Exhibit 4.11


 


TEXAS
REGIONAL BANCSHARES, INC.


 


2005
INCENTIVE STOCK OPTION PLAN


 


Texas Regional Bancshares, Inc.,
a Texas corporation (hereinafter called the “Corporation”) believes that
allowing certain key employees to obtain shares of the Class A Voting
Common Stock of the Corporation through the use of stock options hereinafter
provided for will be beneficial to the initial and continued success of the
Corporation.  In furtherance of the
foregoing, the Corporation hereby establishes the Texas Regional Bancshares, Inc.
2005 Incentive Stock Option Plan (the “Plan”).


 


1.                                       Purpose.  The purpose of the Plan is to secure for the
Corporation and its stockholders the benefits which flow from providing key
employees of the Corporation and its subsidiaries with the incentive inherent
in common stock ownership.   It is
generally recognized that stock option plans aid in retaining competent
employees and furnish a device to attract employees of exceptional ability to
the Corporation because of the opportunity offered to acquire a proprietary
interest in the business.  For purposes
of the Plan, a subsidiary is any corporation in which the Corporation owns,
directly or indirectly, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock or over which the
Corporation has effective operating control. 
The Corporation intends that any stock option granted or exercised under
this Plan qualify as an “incentive stock option” which is given favorable
income tax treatment under Section 422 of the Internal Revenue Code of
1986, as amended from time to time, and pertinent regulations.


 


2.                                       Amount
of Stock.


 


(a)                                  The
total number of shares of Class A Voting Common Stock to be subject to
options granted pursuant to the Plan shall not exceed Three Hundred Thousand
(300,000) shares of the Corporation’s Class A Voting Common Stock
(hereinafter referred to as the “Common Stock” or the “Stock”) each having a
par value of $1.00.


 


(b)                                 In
the event of (i) stock dividends, stock splits, or subdivisions,
combinations or reclassifications of the Stock, or (ii) the merger or
consolidation of the Corporation with any other business entity, the sale of
all or substantially all of the Corporation’s assets, the liquidation or
dissolution the Corporation, or any other form of corporate reorganization or
other similar capital change, the number and kind of shares of stock of the
Corporation described in the Plan or to be granted under the Plan, the number
and kind of shares of stock of the Corporation subject to options then
outstanding under the Plan, the maximum number of shares for which options may
be issued under the Plan, the option price and other relevant provisions shall
be appropriately adjusted.  The
determination of the Board of Directors, or the Committee appointed by the
Board as herein provided, as to any dispute related to adjustments shall be
binding on all persons.


 


(c)                                  In
the event that options granted under this Plan shall expire, terminate
unexercised or otherwise lapse without being exercised in whole or in part, the
shares covered by the unexercised portion of the expired, terminated or lapsed
options shall be available for future grants under the Plan, within the limits
herein described.


 


(d)                                 The
stock to be issued under the Plan may constitute an original issue of
authorized stock or may consist of previously issued stock acquired by the
Corporation, as shall be determined by the Board or the Committee.


 


3.                                       Stock
Option Committee.  The Board of
Directors of the Corporation (the “Board”) shall from time to


 





















 


time appoint a Stock
Option Committee (the “Committee”) to serve under this Plan.  The Committee shall consist of three or more
directors, each of whom is (i) an independent director as that term is
defined in Rule 4200(a)(15) of the Marketplace Rules applicable to
companies the shares of which are traded on The NASDAQ Stock Market, Inc.’s
National Market System; (ii) a “Non-Employee Director” for purposes of Rule 16b-3(d)(1) as
promulgated by the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended; and (iii) an outside director
as that term is defined for purposes of section 162(m) of the Internal
Revenue Code of 1986, as amended.


 


The Committee shall have
authority, consistent with the Plan:


 


(a)                                  to
determine which of the key employees of the Corporation and its subsidiaries
shall be granted options;


 


(b)                                 to
determine the time or times when options shall be granted and the number of
shares of Common Stock to be subject to each option;


 


(c)                                  to
determine the option price of the shares subject to each option and the method
of payment of such price;


 


(d)                                 to
determine the time or times when each option becomes exercisable and the
duration of the exercise period, subject to the limitations contained in
Paragraph 6(b);


 


(e)                                  to
prescribe the form or forms of the instruments evidencing any options granted
under the Plan and of any other instruments required under the Plan and to
change such forms from time to time;


 


(f)                                    to
adopt, amend and rescind rules and regulations for the administration of
the Plan and the options and for its own acts and proceedings;


 


(g)                                 to
decide all questions and settle all controversies and disputes which may arise
in connection with the Plan; and


 


(h)                                 to
take other actions permitted of the Committee by this Plan, authority hereafter
granted by the Board or as permitted by law.


 


All decisions,
determinations and interpretations of the Committee shall be final and binding
on all parties concerned.


