EXHIBIT 10.1


2005 INTERNATIONAL BANCSHARES CORPORATION


 


STOCK OPTION PLAN


The 2005 INTERNATIONAL BANCSHARES CORPORATION STOCK OPTION PLAN (the “Plan”)
is intended to advance the interests of the Company and its shareholders by
affording officers, employees, consultants and advisors of the Company and its
Subsidiaries an opportunity to increase their proprietary equity interest in
the Company by the grant of Options to them under the terms set forth
herein.  The Company seeks to motivate
and retain present officers, employees, consultants and advisors of the Company
and its Subsidiaries as well as attract highly competent individuals whose
judgment, initiative, leadership, and continued effort will contribute to the
success of the Company and its Subsidiaries. 
The Company believes that this Plan will contribute to that end.


ARTICLE I


DEFINITIONS


For purposes of this Plan:


1.01        Board of
Directors.  The term “Board”
or “Board of Directors” shall mean the Board of Directors of the Company.


1.02        Change of
Control.  The term “Change of Control”
shall mean the occurrence of any of the following events:


(a)           any
“person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
other than the Company, any affiliate (as defined in Rule 144 under the Securities
Act) of the Company as of the Effective Date, any Sanchez Shareholder, any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, or any company owned, directly or indirectly, by the shareholders
of the Company in substantially the same proportions as their ownership of the
Stock of the Company, is or becomes the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such person any
securities acquired directly from the Company) representing more than 20% of
the combined voting power of the Company’s then outstanding voting securities;
provided, however, a Change of Control shall not be deemed to occur solely
because such person acquired beneficial ownership of more than 20% of the
combined voting power of the Company’s then outstanding voting securities as a
result of the acquisition of voting securities by the Company, which by
reducing the number of voting securities outstanding, increases the
proportional number of shares beneficially owned by such person, provided that
if a Change of Control would occur (but for the operation of this sentence) as
a result of the acquisition of voting securities by the Company, and after such
share acquisition by the Company, such person becomes the beneficial owner of
any additional voting securities which increases the percentage of the then
outstanding voting securities beneficially owned by such person, then a Change
of Control shall occur;





















 


(b)           during any
period of 24 consecutive months (not including any period prior to the
Effective Date), individuals who at the beginning of such period constitute the
Board and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in subsection (i), (iii) or (iv) of this Section 1.02) whose election
by the Board or nomination for election by the Company’s shareholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority of the Board;


(c)           the
shareholders of the Company approve a merger, consolidation or reorganization
of the Company with any other corporation, other than a merger, consolidation
or reorganization which would result in the shareholders of the Company immediately
before such merger, consolidation or reorganization, owning, directly or
indirectly immediately following such merger, consolidation or reorganization,
at least fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger, consolidation or reorganization in substantially the same
proportion as their ownership of the voting securities immediately before such
merger, consolidation, or reorganization; or


(d)           the
shareholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets.


1.03        Change in
Control Price.  The term “Change
in Control Price” shall mean the price per share of Stock paid in any
transaction related to a Change in Control.


1.04        Code.  The term “Code” shall mean the Internal
Revenue Code of 1986, as amended, or any successor statute, provided that any
specific reference herein to a particular section of the Code will, to the
extent applicable, refer to the corresponding section or provision of any such
successor statute.


1.05        Committee.  The term “Committee” shall mean a committee
of the Board appointed by the Board from time to time consisting of at least
two (2) members of the Board, each of whom is both a Non-Employee Director and
an Outside Director.


1.06        Company.  The term “Company” shall mean INTERNATIONAL
BANCSHARES CORPORATION, a Texas corporation, and any successor thereof.


1.07        Effective Date.  The term “Effective Date” shall mean that
term as defined in Section 11.01 hereof.


1.08        Eligible Person.  The term “Eligible Person” shall mean any
officer, employee, consultant or advisor of the Company or any Subsidiary, as may
be designated from time to time by the Committee as eligible to receive an
Option subject to the conditions set forth herein.


