may be, shall be disregarded and deemed not to be outstanding, except that for the purposes of determining whether the Property Trustee shall be fully protected in relying on any such direction, waiver or consent, only Securities which a Responsible Officer of the Property Trustee actually knows are so owned shall be so disregarded. SECTION 7.9 Temporary Securities. (a) Until Definitive Securities are ready for delivery, the Trust may prepare and, in the case of the Preferred Securities, the Property Trustee upon written request of the Trust signed by any two Administrative Trustees shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Trust considers appropriate for temporary Securities. Without unreasonable delay, the Trust shall prepare and, in the case of the Preferred Securities, the Property Trustee upon written request of the Trust signed by any two Administrative Trustees shall authenticate Definitive Securities in exchange for temporary Securities. (b) A Global Preferred Security deposited with the Clearing Agency or with the Property Trustee as custodian for the Clearing Agency pursuant to Section 7.3 shall be transferred to the beneficial owners thereof in the form of certificated Preferred Securities only if such transfer complies with Section 9.2 and (i) the Clearing Agency notifies the Sponsor that it is 35 unwilling or unable to continue as Clearing Agency for such Global Preferred Security or if at any time such Clearing Agency ceases to be a "clearing agency" registered under the Exchange Act and a clearing agency is not appointed by the Sponsor within 90 days of such notice, (ii) a Default or an Event of Default has occurred and is continuing or (iii) the Trust at its sole discretion elects to cause the issuance of certificated Preferred Securities. (c) Any Global Preferred Security that is transferable to the beneficial owners thereof in the form of certificated Preferred Securities pursuant to this Section 7.9 shall be surrendered by the Clearing Agency to the Property Trustee located in the Borough of Manhattan, The City of New York, to be so transferred, in whole or from time to time in part, without charge, and the Property Trustee shall authenticate and make available for delivery, upon such transfer of each portion of such Global Preferred Security, an equal aggregate liquidation amount of Securities of authorized denominations in the form of certificated Preferred Securities. Any portion of a Global Preferred Security transferred pursuant to this Section shall be registered in such names as the Clearing Agency shall direct. Any Preferred Security in the form of certificated Preferred Securities delivered in exchange for an interest in the Restricted Global Preferred Security shall, except as otherwise provided by Sections 7.3 and 9.1, bear the Restricted Securities Legend set forth in Exhibit A-1 hereto. (d) Subject to the provisions of Section 7.9(c), the Holder of a Global Preferred Security may grant proxies and otherwise authorize any Person, including Participants and Persons that may hold interests through Participants, to take any action which such Holder is entitled to take under this Declaration or the Securities. (e) In the event of the occurrence of any of the events specified in Section 7.9(b), the Trust will promptly make available to the Property Trustee a reasonable supply of certificated Preferred Securities in fully registered form without distribution coupons. SECTION 7.10 Cancellation. The Trust any time may deliver Preferred Securities to the Property Trustee for cancellation. The Registrar and Paying Agent shall forward to the Property Trustee any Preferred Securities surrendered to them for registration of transfer, redemption or payment. The Property Trustee shall promptly cancel all Preferred Securities, surrendered for registration of transfer, redemption, exchange, payment, replacement or cancellation and shall dispose of cancelled Preferred Securities in accordance with its customary procedures unless the Trust otherwise directs. The Trust may not issue new Preferred Securities to replace Preferred Securities that it has paid or that have been delivered to the Property Trustee for cancellation or that any Holder has exchanged. SECTION 7.11 CUSIP Numbers. The Trust in issuing the Preferred Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Property Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders of Preferred Securities; provided that, any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Preferred Securities or as contained in any notice of a redemption and that reliance may be 36 placed only on the other identification numbers printed on the Preferred Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Sponsor will promptly notify the Property Trustee of any change in the CUSIP numbers. ARTICLE VIII TERMINATION OF TRUST SECTION 8.1 Termination of Trust. (a) The Trust shall automatically dissolve: (i) upon the bankruptcy of the Sponsor; (ii) upon the filing of a certificate of dissolution or liquidation or its equivalent with respect to the Sponsor; or the revocation of the Sponsor's charter and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) following the distribution of a Like Amount of the Debentures to the Holders, provided that, the Property Trustee has received written notice from the Sponsor directing the Property Trustee to terminate the Trust (which direction is optional, and except as otherwise expressly provided below, within the discretion of the Sponsor) and provided, further, that such direction and such distribution is conditioned on (a) the prior approval of the Federal Reserve Board if such approval is then required under applicable capital guidelines or policies of the Federal Reserve Board and the receipt of any other required regulatory approval, and (b) the Administrative Trustees' receipt of an opinion of an independent tax counsel experienced in such matters, which opinion may rely on published rulings of the Internal Revenue Service, to the effect that the Holders will not recognize any gain or loss for United States Federal income tax purposes as a result of the dissolution of the Trust and the distribution of Debentures; (iv) upon the entry of a decree of judicial dissolution of the Trust by a court of competent jurisdiction; (v) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; or (vi) the expiration of the term of the Trust provided in Section 3.14. (b) Upon the completion of winding up of the Trust, including the payment or the making of reasonable provision for payment of all obligations of the Trust in accordance with Section 3808(e) of the Statutory Trust Act, the Administrative Trustees shall file a certificate of cancellation with the Delaware Secretary of State in accordance with Section 3810 of the Statutory Trust Act, at which time the Trust and this Declaration (other than Section 3.9 and Article X) shall terminate. The Administrative Trustees shall act as the liquidators of the Trust and shall be responsible for taking all required actions in connection with winding up the Trust. 37 (c) The provisions of Section 3.9 and Article X shall survive the termination of the Trust. ARTICLE IX TRANSFER OF INTERESTS SECTION 9.1 Transfer of Securities. (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void. (b) Subject to this Article IX, Preferred Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void. (c) For so long as the Trust Securities remain outstanding, the Sponsor will covenant: (i) to directly or indirectly maintain 100% direct or indirect ownership of the Common Securities of the Trust, provided that any permitted successor of the Sponsor under the Indenture may succeed to the Sponsor's ownership of such Common Securities, (ii) not to cause, as Sponsor of the Trust, or to permit, as Holder of the Common Securities, the dissolution, winding up or termination of the Trust, except in connection with a distribution of the Debentures as provided in the Declaration and in connection with certain mergers, consolidations or amalgamations permitted by this Declaration, (iii) to use its reasonable efforts to cause the Trust (a) to remain a statutory trust, except in connection with the distribution of Debentures to the Holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities, or certain mergers, consolidations or amalgamations, each as permitted by this Declaration, and (b) to otherwise continue to be classified as a grantor trust for United States Federal income tax purposes; (iv) to use its reasonable efforts to cause each holder of the Common Securities to be treated as owning an undivided beneficial interest in the Debentures, and (v) use commercially reasonable efforts to maintain the eligibility of the Preferred Securities for quotation or listing on any national securities exchange or other organization on which the Preferred Securities are then quoted or listed (including, if applicable, The Nasdaq National Market) and shall use commercially reasonable efforts to keep the Preferred Securities so quoted or listed for so long as the Preferred Securities remain outstanding. (d) The Administrative Trustees shall provide for the registration of Preferred Securities, and the transfer thereof, which will be effected without charge but only upon payment (with such indemnity as the Administrative Trustees may require) in respect of any tax or other governmental charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Preferred Securities, the Administrative Trustees shall cause one or more new Preferred Securities to be issued in the name of the designated transferee or transferees. Every Preferred Security surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Administrative Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Preferred Security 38 surrendered for registration of transfer shall be canceled by the Property Trustee. A transferee of a Preferred Security shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Preferred Security. By acceptance of a Preferred Security, each transferee shall be deemed to have agreed to be bound by this Declaration. SECTION 9.2 Transfer Procedures and Restrictions. (a) Transfer and Exchange of Definitive Preferred Securities. When Definitive Preferred Securities are presented to the Registrar or co-Registrar: (i) to register the transfer of such Definitive Preferred Securities; or (ii) to exchange such Definitive Preferred Securities which became mutilated, destroyed, defaced, stolen or lost, for an equal number of Definitive Preferred Securities, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Preferred Securities surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Trust and the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; (b) Restrictions on Transfer of a Definitive Preferred Security for a Beneficial Interest in a Global Preferred Security. A Definitive Preferred Security may not be exchanged for a beneficial interest in a Global Preferred Security except upon satisfaction of the requirements set forth below. Upon receipt by the Property Trustee of a Definitive Preferred Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Property Trustee, together with written instructions directing the Property Trustee to make, or to direct the Clearing Agency to make, an adjustment on its books and records with respect to the appropriate Global Preferred Security to reflect an increase in the number of the Preferred Securities represented by such Global Preferred Security, then the Property Trustee shall cancel such Definitive Preferred Security and cause, or direct the Clearing Agency to cause, the aggregate number of Preferred Securities represented by the appropriate Global Preferred Security to be increased accordingly. If no Global Preferred Securities are then outstanding, the Trust shall issue and the Property Trustee shall authenticate, upon written order of any Administrative Trustee, an appropriate number of Preferred Securities in global form. (c) Transfer and Exchange of Global Preferred Securities. Subject to Section 9.2(d), the transfer and exchange of Global Preferred Securities or beneficial interests therein shall be effected through the Clearing Agency, in accordance with this Declaration (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Clearing Agency therefor. 39 (d) Transfer of a Beneficial Interest in a Global Preferred Security for a Definitive Preferred Security. (i) Any Person having a beneficial interest in a Global Preferred Security may upon request, but only upon 20 days prior notice to the Property Trustee, and only if accompanied by the information specified below, exchange such beneficial interest for a Definitive Preferred Security representing the same number of Preferred Securities. Upon receipt by the Property Trustee from the Clearing Agency or its nominee on behalf of any Person having a beneficial interest in a Global Preferred Security of written instructions or such other form of instructions as is customary for the Clearing Agency or the Person designated by the Clearing Agency as having such a beneficial interest in a Restricted Preferred Security and a certification from the transferor (in a form substantially similar to that attached hereto as the form of "Assignment" in Exhibit A-1) upon which the Property Trustee may conclusively rely (unless such instructions contain a manifest error, are not believed to be genuine or to have been presented by the proper party) which may be submitted by facsimile, then the Property Trustee will cause the aggregate number of Preferred Securities represented by Global Preferred Securities to be reduced on its books and records and, following such reduction, the Trust will execute and the Property Trustee, upon written receipt of a written order of the Trust signed by one Administrative Trustee, will authenticate and make available for delivery to the transferee a Definitive Preferred Security. (ii) Definitive Preferred Securities issued in exchange for a beneficial interest in a Global Preferred Security pursuant to this Section 9.2(d) shall be registered in such names and in such authorized denominations as the Clearing Agency, pursuant to instructions from its Clearing Agency Participants or otherwise, shall instruct the Property Trustee in writing. The Property Trustee shall deliver such Preferred Securities to the Persons in whose names such Preferred Securities are so registered in accordance with such instructions of the Clearing Agency. (e) Restrictions on Transfer and Exchange of Global Preferred Securities. Notwithstanding any other provisions of this Declaration (other than the provisions set forth in subsection (f) of this Section 9.2), a Global Preferred Security may not be transferred as a whole except by the Clearing Agency to a nominee of the Clearing Agency or another nominee of the Clearing Agency or by the Clearing Agency or any such nominee to a successor Clearing Agency or a nominee of such successor Clearing Agency. (f) Authentication of Definitive Preferred Securities. If at any time: (i) there occurs a Default or an Event of Default which is continuing, or (ii) the Trust, in its sole discretion, notifies the Property Trustee in writing that it elects to cause the issuance of Definitive Preferred Securities under this Declaration, then the Trust will execute, and the Property Trustee, upon receipt of a written order of the Trust signed by one Administrative Trustee requesting the authentication and delivery of Definitive Preferred Securities to the Persons designated by the Trust, will authenticate and make available 40 for delivery Definitive Preferred Securities, equal in number to the number of Preferred Securities represented by the Global Preferred Securities, in exchange for such Global Preferred Securities. (g) Cancellation or Adjustment of Global Preferred Security. At such time as all beneficial interests in a Global Preferred Security have either been exchanged for Definitive Preferred Securities to the extent permitted by this Declaration or redeemed, repurchased or canceled in accordance with the terms of this Declaration, such Global Preferred Security shall be canceled by the Property Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Preferred Security is exchanged for Definitive Preferred Securities, Preferred Securities represented by such Global Preferred Security shall be reduced and an adjustment shall be made on the books and records of the Clearing Agency and the Registrar to reflect such reduction. (h) Obligations with Respect to Transfers and Exchanges of Preferred Securities. (i) To permit registrations of transfers, the Trust shall execute and the Property Trustee shall authenticate Definitive Preferred Securities and Global Preferred Securities at the Registrar's or co-Registrar's request in accordance with the terms of this Declaration. (ii) Registrations of transfers will be effected without charge, but only upon payment (with such indemnity as the Trust or the Sponsor may require) in respect of any tax or other governmental charge that may be imposed in relation to it. (iii) The Registrar or co-Registrar shall not be required to register the transfer of or exchange of (a) Preferred Securities during a period beginning at the opening of business 15 days before the day of mailing of a notice of redemption or any notice of selection of Preferred Securities for redemption and ending at the close of business on the day of such mailing; or (b) any Preferred Security so selected for redemption in whole or in part, except the unredeemed portion of any Preferred Security being redeemed in part. (iv) Prior to the due presentation for registration of transfer of any Preferred Security, the Trust, the Property Trustee, the Paying Agent, the Registrar or any co-Registrar may deem and treat the Person in whose name a Preferred Security is registered as the absolute owner of such Preferred Security for the purpose of receiving Distributions on such Preferred Security and for all other purposes whatsoever, and none of the Trust, the Property Trustee, the Paying Agent, the Registrar or any co-Registrar shall be affected by notice to the contrary. (v) All Preferred Securities issued upon any registration of transfer pursuant to the terms of this Declaration shall evidence the same security and shall be entitled to the same benefits under this Declaration as the Preferred Securities surrendered upon such registration of transfer. 41 (i) No Obligation of the Property Trustee. (i) The Property Trustee shall have no responsibility or obligation to any beneficial owner of a Global Preferred Security, a Clearing Agency Participant in the Clearing Agency or other Person with respect to the accuracy of the records of the Clearing Agency or its nominee or of any Clearing Agency Participant thereof, with respect to any ownership interest in the Preferred Securities or with respect to the delivery to any Clearing Agency Participant, beneficial owner or other Person (other than the Clearing Agency) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Preferred Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Preferred Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Clearing Agency or its nominee in the case of a Global Preferred Security). The rights of beneficial owners in any Global Preferred Security shall be exercised only through the Clearing Agency subject to the applicable rules and procedures of the Clearing Agency. The Property Trustee may conclusively rely and shall be fully protected in relying upon information furnished by the Clearing Agency or any agent thereof with respect to its Clearing Agency Participants and any beneficial owners. (ii) The Property Trustee and the Registrar shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Declaration or under applicable law with respect to any transfer of any interest in any Preferred Security (including any transfers between or among Clearing Agency Participants or beneficial owners in any Global Preferred Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Declaration, and to examine the same to determine substantial compliance as to form with the express requirements hereof. SECTION 9.3 Deemed Security Holders. The Trustees may treat the Person in whose name any Security shall be registered on the books and records of the Trust as the sole owner of such Security for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Security on the part of any Person, whether or not the Trust shall have actual or other notice thereof. SECTION 9.4 Book-Entry Interests. Global Preferred Securities shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee of the Clearing Agency, and no Preferred Security Beneficial Owner will receive a definitive Preferred Security Certificate representing such Preferred Security Beneficial Owner's interests in such Global Preferred Securities, except as provided in Section 7.9 and Section 9.2. Unless and until definitive, fully registered Preferred Securities certificates have been issued to the Preferred Security Beneficial Owners pursuant to Section 7.9 and Section 9.2: 42 (a) the provisions of this Section 9.4 shall be in full force and effect; (b) the Trust and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Preferred Securities and receiving approvals, votes or consents hereunder) as the Holder of the Preferred Securities and the sole holder of the Global Certificates and shall have no obligation to the Preferred Security Beneficial Owners; (c) to the extent that the provisions of this Section 9.4 conflict with any other provisions of this Declaration, the provisions of this Section 9.4 shall control; and (d) the rights of the Preferred Security Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Preferred Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants and receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. DTC will make book entry transfers among the Clearing Agency Participants. SECTION 9.5 Notices to Clearing Agency. Whenever a notice or other communication to the Preferred Security Holders is required under this Declaration, the Trustees shall give all such notices and communications specified herein to be given to the Holders of Global Preferred Securities to the Clearing Agency, and shall have no notice obligations to the Preferred Security Beneficial Owners. SECTION 9.6 Appointment of Successor Clearing Agency If any Clearing Agency elects to discontinue its services as securities depositary with respect to the Preferred Securities, the Administrative Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to such Preferred Securities. ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 10.1 Liability. (a) Except as expressly set forth in this Declaration, the Securities Guarantees and the terms of the Securities, the Sponsor shall not be: (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders which shall be made solely from assets of the Trust; and (ii) required to pay to the Trust or to any Holder any deficit upon dissolution of the Trust or otherwise. (b) The Debenture Issuer shall be liable for all of the debts and obligations of the Trust (other than in respect of the Securities) to the extent not satisfied out of the Trust's assets. 43 (c) Pursuant to Section 3803(a) of the Statutory Trust Act, the Holders shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 10.2 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, cost, liability, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, cost, liability, damage or claim incurred by reason of such Indemnified Person's gross negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders might properly be paid. SECTION 10.3 Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between an Indemnified Person and any Covered Persons; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the 44 resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Notwithstanding any other provision of this Declaration or otherwise applicable law, whenever in this Declaration an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard. SECTION 10.4 Indemnification. (a) (i) The Debenture Issuer shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees and expenses), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if such Company Indemnified Person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Company Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (ii) The Debenture Issuer shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees and expenses) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust and except that no such indemnification shall be made in respect of any claim, issue or matter as to which such Company Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or 45 suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such Person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. (iii) To the extent that a Company Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 10.4(a), or in defense of any claim, issue or matter therein, he shall be indemnified, to the full extent permitted by law, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (iv) Any indemnification under paragraphs (i) and (ii) of this Section 10.4(a) (unless ordered by a court) shall be made by the Debenture Issuer only as authorized in the specific case upon a determination that indemnification of the Company Indemnified Person is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (i) and (ii). Such determination shall be made (1) by the Administrative Trustees by a majority vote of a Quorum consisting of such Administrative Trustees who were not parties to such action, suit or proceeding, (2) if such a Quorum is not obtainable, or, even if obtainable, if a Quorum of disinterested Administrative Trustees so directs, by independent legal counsel in a written opinion, or (3) by the Common Security Holder of the Trust. (v) Expenses (including attorneys' fees and expenses) incurred by a Company Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 10.4(a) shall be paid by the Debenture Issuer in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Company Indemnified Person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Debenture Issuer as authorized in this Section 10.4(a). Notwithstanding the foregoing, no advance shall be made by the Debenture Issuer if a determination is reasonably and promptly made (i) by the Administrative Trustees by a majority vote of a quorum of disinterested Administrative Trustees, (ii) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Administrative Trustees so directs, by independent legal counsel in a written opinion or (iii) the Common Security Holder of the Trust, that, based upon the facts known to the Administrative Trustees, counsel or the Common Security Holder at the time such determination is made, such Company Indemnified Person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Trust, or, with respect to any criminal proceeding, that such Company Indemnified Person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Administrative Trustees, independent legal counsel or Common Security Holder reasonably determine that such person deliberately breached his duty to the Trust or its Common or Preferred Security Holders. 46 (vi) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 10.4(a) shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Debenture Issuer or Preferred Security Holders of the Trust or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 10.4(a) shall be deemed to be provided by a contract between the Debenture Issuer and each Company Indemnified Person who serves in such capacity at any time while this Section 10.4(a) is in effect. Any repeal or modification of this Section 10.4(a) shall not affect any rights or obligations then existing. (vii) The Debenture Issuer or the Trust may purchase and maintain insurance on behalf of any person who is or was a Company Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Debenture Issuer would have the power to indemnify him against such liability under the provisions of this Section 10.4(a). (viii) For purposes of this Section 10.4(a), references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 10.4(a) with respect to the resulting or surviving entity as he would have with respect to such constituent entity if its separate existence had continued. (ix) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 10.4(a) shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a Company Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a person. (b) The Debenture Issuer agrees to indemnify (i) the Property Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee or the Delaware Trustee, and (iv) any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Property Trustee or the Delaware Trustee (each of the Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified Person") for, and to hold each Fiduciary Indemnified Person harmless against, any and all loss, liability, damage, claim or expense including taxes (other than taxes based on the income of such Fiduciary Indemnified Person) incurred without negligence or bad faith on the part of such Fiduciary Indemnified Person, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending against or investigating any claim or liability in connection with the exercise or performance of any of the powers or duties of such Fiduciary Indemnified Person hereunder. The obligation to indemnify as set forth in this Section 10.4(b) shall survive the resignation or removal of the Property Trustee or the Delaware Trustee and the satisfaction and discharge of this Declaration. 47 (c) The Debenture Issuer agrees to pay the Property Trustee and the Delaware Trustee, from time to time, such compensation for all services rendered by the Property Trustee and the Delaware Trustee hereunder as may be mutually agreed upon in writing by the Sponsor and the Property Trustee or the Delaware Trustee, as the case may be, and, except as otherwise expressly provided herein, to reimburse the Property Trustee and the Delaware Trustee upon its or their request for all reasonable expenses, disbursements and advances incurred or made by the Property Trustee or the Delaware Trustee, as the case may be, in accordance with the provisions of this Declaration, except any such expense, disbursement or advance as may be attributable to its or their negligence or bad faith. SECTION 10.5 Outside Businesses. Any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper and the doctrine of corporate opportunity, or any analogous doctrine, shall not apply to such Persons. No Covered Person, the Sponsor, the Delaware Trustee, or the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE XI ACCOUNTING SECTION 11.1 Fiscal Year. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 11.2 Certain Accounting Matters. (a) At all times during the existence of the Trust, the Administrative Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Administrative Trustees. 48 (b) The Administrative Trustees shall cause to be duly prepared and delivered to each of the Holders, any annual United States Federal income tax information statement, required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Administrative Trustees shall endeavor to deliver all such information statements within 30 days after the end of each Fiscal Year of the Trust. (c) The Administrative Trustees shall cause to be duly prepared and filed with the appropriate taxing authority, an annual United States Federal income tax return, on a Form 1041 or such other form required by United States Federal income tax law, and any other annual income tax returns required to be filed by the Administrative Trustees on behalf of the Trust with any state or local taxing authority. SECTION 11.3 Banking. The Trust may maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Property Trustee shall be made directly to the Property Trustee Account and no other funds of the Trust shall be deposited in the Property Trustee Account. The sole signatories for such accounts shall be designated by the Administrative Trustees; provided, however, that the Property Trustee shall designate the signatories for the Property Trustee Account. SECTION 11.4 Withholding. The Trust and the Administrative Trustees shall comply with all withholding requirements under United States Federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Administrative Trustees shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to Distributions or allocations to any Holder, the amount withheld shall be deemed to be a Distribution in the amount of the withholding to the Holder. In the event of any claim of excess withholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. ARTICLE XII AMENDMENTS AND MEETINGS SECTION 12.1 Amendments. (a) Except as otherwise provided in this Declaration (including Section 7 of Annex I hereto) or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed by: 49 (i) the Administrative Trustees (or if there are more than two Administrative Trustees, a majority of the Administrative Trustees); (ii) if the amendment affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee; and (iii) if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee, the Delaware Trustee; (b) No amendment shall be made, and any such purported amendment shall be void and ineffective: (i) unless, in the case of any proposed amendment, the Property Trustee shall have first received an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); (ii) unless, in the case of any proposed amendment which affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee shall have first received: (A) an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (B) an Opinion of Counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities) and that all conditions precedent, if any, in this Declaration to the execution and delivery of such amendment have been satisfied, provided, however, that the Property Trustee shall not be required to sign any such amendment; and (iii) to the extent the result of such amendment would be to: (A) cause the Trust to fail to continue to be classified for purposes of United States Federal income taxation as a grantor trust; (B) reduce or otherwise adversely affect the powers of the Property Trustee in contravention of the Trust Indenture Act; or (C) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act; (c) At such time after the Trust has issued any Securities that remain outstanding, any amendment that would adversely affect the rights, privileges or preferences of any Holder may 50 be effected only with such additional requirements as may be set forth in the terms of such Securities; (d) Section 9.1(c) and this Section 12.1 shall not be amended without the consent of all of the Holders; (e) Article IV shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities and; (f) The rights of the holders of the Common Securities under Article V to increase or decrease the number of, and appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities; and (g) Notwithstanding Section 12.1(c), this Declaration may be amended without the consent of the Holders to: (i) cure any ambiguity, correct or supplement any provision in this Declaration that may be inconsistent with any other provision of this Declaration or to make any other provisions with respect to matters or questions arising under this Declaration which shall not be inconsistent with the other provisions of the Declaration; and (ii) to modify, eliminate or add to any provisions of the Declaration to such extent as shall be necessary to ensure that the Trust will be classified for United States Federal income tax purposes as a grantor trust at all times that any Securities are outstanding or to ensure that the Trust will not be required to register as an Investment Company under the Investment Company Act; provided, however, that in the case of clause (i) of this Section 12.1(g), such action shall not adversely affect in any material respect the interests of the Holders, and any amendments of this Declaration shall become effective when notice thereof is given to the Holders. SECTION 12.2 Meetings of the Holders; Action by Written Consent. (a) Meetings of the Holders of any class of Securities may be called at any time by the Administrative Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading. The Administrative Trustees shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Administrative Trustees one or more notices in writing stating that the signing Holders wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders calling a meeting shall specify in writing the Security Certificates held by the Holders exercising the right to call a meeting and only those Securities specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. 51 (b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders: (i) notice of any such meeting shall be given to all the Holders having a right to vote thereat at least seven days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders is permitted or required under this Declaration or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders. Any action that may be taken at a meeting of the Holders may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders entitled to vote who have not consented in writing. The Administrative Trustees may specify that any written ballot submitted to the Security Holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Administrative Trustees; (ii) each Holder may authorize any Person to act for it by proxy on all matters in which a Holder is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders were stockholders of a Delaware corporation; (iii) each meeting of the Holders shall be conducted by the Administrative Trustees or by such other Person that the Administrative Trustees may designate; and (iv) unless the Statutory Trust Act, this Declaration, the terms of the Securities, the Trust Indenture Act or the listing rules of The Nasdaq National Market, or any automated quotation system or any national securities exchange, as the case may be, on which the Preferred Securities are then listed or trading, otherwise provides, the Administrative Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. 52 ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE SECTION 13.1 Representations and Warranties of Property Trustee. The Trustee that acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that: (a) the Property Trustee is a New York banking corporation, a national banking association or a bank or trust company organized under the laws of any State of the United States or the District of Columbia, in any case with trust powers and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration; (b) the execution, delivery and performance by the Property Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee. This Declaration has been duly executed and delivered by the Property Trustee and constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (c) the execution, delivery and performance of this Declaration by the Property Trustee does not conflict with or constitute a breach of the charter or by-laws of the Property Trustee; and (d) no consent, approval or authorization of, or registration with or notice to, any New York, Texas or Delaware State or Federal banking authority is required for the execution, delivery or performance by the Property Trustee of this Declaration. SECTION 13.2 Representations and Warranties of Delaware Trustee. The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee that: (a) The Delaware Trustee is duly organized, validly existing and in good standing under the laws of the State of Delaware or the United States, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration; (b) The execution, delivery and performance by the Delaware Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Delaware Trustee. This Declaration has been duly executed and delivered by the Delaware Trustee and constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable 53 against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (c) No consent, approval or authorization of, or registration with or notice to, any Federal banking authority is required for the execution, delivery or performance by the Delaware Trustee of this Declaration; and (d) The Delaware Trustee is a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, overnight courier service or confirmed telecopy, as follows: (a) if given to the Trust, in care of the Administrative Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Property Trustee, the Delaware Trustee and the Holders): Sterling Bancshares Capital Trust III c/o Sterling Bancshares, Inc. 2550 North Loop, Suite 600 Houston, Texas 77092 Attention: J. Downey Bridgwater, Administrative Trustee Telecopy: (713) 849-5498 (b) if given to the Delaware Trustee, at the mailing address set forth below (or such other address as Delaware Trustee may give notice of to the Holders): Deutsche Bank Trust Company Delaware 1011 Centre Road, Suite 200 Wilmington, Delaware 19805 Attention: Corporate Trust Department Telecopy: (302) 636-3222 54 (c) if given to the Property Trustee, at the Property Trustee's mailing address set forth below (or such other address as the Property Trustee may give notice of to the Holders): Deutsche Bank Trust Company Americas c/o DB Services NJ, Inc. 100 Plaza One MS JCY03-0604 Jersey City, New Jersey 07311 Attention: Corporate Trust and Agency Services Telecopy: (201) 593-6527 (d) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Property Trustee and the Trust): Sterling Bancshares, Inc. 2550 North Loop, Suite 600 Houston, Texas 77092 Attention: J. Downey Bridgwater Telecopy: (713) 849-5498 (e) if given to any other Holder, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 14.2 Governing Law. THIS DECLARATION AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. SECTION 14.3 Intention of the Parties. It is the intention of the parties hereto that the Trust be classified for United States Federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 14.4 Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. 55 SECTION 14.5 Successors and Assigns. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 14.6 Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 14.7 Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. [Remainder of Page Intentionally Left Blank] 56 IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written. /s/ George Martinez _________________________________________________ George Martinez, as Administrative Trustee /s/ J. Downey Bridgwater __________________________________________________ J. Downey Bridgwater, as Administrative Trustee /s/ Eugene S. Putnam, Jr. __________________________________________________ Eugene S. Putnam, Jr., as Administrative Trustee DEUTSCHE BANK TRUST COMPANY DELAWARE, as Delaware Trustee By: /s/ Elizabeth B. Ferry _______________________________________________ Name: Elizabeth B. Ferry Title: Authorized Signatory DEUTSCHE BANK TRUST COMPANY AMERICAS, as Property Trustee By: /s/ Susan Johnson _______________________________________________ Name: Susan Johnson Title: Vice President STERLING BANCSHARES, INC., as Sponsor and Debenture Issuer By: /s/ J. Downey Bridgwater _______________________________________________ Name: J. Downey Bridgwater Title: President and Chief Executive Officer (Signature Page to Amended and Restated Declaration of Trust] ANNEX I TERMS OF 8.30% CUMULATIVE TRUST PREFERRED SECURITIES 8.30% COMMON SECURITIES Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust, dated as of September 26, 2002 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration or, if not defined in such Declaration, as defined in the Prospectus referred to below in Section 2(c) of this Annex I): 1. Designation and Number. (a) Preferred Securities. 1,250,000 8.30% Cumulative Trust Preferred Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $31,250,000 and each with a liquidation amount with respect to the assets of the Trust of $25 per security, are hereby designated for the purposes of identification only as Preferred Securities. The certificates evidencing the Preferred Securities shall be substantially in the form of Exhibit A-1 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of The Nasdaq National Market or any automated quotation system or national securities exchange, as the case may be, on or in which the Preferred Securities are listed, traded or quoted. (b) Common Securities. 38,660 Common Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $966,500 and each with a liquidation amount with respect to the assets of the Trust of $25 per security, are hereby designated for the purposes of identification only as Common Securities. The certificates evidencing the Common Securities shall be substantially in the form of Exhibit A-2 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. 