Exhibit
10.2


AMENDMENT NUMBER TWELVE

TO

TEXAS REGIONAL BANCSHARES, INC.

AMENDED AND RESTATED EMPLOYEE STOCK OWNERSHIP PLAN

(WITH 401(K) PROVISIONS)


 


Texas
Regional Bancshares, Inc., a corporation organized and operating under the laws
of the State of Texas, and registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended (the “Company”), together with the
Trustees of the Texas Regional Bancshares, Inc. Amended and Restated Employee
Stock Ownership Plan (with 401(k) Provisions) adopt the following amendments to
the Plan effective as of January 1, 2002.


 


WHEREAS,
the Company has established and maintains the Texas Regional
Bancshares, Inc. Amended and Restated Employee Stock Ownership Plan (with
401(k) Provisions) (the “Plan”); and


 


WHEREAS, numerous qualification requirements imposed
on to the Plan under the Internal Revenue Code were amended by the Economic
Growth and Tax Relief Reconciliation Act of 2001; and


 


WHEREAS, the Internal Revenue Service issued sample
“good faith” plan language in Notice 2001-57 and announced in Notice 2001-42
that plans which had adopted “good faith” EGTRRA language by the end of the
plan’s 2002 plan year are protected with respect to EGTRRA language
requirements until the end of the plan’s 2005 plan year; and


 


WHEREAS, the Company has determined that the “good
faith” EGTRRA language previously incorporated into the Plan in Amendment
Number One to the Plan (as restated effective December 31, 2001) does not
address all EGTRRA requirements which affect the Plan and wishes to expand such
language in order to protect the Plan’s qualified status; and


 


WHEREAS, the Bank has also submitted proposed
corrected EGTRRA “good faith” language to the Internal Revenue Service under
the plan document correction provisions of Revenue Procedure 2003-44 along with
a request for a Compliance Statement and has received such a Compliance
Statement dated April 26, 2004; and


 


WHEREAS, under the terms of the Compliance Statement,
the approved language must be adopted no later than 150 days after
April 26, 2004; and


 


WHEREAS, the Company has determined that it is
appropriate for this purposes to amend and restate Amendment Number One to the
Plan as Amendment Number Twelve to the Plan, but effective retroactively as of
the EGTRRA effective date.


 


NOW THEREFORE, IT IS
HEREBY AGREED THAT the Plan is amended effective as of January 1, 2002, as
follows:


 


PREAMBLE


 


1.               Adoption and Effective Date of Amendment. 
This amendment to the Amended and Restated Texas Regional Bancshares,
Inc. Employee Stock Ownership Plan (With 401(k) Provisions) (the “Plan”) is
adopted to reflect certain provisions of the Economic Growth and Tax Relief
Reconciliation Act of 2001 (“EGTRRA”). 
This amendment is intended as a good faith compliance with the requirements
of EGTRRA and is to be construed in accordance with EGTRRA and guidance issued
thereunder.  Except as otherwise
provided, this amendment shall be effective as of the first day of the first
plan year beginning after December 31, 2001.


 


2.               Supersession of Inconsistent Provisions. 
This amendment shall supersede the provisions of the Plan to the extent
those provisions are inconsistent with the provisions of this amendment.


 


SECTION 1.0  LIMITATIONS ON CONTRIBUTIONS


 


1.1         Effective Date.  This
section shall be effective for limitation years beginning after
December 31, 2001.


 


1.2         Maximum Annual Addition.  Except to the
extent permitted under Section 7.0 of this Amendment and
section 414(v) of the Code, if applicable, the annual addition that may be
contributed or allocated to a Participant’s accounts under the Plan for any
limitation year shall not exceed the lesser of:


 


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(a)          $40,000, as adjusted for increases in the
cost-of-living under section 415(d) of the Code, or


 


(b)         100 percent of the Participant’s compensation, within
the meaning of section 415(c)(3) of the Code, for the limitation year.