1.09        Exchange Act.  The term “Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended from time to time.


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1.10        Fair Market
Value.  The term “Fair Market Value”
shall mean, unless otherwise required by the Code, as of any date, the last
sales price reported for the Stock on the applicable date, (i) as reported
by the national securities exchange in the United States on which it is then
traded or The Nasdaq Stock Market, Inc. or (ii) if not traded on any such
national securities exchange or The Nasdaq Stock Market, Inc., as quoted on an
automated quotation system sponsored by the National Association of Securities
Dealers, Inc., or if the Stock shall not have been reported or quoted on such
date, on the first day prior thereto on which the Stock was reported or quoted;
provided, however, that the
Committee may modify the definition of Fair Market Value to reflect any changes
in the trading practices of any exchange or automated system sponsored by the
National Association of Securities Dealers, Inc. on which the Stock is listed
or traded. If the Stock is not readily traded on a national securities
exchange, The Nasdaq Stock Market, Inc. or any system sponsored by the National
Association of Securities Dealers, Inc., the Fair Market Value shall be
determined in good faith by the Committee.


1.11        Incentive Stock
Option.  The term “Incentive Stock
Option” shall have the meaning given to it by Section 422 of the Code and as
further defined in Article VI hereof.


1.12        Non-Employee
Director.  The term “Non-Employee
Director” shall have the meaning given to it by Rule 16b-3 promulgated under
the Exchange Act.


1.13        Nonstatutory
Stock Option.  The term “Nonstatutory
Stock Option” shall mean any Option granted by the Company pursuant to this
Plan which is not an Incentive Stock option.


1.14        Option.  The term “Option” shall mean an option
granted by the Company to purchase Stock pursuant to the provisions of this
Plan and the related Stock Option Agreement executed pursuant hereto.


1.15        Option Price.  The term “Option Price” shall mean the price
per share of Stock purchasable under an Option. 
The Option Price of an Option shall be determined by the Committee at
the time of grant and, in the case of an Incentive Stock Option or a
Nonstatutory Stock Option, shall not be less than the Fair Market Value on the
date of grant, unless, in the case of a Participant who is granted an Incentive
Stock Option, such Participant owns more than ten percent (10%) of the Stock or
more than ten percent (10%) of the voting stock of any Subsidiary, in which
case the Option Price shall not be less than one hundred ten percent (110%) of
the Fair Market Value on the date of grant.


1.16        Outside
Director.  The term “Outside
Director” shall have the meaning given to it in the Regulations promulgated
under Section 162(m) of the Code, as may be amended from time to time.


1.17        Participant.  The term “Participant” shall mean an Eligible
Person who has been granted an Option hereunder.


1.18        Plan.  The term “Plan” shall mean the 2005
International Bancshares Corporation Stock Option Plan.


1.19        Regulations.  The term “Regulations” shall mean the
regulations promulgated under the Code.


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1.20        Sanchez Family.  The term “Sanchez Family” shall mean the
Estate of Alicia M. Sanchez, deceased, and Alicia M. Sanchez’s children, grandchildren
and great-grandchildren.


1.21        Sanchez
Shareholder.  The term “Sanchez
Shareholder” shall mean a shareholder of the Company who is a member of the
Sanchez Family or a corporation, partnership, or other entity in which one or
more of the members of the Sanchez Family beneficially own a majority of the
ownership interest, or a trust in which all of the beneficial interests are
held by or for one or more members of the Sanchez Family; provided, however, a
trustee of such trust must be a member of the Sanchez Family.


1.22        Securities Act.  The term “Securities Act” shall mean the
Securities Act of 1933, as amended from time to time.


1.23        Stock.  The term “Stock” shall mean common stock, par
value $1.00 per share, issued by the Company.


1.24        Stock Option
Agreement.  The term “Stock
Option Agreement” shall mean the agreement as described in Section 3.04 of this
Plan between the Company and the Participant under which such Participant
receives an Option pursuant to this Plan.


1.25        Subsidiary.  The term “Subsidiary” shall mean any
subsidiary corporation, as defined in Section 424(f) of the Code, to which the
Committee has determined to extend the application of this Plan.


ARTICLE
II

PARTICIPATION


2.01        Participation.  A grant of an Option under this Plan may be
made by the Committee to any Eligible Person. 
In determining the eligibility of an individual to be granted an Option,
as well as in determining the number of shares to be issuable pursuant to
Options granted to any individual, the Committee shall take into account the
position and responsibilities of the individual being considered, the nature
and value to the Company or its Subsidiaries of his or her service and
accomplishments, his or her present and potential contribution to the success
of the Company or its subsidiaries, and such other factors as the Committee may
deem relevant.