 


4.                                       Eligibility
and Participation.  Options may be
granted pursuant to the Plan to employees of the Corporation and any parent or
subsidiary of the Corporation (hereinafter sometimes called “employee” or “employees”);
provided that no option may be granted under the Plan to an employee who,
immediately before or at the time such option is granted, owns stock possessing
more than ten percent (10%) of the total combined voting power or value of all
classes of stock of the employer corporation or of any parent or subsidiary
corporation.  For the purposes of the
preceding sentence: (a) the employee shall be considered as owning the
stock owned directly or indirectly by or for himself, the stock which the
employee may purchase under outstanding options, and the stock owned, directly
or indirectly, by or for his or her brothers and sisters (whether of the whole
or half blood), spouse, ancestors, and lineal descendants; and (b) stock
owned, directly or indirectly, by or for a corporation, partnership, estate, or
trust shall be considered as being owned proportionately by or for its
shareholders, partners, or beneficiaries.


 


From time to time the
Committee shall select the employees to whom options may be granted by the
Board and shall determine the number of shares to be covered by each option so
granted.  Future as well as present
employees (including employees who are directors) shall be eligible to
participate in the Plan.  If the entire
Board constitutes the Committee, then members of the Committee that are
otherwise eligible to participate in the Plan shall be allowed to participate
in the Plan, provided that such eligible members constitute a minority of the
Board, and provided further, that any individual member of the Committee
allowed to participate will be prohibited from voting upon or in any way
influencing the other members of the Committee in designating such individual
member as a recipient of option grants or


 





















 


in exercising any other
discretion granted to the Committee regarding the option grants to such
individual member.  If the Committee is
appointed under the terms of subparagraph (i) of Section 3 hereof,
then members of the Committee (including those who are key employees of the
Corporation or a subsidiary corporation of the Corporation) shall not be
eligible to participate in the Plan.


 


The adoption of the Plan
does not confer upon any employee of the Corporation or a subsidiary any right
to continue employment with the Corporation or a subsidiary, as the case may
be, nor does it interfere in any way with the right of the Corporation or a
subsidiary to terminate the employment of any of its employees at any time.


 


The maximum number of
shares which respect to which options may be granted under this Plan during any
calendar year to any person is all shares for which options may be granted
under this Plan.


 


5.                                       Option
Agreement.  The terms and provisions
of options granted pursuant to the Plan shall be set forth in agreements (which
need not be identical) in such form and containing such provisions as are
consistent with this Plan as the Board or the Committee may from time to time
approve (individually an “Option Agreement” and collectively the “Option
Agreements”).  An Option Agreement may
incorporate all or any of the terms hereof by reference and shall comply with
and be subject to the terms and conditions herein provided.


 


6.                                       Price.  The purchase price per share of Common Stock
purchasable under options granted pursuant to the Plan shall be an amount equal
to one hundred percent (100%) of the fair market value of the stock, as determined
by the Board or the Committee, at the time the options are granted.  The full purchase price of shares purchased
shall be paid upon exercise of the option in the manner and by the means set
forth in the employee’s Option Agreement. 
The consideration shall be paid either in cash, by check, or for such
other consideration as the Board or Committee may approve.  Under certain circumstances the purchase
price per share shall be subject to adjustment as referred to in Section 11
or 13 of this Plan and as described in the Option Agreement executed pursuant
to a grant under this Plan; however, the price per share of Common Stock
purchasable under options granted pursuant to the Plan shall not be subject to
adjustment after the date of grant in the absence of the occurrence of an event
described in Section 11 or 13.


 


7.                                       Exercise
Period.  The right to purchase any
Common Stock pursuant to the exercise of an option granted under this Plan may
be either cumulative or non-cumulative, as determined by the Board or the
Committee.  Any Common Stock purchasable
pursuant to the exercise of an option granted under this Plan will be
purchasable in accordance with the schedule set forth in the Option
Agreement between the Corporation and the employee receiving the option, subject
to any other limitation provided in this Plan or in the employee’s Option
Agreement.  A person electing to exercise
an option shall give notice as described in his or her Option Agreement, such
notice to be accompanied by such instruments or documents as may be required by
the Option Agreement and the Committee, and unless otherwise directed by the
Committee, the employee shall at the time of exercise tender the purchase price
of the shares he or she has elected to purchase.  Unless otherwise provided in the particular
Option Agreement, in the event the portion of Common Stock purchasable under
the Option Agreement involves a fraction of a share, the amount purchasable at
that time shall be rounded upward to the next complete share to allow the purchase
of a complete share of Common Stock.


 


8.                                       Option
Period.  No option granted pursuant
to the Plan shall be exercisable after the expiration of ten (10) years
from the date the option is first granted. 
The expiration date for any option or portion thereof, which may be any
period not in excess of ten (10) years following the date of grant of the
option, shall be stated in the Option Agreement and is hereinafter called the “Expiration
Date”.


 


Notwithstanding any other
provision of this Plan, no option shall be granted under this Plan more than
ten (10) years after the date this Plan is adopted by the Board, or the
date this Plan is approved by the Common Stock stockholders, whichever is
earlier.