2. Distributions. (a) Distributions payable on each Security will be fixed at a rate per annum of 8.30% (the "Coupon Rate") of the liquidation amount of $25 per Security (the "Liquidation Amount"), such rate being equivalent to the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one quarterly period will bear additional distributions thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds on hand legally available therefor. (b) Distributions on the Securities will be cumulative, will accumulate from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from September 26, 2002, and will be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2002, except as otherwise I-1 described below and on the Stated Maturity Date (each, a "Distribution Date"). Distributions will be computed on the basis of a 360-day year consisting of twelve 30-day months and for any period less than a full calendar month on the basis of the actual number of days elapsed in such month. As long as no Event of Default has occurred and is continuing under the Indenture, the Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period at any time and from time to time on the Debentures for a period not exceeding 20 consecutive quarterly periods, including the first such quarterly period during such period (each an "Extension Period"), during which Extension Period no interest shall be due and payable on the Debentures, provided that no Extension Period shall end on a date other than an Interest Payment Date for the Debentures or extend beyond the Stated Maturity Date of the Debentures. As a consequence of such deferral, Distributions will also be deferred. Despite such deferral, Distributions will continue to accumulate with interest thereon (to the extent permitted by applicable law but not at a rate greater than the rate at which interest is then accruing on the Debentures) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Debenture Issuer may further defer payments of interest by further extending such Extension Period; provided that such Extension Period, together with all such previous and further extensions within such Extension Period, may not exceed 20 consecutive quarterly periods, including the first quarterly period during such Extension Period, or extend beyond the Stated Maturity Date of the Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. (c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the close of business on the 15th day of the month in which the relevant Distribution Date occurs, which Distribution Dates correspond to the interest payment dates on the Debentures. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment in respect of the Preferred Securities will be made as described under the heading "Description of the Trust Preferred Securities - Distributions" and "--Payment and Paying Agency" in the Prospectus Supplement dated September 23, 2002, of the Debenture Issuer and the Trust relating to the Securities and the Debentures. The relevant record dates for the Common Securities shall be the same as the record dates for the Preferred Securities. Distributions payable on any Securities that are not punctually paid on any Distribution Date, as a result of the Debenture Issuer having failed to make a payment under the Debentures, will cease to be payable to the Holder on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that if such next succeeding Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day with the same force and effect as if made on such date. (d) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders. I-2 3. Liquidation Distribution Upon Dissolution. In the event of any termination of the Trust, or if the Sponsor otherwise gives notice of its election to liquidate the Trust pursuant to Section 8.1(a)(iii) of the Declaration, the Trust shall be liquidated by the Administrative Trustees as expeditiously as the Administrative Trustees determine to be possible by distributing to the Holders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, a Like Amount (as defined below) of the Debentures, unless such distribution is determined by the Property Trustee not to be practicable, in which event such Holders will be entitled to receive Pro Rata out of the assets of the Trust legally available for distribution to Holders an amount equal to the aggregate of the liquidation amount of $25 per Security plus accumulated and unpaid Distributions thereon to the date of payment, after satisfaction of liabilities to creditors of the Trust as provided by applicable law (such amount being the "Liquidation Distribution"). "Like Amount" means (i) with respect to a redemption of the Securities, Securities having a liquidation amount equal to the principal amount of Debentures to be paid or prepaid in accordance with their terms and (ii) with respect to a distribution of Debentures upon the dissolution or liquidation of the Trust, Debentures having a principal amount equal to the liquidation amount of the Securities of the Holder to whom such Debentures are distributed. If, upon any such liquidation, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets on hand legally available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Securities shall be paid on a Pro Rata basis. 4. Redemption and Distribution. (a) Upon the repayment or prepayment of the Debentures in whole or in part, at maturity or otherwise (either at the option of the Debenture Issuer or following a Special Event, as described below), the proceeds from such repayment or prepayment shall be simultaneously applied by the Property Trustee (subject to the Property Trustee having received written notice no later than 45 days prior to such repayment or prepayment) to redeem a Like Amount of the Securities at a redemption price (the "Redemption Price") equal to 100% of the liquidation amount of the Securities to be redeemed, plus in each case, the accumulated and unpaid Distributions thereon, if any, to the applicable date of redemption. Holders will be given not less than 30 nor more than 60 days notice of such redemption. (b) In the case of an optional redemption, if fewer than all the outstanding Securities are to be so redeemed, the Securities to be redeemed will be determined as described in Section 4(f)(ii) below. The Debenture Issuer shall have the right (subject to the conditions in the Indenture) to elect to prepay the Debentures in whole or in part at any time on or after September 26, 2007 upon not less than 30 days and not more than 60 days notice, at the Redemption Price and, simultaneous with such prepayment, to cause a Like Amount of the Securities to be prepaid by the Trust at the Redemption Price on a Pro Rata basis. I-3 (c) If at any time an Investment Company Event, a Tax Event or a Regulatory Capital Event (each as defined below, and each a "Special Event") occurs, the Debenture Issuer shall have the right (subject to the conditions set forth in the Indenture) at any time prior to September 26, 2007 upon not less than 30 nor more than 60 days' notice, to prepay the Debentures in whole, but not in part, within the 180 days following the occurrence of such Special Event (the "180 Day Period"), and, simultaneous with such redemption, to cause a Like Amount of the Securities to be redeemed by the Trust at the Redemption Price on a Pro Rata basis. "Investment Company Event" means the receipt by the Trust and the Debenture Issuer of an opinion of counsel, rendered by a law firm experienced in such matters, to the effect that, as a result of change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, the Trust is or will be considered an "investment company" that is required to be registered under the Investment Company Act, which change becomes effective on or after the date of original issuance of the Preferred Securities of the Trust. A "Tax Event" means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after September 23, 2002, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures, (ii) interest payable by the Debenture Issuer on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Debenture Issuer, in whole or in part, for United States federal income tax purposes, or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Regulatory Capital Event" shall mean that the Debenture Issuer shall have received an opinion of independent bank regulatory counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any rules, guidelines or policies of the Federal Reserve Board or any regulatory authority applicable to the Debenture Issuer or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such pronouncement or decision is announced on or after September 23, 2002, the Preferred Securities do not constitute, or within 90 days of the date thereof, will not constitute, Tier 1 Capital (or its then equivalent); provided, however, that the inability of the Company to treat all or a portion of the Preferred Securities as Tier 1 Capital (or its equivalent) shall not constitute the basis for a Regulatory Capital Event if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve now or may hereafter accord treatment as Tier 1 Capital (or its equivalent) in excess of the amount which may qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines of the Federal Reserve; provided further, however, that the distribution of the I-4 Debentures in connection with the liquidation of the Trust by the Debenture Issuer shall not in and of itself constitute a Regulatory Capital Event unless such liquidation shall have occurred in connection with a Tax Event. (d) On and from the date fixed by the Administrative Trustees for any distribution of Debentures and liquidation of the Trust: (i) the Securities will no longer be deemed to be outstanding, (ii) the Clearing Agency or its nominee (or any successor Clearing Agency or its nominee), as the Holder of the Preferred Securities, will receive a registered global certificate or certificates representing the Debentures to be delivered upon such distribution, and (iii) any certificates representing Securities not held by the Clearing Agency or its nominee (or any successor Clearing Agency or its nominee) will be deemed to represent beneficial interests in a Like Amount of Debentures until such certificates are presented to the Debenture Issuer or its agent for transfer or reissue. (e) The Trust may not redeem fewer than all the outstanding Securities unless all accumulated and unpaid Distributions have been paid on all Securities for all quarterly Distribution periods terminating on or before the date of redemption. (f) The procedure with respect to redemptions or distributions of Securities shall be as follows: (i) Notice of any redemption of, or notice of distribution of Debentures in exchange for, the Securities (a "Redemption/Distribution Notice") will be given by the Trust by mail to each Holder to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this Section 4(f)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders. Each Redemption/Distribution Notice shall be addressed to the Holders at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (ii) In the event that fewer than all the outstanding Securities are to be redeemed, the particular Securities to be redeemed shall be selected on a Pro Rata basis (based upon Liquidation Amounts) not more than 60 days prior to the date fixed for redemption from the outstanding Preferred Securities not previously called for redemption; provided, however, that with respect to Holders that would be required to hold less than 100 but more than zero Securities as a result of such pro rata redemption, the Trust shall redeem Securities of each such Holder so that after such redemption such Holder shall hold either 100 Securities or such Holder no longer holds any Securities, and in selecting Securities for redemption shall use such method (including, without limitation, by lot) as the Trust shall deem fair and appropriate; and provided, further, that any such proration may be made on the basis of the aggregate Liquidation Amount of Securities held by each Holder thereof and may be made by making such adjustments as I-5 the Trust deems fair and appropriate in order that only Securities in denominations of $25 liquidation amount or integral multiples thereof shall be redeemed. In respect of Preferred Securities registered in the name of and held of record by the Clearing Agency or its nominee (or any successor Clearing Agency or its nominee) or any nominee, the distribution of the proceeds of such redemption will be made to the Clearing Agency and disbursed by such Clearing Agency in accordance with the procedures applied by such agency or nominee. (iii) If Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice, (which notice will be irrevocable), then (A) with respect to Preferred Securities issued in book-entry form, by 12:00 noon, New York City time, on the redemption date, provided that the Debenture Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures by 10:00 a.m., New York City time, on the maturity date or the date of redemption, as the case requires, the Property Trustee will deposit irrevocably with the Clearing Agency or its nominee (or successor Clearing Agency or its nominee) funds sufficient to pay the applicable Redemption Price with respect to such Preferred Securities and will give the Clearing Agency irrevocable instructions and authority to pay the Redemption Price to the relevant Clearing Agency Participants, and (B) with respect to Preferred Securities issued in certificated form and Common Securities, provided that the Debenture Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related prepayment or maturity of the Debentures, the Property Trustee will pay the relevant Redemption Price to the Holders by check mailed to the address of the relevant Holder appearing on the books and records of the Trust on the redemption date. If a Redemption/Distribution Notice shall have been given and funds deposited as required, if applicable, then immediately prior to the close of business on the date of such deposit, or on the redemption date, as applicable, Distributions will cease to accumulate on the Securities so called for redemption and all rights of Holders so called for redemption will cease, except the right of the Holders of such Securities to receive the Redemption Price, but without interest on such Redemption Price, and such Securities shall cease to be outstanding. (iv) Payment of accumulated and unpaid Distributions on the Redemption Date of the Securities will be subject to the rights of Holders on the close of business on a regular record date in respect of a Distribution Date occurring on or prior to such Redemption Date. Neither the Administrative Trustees nor the Trust shall be required to register or cause to be registered the transfer of (i) any Securities beginning on the opening of business 15 days before the day of mailing of a notice of redemption or any notice of selection of Securities for redemption or (ii) any Securities selected for redemption except the unredeemed portion of any Security being redeemed. If any date fixed for redemption of Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such next succeeding Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, with the same force and effect I-6 as if made on such date fixed for redemption. If payment of the Redemption Price in respect of any Securities is improperly withheld or refused and not paid either by the Property Trustee or by the Sponsor as guarantor pursuant to the relevant Securities Guarantee, Distributions on such Securities will continue to accumulate from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. (v) Redemption/Distribution Notices shall be sent by the Property Trustee on behalf of the Trust to (A) in respect of the Preferred Securities, to the Clearing Agency or its nominee (or any successor Clearing Agency or its nominee) if the Global Certificates have been issued or, if Definitive Preferred Security Certificates have been issued, to the Holder thereof, and (B) in respect of the Common Securities, to the Holder thereof. (vi) Subject to the foregoing and applicable law (including, without limitation, United States Federal securities laws and banking laws), provided the acquiror is not the Holder of the Common Securities or the obligor under the Indenture, the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. 5. Voting Rights - Preferred Securities. (a) Except as provided under Sections 5(b), 6(b) and 7 and as otherwise required by law and the Declaration, the Holders of the Preferred Securities will have no voting rights. (b) So long as any Debentures are held by the Property Trustee, the Trustees shall not (i) direct the time, method or place of conducting any proceeding for any remedy available to the Debenture Trustee or executing any trust or power conferred on such Debenture Trustee with respect to the Debentures, (ii) waive any past default that is waivable under Section 5.7 of the Indenture, (iii) exercise any right to rescind or annul a declaration of acceleration of the maturity of the principal of the Debentures or (iv) consent to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of a majority in liquidation amount of all outstanding Preferred Securities; provided, however, that where a consent under the Indenture would require the consent of a Super Majority, only the Holders of at least a Super Majority in aggregate liquidation amount of the Preferred Securities may direct the Property Trustee to give such consent or take such action; and provided further, that where a consent under the Indenture would require the consent of each holder of Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior approval of each Holder of the Preferred Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of the Preferred Securities except by subsequent vote of such Holders. The Property Trustee shall notify each Holder of Preferred Securities of any notice of default with respect to the Debentures. In addition to obtaining the foregoing approvals of such Holders of the Preferred Securities, prior to taking any of the foregoing actions, the Trustees shall obtain an opinion of counsel experienced in such matters to the effect that the Trust will not be classified as an association taxable as a corporation for United States Federal income tax purposes on account of such action. I-7 If an Event of Default under the Declaration has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay principal of or interest on the Debentures on the due date (or in the case of redemption, on the redemption date), then a Holder of Preferred Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on a Like Amount of Debentures (a "Direct Action") on or after the respective due date specified in the Debentures. In connection with such Direct Action, the rights of the Common Securities Holder will be subrogated to the rights of such Holder of Preferred Securities to the extent of any payment made by the Debenture Issuer to such Holder of Preferred Securities in such Direct Action. Except as provided in the second preceding sentence, the Holders of Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Debentures. Any approval or direction of Holders of Preferred Securities may be given at a separate meeting of Holders of Preferred Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Property Trustees will cause a notice of any meeting at which Holders of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Preferred Securities will be required for the Trust to redeem and cancel Preferred Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. Notwithstanding that Holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. 6. Voting Rights - Common Securities. (a) Except as provided under Sections 6(b), 6(c), and 7 as otherwise required by law and the Declaration, the Holders of the Common Securities will have no voting rights. (b) Unless an Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by the holder of the Common Securities. If an Event of Default has occurred and is continuing, the Property Trustee and the Delaware Trustee may be removed at such time by the holders of a Majority in liquidation amount of the outstanding Preferred Securities. In no event will the holders of the Preferred Securities have the right to vote to appoint, remove or replace the Administrative Trustees, which voting rights are vested exclusively in the Sponsor as the holder of the Common Securities. No resignation or removal of a Trustee and no appointment of a successor trustee shall be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the Declaration. I-8 (c) Subject to Section 2.6 of the Declaration and only after the Event of Default with respect to the Preferred Securities has been cured, waived or otherwise eliminated, so long as any Debentures are held by the Property Trustee, the Trustees shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or executing any trust or power conferred on such Debenture Trustee with respect to the Debentures, (ii) waive any past default that is waivable under Section 5.7 of the Indenture, (iii) exercise any right to rescind or annul a declaration of acceleration of the maturity of the principal of the Debentures or (iv) consent to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of a Majority in liquidation amount of all outstanding Common Securities; provided, however, that where a consent under the Indenture would require the consent of a Super Majority, only the Holders of at least a Super Majority in aggregate liquidation amount of the Common Securities may direct the Property Trustee to give such consent or take such action; and provided further, that where a consent under the Indenture would require the consent of each holder of Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior approval of each Holder of the Common Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of the Common Securities except by subsequent vote of such Holders. The Property Trustee shall notify each Holder of Common Securities of any notice of default with respect to the Debentures. In addition to obtaining the foregoing approvals of such Holders of the Common Securities prior to taking any of the foregoing actions, the Trustees shall obtain an opinion of counsel experienced in such matters to the effect that the Trust will not be classified as an association taxable as a corporation for United States Federal income tax purposes on account of such action. If an Event of Default under the Declaration has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay principal of or interest on the Debentures on the due date (or in the case of redemption, on the redemption date), then a Holder of Common Securities may institute a Direct Action for enforcement of payment to such Holder of the principal of or interest on a Like Amount of Debentures on or after the respective due date specified in the Debentures. In connection with Direct Action, the rights of the Common Securities Holder will be subordinated to the rights of such Holder of Preferred Securities to the extent of any payment made by the Debenture Issuer to such Holder of Common Securities in such Direct Action. Except as provided in the second preceding sentence, the Holders of Common Securities will not be able to exercise directly any other remedy available to the holders of the Debentures. Any approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Administrative Trustees will cause a notice of any meeting at which Holders of Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. I-9 No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. 