2.02        Limitations on
Grants to Individual Participant.  Subject to adjustments pursuant to the
provisions of Section 3.03 hereof, the number of shares of Stock which may be covered
by Options granted hereunder to any Participant during any fiscal year shall not exceed 75,000 shares. 
If an Option is cancelled, the cancelled Option shall continue to be
counted toward such 75,000 share
limit for the year granted.  An Option
that is re-priced during any fiscal year shall be treated as the cancellation
of such Option and a grant of a new Option for purposes of the 75,000 share limit for that fiscal year.


ARTICLE
III

SHARES
OF STOCK SUBJECT TO PLAN


3.01        Limitations.  Subject to Section 3.02 and the adjustments
pursuant to the provisions of Section 3.03 hereof, the number of shares of
Stock covered by Options which may 


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be
granted hereunder to Participants under all Options shall not exceed Three
Hundred Eighty Thousand (380,000) shares. 
The shares of Stock which may be issued by the Company upon exercise of
an option may be issued out of the Company’s authorized and unissued shares of
Stock or reaquired shares of Stock (treasury stock).


3.02        Availability Of
Shares Once Issued Under Plan.  Once an Option has lapsed, terminated or been
forfeited, the Committee shall have the sole discretion to issue a new Option
to any Eligible Person, covering the number of shares to which such lapsed,
terminated or forfeited Option related.


3.03        Adjustments To
Options Once Issued.  In the
event that the outstanding shares of Stock of the Company are changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of another corporation or other entity by reason of any
reorganization, merger, consolidation, recapitalization, reclassification,
stock split-up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made (i) in the number and kind of shares as to
which Options may be granted under the Plan, (ii) the number and kind of shares
which may be granted to an Eligible Person in any one taxable year of the
Company, (iii) the number and kind of shares as to which outstanding Options or
portions thereof then unexercised shall be exercisable, to the end that
securities issuable upon exercise of any Option after such event shall be
equivalent to the securities which would have been issuable upon exercise of
such Option had such exercise been completed prior to such event, and (iv) a
corresponding adjustment in the Option Price shall be made to each outstanding
Option.  Such adjustment shall be made by
the Committee, whose determination in that respect shall be final, binding and
conclusive on all persons.  Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number, type or price of Stock subject to an Option.


3.04        Grants and
Agreement.  Each grant
of an Option under this Plan shall be evidenced by a written Stock Option
Agreement dated as of the date of the grant and executed by the Company and the
Participant.  The rights of a grantee in
and to an Option shall become effective only upon execution and delivery by the
Company of the Stock Option Agreement. 
Such Stock Option Agreement shall set forth the terms and conditions of
such Option, as may be determined by the Committee consistent with this Plan,
and shall indicate whether the Option that it evidences is intended to be an
Incentive Stock Option or a Nonstatutory Stock Option.


3.05        Restrictions on
Stock.  Stock issuable upon exercise
of an Option granted under the Plan may be subject to such restrictions on
transfer, repurchase rights or other restrictions as shall be determined by the
Committee, consistent with the Code and Regulations.


ARTICLE
IV

OPTIONS


4.01        Options; Grant
and Exercise.  The
Committee shall have full and final authority to select those Eligible Persons
who will be granted Options and whether such options shall be Incentive Stock
Options or Nonstatutory Stock Options. 
Subject to Federal and state statutes then applicable and the express
terms of this Plan, the terms and procedures by which an Option


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may
be exercised shall be set forth in the Participant’s Stock Option Agreement or
in procedures established by the Committee. 
Certain of the procedures for the notice of the grant of an Option, the
execution of the Stock Option Agreement, and the exercise of an Option, are as
follows:


(a)           As
soon as practicable after a determination is made by the Committee to grant an
Option to an Eligible Person, as set forth in this Article IV, the appropriate
officer or officers of the Company shall give notice (written or oral) to such
effect to each such Eligible Person, which notice shall be accompanied by a
copy or copies of the Stock Option Agreement to be executed by such Eligible
Person.  The Stock Option Agreement shall
designate whether it is an Incentive Stock Option or Nonstatutory Stock Option.