 


The compensation limit referred to in (b) shall not
apply to any contribution for medical benefits after separation from service
(within the meaning of section 401(h) or section 419A(f)(2) of the
Code) which is otherwise treated as an annual addition.


 


SECTION 2.0  INCREASE IN COMPENSATION LIMIT


 


The annual compensation of each Participant taken into
account in determining allocations for any Plan Year beginning after
December 31, 2001 shall not exceed $200,000, as adjusted for
cost-of-living increases in accordance with section 401(a)(17)(B) of the
Code.


 


Annual compensation means compensation during the Plan Year or such
other consecutive 12-month period over which compensation is otherwise
determined under the Plan (the determination period).  The cost-of-living adjustment in effect for a
calendar year applies to annual compensation for the determination period that
begins with or within such calendar year.


 


SECTION 3.0  MODIFICATION OF TOP-HEAVY RULES


 


3.1         Effective Date.  This
section shall apply for purposes of determining whether the plan is a
top-heavy plan under section 416(g) of the Code for Plan Years beginning
after December 31, 2001, and whether the Plan satisfies the minimum
benefits requirements of section 416(c) of the Code for such years.  This section amends Section 11.2,
and related sections, of the Plan.


 


3.2         Determination of Top-Heavy Status.


 


3.2.1                        Key Employee.  Key Employee
means any Employee or former Employee (including any deceased Employee) who at
any time during the Plan Year that includes the Determination Date was an
officer of the Employer having annual compensation greater than $130,000 (as
adjusted under section 416(i)(1) of the Code for Plan Years beginning
after December 31, 2002), a 5-percent owner of the Employer, or a
1-percent owner of the Employer having annual compensation of more than
$150,000.   For this purpose, annual
compensation means compensation within the meaning of section 415(c)(3) of
the Code.  The determination of who is a
Key Employee will be made in accordance with section 416(i)(1) of the Code
and the applicable Regulations and other guidance of general applicability issued
thereunder.


 


3.2.2                        Determination of Present Values and Amounts. 
This section 3.2 shall apply for purposes of determining the
present values of accrued benefits and the amounts of account balances of
Employees as of the Determination Date.


 


3.2.3.                     Distributions during Year Ending on the Determination
Date.  The present values of accrued benefits and
the amounts of account balances of an Employee as of the Determination Date
shall be increased by the distributions made with respect to the Employee under
the Plan and any plan aggregated with the Plan under section 416(g)(2) of
the Code during the 1-year period ending on the Determination Date.  The preceding sentence shall also apply to
distributions under a terminated plan which, had it not been terminated, would
have been aggregated with the Plan under section 416(g)(2)(A)(i) of the
Code.  In the case of a distribution made
for a reason other than separation from service, death, or disability, this
provision shall be applied by substituting “5-year period” for “1-year period.”


 


3.2.4                        Employees not Performing Services during Year Ending
on the Determination Date.  The accrued benefits and
accounts of any individual who has not performed services for the Employer
during the 1-year period ending on the Determination Date shall not be taken
into account.


 


3.3         Minimum Benefits.


 


3.3.1.                     Matching Contributions.  Employer
Optional Matching Contributions shall be taken into account for purposes of
satisfying the minimum contribution requirements of section 416(c)(2) of
the Code and the Plan.  The preceding
sentence shall apply with respect to matching contributions under the Plan or,
if the Plan provides that the minimum contribution requirement shall be met in
another plan, such other plan.  Employer
Optional Matching Contributions that are used to satisfy the minimum
contribution requirements shall be treated as matching contributions for
purposes of the actual contribution percentage test and other requirements of
section 401(m) of the Code.