7. Amendments to Declaration and Indenture. In addition to the requirements set out in Section 12.1 of the Declaration, the Declaration may be amended from time to time by the Sponsor, the Property Trustee and the Administrative Trustees without the consent of the Holders (i) to cure any ambiguity, correct or supplement any provisions in the Declaration that may be inconsistent with any other provisions, or to make any other provisions with respect to matters or questions arising under the Declaration which shall not be inconsistent with the other provisions of the Declaration; or (ii) to modify, eliminate or add to any provisions of the Declaration to such extent as shall be necessary to ensure that the Trust will be classified for United States Federal income tax purposes as a grantor trust at all times that any Securities are outstanding or to ensure that the Trust will not be required to register as an "Investment Company" under the Investment Company Act; provided, however, that in the case of clause (i), such action shall not adversely affect in any material respect the interests of any Holder, and any amendments of the Declaration shall become effective when notice thereof is given to the Holders. The Declaration may also be amended by the Trustees and the Sponsor with (i) the consent of Holders representing a Majority in liquidation amount of all outstanding Securities, and (ii) receipt by the Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment will not affect the Trust's status as a grantor trust for United States Federal income tax purposes or the Trust's exemption from status as an Investment Company under the Investment Company Act, provided that, without the consent of each Holder of Trust Securities, the Declaration may not be amended to: (i) change the amount or timing of any Distribution on the Trust Securities or reduce the amount payable on redemption thereof or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date; or (ii) restrict the right of a holder of Trust Securities to institute suit for the enforcement of any such payment on or after such date. 8. Pro Rata. A reference in these terms of the Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, in relation to a payment, an Event of Default under the Declaration has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Preferred Securities pro rata according to the aggregate liquidation amount of Preferred Securities held by the relevant Holder relative to the aggregate liquidation amount of all Preferred Securities outstanding, and, only after satisfaction of all amounts owed to the Holders of the Preferred Securities, to each Holder of Common Securities pro rata according to the aggregate liquidation amount of Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding. I-10 9. Ranking. The Preferred Securities rank pari passu with the Common Securities and payment thereon shall be made Pro Rata with the Common Securities, except that, if an Event of Default under the Declaration occurs and is continuing, no payments in respect of Distributions on, or payments upon liquidation, redemption or otherwise with respect to, the Common Securities shall be made until the Holders of the Preferred Securities shall be paid in full the Distributions, Redemption Price, Liquidation Distribution and other payments to which they are entitled at such time. 10. Acceptance of Securities Guarantee and Indenture. Each Holder of Preferred Securities and Common Securities, by the acceptance thereof, agrees to the provisions of the Preferred Securities Guarantee and the Common Securities Guarantee, respectively, including the subordination provisions therein and to the provisions of the Indenture. 11. No Preemptive Rights. The Holders shall have no preemptive rights to subscribe for any additional securities. 12. Miscellaneous. These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration, the Preferred Securities Guarantee, the Common Securities Guarantee (as may be appropriate), and the Indenture (including any supplemental indenture) to a Holder without charge upon written request to the Sponsor at its principal place of business. I-11 EXHIBIT A-1 FORM OF 8.30% CUMULATIVE TRUST PREFERRED SECURITY CERTIFICATE [FORM OF FACE OF SECURITY] [IF THIS GLOBAL SECURITY IS A GLOBAL PREFERRED SECURITY, INSERT: THIS PREFERRED SECURITY IS A GLOBAL PREFERRED SECURITY WITHIN THE MEANING OF THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF [THE DEPOSITORY TRUST COMPANY]/1/ (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING AGENCY. THIS PREFERRED SECURITY IS EXCHANGEABLE FOR PREFERRED SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO TRANSFER OF THIS PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED SECURITY AS A WHOLE BY THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.] UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE CLEARING AGENCY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE CLEARING AGENCY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE CLEARING AGENCY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] __________________________ /1/ Insert name of Clearing Agency for the Global Preferred Securities. A1-1 Number of Aggregate Liquidation Preferred Securities Amount:__________________ ___________________ CUSIP NO. 85915Q 20 6 Certificate Evidencing 8.30% Cumulative Trust Preferred Securities of Sterling Bancshares Capital Trust III 8.30% Cumulative Trust Preferred Securities (liquidation amount $25 per Preferred Security) Sterling Bancshares Capital Trust III, a statutory trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that ______________ (the "Holder") is the registered owner of [$_________ in aggregate liquidation amount of Preferred Securities of the Trust]/2/ [the aggregate liquidation amount of Preferred Securities of the Trust specified in Schedule A hereto]/3/ representing undivided beneficial interests in the assets of the Trust designated the 8.30% Cumulative Trust Preferred Securities (liquidation amount $25 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of September 26, 2002, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Preferred Securities as set forth in Annex I to the Declaration. Capitalized terms used but not defined herein shall have the meaning given them in the Declaration. The Sponsor will provide a copy of the Declaration, the Preferred Securities Guarantee, the Common Securities Guarantee (as may be appropriate), and the Indenture (including any supplemental indenture) to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder and to the benefits of the Preferred Securities Guarantee to the extent provided therein. By acceptance, the Holder agrees to treat, for United States Federal income tax purposes, the Debentures as indebtedness and the Preferred Securities as evidence of indirect beneficial ownership in the Debentures. ______________________________ /2/ Insert in Definitive Preferred Securities only. /3/ Insert in Global Preferred Securities only. A1-2 IN WITNESS WHEREOF, the Trust has duly executed this certificate. Dated: STERLING BANCSHARES CAPITAL TRUST III By:__________________________________ Name:________________________________ Administrative Trustee PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Preferred Securities referred to in the within-mentioned Declaration. DEUTSCHE BANK TRUST COMPANY AMERICAS, as Property Trustee By:__________________________________ Authorized Signatory A1-3 [FORM OF REVERSE OF SECURITY] Distributions payable on each Preferred Security will be fixed at a rate per annum of 8.30% (the "Coupon Rate") of the liquidation amount of $25 per Preferred Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one quarterly period will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds on hand legally available therefor. Distributions on the Preferred Securities will be cumulative, will accumulate from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from September 26, 2002 will be payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2002, except as otherwise described below and on the Stated Maturity Date. Distributions will be computed on the basis of a 360-day year consisting of twelve 30-day months and, for any period less than a full calendar month, the number of days elapsed in such month. As long as no Event of Default has occurred and is continuing under the Indenture, the Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period at any time and from time to time on the Debentures for a period not exceeding 20 consecutive calendar quarterly periods, including the first such quarterly period during such extension period (each an "Extension Period"), provided that no Extension Period shall end on a date other than an Interest Payment Date for the Debentures or extend beyond the Stated Maturity Date of the Debentures. As a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accumulate with interest thereon (to the extent permitted by applicable law, but not at a rate exceeding the rate of interest then accruing on the Debentures) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Debenture Issuer may further defer payments of interest by further extending such Extension Period; provided that such Extension Period, together with all such previous and further extensions within such Extension Period, may not exceed 20 consecutive quarterly periods, including the first quarterly period during such Extension Period, end on a date other than an Interest Payment Date for the Debentures or extend beyond the Stated Maturity Date of the Debentures. Payments of accumulated Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. Subject to the prior approval of the Federal Reserve Board if such approval is then required under applicable law or capital guidelines or policies of the Federal Reserve Board and the receipt of any other required regulatory approvals and to certain other conditions set forth in the Declaration and the Indenture, the Property Trustee may, at the direction of the Sponsor, at any time liquidate the Trust and cause the Debentures to be distributed to the holders of the Securities in liquidation of the Trust or, simultaneously with any redemption of the Debentures, cause a Like Amount of the Securities to be redeemed by the Trust. The Preferred Securities shall be redeemable as provided in the Declaration. A1-4 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security Certificate to: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert assignee's social security or tax identification number) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints _______________________________________________________ ________________________________________________________________________________ ________________________________ agent to transfer this Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: _______________________ Signature: __________________ (Sign exactly as your name appears on the other side of this Preferred Security Certificate) Signature Guarantee ***: ___________________________________ _________________________ *** Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities and Exchange Act of 1934, as amended. A1-5 Schedule A* The initial number of Preferred Securities evidenced by the Certificate to which this Schedule is attached is 1,250,000 (having an aggregate liquidation amount of $31,250,000). The notations in the following table evidence decreases and increases in the number of Preferred Securities evidenced by such certificate.
- ------------------------------------------------------------------------------------------------------------------ Number of Preferred Decrease in Increase in Securities Number of Number of Remaining After Preferred Preferred such Decrease Notation by Securities Securities or Increase Registrar - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------
________________________________ * Append to Global Preferred Securities only. A1-6 EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS COMMON SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS COMMON SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS COMMON SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH STERLING BANCSHARES, INC. (THE "COMPANY") OR ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS COMMON Security (OR ANY PREDECESSOR OF THIS COMMON SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS COMMON SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS COMMON SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE TRUST AND THE COMPANY PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO CLAUSE (D), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE REVERSE OF THIS COMMON SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEREE TO THE TRUST. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS COMMON SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. Certificate Evidencing Common Securities of Sterling Bancshares Capital Trust III 8.30% Common Securities (liquidation amount $25 per Common Security) Sterling Bancshares Capital Trust III, a statutory trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that ______________________ (the "Holder") is the registered owner of __________ common securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the 8.30% Common Securities (liquidation amount $25 per Common Security) (the "Common Securities"). The Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of September 26, 2002, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Common Securities as set forth in Annex I to the Declaration. Capitalized terms used but not defined herein shall have the meaning given them in the Declaration. The Sponsor will provide a copy of the Declaration, the Common Securities Guarantee, the Preferred Securities Guarantee (as may be appropriate) and the Indenture (including any supplemental indenture) to a Holder without charge upon written request to the Sponsor at its principal place of business. Upon receipt of this certificate, the Sponsor is bound by the Declaration and is entitled to the benefits thereunder and to the benefits of the Common Securities Guarantee to the extent provided therein. By acceptance, the Holder agrees to treat, for United States Federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this ___ day of September, 2002. STERLING BANCSHARES CAPITAL TRUST III By:________________________________ Name:______________________________ Administrative Trustee [FORM OF REVERSE OF SECURITY] Distributions payable on each Common Security will be fixed at a rate per annum of 8.30% (the "Coupon Rate") of the liquidation amount of $25 per Common Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one quarterly period will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds available therefor. Distributions on the Common Securities will be cumulative, will accrue from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from September 26, 2002 and will be payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2002, except as otherwise described below and on the Stated Maturity Date. Distributions will be computed on the basis of a 360-day year consisting of twelve 30-day months and, for any period less than a full calendar month, the number of days elapsed in such month. As long as no Event of Default has occurred and is continuing under the Indenture, the Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period at any time and from time to time on the Debentures for a period not exceeding 20 consecutive calendar quarterly periods, including the first such quarterly period during such extension period (each an "Extension Period"), provided that no Extension Period shall end on a date other than an Interest Payment Date for the Debentures or extend beyond the Stated Maturity Date of the Debentures. As a consequence of such deferral, Distributions will also be deferred. Despite such deferral, Distributions will continue to accumulate with interest thereon (to the extent permitted by applicable law, but not at a rate exceeding the rate of interest then accruing on the Debentures) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Debenture Issuer may further defer payments of interest by further extending such Extension Period; provided that such Extension Period, together with all such previous and further extensions within such Extension Period, may not exceed 20 consecutive quarterly periods, including the first quarterly period during such Extension Period, or end on a date other than an Interest Payment Date for the Debentures or extend beyond the Stated Maturity Date of the Debentures. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. Subject to the prior approval of the Federal Reserve Board if such approval is then required under applicable law or capital guidelines or policies of the Federal Reserve Board and the receipt of any other required regulatory approval and to certain other conditions set forth in the Declaration and the Indenture, the Property Trustee may, at the direction of the Sponsor, at any time liquidate the Trust and cause the Debentures to be distributed to the holders to the Securities in liquidation of the Trust or, simultaneous with any redemption of the Debentures, cause a Like Amount of the Securities to be redeemed by the Trust. Under certain circumstances, the right of the holders of the Common Securities shall be subordinate to the rights of the holders of the Preferred Securities (as defined in the Declaration), as provided in the Declaration. The Common Securities shall be redeemable as provided in the Declaration. EX-4.6 6 dex46.txt SECOND SUPPLERMENTAL INDENTURE EXHIBIT 4.6 SECOND SUPPLEMENTAL INDENTURE Between STERLING BANCSHARES, INC. and DEUTSCHE BANK TRUST COMPANY AMERICAS (FORMERLY KNOWN AS "BANKERS TRUST COMPANY") AS TRUSTEE Dated as of September 26, 2002. TABLE OF CONTENTS*
PAGE ---- ARTICLE I DEFINITIONS ........................................................ 2 Section 1.1 Definition of Terms ..................................... 2 ARTICLE II GENERAL TERMS AND CONDITIONS OF THE DEBENTURES .................... 4 Section 2.1 Designation and Principal Amount ........................ 4 Section 2.2 Maturity ................................................ 4 Section 2.3 Form and Payment ........................................ 5 Section 2.4 Global Debenture ........................................ 5 Section 2.5 Interest ................................................ 7 ARTICLE III PREPAYMENT OF THE DEBENTURES ..................................... 8 Section 3.1 Special Event Prepayment ................................ 8 Section 3.2 Optional Prepayment by Company .......................... 8 Section 3.3 No Sinking Fund ......................................... 9 ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD .............................. 9 Section 4.1 Extension of Interest Payment Period .................... 9 Section 4.2 Notice of Extension ..................................... 9 Section 4.3 Limitation of Transactions .............................. 10 ARTICLE V CHANGE OF STATED MATURITY DATE ..................................... 11 Section 5.1 Change of Stated Maturity Date .......................... 11 Section 5.2 Notice of Change of Stated Maturity Date ................ 11 ARTICLE VI EXPENSES .......................................................... 12 Section 6.1 Payment of Expenses ..................................... 12 Section 6.2 Payment Upon Resignation or Removal ..................... 12 ARTICLE VII COVENANT TO LIST ON EXCHANGE ..................................... 13 Section 7.1 Listing on an Exchange .................................. 13 ARTICLE VIII FORM OF DEBENTURE ............................................... 13 Section 8.1 Form of Debenture ....................................... 13 ARTICLE IX ORIGINAL ISSUE OF DEBENTURES ...................................... 13 Section 9.1 Original Issue of Debentures ............................ 13 ARTICLE X MISCELLANEOUS ...................................................... 13 Section 10.1 Ratification of Indenture ............................... 13 Section 10.2 Trustee Not Responsible for Recitals .................... 14 Section 10.3 Governing Law ........................................... 14 Section 10.4 Counterparts ............................................ 14