(b)           Upon
the due execution by such Eligible Person and the Company of a Stock Option Agreement
(on such terms as the Committee shall determine) within such number of days
from the giving of such notice as shall be specified in such notice (unless
waived by the Company), such Option shall be granted and such Eligible Person
shall become and be a Participant.


(c)           Each
Option granted under the Plan shall, subject to this Section, be exercisable at
such time or times and during such period as shall be set forth in the Stock
Option Agreement and as set forth herein; provided, however,
that no Option granted under the Plan shall have a term in excess of ten (10)
years from the date of grant, and shall be exercisable only if compliance with
all applicable Federal and state securities laws can be effected.  The Committee may permit payment of the Option
Price to be made through the tender of cash or securities, the withholding of
Stock, or any other arrangement satisfactory to the Committee.


4.02        Vesting of
Options.  The Stock Option Agreement
shall specify the date or dates on which the Stock subject to such Stock Option
Agreement shall vest and the date or dates on which the Participant may begin
to exercise all or a portion of such Option. 
To the extent not exercised, the vested portion of the option shall be
exercisable, in whole or in part, at any time after becoming exercisable, but
not later than the date the Option terminates. 
Notwithstanding the terms of any Stock Option Agreement, the Committee
at any time may accelerate such date or dates and otherwise waive or amend any
conditions of the Option in a manner that is not adverse to the Option
holder.  A Participant’s subsequent
transfer or disposition of any Stock obtained through the exercise of an option
shall be subject to any Federal and state laws then applicable, specifically
including securities laws.


ARTICLE
V

NONSTATUTORY STOCK OPTION


5.01        General.  The Committee may grant Nonstatutory Stock
Options to Eligible Persons under this Plan. The grant of Nonstatutory Stock
Options shall be designated as such in a Participant’s Stock Option Agreement.
Such Nonstatutory Stock Options must comply with all requirements of this Plan
except for those contained in Article VI hereof.


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ARTICLE
VI

INCENTIVE STOCK OPTIONS


6.01        General.  The Committee may only grant Incentive Stock
Options under this Plan to Eligible Persons who are employees (including
officers) of the Company or any Subsidiary. 
All Incentive Stock Options shall comply with all of the restrictions and
limitations set forth in Section 422 of the Code and Regulations issued
thereunder, and this Article.  To the
extent that any Option does not qualify as an Incentive Stock Option, it shall
constitute a Nonstatutory Stock Option.


6.02        Terms and
Conditions of Incentive Stock Options.  Notwithstanding any other provision of this
Plan, Incentive Stock Options shall be subject to such terms and conditions as
shall be determined by the Committee, which shall include the following:


(a)           The
Option Price shall be an amount determined by the Committee in accordance with
the provision of Section 1.14 hereof.


(b)           No
Incentive Stock Option shall be exercisable after the lapse of ten (10) years
from the date such Incentive Stock Option is granted; provided, however, if the
Participant owns more than ten percent (10%) of the Stock or of the voting
stock of any Subsidiary, such Participant’s Incentive Stock Option shall not be
exercisable after the lapse of five (5) years from the date such Incentive
Stock Option is granted.


(c)           Except
as provided in this Subsection 6.02(c) and Subsections 6.02 (d) and (e), all
Incentive Stock Options granted to a Participant shall terminate no later than
three (3) months from the date the Participant’s service with the Company
terminates; provided, however, if the Participant’s service with the Company
terminates as a result of the Participant’s permanent disability, such
Incentive Stock Options shall terminate no later than twelve (12) months from
the date that the Participant’s service with the Company terminates as a result
of such disability.  Notwithstanding the
foregoing, the Committee may, in its sole discretion, provide in the Stock
Option Agreement for the termination of the Option upon the Participant’s
termination of service with the Company prior to such three (3) month period or
twelve (12) month period, as the case may be.