 


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SECTION 4.0  DIRECT ROLLOVERS OF PLAN
DISTRIBUTIONS


 


4.1         Effective Date.  This
section shall apply to distributions made after December 31, 2001.


 


4.2         Modification of Definition of Eligible Retirement Plan. 
For purposes of the direct rollover provisions in Section 9.13 of
the Plan, an Eligible Retirement Plan shall also mean an annuity contract
described in section 403(b) of the Code and an eligible plan under
section 457(b) of the Code which is maintained by a state, political subdivision
of a state, or any agency or instrumentality of a state or political
subdivision of a state and which agrees to separately account for amounts
transferred into such plan from this Plan. 
The definition of eligible retirement plan shall also apply in the case
of a distribution to a surviving spouse, or to a spouse or former spouse who is
the alternate payee under a qualified domestic relation order, as defined in
section 414(p) of the Code.


 


4.3         Modification of Definition of Eligible Rollover Distribution
to Exclude Hardship Distributions.  For purposes
of the direct rollover provisions in Section 9.13 of the Plan, any amount
that is distributed on account of hardship shall not be an eligible rollover
distribution and the distributee may not elect to have any portion of such a
distribution paid directly to an Eligible Retirement Plan.


 


4.4         Modification of Definition of Eligible Rollover
Distribution to Include After-Tax Employee Contributions. For purposes of the direct rollover
provisions in Section 9.13 of the Plan, a portion of a distribution shall
not fail to be an eligible rollover distribution merely because the portion
consists of after-tax employee contributions which are not includible in gross
income. However, such portion may be transferred only to an individual
retirement account or annuity described in section 408(a) or (b) of the
Code, or to a qualified defined contribution plan described in
section 401(a) or 403(a) of the Code that agrees to separately account for
amounts so transferred, including separately accounting for the portion of such
distribution which is includible in gross income and the portion of such
distribution which is not so includible.


 


SECTION 5.0  ROLLOVERS DISREGARDED IN
INVOLUNTARY CASH-OUTS


 


5.1         Applicability and Effective Date. 
This section shall apply effective for Plan Years commencing after
December 31, 2001.


 


5.2         Rollovers Disregarded in Determining Value of Account
Balance for Involuntary Distributions.  For purposes
of Section 8.6(b) of the Plan, the value of a Participant’s nonforfeitable
account balance shall be determined without regard to that portion of the
account balance that is attributable to rollover contributions (and earnings
allocable thereto) within the meaning of sections 402(c), 403(a)(4), 403(b)(8),
408(d)(3)(A)(ii), and 457(e)(16) of the Code. 
If the value of the Participant’s nonforfeitable account balance as so
determined is $5,000 or less, the Plan shall immediately distribute the
Participant’s entire nonforfeitable account balance.


 


SECTION 6.0  ELECTIVE DEFERRALS –
CONTRIBUTION LIMITATION


 


No Participant shall be permitted to have elective
deferrals made under this Plan, or any other qualified plan maintained by the
Employer during any taxable year, in excess of the dollar limitation contained
in section 402(g) of the Code in effect for such taxable year, except to
the extent permitted under Section 7.0 of this Amendment and
section 414(v) of the Code, if applicable.


 


SECTION 7.0  CATCH-UP CONTRIBUTIONS


 


All Employees who are eligible to make elective
deferrals under this Plan and who have attained age 50 before the close of the
Plan Year shall be eligible to make catch-up contributions in accordance with,
and subject to the limitations of, section 414(v) of the Code. Such
catch-up contributions shall not be taken into account for purposes of the
provisions of the Plan implementing the required limitations of sections 402(g)
and 415 of the Code.  The Plan shall not
be treated as failing to satisfy the provisions of the Plan implementing the requirements
of sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as
applicable, by reason of the making of such catch-up contributions.


 


SECTION 8.0  SUSPENSION PERIOD FOLLOWING
HARDSHIP DISTRIBUTION


 


A Participant who receives a distribution of elective
deferrals after December 31, 2001, on account of hardship shall be
prohibited from making elective deferrals and employee contributions under this
and all other plans of the Employer for 6 months after receipt of the
distribution.  A Participant who receives
a distribution of elective deferrals in calendar year 2001 on account of
hardship shall be prohibited from making elective deferrals and employee
contributions under this and all other plans


 


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of the employer for the
period specified in the provisions of the plan relating to suspension of
elective deferrals that were in effect prior to this amendment.