*THIS TABLE OF CONTENTS SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE A PART OF THIS SECOND SUPPLEMENTAL INDENTURE. i SECOND SUPPLEMENTAL INDENTURE Between STERLING BANCSHARES, INC. and DEUTSCHE BANK TRUST COMPANY (Formerly Known As "Bankers Trust Company") SECOND SUPPLEMENTAL INDENTURE, dated as of September 26, 2002 (the "Second Supplemental Indenture"), between Sterling Bancshares, Inc., a Texas corporation (the "Company"), and Deutsche Bank Trust Company Americas (formerly known as "Bankers Trust Company"), a New York banking corporation, as trustee (the "Trustee") under the Indenture dated as of March 21, 2001 between the Company and the Trustee (the "Indenture"). WHEREAS, the Company executed and delivered the Indenture to the Trustee to provide for the future issuance of the Company's unsecured junior subordinated securities to be issued from time to time in one or more series as might be determined by the Company under the Indenture, in an unlimited aggregate principal amount which may be authenticated and delivered as provided in the Indenture; WHEREAS, pursuant to the terms of the Indenture, the Company desires to provide for the establishment of a new series of such securities to be known as its 8.30% Junior Subordinated Deferrable Interest Debentures due September 26, 2032 (the "Debentures"), the form and substance of such Debentures and the terms, provisions and conditions thereof to be set forth as provided in the Indenture and this Second Supplemental Indenture; WHEREAS, the Company and Sterling Bancshares Capital Trust III, a Delaware statutory trust (the "Trust"), has offered to the public $31,250,000 aggregate liquidation amount of its 8.30% Trust Preferred Securities (the "Preferred Securities"), representing preferred undivided beneficial interests in the assets of the Trust, and proposes to invest the proceeds from such offering, together with the proceeds of the issuance and sale by the Trust to the Company of $966,500 aggregate liquidation amount of its 8.30% Trust Common Securities (the "Common Securities"), in $32,216,500 aggregate principal amount of the Debentures; and WHEREAS, the Company has requested that the Trustee execute and deliver this Second Supplemental Indenture and all requirements necessary to make this Second Supplemental Indenture a valid instrument in accordance with its terms, and to make the Debentures, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company, have been performed, and the execution and delivery of this Second Supplemental Indenture has been duly authorized in all respects. NOW THEREFORE, in consideration of the purchase and acceptance of the Debentures by the Holders thereof, and for the purpose of setting forth, as provided in the Indenture, the form and substance of the Debentures and the terms, provisions and conditions thereof, the Company covenants and agrees with the Trustee as follows: ARTICLE I DEFINITIONS Section 1.1 Definition of Terms. Unless the context otherwise requires: (a) a term defined in the Indenture has the same meaning when used in this Second Supplemental Indenture; (b) a term defined anywhere in this Second Supplemental Indenture has the same meaning throughout; (c) the singular includes the plural and vice versa; (d) a reference to a Section or Article is to a Section or Article of this Second Supplemental Indenture; (e) headings are for convenience of reference only and do not affect interpretation; (f) the following terms have the meanings given to them in the Declaration: (i) Administrative Trustee; (ii) Delaware Trustee; (iii) Distributions; (iv) Preferred Securities Guarantee; (v) Property Trustee; and (vi) Underwriting Agreement. (g) the following terms have the meanings given to them in this Section 1.1(g): "Additional Sums" shall have the meaning set forth in Section 2.5(c). "Compounded Interest" shall have the meaning set forth in Section 4.1. "Coupon Rate" shall have the meaning set forth in Section 2.5(a). "Declaration" means the Amended and Restated Declaration of Trust of Sterling Bancshares Capital Trust III, a Delaware statutory trust, dated as of September 26, 2002. "Deferred Interest" shall have the meaning set forth in Section 4.1. 2 "Dissolution Event" means the dissolution of the Trust pursuant to the Declaration, and the distribution of the Debentures held by the Property Trustee pro rata to the holders of the Trust Securities in accordance with the Declaration. "Extended Interest Payment Period" shall have the meaning set forth in Section 4.1. "Federal Reserve" means the Board of Governors of the Federal Reserve System. "Global Debenture" shall have the meaning set forth in Section 2.4(a). "Holder" means any person in whose name at the time a Debenture is registered on the Securities Register. "Initial Optional Prepayment Date" means September 26, 2007. "Interest Payment Date" shall have the meaning set forth in Section 2.5(a). "Investment Company Event" means the receipt by the Trust and the Company of an opinion of counsel, rendered by a law firm experienced in such matters, to the effect that, as a result of a change in law or regulation or a change in the interpretation or application of law or regulation by a legislative body, court, governmental agency or regulatory authority, the Trust is or will be considered an "investment company" that is required to be registered under the Investment Company Act of 1940, as amended, which change becomes effective on or after the date of original issuance of the Preferred Securities of the Trust. "Non Book-Entry Preferred Securities" shall have the meaning set forth in Section 2.4(a). "Prepayment Price" shall have the meaning set forth in Section 3.1. "Regulatory Capital Event" means that the Company shall have received an opinion of independent bank regulatory counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any rules, guidelines or policies of the Federal Reserve or any rules, guidelines or policies of any regulatory authority applicable to the Company, or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such pronouncement or decision is announced on or after the date of original issuance of the Debentures, the Preferred Securities do not constitute, or within 90 days of the date thereof, will not constitute, Tier 1 Capital (or its equivalent) for purposes of the Federal Reserve's capital guidelines for bank holding companies; provided, however, that the inability of the Company to treat all or a portion of the Preferred Securities as Tier 1 Capital (or its equivalent) shall not constitute the basis for a Regulatory Capital Event if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve now or may hereafter accord 3 treatment as Tier 1 Capital (or its equivalent) in excess of the amount which may qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines of the Federal Reserve; provided, further, however, that the distribution of the Debentures in connection with the liquidation of the Trust by the Company, as sponsor, and the treatment thereafter of the Debentures as other than Tier 1 Capital shall not in and of itself constitute a Regulatory Capital Event unless such liquidation shall have occurred in connection with a Tax Event. "Special Event" means an Investment Company Event, Tax Event or a Regulatory Capital Event, as the case may be. "Stated Maturity Date" means the date on which the Debentures mature and on which the principal shall be due and payable, together with all accrued and unpaid interest thereon including Compounded Interest and Additional Sums, if any, which date shall be September 26, 2032. "Tax Event" means that the Trust and the Company shall have received an opinion of counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of the original issuance of the Debentures, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures, (ii) interest payable by the Company on the Debentures is not, or within 90 days of the date thereof will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes, or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges. ARTICLE II GENERAL TERMS AND CONDITIONS OF THE DEBENTURES Section 2.1 Designation and Principal Amount. There is hereby authorized a series of Securities designated the "8.30% Junior Subordinated Deferrable Interest Debentures due September 26, 2032," limited in aggregate principal amount to $32,216,500 which amount shall be as set forth in any written order of the Company for the authentication and delivery of Debentures pursuant to Section 2.4 of the Indenture. Section 2.2 Maturity. The Debentures shall mature on September 26, 2032 (the "Stated Maturity Date"). 4 Section 2.3 Form and Payment. Except as provided in Section 2.4, the Debentures shall be issued in fully registered certificated form without interest coupons. Principal and interest on the Debentures issued in certificated form will be payable, the transfer of such Debentures will be registrable and such Debentures will be exchangeable for Debentures bearing identical terms and provisions at the office or agency of the Company maintained for such purpose pursuant to Section 3.2 of the Indenture; provided, however, that payment of interest with respect to Debentures (other than a Global Debenture) may be made at the option of the Company (i) by check mailed to the Holder entitled thereto at such address as shall appear in the Securities Register or (ii) by wire transfer to an account appropriately designated by the Holder entitled thereto, provided that proper transfer instructions have been received in writing by the relevant record date. Notwithstanding the foregoing, so long as the Holder of any Debentures is the Property Trustee, the payment of the principal of and interest (including Compounded Interest and Additional Sums, if any) on such Debentures held by the Property Trustee will be made at such place and to such account as may be designated by the Property Trustee. Section 2.4 Global Debenture. (a) In connection with a Dissolution Event, (i) if any Preferred Securities are held in book-entry form, the related Debentures in certificated form shall be presented to the Trustee (if an arrangement with the Depositary has been maintained) by the Property Trustee in exchange for one or more global Debentures in an aggregate principal amount equal to the aggregate principal amount of all outstanding Debentures (a "Global Debenture"), to be registered in the name of the Depositary, or its nominee, and delivered by the Trustee to the Depositary for crediting to the accounts of its participants pursuant to the instructions of the Administrative Trustees. The Company upon any such presentation shall execute one or more Global Debentures in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery in accordance with the Indenture and this Second Supplemental Indenture. Payments on the Debentures issued as a Global Debenture will be made to the Depositary; and (ii) if any Preferred Securities are held in non book-entry certificated form, the related Debentures in certificated form may be presented to the Trustee by the Property Trustee and any certificate which represents Preferred Securities other than Preferred Securities in book-entry form held by the Depositary or its nominee ("Non Book-Entry Preferred Securities") will be deemed to represent beneficial interests in Debentures presented to the Trustee by the Property Trustee having an aggregate principal amount equal to the aggregate liquidation amount of the Non Book-Entry Preferred Securities until such Preferred Security certificates are presented to the Security Registrar for transfer or reissuance, at which time such Preferred Security certificates will be canceled and a Debenture, registered in the name of the holder of the Preferred Security certificate or the transferee of the holder of such Preferred Security certificate, as the case may be, 5 with an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Security certificate canceled, will be executed by the Company and delivered to the Trustee for authentication and delivery in accordance with the Indenture and this Second Supplemental Indenture. Upon issue of such Debentures, Debentures with an equivalent aggregate principal amount that were presented by the Property Trustee to the Trustee will be deemed to have been canceled. (b) A Global Debenture shall represent the aggregate amount of outstanding Debentures from time to time endorsed thereon; provided, that the aggregate amount of outstanding Debentures represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges or redemptions. Any endorsement of a Global Debenture to reflect the amount of any increase or decrease in the amount of outstanding Debentures represented thereby shall be made by the Trustee, in accordance with instructions given by the Company as required by this Section 2.4. (c) A Global Debenture may be transferred, in whole but not in part, only to another nominee of the Depositary, or to a successor Depositary selected or approved by the Company or to a nominee of such successor Depositary. (d) If (i) at any time the Depositary notifies the Company that it is unwilling or unable to continue as Depositary or if at any time the Depositary for such series shall no longer be registered or in good standing under the Exchange Act, or other applicable statute or regulation, and a successor Depositary for such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, as the case may be, (ii) the Company at any time determines that the Debentures shall no longer be solely represented by a Global Debenture or (iii) there shall have occurred an Event of Default, then the Company shall execute, and, subject to Article II of the Indenture, the Trustee, upon written notice from the Company, shall authenticate and deliver the Debentures in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debenture, in exchange for such Global Debenture. In such event the Company shall execute, and, subject to Section 2.6 of the Indenture, the Trustee, upon receipt of an Officers' Certificate evidencing such determination by the Company and a Company Order, shall authenticate and make available for delivery the Debentures in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debenture, in exchange for such Global Debenture. Upon the exchange of the Global Debenture for such Debentures in definitive registered form without coupons, in authorized denominations, the Global Debenture shall be canceled by the Trustee. Such Debentures in definitive registered form issued in exchange for the Global Debenture shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Securities to the Depositary for delivery to the Persons in whose names such Securities are so registered. 6 Section 2.5 Interest. (a) Each Debenture will bear interest at the rate of 8.30% per annum (the "Coupon Rate") from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from the original date of issuance until the principal thereof becomes due and payable, and on any overdue principal and, to the extent that payment of such interest is enforceable under applicable law, on any overdue installment of interest at the Coupon Rate, compounded quarterly, payable quarterly in arrears on the last day of March, June, September and December of each year and on the Stated Maturity Date (each, an "Interest Payment Date"), commencing on December 31, 2002, to the Person in whose name such Debenture or any predecessor Debenture is registered at the close of business on the relevant record date, which will be the 15th day of the month in which the relevant Interest Payment Date occurs, except as otherwise provided pursuant to the provisions of Article IV hereof. (b) The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Except as provided in the following sentence, the amount of interest payable for any period shorter than a full calendar month for which interest is computed, will be computed on the basis of the actual number of days elapsed in the calendar month. In the event that any Interest Payment Date falls on a day that is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date that such interest otherwise would have been payable. (c) During such time as the Property Trustee is the holder of any Debentures, the Company shall pay any additional amounts on the Debentures as may be necessary in order that the amount of Distributions then due and payable by the Trust on the outstanding Trust Securities shall not be reduced as a result of any additional taxes, duties and other governmental charges to which the Trust has become subject as a result of a Tax Event ("Additional Sums"). Whenever in the Indenture, this Second Supplemental Indenture, or the Debentures there is a reference in any context to the payment of principal of or interest on the Debentures, such mention shall be deemed to include mention of the payments of the Additional Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof where such express mention is not made; provided, however, that the deferral of the payment of interest pursuant to Section 4.1 or the provisions of the Debentures shall not defer the payment of any Additional Sums that may be due and payable. 7 ARTICLE III PREPAYMENT OF THE DEBENTURES Section 3.1 Special Event Prepayment. If, prior to the Initial Optional Prepayment Date, a Special Event has occurred and is continuing, then notwithstanding Section 3.2(a) but subject to Section 3.2(c), the Company shall have the right, at any time within 180 days following the occurrence of such Special Event, upon (i) not less than 45 days prior written notice to the Trustee, and (ii) not less than 30 days nor more than 60 days prior written notice to the Holders, to prepay the Debentures, in whole (but not in part), at a prepayment price equal to 100% of the principal amount of the Debentures plus accrued and unpaid interest thereon (including Compounded Interest), if any, and Additional Sums, if any, to the applicable date of prepayment (the "Prepayment Price"). The Prepayment Price shall be paid prior to 12:00 noon, New York City time, on the date of such prepayment or such earlier time as the Company determines, provided that the Company shall deposit with the Trustee an amount sufficient to pay the Prepayment Price by 10:00 a.m., New York City time, on the date such Prepayment Price is to be paid. Section 3.2 Optional Prepayment by Company. (a) Subject to the provisions of this Article III, the Company shall have the right to prepay the Debentures, in whole or in part, from time to time, on or after the Initial Optional Prepayment Date, at the Prepayment Price. If the Debentures are only partially prepaid pursuant to this Section 3.2, the Debentures to be prepaid shall be selected on a pro rata basis not more than 60 days prior to the date fixed for prepayment from the outstanding Debentures not previously called for prepayment, provided, however, that any such proration may be made on the basis of the aggregate principal amount of Debentures held by each Holder and may be made by making such adjustments as the Company deems fair and appropriate in order that only Debentures in denominations of $25 or integral multiples thereof shall be prepaid. The Prepayment Price shall be paid prior to 12:00 noon, New York time, on the date of such prepayment or at such earlier time as the Company determines, provided further that the Company shall deposit with the Trustee an amount sufficient to pay the Prepayment Price by 10:00 a.m., New York City time, on the date such Prepayment Price is to be paid. (b) Notwithstanding the first sentence of Section 3.2(a), upon the entry of an order for dissolution of the Trust by a court of competent jurisdiction, the Debentures thereafter will be subject to prepayment, in whole only, but not in part, at the option of the Company, on or after the Initial Optional Prepayment Date, at the Prepayment Price, and otherwise in accordance with this Article III. (c) Any prepayment of Debentures pursuant to Section 3.1 or Section 3.2 shall be subject to the Company obtaining the prior approval of the Federal Reserve, if such approval is then required under applicable capital guidelines or policies of the Federal Reserve, and any other required regulatory approvals. 8 (d) If a prepayment of some but not all of the Debentures would result in the Preferred Securities ceasing to be quoted on The Nasdaq Stock Market or any successor thereto or result in a delisting of the Preferred Securities from any national securities exchange on which the Preferred Securities are then listed, the Debentures will be subject to prepayment, in whole only, but not in part, by the Company. Section 3.3 No Sinking Fund. The Debentures are not entitled to the benefit of any sinking fund. ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD Section 4.1 Extension of Interest Payment Period. So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time and from time to time during the term of the Debentures, to defer payments of interest by extending the interest payment period of such Debentures for a period not exceeding 20 consecutive quarterly periods, including the first such quarterly period during such extension period (the "Extended Interest Payment Period"), during which Extended Interest Payment Period no interest shall be due and payable; provided that no Extended Interest Payment Period shall end on a date other than an Interest Payment Date or extend beyond the Stated Maturity Date. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 4.1, will bear interest thereon at the Coupon Rate compounded quarterly for each quarterly period of the Extended Interest Payment Period ("Compounded Interest"). At the end of the Extended Interest Payment Period, the Company shall pay all interest accrued and unpaid on the Debentures, including any Additional Sums and Compounded Interest (together, "Deferred Interest") that shall be payable to the Holders of the Debentures in whose names the Debentures are registered in the Securities Register on the record date for the first regular Interest Payment Date next preceding the end of the Extended Interest Payment Period (which Interest Payment Date shall be as specified in the Debenture). Before the termination of any Extended Interest Payment Period, the Company may further defer payments of interest by further extending such period, provided that such period, together with all such previous and further extensions within such Extended Interest Payment Period, shall not exceed 20 consecutive quarterly periods, including the first such quarterly period during such Extended Interest Payment Period, end on a date other than an Interest Payment Date or extend beyond the Stated Maturity Date. Upon the termination of any Extended Interest Payment Period and the payment of all Deferred Interest then due, the Company may commence a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof, but the Company may prepay at any time all or any portion of the interest accrued during an Extended Interest Payment Period. Section 4.2 Notice of Extension. (a) If the Property Trustee is the only registered holder of the Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give 9 written notice to the Administrative Trustees, the Property Trustee and the Trustee of its selection of such Extended Interest Payment Period five Business Days before the earlier of (i) the next succeeding date on which Distributions on the Trust Securities issued by the Trust are payable, and (ii) the date the Trust is required to give notice of the record date, or the date such Distributions are payable, to any national securities exchange or to holders of the Preferred Securities issued by the Trust, but in any event at least five Business Days before such record date. (b) If the Property Trustee is not the only holder of the Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give the Holders of the Debentures and the Trustee written notice of its selection of such Extended Interest Payment Period at least 10 Business Days before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to any national securities exchange. (c) The quarterly period in which any notice is given pursuant to paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the 20 quarterly periods permitted in the maximum Extended Interest Payment Period permitted under Section 4.1. Section 4.3 Limitation of Transactions. If (i) the Company shall exercise its right to defer payment of interest as provided in Section 4.1 and the Extended Interest Payment Period is continuing, (ii) there shall have occurred any event, of which the Company has actual knowledge that (a) is, or with the giving of notice or the lapse of time, or both, would constitute, an Event of Default and (b) in respect of which the Company shall not have taken reasonable steps to cure, or (iii) the Debentures are held by the Property Trustee and the Company shall be in default with respect to its payment obligations under the Preferred Securities Guarantee, then the Company will not: (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital stock (which includes common and preferred stock) (other than (1) dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, Common Stock of the Company, (2) any declaration of a dividend in connection with the implementation of a stockholder's rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (3) as a result of a reclassification of any class or series of the Company's capital stock solely into another class or series of the Company's capital stock, (4) the purchase of fractional shares resulting from such reclassification or pursuant to the conversion or exchange provisions of such capital stock or any security convertible or exchangeable into shares of the Company's capital stock, and (5) purchases of Common Stock related to the issuance of Common Stock or rights under any of the Company's benefit plans for its directors, officers or employees or any of the Company's dividend reinvestment plans); (ii) make any payment of principal, premium, if any, or interest on or repay or repurchase or redeem any debt securities of the Company (including Other Debentures) that rank pari passu with or junior in right of payment to the Debentures; or (iii) make any guarantee payments (other than payments under the Preferred Securities Guarantee) with respect to any guarantee by the Company of the debt securities of any Subsidiary of the Company (including Other Guarantees) if such guarantee ranks pari passu or junior in right of payment to the Debentures. 