(d)           An
Incentive Stock Option or any of the rights thereunder may be exercised by such
Participant only, and may not be transferred or assigned, voluntarily,
involuntarily or by operation of law (including, without limitation, the laws
of bankruptcy, intestacy, descent and distribution and succession); provided,
however, that the Committee may approve a transfer of an Incentive Stock
Option, or a Stock Option Agreement relating thereto may provide for a transfer
by will or the laws of descent and distribution.  During the lifetime of the Participant, such
Incentive Stock Option shall be exercisable or perfected only by the
Participant in accordance with the terms of this Plan and the Stock Option Agreement.  If such transfer by will or the laws of
descent and distribution is provided for in a Stock Option Agreement or such
transfer is approved by the Committee, upon the death of a Participant who has
been granted an Incentive Stock Option, such Incentive Stock Option exercisable
on the date of death may be exercised by the Participant’s estate or by a
person who acquires the right to exercise such Incentive 


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Stock Option pursuant to the Participant’s will or by the laws of
descent and distribution, provided that, subject to any additional restrictions
in the Stock Option Agreement or imposed by the Committee, the exercise of the
Incentive Stock Option must occur within both the remaining term of the Incentive
Stock Option and twelve (12) months after the Eligible Person’s death. The
provisions of this Section 6.02(d) shall apply notwithstanding that the
Participant’s employment may have terminated prior to death, but only to the
extent that such Incentive Stock Option is exercisable on the date of death.


(e)           An
Incentive Stock Option may provide, in the Committee’s discretion, that if the
provisions of this Article VI are not satisfied, the Option granted shall not
lapse and the option shall be classified as a Nonstatutory Stock Option.


(f)            Stock
issued to a Participant pursuant to an Incentive Stock Option may not be
disposed of in any fashion, voluntarily, involuntarily or by operation of law
(including, without limitation, the laws of bankruptcy, intestacy, descent and
distribution and succession) to any person within two (2) years from the date
of the granting of the Incentive Stock Option nor within one (1) year after the
transfer of such Stock to him; provided, however, that if an insolvent Participant
holds Stock acquired pursuant to his exercise of an Incentive Stock option, and
if such stock is transferred to a trustee, receiver, or other similar fiduciary
in any proceeding under Title 11 of the United States Code or any other similar
insolvency proceeding, neither such transfer, nor any other transfer of such
Stock for the benefit of his creditors in such proceeding, shall constitute a
disposition of such Stock for purposes of this Plan and the Stock Option
Agreements.


6.03        Limitations on
Grants of Incentive Stock Options.  The Committee may not grant an Incentive Stock
Option hereunder to an Eligible Person if such grant could result in the
aggregate Fair Market Value (determined at the time each incentive stock option
is granted) of Stock with respect to which incentive stock options are
exercisable for the first time by such Eligible Person during any calendar year
(under all incentive stock option plans of the Company or its parent or
subsidiaries, if any, as defined in Section 424(e) and (f) of the Code)
exceeding one hundred thousand dollars ($100,000) or such other maximum amount
which is permissible under the Code, as it may be amended, on the date of such
grant; provided, however, for purposes of determining whether a proposed grant
of an Incentive Stock Option is permissible under this Section 6.03, the
Committee shall not consider the possible accelerated vesting upon (i) a Change
of Control under Article X hereof unless the Committee has received notice of
such Change of Control or (ii) the occurrence of any other event as may be
provided in a Stock Option Agreement.


ARTICLE
VII

STOCK CERTIFICATES


7.01        Stock
Certificates.  The Company
shall not be required to issue or deliver any certificate for shares of Stock
upon the exercise of any option or of any portion thereof prior to fulfillment
of all of the following conditions:


(a)           The
admission of such shares to listing or quotation on all stock exchanges or
automated quotation systems on which the Stock is then listed or quoted, if
any;


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(b)           The
completion of any registration or other qualification of such shares under any
Federal or state law, under the rulings or regulations of the Securities and
Exchange Commission, or under any other governmental regulatory agency which
the Committee shall in its sole discretion determine to be necessary or
advisable;


(c)           The
obtaining of any approval or other clearance from any Federal or state
governmental agency which the Committee shall in its sole discretion determine
to be necessary or advisable; and


(d)           The
lapse of such reasonable period of time following the exercise of the Option as
the Committee from time to time may establish for reasons of administrative
convenience.


If these conditions are not satisfied the Participant may lose his
rights to such Stock as determined by the Committee.