 


SECTION 9.0  DISTRIBUTION UPON SEVERANCE FROM EMPLOYMENT


 


9.1         Effective Date. This section shall apply for distributions and
severances from employment occurring after December 31, 2001.


 


9.2         New Distributable Event.  A
Participant’s elective deferrals, qualified nonelective contributions,
qualified matching contributions, and earnings attributable to these
contributions shall be distributed on account of the Participant’s severance
from employment.  However, such a
distribution shall be subject to the other provisions of the Plan regarding
distributions, other than provisions that require a separation from service
before such amounts may be distributed.


 


SECTION 10.0                    REPEAL OF
MULTIPLE USE TEST


 


The multiple use test described in Treasury Regulation
section 1.401(m)-2 and Sections 5.5(a)(2) and 5.7(a)(2) of the Plan shall
not apply for Plan Years beginning after December 31, 2001.


 


SECTION 11.0                    S CORPORATION
NONALLOCATON PROVISIONS


 


11.1   No Prohibited Allocations.  Effective
for Plan Years beginning after December 31, 2001 in which the Company is
an S Corporation, no “EGTRRA Prohibited Allocation” may be made directly or
indirectly in an “EGTRRA Nonallocation Year” to an EGTRRA Disqualified Person
(as defined in paragraph (e)) under this Plan or any other plan maintained by
the Employer and meeting the requirements of Code Section 401(a).


 


11.2   EGTRRA Nonallocation Year.           For
purposes of this Section, “EGTRRA Nonallocation Year” means any Plan Year if,
at any time during such Plan Year, the Company is an S Corporation and EGTRRA
Disqualified Persons own at least 50% of the number of shares of stock in the S
Corporation.  The attribution and
ordering rules of Code Section 409(p)(3) shall apply for purposes of
determining share ownership under this Subsection.


 


11.3   EGTRRA Prohibited Allocation.                       For purposes of this Section, an “EGTRRA Prohibited
Allocation” occurs when any portion of the assets of the Plan attributable to
(or allocable in lieu of) Company Stock accrues (or is allocated directly or
indirectly under any other qualified plan of the Employer) during an EGTRRA
Nonallocation Year for the benefit of an EGTRRA Disqualified Person.


 


11.4   First Nonallocation Year.            “First
Nonallocation Year” shall mean, for purposes of this Section, an EGTRRA
Nonallocation Year that is described in Code Sections 4979A(a)(3) and
(e)(2)(C).  A First Nonallocation Year
may occur regardless of whether there is an EGTRRA Prohibited Allocation during
such Plan Year.


 


11.5   EGTRRA Disqualified Person.         “EGTRRA
Disqualified Person” means, effective for Plan Years beginning after
December 31, 2004, and solely for purposes of this Section in years,
if any, when the Company is an S Corporation, a person described in Code
Section 409(p)(4).


 


IN WITNESS
WHEREOF, this Amendment Number Twelve to the Texas Regional Bancshares, Inc.
Amended and Restated Employee Stock Ownership Plan (with 401(k) Provisions) has
been executed this 11th day of May, 2004 to be effective as of the
dates provided above.


 


	
   

  	
  Texas Regional Bancshares, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ G. E. Roney

  
	
   

  	
   

  	
  Glen E. Roney,

  
	
   

  	
   

  	
  Chairman of the Board
  and

  
	
   

  	
   

  	
  Chief Executive Officer

  



 


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  AGREED TO AND ACCEPTED
  BY:

  
	
   

  
	
   

  
	
  /s/ G. E. Roney

  	
   

  
	
  Glen E. Roney, Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /a/ Morris Atlas

  	
   

  
	
  Morris Atlas, Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Frank N. Boggus

  	
   

  
	
  Frank N. Boggus,
  Trustee

  	
   

  



 


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