10 ARTICLE V CHANGE OF STATED MATURITY DATE Section 5.1 Change of Stated Maturity Date. So long as no Event of Default has occurred and is continuing and subject to Section 5.2(c), the Company shall have the right, at any time, but only once, during the term of the Debentures, to reduce the term of the Debentures by selecting a date, not earlier than the Initial Optional Prepayment Date, as the new "Stated Maturity Date" for the purposes of this Second Supplemental Indenture and the Debentures; provided that such new "Stated Maturity Date" is an Interest Payment Date and provided further that such new "Stated Maturity Date" shall not be later than September 26, 2032 or be earlier than any date that has occurred. Section 5.2 Notice of Change of Stated Maturity Date. (a) If the Property Trustee is the only registered holder of the Debentures at the time the Company designates a new "Stated Maturity Date" pursuant to Section 5.1, the Company shall give written notice to the Administrative Trustees, the Property Trustee and the Trustee of its selection of such new "Stated Maturity Date" five Business Days before the earlier of (i) the next succeeding date on which Distributions on the Trust Securities issued by the Trust are payable, and (ii) the date the Trust is required to give notice of the record date, or the date such Distributions are payable, to any national securities exchange or to holders of the Preferred Securities issued by the Trust, but in any event at least five Business Days before such record date. (b) If the Property Trustee is not the only holder of the Debentures at the time the Company selects a new "Stated Maturity Date" pursuant to Section 5.1, the Company shall give the Holders of the Debentures and the Trustee written notice of its selection of such new "Stated Maturity Date" at least 10 Business Days before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to any national securities exchange. (c) It is a condition precedent to the exercise of the Company's right under Section 5.1 that the Company shall have obtained the approval of the Federal Reserve for such exercise, if such approval is then required for such exercise under applicable laws, regulations, capital guidelines or policies of the Federal Reserve, and any other regulatory approval required for such exercise. (d) Any selection of a new "Stated Maturity Date" shall have no effect under this Second Supplemental Indenture unless and until the Company and the Trustee have given the written notices required by Section 5.2(a) or (b). If all such notices have been given in accordance with Section 5.2 (a) or (b), then the new "Stated Maturity Date" selected in accordance with Section 5.1 shall become the Stated Maturity Date for the Debentures with effect from the date specified in such notices. 11 ARTICLE VI EXPENSES Section 6.1 Payment of Expenses. In connection with the offering, sale and issuance of the Debentures to the Property Trustee and in connection with the sale of the Trust Securities by the Trust, the Company, in its capacity as borrower with respect to the Debentures, shall: (a) pay all costs and expenses relating to the offering, sale and issuance of the Debentures, including commissions to the underwriter payable pursuant to the Underwriting Agreement and compensation of the Trustee under the Indenture in accordance with the provisions of Section 6.6 of the Indenture; (b) pay all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization of the Trust), the offering, sale and issuance of the Trust Securities (including commissions to the underwriters in connection therewith), the fees and expenses of the Property Trustee and the Delaware Trustee, the costs and expenses relating to the operation of the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of assets of the Trust; (c) be primarily and fully liable for any indemnification obligations arising with respect to the Declaration; (d) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust; and (e) pay all other fees, expenses, debts and obligations (other than in respect of the Trust Securities). The provisions of this Section shall survive the termination of this Second Supplemental Indenture. Section 6.2 Payment Upon Resignation or Removal. Upon termination of this Second Supplemental Indenture or the Indenture or the removal or resignation of the Trustee, unless otherwise stated, the Company shall pay to the Trustee all amounts accrued to the date of such termination, removal or resignation that are payable pursuant to Section 6.6 of the Indenture. Upon termination of the Declaration or the removal or resignation of the Delaware Trustee or the Property Trustee, as the case may be, pursuant to Section 5.7 of the Declaration, the Company shall pay to the Delaware Trustee or the Property Trustee, as the case may be, all amounts accrued to the date of such termination, removal or resignation. 12 ARTICLE VII COVENANT TO LIST ON EXCHANGE Section 7.1 Listing on an Exchange. If the Debentures are distributed to the holders of the Securities issued by the Trust, and the Preferred Securities are then so listed, the Company will use commercially reasonable efforts to list such Debentures on The Nasdaq Stock Market or on such other exchange as the Preferred Securities are then listed. ARTICLE VIII FORM OF DEBENTURE Section 8.1 Form of Debenture. The Debentures and the Trustee's Certificate of Authentication to be endorsed thereon shall be substantially in the form of Exhibit A, the terms of which are incorporated in and made a part of this Second Supplemental Indenture. ARTICLE IX ORIGINAL ISSUE OF DEBENTURES Section 9.1 Original Issue of Debentures. Debentures in the aggregate principal amount of $32,216,500, may, upon execution of this Second Supplemental Indenture or upon any written order of the Company setting forth the amount therefor, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Debentures to or upon the written order of the Company, signed by its Chairman, its President, or any Vice President and its Treasurer, its Secretary, any Assistant Treasurer, or any Assistant Secretary, without any further action by the Company. ARTICLE X MISCELLANEOUS Section 10.1 Ratification of Indenture. The Indenture, as supplemented by this Second Supplemental Indenture, is in all respects ratified and confirmed, and this Second Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided. 13 Section 10.2 Trustee Not Responsible for Recitals. The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this Second Supplemental Indenture. Section 10.3 Governing Law. This Second Supplemental Indenture and each Debenture shall be deemed to be a contract made under the internal laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State. Section 10.4 Counterparts. This Second Supplemental Indenture may be executed in any number of counterparts each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. [Seal] STERLING BANCSHARES, INC. Attest: By: /s/ James W. Goolsby, Jr. By: /s/ J. Downey Bridgwater ________________________________ _____________________________________ Name: James W. Goolsby, Jr. Name: J. Downey Bridgwater Title: Secretary Title: President and Chief Executive Officer DEUTSCHE BANK TRUST COMPANY AMERICAS (formerly known as "Bankers Trust Company"), as Trustee By: /s/ Susan Johnson __________________________________ Name: Susan Johnson Title: Vice President 14 STATE OF TEXAS (S) (S) COUNTY OF HARRIS (S) On the 25th day of September before me personally came J. Downey Bridgwater, to me known, who, being by me duly sworn, did depose and say that he resides in Houston, Texas; that he is President and Chief Executive Officer of Sterling Bancshares, Inc., one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority. /s/ Jennifer F. Wilson ____________________________________ Notary Public, State Of Texas [seal] Commission expires: Oct. 8, 2005 15 EXHIBIT A (FORM OF FACE OF DEBENTURE) No. __________ Principal Amount: $____________ CUSIP No. ________________ [IF THE DEBENTURE IS A GLOBAL DEBENTURE, INSERT: THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS DEBENTURE IS EXCHANGEABLE FOR DEBENTURES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS DEBENTURE (OTHER THAN A TRANSFER OF THIS DEBENTURE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. IF THE DEPOSITARY FOR THIS DEBENTURE IS THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), THEN, UNLESS THIS DEBENTURE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DTC TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEBENTURE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] A-1 STERLING BANCSHARES, INC. 8.30% SERIES JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE DUE SEPTEMBER 26, 2032 Sterling Bancshares, Inc., a Texas corporation (the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to _______ or registered assigns, [the principal sum of] [$___________ Dollars]/1/ [specified on Schedule A attached hereto]/2/ on September 26, 2032 (subject to no earlier date having been designated in accordance with Article V of the Second Supplemental Indenture to the Indenture, the "Stated Maturity Date"), unless previously prepaid or redeemed, and to pay interest on the outstanding principal amount hereof from September 26, 2002, or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 2002, and on the Stated Maturity Date (each such date, an "Interest Payment Date") at the rate of 8.30% per annum until the principal hereof shall have become due and payable, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum compounded quarterly. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months and, for any period less than a full calendar month, the number of days elapsed in such month. In the event that any date on which the principal of, or interest on this Debenture is payable is not a Business Day, then the payment payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that if such next succeeding Business Day falls in the next calendar year, then such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. Pursuant to the Second Supplemental Indenture to the Indenture, in certain circumstances the Company will be required to pay Additional Sums and Compounded Interest (each as defined in the Second Supplemental Indenture to the Indenture) with respect to this Debenture. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Securities, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment, which shall be at the close of business on the 15th day of the month in which the relevant Interest Payment Date falls. Payments of interest may be deferred by the Company pursuant to the provisions of Article IV of the Second Supplemental Indenture to the Indenture. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the Holders on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the Holders of this series of Debentures not less than 10 days prior to such special record date, or _____________ /1/ Insert in Definitive Securities only. /2/ Insert in Global Securities only. A-2 may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of and interest (including Compounded Interest and Additional Sums, if any) on this Debenture shall be payable at the office or agency of the Trustee maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that, payment of interest may be made at the option of the Company by (i) check mailed to the Holder at such address as shall appear in the Securities Register or (ii) by transfer to an account maintained by the Person entitled thereto, provided that proper written transfer instructions have been received by the relevant record date. Notwithstanding the foregoing, so long as the Holder of this Debenture is the Property Trustee, the payment of the principal of and interest (including Compounded Interest and Additional Sums, if any,) on this Debenture will be made at such place and to such account as may be designated by the Property Trustee. So long as no Event of Default has occurred and is continuing, and subject to the Company having received prior approval of the Federal Reserve if then required under applicable capital guidelines, policies or regulations of the Federal Reserve, the Company shall have the right, at any time, but only once, during the term of the Debentures, to reduce the term of the Debentures by selecting a date, not earlier than the Initial Optional Prepayment Date, as the new "Stated Maturity Date"; provided that such new "Stated Maturity Date" is an Interest Payment Date and provided further that such new "Stated Maturity Date" shall not be later than September 26, 2032 or be earlier than any date that has occurred. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each Holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such Holder upon said provisions. This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee. The provisions of this Debenture are continued on the reverse side hereof and such provisions shall for all purposes have the same effect although fully set forth at this place. A-3 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed and sealed. Dated: September ___, 2002. Attest: STERLING BANCSHARES, INC. By:____________________________________ By:__________________________________ Name:__________________________________ Name:________________________________ Title:_________________________________ Title:_______________________________ (FORM OF CERTIFICATE OF AUTHENTICATION) CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the within-mentioned Indenture and Second Supplemental Indenture. DEUTSCHE BANK TRUST COMPANY AMERICAS (formerly known as "Bankers Trust Company"), as Trustee By__________________________________ Authorized Officer A-4 (FORM OF REVERSE OF SECURITY) This Debenture, designated as the 8.30% Junior Subordinated Deferrable Interest Debentures due September 26, 2032 (herein sometimes referred to as the "Debentures"), is one of the series of Securities of the Company specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture, dated as of March 21, 2001, duly executed and delivered between the Company and Deutsche Bank Trust Company Americas (formerly known as "Bankers Trust Company"), as Trustee (the "Trustee"), as supplemented by the Second Supplemental Indenture dated as of September 26, 2002 between the Company and the Trustee (the Indenture, as so supplemented, being referred to as the "Indenture") to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Debentures. By the terms of the Indenture, the Securities are issuable in series that may vary as to amount, date of maturity, rate of interest and in other respects as provided in the Indenture. This series of Debentures is limited in aggregate principal amount as specified in the Second Supplemental Indenture. Upon the occurrence and continuation of a Special Event, as defined in the Second Supplemental Indenture, prior to September 26, 2007 (the "Initial Optional Prepayment Date"), the Company shall have the right, at any time within 180 days following the occurrence of such Special Event, to prepay this Debenture in whole (but not in part) at the Prepayment Price. "Prepayment Price" shall mean an amount in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest on the Debenture to be so prepaid (including Compounded Interest and Additional Sums, if any) to the date of such prepayment. In addition, subject to the Company having received the prior approval of the Federal Reserve System (the "Federal Reserve"), if then required under applicable guidelines or policies of the Federal Reserve, and any other required regulatory approvals, the Company shall have the right to prepay this Debenture, in whole or in part, at any time on or after the Initial Optional Prepayment Date at the Prepayment Price. The Prepayment Price shall be paid prior to 12:00 noon, New York City time, on the date of such prepayment or at such earlier time as the Company determines, provided, that the Company shall deposit with the Trustee an amount sufficient to pay the applicable Prepayment Price by 10:00 a.m., New York City time, on the date such Prepayment Price is to be paid. Any prepayment pursuant to this paragraph will be made upon not less than 30 days or more than 60 days notice. If the Debentures are only partially prepaid by the Company pursuant to an Optional Prepayment, the particular Debentures to be prepaid shall be selected on a pro rata basis not more than 60 days prior to the date fixed for prepayment from the outstanding Debentures not previously called for prepayment, provided, however, that any such proration may be made on the basis of the aggregate principal amount of Debentures held by each Holder thereof and may be made by making such adjustments as the Company deems fair and appropriate in order that only Debentures in denominations of $25 or integral multiples thereof shall be prepaid. In the event of prepayment of this Debenture in part only, a new Debenture or Debentures for the portion hereof that has not been prepaid will be issued in the name of the Holder hereof upon the cancellation hereof. A-5 Notwithstanding the foregoing, any prepayment of Debentures by the Company shall be subject to the prior approval of the Federal Reserve, if such approval is then required under applicable capital guidelines or policies of the Federal Reserve, and the receipt of any other required regulatory approvals. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debentures may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of a majority in aggregate principal amount of the Securities of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Securities; provided, however, that no such supplemental indenture shall, without the consent of each Holder of Securities then outstanding and affected thereby, (i) extend or change the Stated Maturity Date of any Securities (except as expressly permitted in accordance with the terms of any supplemental indenture establishing such series of Securities in accordance with Section 2.2 of the Indenture), or reduce the principal amount thereof, or reduce any amount payable on redemption thereof, or reduce the rate of interest thereon, or extend the time of payment of interest thereon (except as expressly permitted in accordance with the terms of any supplemental indenture establishing such series of Securities in accordance with Section 2.2 of the Indenture), or make the principal of, or interest on, the Securities payable in any coin or currency other than U.S. dollars, or impair or affect the right of any holder of Securities to institute suit for the payment thereof, or (ii) reduce the aforesaid percentage amount of Securities, the Holders of which are required to consent to any such supplemental indenture. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Securities of any series at the time outstanding affected thereby, on behalf of all of the Holders of the Securities of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or interest on any of the Securities or a default in respect of any covenant or provision under which the Indenture cannot be modified or amended without the consent of each Holder of Securities affected thereby. Any such consent or waiver by the holder of this Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future holders and owners of this Debenture and of any Debenture issued in exchange herefor or in place hereof, irrespective of whether or not any notation of such consent or waiver is made upon this Debenture. No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest (including Compounded Interest and Additional Sums, if any) on this Debenture at the time and place and at the rate and in the money herein prescribed. So long as no Event of Default shall have occurred and be continuing, the Company shall have the right, at any time and from time to time during the term of the Debentures, to defer payments of interest by extending the interest payment period of such Debentures for a period A-6 not exceeding 20 consecutive quarterly periods, including the first such quarterly period during such extension period, and not extending beyond the Stated Maturity Date of the Securities (an "Extended Interest Payment Period") or ending on a date other than an Interest Payment Date, at the end of which period the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Debentures to the extent that payment of such interest is enforceable under applicable law). Before the termination of any such Extended Interest Payment Period, the Company may further defer payments of interest by further extending such Extended Interest Payment Period, provided that such Extended Interest Payment Period, together with all such previous and further extensions within such Extended Interest Payment Period, (i) shall not exceed 20 consecutive quarterly periods, including the first quarterly period during such Extended Interest Payment Period, (ii) shall not end on any date other than an Interest Payment Date, and (iii) shall not extend beyond the Stated Maturity Date of the Debentures. Upon the termination of any such Extended Interest Payment Period and the payment of all accrued and unpaid interest and any additional amounts then due, the Company may commence a new Extended Interest Payment Period, subject to the foregoing requirements. The Company has agreed that it will not: (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital stock (which includes common and preferred stock) (other than (a) dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, Common Stock of the Company, (b) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) as a result of a reclassification of any class or series of the Company's capital stock solely into another class or series of the Company's capital stock, (d) the purchase of fractional shares resulting from such a reclassification or pursuant to the conversion or exchange provisions of such capital stock or any security convertible or exchangeable into shares of the Company's capital stock, and (e) purchases of Common Stock related to the issuance of Common Stock or rights under any of the Company's benefit plans for its directors, officers or employees or any of the Company's dividend reinvestment plans); (ii) make any payment of principal, interest on or repay or prepay or repurchase or redeem any debt securities of the Company that rank pari passu with or junior in right of payment to the Debentures; or (iii) make any guarantee payments with respect to any guarantee (other than payments under the Preferred Securities Guarantee) by the Company of the debt securities of any Subsidiary of the Company if such guarantee ranks pari passu or junior in right of payment to the Debentures, if at such time (1) there shall have occurred any event of which the Company has actual knowledge that (a) is or, with the giving of notice or the lapse of time, or both, would be, an Event of Default and (b) in respect of which the Company shall not have taken reasonable steps to cure, (2) the Company shall be in default with respect to its payment obligations under the Preferred Securities Guarantee or (3) the Company shall have given notice of its election of the exercise of its right to extend the interest payment period and any such extension shall be continuing. Subject to (i) the prior approval of the Federal Reserve, if such approval is then required under applicable capital guidelines or policies of the Federal Reserve and the receipt of any other required regulatory approval, and (ii) the receipt by the Company of an opinion of counsel to the effect that such distribution will not be a taxable event to holders of Preferred Securities, the Company will have the right at any time to liquidate the Trust and cause the Debentures to be distributed to the holders of the Trust Securities in liquidation of the Trust. A-7 The Debentures of this series are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. As provided in the Indenture and subject to the transfer restrictions limitations as may be contained herein and therein from time to time, this Debenture is transferable by the holder hereof on the Securities Register of the Company, upon surrender of this Debenture for registration of transfer at the office or agency of the Company in the City and State of New York accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the holder hereof or his attorney duly authorized in writing, and thereupon one or more new Debentures of authorized denominations and for the same aggregate principal amount and series will be issued to the designated transferee or transferees. No service charge will be made for any such registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Debenture, the Company, the Trustee, any authenticating agent, any paying agent, any transfer agent and the registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Security Registrar) for the purpose of receiving payment of or on account of the principal hereof and (subject to the Indenture) interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any authenticating agent nor any paying agent nor any transfer agent nor any registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of, or interest on this Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor Person, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. All terms used in this Debenture that are defined in the Indenture shall have the meanings assigned to them in the Indenture. THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. A-8 SCHEDULE A The initial aggregate principal amount of Debentures evidenced by the Certificate to which this Schedule is attached is ____________________ (having an aggregate liquidation amount of __________________). The notations in the following table evidence decreases and increases in the aggregate principal amount of the Debentures evidenced by such Certificate.
- ---------------------------------------------------------------------------------------------- Aggregate principal Decrease in aggregate Increase in aggregate amount of Debentures principal amount of principal amount of remaining after such Debentures Debentures decrease or increase Notation by Registrar - ---------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------
* Append to Global Debentures only. Schedule A EX-4.7 7 dex47.txt CERTIFICATE OF TRUST PREFERRED SECURITY EXHIBIT 4.7 Number of Aggregate Liquidation Preferred Securities Amount: $31,250,000 1,250,000 CUSIP NO. 85915Q 20 6 Certificate Evidencing 8.30% Cumulative Trust Preferred Securities of Sterling Bancshares Capital Trust III 8.30% Cumulative Trust Preferred Securities (liquidation amount $25 per Preferred Security) THIS PREFERRED SECURITY IS A GLOBAL PREFERRED SECURITY WITHIN THE MEANING OF THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING AGENCY. THIS PREFERRED SECURITY IS EXCHANGEABLE FOR PREFERRED SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO TRANSFER OF THIS PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED SECURITY AS A WHOLE BY THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE CLEARING AGENCY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE CLEARING AGENCY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE CLEARING AGENCY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. Sterling Bancshares Capital Trust III, a statutory trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that ______________ (the "Holder") is the registered owner of $31,250,000 in aggregate liquidation amount of Preferred Securities of the Trust specified in Schedule A hereto representing undivided beneficial interests in the assets of the Trust designated the 8.30% Cumulative Trust Preferred Securities (liquidation amount $25 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of September 26, 2002, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Preferred Securities as set forth in Annex I to the Declaration. Capitalized terms used but not defined herein shall have the meaning given them in the Declaration. The Sponsor will provide a copy of the Declaration, the Preferred Securities Guarantee, the Common Securities Guarantee (as may be appropriate), and the Indenture (including any supplemental indenture) to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder and to the benefits of the Preferred Securities Guarantee to the extent provided therein. By acceptance, the Holder agrees to treat, for United States Federal income tax purposes, the Debentures as indebtedness and the Preferred Securities as evidence of indirect beneficial ownership in the Debentures. IN WITNESS WHEREOF, the Trust has duly executed this certificate. Dated: September 26, 2002 STERLING BANCSHARES CAPITAL TRUST III By: /s/ J. Downey Bridgwater ------------------------------------ Name: J. Downey Bridgwater Administrative Trustee PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Preferred Securities referred to in the within-mentioned Declaration. DEUTSCHE BANK TRUST COMPANY AMERICAS, as Property Trustee By: /s/ Susan Johnson ----------------------------------- Authorized Signatory Distributions payable on each Preferred Security will be fixed at a rate per annum of 8.30% (the "Coupon Rate") of the liquidation amount of $25 per Preferred Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one quarterly period will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds on hand legally available therefor. Distributions on the Preferred Securities will be cumulative, will accumulate from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from September 26, 2002, will be payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2002, except as otherwise described below and on the Stated Maturity Date. Distributions will be computed on the basis of a 360-day year consisting of twelve 30-day months and, for any period less than a full calendar month, the number of days elapsed in such month. As long as no Event of Default has occurred and is continuing under the Indenture, the Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period at any time and from time to time on the Debentures for a period not exceeding 20 consecutive calendar quarterly periods, including the first such quarterly period during such extension period (each an "Extension Period"), provided that no Extension Period shall end on a date other than an Interest Payment Date for the Debentures or extend beyond the Stated Maturity Date of the Debentures. As a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accumulate with interest thereon (to the extent permitted by applicable law, but not at a rate exceeding the rate of interest then accruing on the Debentures) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Debenture Issuer may further defer payments of interest by further extending such Extension Period; provided that such Extension Period, together with all such previous and further extensions within such Extension Period, may not exceed 20 consecutive quarterly periods, including the first quarterly period during such Extension Period, end on a date other than an Interest Payment Date for the Debentures or extend beyond the Stated Maturity Date of the Debentures. Payments of accumulated Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. Subject to the prior approval of the Federal Reserve Board if such approval is then required under applicable law or capital guidelines or policies of the Federal Reserve Board and the receipt of any other required regulatory approvals and to certain other conditions set forth in the Declaration and the Indenture, the Property Trustee may, at the direction of the Sponsor, at any time liquidate the Trust and cause the Debentures to be distributed to the holders of the Securities in liquidation of the Trust or, simultaneously with any redemption of the Debentures, cause a Like Amount of the Securities to be redeemed by the Trust. The Preferred Securities shall be redeemable as provided in the Declaration. Schedule A The initial number of Preferred Securities evidenced by the Certificate to which this Schedule is attached is 1,250,000 (having an aggregate liquidation amount of $31,250,000). The notations in the following table evidence decreases and increases in the number of Preferred Securities evidenced by such certificate. - ------------------------------------------------------------------------------ Number of Preferred Decrease in Increase in Securities Number of Number of Remaining After Preferred Preferred such Decrease Notation by Securities Securities or Increase Registrar - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ EX-4.8 8 dex48.txt 8.30% JR SUBORDINATED DEFERRABLE INTEREST EXHIBIT 4.8 No. 1 Principal Amount: $32,216,500 CUSIP No. 858907 AC 2 STERLING BANCSHARES, INC. 8.30% SERIES JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE DUE September 26, 2032 Sterling Bancshares, Inc., a Texas corporation (the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Deutsche Bank Trust Company Americas (formerly known as "Bankers Trust Company"), not in its individual capacity but solely as Property Trustee of Sterling Bancshares Capital Trust III, or registered assigns, the principal sum of Thirty-Two Million Two Hundred Sixteen Thousand Five Hundred Dollars ($32,216,500) on September 26, 2032 (subject to no earlier date having been designated in accordance with Article V of the Second Supplemental Indenture to the Indenture, the "Stated Maturity Date"), unless previously prepaid or redeemed, and to pay interest on the outstanding principal amount hereof from September 26, 2002, or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 2002, and on the Stated Maturity Date (each such date, an "Interest Payment Date") at the rate of 8.30% per annum until the principal hereof shall have become due and payable, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum compounded quarterly. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months and, for any period less than a full calendar month, the number of days elapsed in such month. In the event that any date on which the principal of, or interest on this Debenture is payable is not a Business Day, then the payment payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that if such next succeeding Business Day falls in the next calendar year, then such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. Pursuant to the Second Supplemental Indenture to the Indenture, in certain circumstances the Company will be required to pay Additional Sums and Compounded Interest (each as defined in the Second Supplemental Indenture to the Indenture) with respect to this Debenture. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Securities, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment, which shall be at the close of business on the 15th day of the month in which the relevant Interest Payment Date falls. Payments of interest may be deferred by the Company pursuant to the provisions of Article IV of the Second Supplemental Indenture to the Indenture. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the Holders on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the Holders of this series of Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of and interest (including Compounded Interest and Additional Sums, if any) on this Debenture shall be payable at the office or agency of the Trustee maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that, payment of interest may be made at the option of the Company by (i) check mailed to the Holder at such address as shall appear in the Securities Register or (ii) by transfer to an account maintained by the Person entitled thereto, provided that proper written transfer instructions have been received by the relevant record date. Notwithstanding the foregoing, so long as the Holder of this Debenture is the Property Trustee, the payment of the principal of and interest (including Compounded Interest and Additional Sums, if any,) on this Debenture will be made at such place and to such account as may be designated by the Property Trustee. So long as no Event of Default has occurred and is continuing, and subject to the Company having received prior approval of the Federal Reserve if then required under applicable capital guidelines, policies or regulations of the Federal Reserve, the Company shall have the right, at any time, but only once, during the term of the Debentures, to reduce the term of the Debentures by selecting a date, not earlier than the Initial Optional Prepayment Date, as the new "Stated Maturity Date"; provided that such new "Stated Maturity Date" is an Interest Payment Date and provided further that such new "Stated Maturity Date" shall not be later than September 26, 2032 or be earlier than any date that has occurred. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each Holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such Holder upon said provisions. This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee. The provisions of this Debenture are continued on the reverse side hereof and such provisions shall for all purposes have the same effect although fully set forth at this place. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed and sealed. Dated: September 26, 2002. Attest: STERLING BANCSHARES, INC. By: /s/ James W. Goolsby, Jr. By: /s/ J. Downey Bridgwater ----------------------------------- ---------------------------------- Name: James W. Goolsby, Jr. Name: J. Downey Bridgwater Title: Secretary Title: President and Chief Executive Officer CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the within-mentioned Indenture and Second Supplemental Indenture. DEUTSCHE BANK TRUST COMPANY AMERICAS (formerly known as "Bankers Trust Company"), as Trustee By /s/ Susan Johnson ------------------------------------------ Authorized Officer This Debenture, designated as the 8.30% Junior Subordinated Deferrable Interest Debenture due September 26, 2032 (herein sometimes referred to as the "Debentures"), is one of the series of Securities of the Company specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture, dated as of March 21, 2001, duly executed and delivered between the Company and Deutsche Bank Trust Company Americas (formerly known as "Bankers Trust Company"), as Trustee (the "Trustee"), as supplemented by the Second Supplemental Indenture dated as of September 26, 2002 between the Company and the Trustee (the Indenture, as so supplemented, being referred to as the "Indenture") to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Debentures. By the terms of the Indenture, the Securities are issuable in series that may vary as to amount, date of maturity, rate of interest and in other respects as provided in the Indenture. This series of Debentures is limited in aggregate principal amount as specified in the Second Supplemental Indenture. Upon the occurrence and continuation of a Special Event, as defined in the Second Supplemental Indenture, prior to September 26, 2007 (the "Initial Optional Prepayment Date"), the Company shall have the right, at any time within 180 days following the occurrence of such Special Event, to prepay this Debenture in whole (but not in part) at the Prepayment Price. "Prepayment Price" shall mean an amount in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest on the Debenture to be so prepaid (including Compounded Interest and Additional Sums, if any) to the date of such prepayment. In addition, subject to the Company having received the prior approval of the Federal Reserve System (the "Federal Reserve"), if then required under applicable guidelines or policies of the Federal Reserve, and any other required regulatory approvals, the Company shall have the right to prepay this Debenture, in whole or in part, at any time on or after the Initial Optional Prepayment Date at the Prepayment Price. The Prepayment Price shall be paid prior to 12:00 noon, New York City time, on the date of such prepayment or at such earlier time as the Company determines, provided, that the Company shall deposit with the Trustee an amount sufficient to pay the applicable Prepayment Price by 10:00 a.m., New York City time, on the date such Prepayment Price is to be paid. Any prepayment pursuant to this paragraph will be made upon not less than 30 days or more than 60 days notice. If the Debentures are only partially prepaid by the Company pursuant to an Optional Prepayment, the particular Debentures to be prepaid shall be selected on a pro rata basis not more than 60 days prior to the date fixed for prepayment from the outstanding Debentures not previously called for prepayment, provided, however, that any such proration may be made on the basis of the aggregate principal amount of Debentures held by each Holder thereof and may be made by making such adjustments as the Company deems fair and appropriate in order that only Debentures in denominations of $25 or integral multiples thereof shall be prepaid. In the event of prepayment of this Debenture in part only, a new Debenture or Debentures for the portion hereof that has not been prepaid will be issued in the name of the Holder hereof upon the cancellation hereof. Notwithstanding the foregoing, any prepayment of Debentures by the Company shall be subject to the prior approval of the Federal Reserve, if such approval is then required under applicable capital guidelines or policies of the Federal Reserve, and the receipt of any other required regulatory approvals. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debentures may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of a majority in aggregate principal amount of the Securities of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Securities; provided, however, that no such supplemental indenture shall, without the consent of each Holder of Securities then outstanding and affected thereby, (i) extend or change the Stated Maturity Date of any Securities (except as expressly permitted in accordance with the terms of any supplemental indenture establishing such series of Securities in accordance with Section 2.2 of the Indenture), or reduce the principal amount thereof, or reduce any amount payable on redemption thereof, or reduce the rate of interest thereon, or extend the time of payment of interest thereon (except as expressly permitted in accordance with the terms of any supplemental indenture establishing such series of Securities in accordance with Section 2.2 of the Indenture), or make the principal of, or interest on, the Securities payable in any coin or currency other than U.S. dollars, or impair or affect the right of any holder of Securities to institute suit for the payment thereof, or (ii) reduce the aforesaid percentage amount of Securities, the Holders of which are required to consent to any such supplemental indenture. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Securities of any series at the time outstanding affected thereby, on behalf of all of the Holders of the Securities of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or interest on any of the Securities or a default in respect of any covenant or provision under which the Indenture cannot be modified or amended without the consent of each Holder of Securities affected thereby. Any such consent or waiver by the holder of this Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future holders and owners of this Debenture and of any Debenture issued in exchange herefor or in place hereof, irrespective of whether or not any notation of such consent or waiver is made upon this Debenture. No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest (including Compounded Interest and Additional Sums, if any) on this Debenture at the time and place and at the rate and in the money herein prescribed. So long as no Event of Default shall have occurred and be continuing, the Company shall have the right, at any time and from time to time during the term of the Debentures, to defer payments of interest by extending the interest payment period of such Debentures for a period not exceeding 20 consecutive quarterly periods, including the first such quarterly period during such extension period, and not extending beyond the Stated Maturity Date of the Securities (an "Extended Interest Payment Period") or ending on a date other than an Interest Payment Date, at the end of which period the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Debentures to the extent that payment of such interest is enforceable under applicable law). Before the termination of any such Extended Interest Payment Period, the Company may further defer payments of interest by further extending such Extended Interest Payment Period, provided that such Extended Interest Payment Period, together with all such previous and further extensions within such Extended Interest Payment Period, (i) shall not exceed 20 consecutive quarterly periods, including the first quarterly period during such Extended Interest Payment Period, (ii) shall not end on any date other than an Interest Payment Date, and (iii) shall not extend beyond the Stated Maturity Date of the Debentures. Upon the termination of any such Extended Interest Payment Period and the payment of all accrued and unpaid interest and any additional amounts then due, the Company may commence a new Extended Interest Payment Period, subject to the foregoing requirements. The Company has agreed that it will not: (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital stock (which includes common and preferred stock) (other than (a) dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, Common Stock of the Company, (b) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) as a result of a reclassification of any class or series of the Company's capital stock solely into another class or series of the Company's capital stock, (d) the purchase of fractional shares resulting from such a reclassification or pursuant to the conversion or exchange provisions of such capital stock or any security convertible or exchangeable into shares of the Company's capital stock, and (e) purchases of Common Stock related to the issuance of Common Stock or rights under any of the Company's benefit plans for its directors, officers or employees or any of the Company's dividend reinvestment plans); (ii) make any payment of principal, interest on or repay or prepay or repurchase or redeem any debt securities of the Company that rank pari passu with or junior in right of payment to the Debentures; or (iii) make any guarantee payments with respect to any guarantee (other than payments under the Preferred Securities Guarantee) by the Company of the debt securities of any Subsidiary of the Company if such guarantee ranks pari passu or junior in right of payment to the Debentures, if at such time (1) there shall have occurred any event of which the Company has actual knowledge that (a) is or, with the giving of notice or the lapse of time, or both, would be, an Event of Default and (b) in respect of which the Company shall not have taken reasonable steps to cure, (2) the Company shall be in default with respect to its payment obligations under the Preferred Securities Guarantee or (3) the Company shall have given notice of its election of the exercise of its right to extend the interest payment period and any such extension shall be continuing. Subject to (i) the prior approval of the Federal Reserve, if such approval is then required under applicable capital guidelines or policies of the Federal Reserve and the receipt of any other required regulatory approval, and (ii) the receipt by the Company of an opinion of counsel to the effect that such distribution will not be a taxable event to holders of Preferred Securities, the Company will have the right at any time to liquidate the Trust and cause the Debentures to be distributed to the holders of the Trust Securities in liquidation of the Trust. The Debentures of this series are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. As provided in the Indenture and subject to the transfer restrictions limitations as may be contained herein and therein from time to time, this Debenture is transferable by the holder hereof on the Securities Register of the Company, upon surrender of this Debenture for registration of transfer at the office or agency of the Company in the City and State of New York accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the holder hereof or his attorney duly authorized in writing, and thereupon one or more new Debentures of authorized denominations and for the same aggregate principal amount and series will be issued to the designated transferee or transferees. No service charge will be made for any such registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Debenture, the Company, the Trustee, any authenticating agent, any paying agent, any transfer agent and the registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Security Registrar) for the purpose of receiving payment of or on account of the principal hereof and (subject to the Indenture) interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any authenticating agent nor any paying agent nor any transfer agent nor any registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of, or interest on this Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor Person, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. All terms used in this Debenture that are defined in the Indenture shall have the meanings assigned to them in the Indenture. THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EX-5.1 9 dex51.txt OPINION OF ANDREWS & KURTH L.L.P. EXHIBIT 5.1 ANDREWS & KURTH L.L.P. 10001 Woodloch Forest Drive, Suite 200 The Woodlands, Texas 77380 September 26, 2002 Board of Directors Sterling Bancshares, Inc. 2550 North Loop West, Suite 600 Houston, Texas 77092 Sterling Bancshares Capital Trust III c/o Sterling Bancshares, Inc. 2550 North Loop West, Suite 600 Houston, Texas 77092 Gentlemen: We have acted as special Texas and New York counsel to Sterling Bancshares, Inc., a Texas corporation (the "Company"), and Sterling Bancshares Capital Trust III, a Delaware statutory trust ("Trust III" or the "Trust"), in connection with: (a) the formation of Trust III; (b) the preparation and filing with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), of the registration statement on Form S-3 filed by the Company, Trust III and Sterling Bancshares Capital Trust II with the Commission (Commission File Numbers 333-55724, 333-55724-01 and 333-55724-02) on February 15, 2001, as amended by Amendment No. 1 to Form S-3 filed on March 5, 2001 (such registration statement, as amended, being hereinafter referred to as the "Registration Statement"). The Registration Statement relates to the offering from time to time, as set forth in the Registration Statement and the form of prospectus contained therein (the "Prospectus"), of (i) trust preferred securities of Trust III (the "Trust III Preferred Securities"), (ii) junior subordinated debentures (the "Subordinated Debentures") to be issued by the Company to the Trust, and (iii) the guarantee of the Company (the "Trust III Guarantee") pursuant to the Preferred Securities Guarantee Agreement relating to the Trust III Preferred Securities (the "Trust III Guarantee Agreement"); and (c) the preparation and filing with the Commission of a prospectus supplement (the "Prospectus Supplement") in connection with issuance of up to 1,250,000 8.30% Trust III Preferred Securities, up to $32,216,500 principal amount of the 8.30% Subordinated Debentures issuable by the Company to Trust III, and the Trust III Sterling Bancshares, Inc. Sterling Bancshares Capital Trust III September 26, 2002 Page 2 Guarantee Agreement in respect of such 1,250,000 8.30% Trust III Preferred Securities (the "Prospectus Supplement"). The 8.30% Trust III Preferred Securities are being issued in accordance with the provisions of the Amended and Restated Declaration of Trust of Trust III dated September 26, 2002 between the Company, as sponsor, and the trustees identified therein (the "Amended and Restated Declaration"). The 8.30% Subordinated Debentures are being issued in accordance with the provisions of the Indenture dated March 21, 2001 between the Company and Bankers Trust Company (now known as "Deutsche Bank Trust Company Americas"), as trustee (the "Indenture"), as supplemented by the First Supplemental Indenture dated March 21, 2001 and the Second Supplemental Indenture dated September 26, 2002 (the "Second Supplemental Indenture"). The 8.30% Trust III Preferred Securities, the 8.30% Subordinated Debentures and the Trust III Guarantee Agreement are collectively referred to herein as the "Securities." The global certificate evidencing the Trust Preferred Securities, the Indenture, the Second Supplemental Indenture, the Delivered Debenture (defined below) and the Trust III Guarantee Agreement are collectively referred to herein as the "Opinion Documents." In rendering the opinions expressed below, we have examined originals or copies, certified or otherwise identified to our satisfaction, of: (i) the Registration Statement, as amended to the date hereof, including the Prospectus included therein, (ii) the Prospectus Supplement dated September 23, 2002, (iii) the Certificate of Trust of Trust III (the "Certificate of Trust") filed with the Secretary of State of the State of Delaware on February 13, 2001, (iv) the Declaration of Trust of Trust III dated February 13, 2001, (v) the Amended and Restated Declaration, (vi) the Trust III Guarantee Agreement, (vii) the Indenture, (viii) the Second Supplemental Indenture, (ix) the 8.30% Subordinated Debenture issued and delivered by the Company to the Trust today (the "Delivered Debenture"), and (x) the global certificate evidencing the 8.30% Trust III Preferred Securities. We have also examined the originals or copies certified or otherwise identified to our satisfaction of such other instruments and certificates of public officials, officers and representatives of the Company and other persons, and made such investigations of law, as we have deemed Sterling Bancshares, Inc. Sterling Bancshares Capital Trust III September 26, 2002 Page 3 appropriate as a basis for the opinions expressed below. As to any facts material to the opinions expressed herein, we have relied upon oral or written statements and representations of officers, trustees, and other representatives of the Company, Trust III and others deemed by us appropriate sources of information with respect thereto. In rendering the opinions expressed below, we have assumed, without verification (i) the genuineness of the signatures on all documents that we have examined, (ii) the authenticity of all documents submitted to us as originals, (iii) the conformity with authentic original documents of all documents submitted to us as copies, and (iv) the legal capacity of all natural persons. We have assumed (except as and to the extent set forth in our opinion in paragraph 1 below as to Trust III) that all parties to, or that have otherwise executed, the Opinion Documents have been duly organized or formed, as the case may be, and (as applicable) are in good standing under the laws of their respective jurisdictions of organization or formation, as the case may be, and have full power, corporate or other, to enter into and perform all obligations thereunder and (except as and to the extent set forth in our opinions in paragraphs 2, 4 and 5 below as to the Company and Trust III) we have also assumed the due authorization by all requisite action, corporate or other, and execution and delivery by such persons of such documents and that such documents constitute valid and binding obligations of the parties thereto, enforceable against them in accordance with their terms. Based on and subject to the foregoing, and subject also to the additional assumptions, limitations and exceptions set forth below, it is our opinion that: 1. Trust III has been duly created and is validly existing in good standing as a statutory trust under the Delaware Statutory Trust Act (Delaware Code, Title 12, (S)(S)3801 et seq.), and all filings required under the laws of the State of Delaware with respect to the creation and valid existence of Trust III as a statutory trust have been made. 2. The 8.30% Trust III Preferred Securities represent valid and, to the extent set forth in paragraph 3 below, fully paid and non-assessable preferred beneficial interests in the assets of Trust III. 3. Upon full payment by the Trust III Preferred Security holders of the purchase price for the 8.30% Trust III Preferred Securities, the Trust III Preferred Security holders, as beneficial owners of Trust III, are entitled under the Delaware Statutory Trust Act (Delaware Code, Title 12, (S)3803(a)) to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the Delaware General Corporation Law. We advise you, however, that the Trust III Preferred Security holders may be obligated pursuant to the Amended and Restated Declaration, to (a) provide indemnity and/or security in connection with, and pay taxes or governmental charges arising from, transfers of Trust III Preferred Securities and (b) provide security and indemnity in connection with requests of or directions to the Property Trustee (as defined Sterling Bancshares, Inc. Sterling Bancshares Capital Trust III September 26, 2002 Page 4 therein) to exercise its rights and powers under the Amended and Restated Declaration. 4. The 8.30% Subordinated Debentures have been duly authorized by the Company, and the Delivered Debenture has been duly executed and issued by the Company in accordance with the Indenture and the Second Supplemental Indenture and delivered and (assuming due authentication thereof by the trustee under the Indenture) constitutes a valid and binding obligation of the Company, entitled to the benefits of the Indenture and the Second Supplemental Indenture and enforceable against the Company in accordance with its terms, except to the extent expressed below. 5. The Trust III Guarantee Agreement has been duly authorized, executed and delivered by the Company, and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent expressed below. The opinions expressed in paragraphs 4 and 5 above with respect to the obligations of the Company and Trust III are subject to applicable bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfer or conveyance), reorganization, moratorium and other similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law), including, without limitation, (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing, and we express no opinion herein with respect to provisions relating to severability or separability, or indemnification, to the extent such indemnification is contrary to federal securities laws or the policies underlying such laws. We express no opinion as to any laws other than (a) as to paragraphs 1, 2 and 3, the Delaware Statutory Trust Act and (b) as to paragraphs 4 and 5, the laws of the State of New York, and to the extent applicable, to the federal laws of the United States of America. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the heading "Legal Opinions" in the Prospectus and "Legal Matters" in the Prospectus Supplement. In giving this consent we do not admit that we are "experts" under the Act, or the rules and regulations of the Commission issued thereunder, with respect to any part of the Registration Statement, including this exhibit. This opinion is expressed as of the date hereof, and we disclaim any undertaking to advise you of any subsequent changes of the facts stated or assumed herein or any subsequent changes in applicable law, and we have assumed that at no future time would any such subsequent change of fact or law affect adversely our ability to render at such time an opinion (a) containing the same legal conclusions set forth herein and (b) subject only to such (or fewer) assumptions, limitations and qualifications as are contained herein. Very truly yours, /s/ Andrews & Kurth L.L.P. EX-8.1 10 dex81.txt OPINION OF ANDREWS & KURTH L.L.P. EXHIBIT 8.1 ANDREWS & KURTH L.L.P. 600 TRAVIS STREET, SUITE 4200 HOUSTON, TEXAS 77002 September 26, 2002 Sterling Bancshares, Inc. 2550 North Loop West, Suite 600 Houston, Texas 77092 Sterling Bancshares Capital Trust III 2550 North Loop West, Suite 600 Houston, Texas 77092 Ladies and Gentlemen: We have acted as counsel for Sterling Bancshares, Inc., a corporation organized under the laws of the State of Texas (the "Company") and Sterling Bancshares Capital Trust III (the "Trust"), a statutory trust created under the laws of the State of Delaware, in connection with the Registration Statement on Form S-3, as amended, filed by the Company and the Trust with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Registration Statement"), for the purpose of registering the trust preferred securities ("Trust Preferred Securities") to be issued by the Trust, and with respect to the guarantee of the Company pursuant to the Preferred Securities Guarantee Agreement and the junior subordinated debentures to be issued by the Company to the Trust in connection with such issuance of the trust preferred securities. Subject to the limitations and qualifications set forth below, we are of the opinion that the description of federal income tax consequences appearing under the heading "Material Federal Income Tax Consequences" in the prospectus supplement filed with the Commission in connection with the Registration Statement accurately describes the material federal income tax consequences to holders of Trust Preferred Securities under existing law and subject to the qualifications and assumptions stated therein. The opinion herein is based upon our interpretations of current law, including court authority and existing Final and Temporary Regulations, which are subject to change both prospectively and retroactively, and upon the facts and assumptions discussed herein. This opinion letter is limited to the matters set forth herein, and no opinions are intended to be implied or may be inferred beyond those expressly stated herein. Our opinion is rendered as of the date hereof and we assume no obligation to update or supplement this opinion or any matter related to this opinion to reflect any change of fact, circumstances, or law after the date hereof. In addition, our opinion is based on the assumption that the matter will be properly presented to the applicable court. Furthermore, our opinion is not binding on the Internal Revenue Service or a court. In addition, we must note that our opinion represents merely our best legal judgment on the matters presented and that others may disagree with our conclusion. There can be no assurance that the Internal Revenue Service will not take a contrary position or that a court would agree with our opinion if litigated. We consent to the use and filing of this opinion as Exhibit 8.1 to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the prospectus supplement and prospectus contained therein. In giving such consent we do not imply or admit that we are within the category of persons whose consent is required under Section 7 of the 1933 Act or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, /s/ ANDREWS & KURTH L.L.P. EX-99.1 11 dex991.txt PRESS RELEASE EXHIBIT 99.1 Press Release Sterling Bancshares Issues Trust Preferred Securities HOUSTON -- Sterling Bancshares, Inc. (Nasdaq: SBIB) announced today the issuance of $31,250,000 of 8.30% Cumulative Trust Preferred Securities (the "Trust Preferred Securities") of Sterling Bancshares Capital Trust III with a liquidation value of $25 per security. The securities represent undivided beneficial interests in the trust, which was established by Sterling Bancshares for the purpose of issuing the securities. The Trust Preferred Securities were sold in a publicly underwritten offering, have a maturity of 30 years and will pay quarterly cumulative cash distributions. The Trust Preferred Securities began trading today on the Nasdaq National Market under the trading symbol "SBIBN". Sterling Bancshares Capital Trust III used the proceeds from the sale of the Trust Preferred Securities to purchase junior subordinated debentures of the company. The company expects to use the net proceeds to redeem in full the 9.28% junior subordinated debentures previously sold to Sterling Bancshares Capital Trust I in 1997. Sterling Bancshares Capital Trust I will then use the net proceeds to redeem from the public all of its outstanding trust preferred securities. The Trust Preferred Securities were underwritten and sold by Legg Mason Wood Walker, Incorporated and Stifel, Nicolaus & Company, Incorporated. Sterling Bancshares, Inc. is a Houston-based bank holding company that operates 39 community-banking offices in the greater metro areas of Dallas, Houston, San Antonio, and South Texas. Sterling also provides mortgage- banking services through its 80 percent-owned subsidiary, Sterling Capital Mortgage Company. Sterling's common stock is traded through the Nasdaq National Market System under the symbol SBIB. For more information on Sterling Bancshares, please visit the company's web site at www.banksterling.com. Except for historical information contained herein, this press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, including, but not limited to, the following: general business and economic conditions in the markets the Company serves may be less favorable than anticipated which could decrease the demand for loan, deposit and other financial services and increase loan delinquencies and defaults; changes in market rates and prices may adversely impact the value of securities, loans, deposits and other financial instruments; the Company's liquidity requirements could be adversely affected by changes in its assets and liabilities; legislative or regulatory developments including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial securities industry; competitive factors may increase, including product and pricing pressures among financial services organizations; and changes in fiscal and governmental policies of the United States federal government could have an adverse effect on the Company's business. Please also read the additional risks and factors described from time to time in the Company's reports filed with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001. For More Information Contact: Eugene S. Putnam, Jr., Chief Financial Officer 713-507-7292 -----END PRIVACY-ENHANCED MESSAGE-----