ARTICLE
VIII

PLAN ADMINISTRATION


8.01        Plan Administration.


(a)           This Plan and all Stock Option Agreements
shall be administered, and all grants of Options under this Plan shall be
granted, by the Committee. The Committee shall have full authority and absolute
sole discretion:


(i)            To
determine, consistent with the provisions of this Plan, which of the Eligible
Persons shall be granted Options; the form and terms of such Options; the
timing of such grants; the number of shares subject to each option and the
option Price of Stock covered by each option; the restrictions, if any,
applicable to the shares of Stock issuable upon the exercise of each Option;
and the period over which the Option shall vest and become and remain
exercisable;


(ii)           To construe and
interpret this Plan and the Stock Option Agreements;


(iii)          To
determine the terms and provisions of each respective Stock Option Agreement,
which need not be identical.


(iv)          To
make all other determinations and take all other actions deemed necessary or
advisable for the proper administration of this Plan;


(v)           To
modify and amend outstanding Options unilaterally in any manner that is not
adverse to the Option holder; and


(vi)          To
adopt, alter, and repeal such rules, guidelines, and practices for
administration of this Plan and for its own acts and proceedings as it shall
deem advisable; to interpret the terms and provisions of this Plan and any
Option (including related Stock Option Agreements); to make all determinations
it deems 


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advisable for the administration of this Plan; to decide all disputes
arising in connection with this Plan; and to otherwise supervise the administration
of this Plan.


(b)           The
decision of the Committee as to all questions of interpretation and application
of the Plan and the Stock Option Agreements shall be final, binding and
conclusive on all persons.  The Committee
may correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any Stock Option Agreement granted hereunder in the manner and
to the extent it shall deem expedient to carry the Plan into effect and shall
be the sole and final judge of such expediency.


8.02        Advisors to
Committee.  The
Committee may designate employees of the Company and its Subsidiaries and
professional advisors to assist the Committee in the administration of the Plan
and may grant authority to employees of the Company to execute agreements or
other documents on behalf of the Committee in connection with the
administration of the Plan. The Committee may employ such legal counsel,
consultants, and agents as it may deem desirable for the administration of the
Plan and may rely upon any advice and any computation received from any such
counsel, consultant, or agent. The Company shall pay all expenses and costs
incurred by the Committee for the engagement of any such counsel, consultant,
or agent.


8.03        Participants
Outside the U.S.  In order to
conform with the provisions of local laws and regulations in foreign countries
in which the Company operates, the Committee shall have the sole discretion to
(i) modify the terms and conditions of the Options granted under the Plan
to Eligible Individuals located outside the United States; (ii) establish
subplans with such modifications as may be necessary or advisable under the
circumstances present by local laws and regulations; and (iii) take any
action which it deems advisable to comply with or otherwise reflect any
necessary governmental regulatory procedures, or to obtain any exemptions or
approvals necessary with respect to the Plan or any subplan established
hereunder.


ARTICLE
IX

MISCELLANEOUS PROVISIONS


9.01        Applicable Law.  To the extent that state law shall not have
been preempted by any laws of the United States, this Plan shall be construed,
regulated, interpreted and administered according to the laws of the State of
Texas, without regard to conflicts of law principles.


9.02        Expenses.  The cost of benefit payments from this Plan
and the expenses of administering this Plan shall be borne by the Company;
provided, however, that except as otherwise specifically provided in this Plan
or the applicable Stock Option Agreement between the Company and a Participant,
the Company shall not be obligated to pay any costs or expenses (including
legal fees) incurred by any Participant in connection with any Stock Option
Agreement, this Plan or option or Company Stock held by any Participant.


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9.03        Gender and
Number.  Unless the context clearly
requires otherwise, the masculine pronoun whenever used shall include the
feminine and neuter pronoun, the singular shall include the plural, and vice
versa.


9.04        Headings Not
Part Of Plan.  Headings of
Articles and Sections are inserted for convenience and reference; they
constitute no part of this Plan.


9.05        Indemnification.  No member of the Board of Directors or the
Committee shall be liable for any action or determination taken or made in good
faith with respect to this Plan nor shall any member of the Board of Directors
or the Committee be liable for any Stock Option Agreement issued pursuant to
this Plan or any grants under it. Without limiting any other rights to indemnification,
each member of the Board of Directors and of the Committee shall be indemnified
by the Company against any losses incurred in such administration of this Plan
to the fullest extent permitted by the Texas Business Corporation Act, as
amended.


9.06        Limitation of
Rights.


(a)           Neither
the adoption and maintenance of this Plan or Stock Option Agreement nor
anything contained herein, shall with respect to any Participant, be deemed to:


(i)            limit the right
of the Company or any Subsidiary to discharge or discipline any such person, or
otherwise terminate or modify the terms of his employment, or


(ii)           create
any contract or other right or interest under this Plan other than as
specifically provided in this Plan and a Stock Option Agreement.


(b)           A
Participant shall not be deemed for any purpose to be a shareholder of the
Company with respect to any of the Options except to the extent that the Option
shall have been exercised with respect thereto, the Option Price therefor shall
have been paid in full, and the issuance and delivery of a certificate or
certificates evidencing the Stock purchased pursuant to such exercise, and the
Participant shall have complied with all applicable provisions of the Plan and
the Stock Option Agreement pursuant to which such Options were granted.


9.07        No
Distribution, Compliance With Legal Requirements.


(a)           Unless the
shares to be issued upon exercise of an Option granted under the Plan have been
effectively registered under the Securities Act, the Person who exercises such
Option, in whole or in part, shall give a written representation and
undertaking to the Company which is satisfactory in form and scope to counsel
for the Company and upon which, in the opinion of such counsel, the Company may
reasonably rely, that he or she is acquiring the shares issued pursuant to such
exercise of the Option for his or her own account as an investment and not with
a view to, or for sale in connection with, the distribution of any such shares,
and that he or she will make no transfer of the same except in compliance with
any rules and regulations in force at the time of such transfer under the
Securities Act, or any other applicable law, and that if 


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shares are issued without such registration, a legend to this effect
may be endorsed upon the securities so issued.


(b)           In
the event that the Company shall, nevertheless, deem it necessary or desirable
to register such shares, including any shares with respect to which an Option
shall have been exercised, under the Securities Act, or other applicable
statutes, or to qualify any such shares for exemption from registration
requirements of the Securities Act, or other applicable statutes, then the
Company may take such action and may require from each Participant such
information in writing for use in any registration statement, supplementary
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for such purpose and may require reasonable
indemnity to the Company and its officers and directors and controlling persons
from such holder against all losses, claims, damages and liabilities arising
from such use of the information so furnished and caused by any untrue
statement of any material fact therein or caused by the omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, and each Participant by his or her acceptance of an Option agrees to
provide such information and indemnity and to execute all documents reasonably
requested by the Company to evidence the Participant’s indemnity obligation.


(c)           The
Committee may require the placing of such stop-orders and restrictive legends on
certificates for Stock and Options as it deems appropriate.


9.08        Timing of
Grants.  All Options granted under this
Plan shall be granted prior to the tenth (10th) anniversary of the
Effective Date.


9.09        Non-Assignability.  Except as otherwise set forth herein, a
Participant’s interest under this Plan shall not be subject at any time or in
any manner to alienation, sale, transfer, assignment, pledge, attachment,
garnishment or encumbrance of any kind and any attempt to deliver, sell,
transfer, assign, pledge, attach, garnish or otherwise encumber such interest
shall be null and void and any interest so encumbered will terminate.


9.10        Nontransferability.  Except as specifically provided by a duly
executed Stock Option Agreement or unless approved by the Committee, an Option
or any of the rights thereunder may be exercised by such Participant only, and
may not be sold, transferred, assigned, pledged, hypothecated, encumbered or
otherwise disposed of (whether voluntarily, involuntarily or by operation of
law, including, without limitation, the laws of bankruptcy, intestacy, descent
and distribution and succession) or be subject to execution, attachment or
similar process.  Upon any attempt to so
sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of
any Option, such Option and all rights thereunder shall immediately become null
and void.


9.11        Other
Compensation Plans.  The
adoption of this Plan shall not affect any other existing or future incentive
or compensation plans for directors, officers or employees of the Company or
its Subsidiaries. Moreover, the adoption of this Plan shall not preclude the
Company or its Subsidiaries from:


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(a)           Establishing
any other forms of incentive or other compensation for officers, employees,
consultants or advisors or directors of the Company or its Subsidiaries; or


(b)           Assuming
any forms of incentives or other compensation of any person or entity in
connection with the acquisition or the business or assets, in whole or in part,
of any person or entity.


9.12        Plan Binding on
Successors.  This Plan
shall be binding upon the successors and assigns of the Company.


9.13        Tax Withholding.  Each Participant shall, no later than the
date as of which the value of an Option or of any Stock or other amount
received thereunder first becomes includable in the gross income of the
Participant for Federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Committee regarding payment of any Federal,
state, or local taxes of any kind required by law, or deemed advisable by the
Company, to be withheld with respect to such income. The Committee may permit
payment of such taxes to be made through the tender of cash or securities, the
withholding of Stock or any other arrangement satisfactory to the Committee.
The Company and its Subsidiaries shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind otherwise due
to the Participant.


9.14        Non-Contravention
of Securities Laws.  Notwithstanding
anything to the contrary expressed in this Plan, any provisions hereof that
vary from or conflict with any applicable Federal or state securities laws
(including any regulations promulgated thereunder) shall be deemed to be
modified to conform to and comply with such laws.


9.15        Unenforceability
of a Particular Provision.  The
unenforceability of any particular provision of this document shall not affect
the other provisions, and this document shall be construed in all respects as
if such unenforceable provision were omitted.


ARTICLE
X

CHANGE OF CONTROL AND
OTHER CORPORATE EVENTS


10.01      Change in Control.  Unless
otherwise provided in a Stock Option Agreement, upon the occurrence of a Change
in Control, the Committee may in its sole and absolute discretion, provide on a
case by case basis that (i) some or all outstanding Options may become
immediately exercisable or vested, without regard to any limitation imposed
pursuant to this Plan, (ii) that Options shall terminate, provided
however, that Participants shall have the right, immediately prior to the
occurrence of such Change in Control and during such reasonable period as the
Committee in its sole discretion shall determine and designate, to exercise any
vested Option in whole or in part, and/or (iii) that Options shall
terminate provided that Participants shall be entitled to a cash payment equal
to the excess of the aggregate Change in Control Price with respect to shares
subject to the vested portion of the Option over the aggregate Exercise Price
of the shares subject to the vested portion of the Option. In the event that
the Committee does not terminate an Option upon a Change in Control then each
outstanding Option shall upon exercise thereafter entitle the holder thereof to
such number of shares of Stock or


 


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other
securities or property to which a holder of shares of Stock would have been
entitled to upon such Change in Control.


10.02      Change in
Status of Subsidiary.  Unless
otherwise provided in a Stock Option Agreement or otherwise determined by the
Committee, in the event that an entity which was previously a Subsidiary is no
longer a Subsidiary, as determined by the Committee in its sole discretion, the
Committee may, in its sole and absolute discretion (i) provide on a case
by case basis that some or all outstanding Options held by a Participant
employed by or performing service for such entity may become immediately
exercisable or vested, without regard to any limitation imposed pursuant to
this Plan and/or (ii) treat the employment or other services of a
Participant employed by such entity as terminated if such Participant is not
employed by the Company or any Subsidiary immediately after such event.


ARTICLE
XI

PERMANENCY OF THIS PLAN AND PLAN TERMINATION


11.01      Effective Date.  This Plan shall become effective upon its
adoption by the Board of Directors of the Company (the “Effective Date”);
provided, however, that the shareholders of the Company shall approve this Plan
within twelve (12) months of the date of adoption by the Board of this Plan.
Notwithstanding any terms or provisions to the contrary, this Plan, and all
Options granted hereunder, are subject to the approval of the Plan by the
shareholders of the Company not later than twelve (12) months from the date of
adoption by the Board of Directors and no Option may be exercised prior to such
shareholder approval. In the event the preceding condition is not satisfied,
Options granted under this Plan shall be null and void.


11.02      Termination,
Amendment, and Modification of Plan.  The Board of Directors may at any time
terminate or suspend, and may at any time and from time to time and in any
respect amend or modify, this Plan; provided, however, that no such action of
the Board of Directors without approval of the shareholders of the Company may
increase the total number of shares of Stock subject to this Plan except as
contemplated in Section 3.03 hereof.


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