 


9.                                       Termination
of Employment.  The Option Agreement
may provide that:


 


(a)                                  If,
prior to the Expiration Date for any option granted hereunder, the employee
shall for any reason whatever, other than (1) his or her permanent and
total disability as defined in (c) below, or (2) his or her death,
cease to be employed by the Corporation, or a parent or subsidiary


 





















 


corporation of the
Corporation, then any unexercised portion of such option shall automatically
terminate upon the date of such termination of employment.


 


(b)                                 If,
prior to the Expiration Date for any option granted hereunder, the employee
shall die at a time when he or she had been employed by the Corporation, or a
parent or subsidiary corporation of the Corporation, from the date of granting
of such option until the date of his or her death, then the legal representatives
of his or her estate or a legatee or legatees of the option shall have the
right, for a period of three (3) months after his or her death, to
purchase all or any part of the Stock subject to the option outstanding and
unexpired as of his or her date of death.


 


(c)                                  If,
prior to the Expiration Date for any option granted hereunder, the employee
shall cease to be employed by the Corporation, or a parent or subsidiary
corporation of the Corporation, because he or she becomes permanently and
totally disabled, as hereafter defined, and prior to such termination of
employment by reason of disability the employee had been employed by the
Corporation, or a parent or subsidiary of the Corporation, at all times since
the date of the granting of such option, then such employee or his or her legal
representative shall have the right, for a period of one (1) year from the
date of such termination of employment by reason of disability, to exercise any
right to purchase Stock pursuant to the option.


 


An employee is “permanently
and totally disabled” if he or she is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than twelve (12)
months.  Such determination of permanent
and total disability shall be made as allowable under Section 22, and
applicable regulations, of the Internal Revenue Code of 1986, as amended, or
any other applicable method necessary for the continued qualification of this
Plan under Section 422 of the Internal Revenue Code.  In the absence of any specific requirements
for this determination, the decision of the Board or the Committee, as aided by
any physicians they designate, shall be conclusive.


 


Nothing in (a), (b), or (c) shall extend the time for exercising any option granted pursuant to the Plan beyond the Expiration Date for the option. Any Option Agreement may contain or otherwise provide for conditions giving rise to the forfeiture of Stock or a repurchase right with respect to Stock acquired pursuant to an Option Agreement executed pursuant to this Plan, and may also provide for such restrictions on the transferability of shares of Stock acquired pursuant to an Option Agreement executed pursuant to this Plan, that the Board or the Committee in its sole and absolute discretion may deem proper or advisable.  The conditions giving rise to forfeiture or right of repurchase may include, but need not be limited to, the requirement that the optionee render substantial services to the Corporation or any subsidiary of the Corporation for a specified period of time.  The restrictions on transferability may include, but need not be limited to, options and rights of first refusal in favor of the Corporation.
 
10.                                 Assignability.  The Option Agreement shall provide that the option granted thereby shall not be transferable or assignable by the employee otherwise than by will or by the laws of descent and distribution, and during the lifetime of the employee shall be exercisable only by him or her.
 


11.                                 Adjustments
and Modifications.  The Option
Agreement may contain such provisions as the Board or the Committee may approve
concerning the effect upon the option granted thereby and upon the per share or
per unit option price, of (i) stock dividends, stock splits, or
subdivisions, combinations or reclassifications of the Stock, or (ii) the
merger or consolidation of the Corporation with any other business entity, the
sale of all or substantially all of the Corporation’s assets, the liquidation
or dissolution the Corporation, or any other form of corporate reorganization
or other similar capital change. Subject to the terms and conditions and within
the limitations of this Plan, the Board or Committee may modify, extend, or
renew outstanding rights granted under this Plan, or accept the surrender of
outstanding rights (to the extent not theretofore exercised); however, the
price per share of Common Stock purchasable under options granted pursuant to
the Plan shall not be subject to adjustment after the date of grant in the
absence of the occurrence of an event described in the preceding sentence of
this Section 11 or in Section 13. 
Notwithstanding the foregoing, no modification of an option shall,
without the consent of the optionee, alter or impair any rights of the optionee
under the option.


 





















 


12.                                 Issuance
Requirements.  The Corporation shall
not be obligated to issue any shares unless and until, in the opinion of the
Corporation’s counsel, (i) all applicable laws and regulations have been
complied with, (ii) in the event the Corporation’s Common Stock is at the
time listed upon any stock exchange or approved for trading on the Nasdaq Stock
Market, the shares to be issued have been listed or trading shall otherwise be
authorized upon official notice of issuance, and (iii) all other legal
matters in connection with the issuance and delivery of shares shall have been
approved by the Corporation’s counsel. 
The participant shall take any action reasonably requested by the
Corporation in connection therewith. 
Without limiting the generality of the foregoing, the Corporation may
require from the participant such investment representation or such agreement,
if any, as counsel for the Corporation may consider necessary in order to
comply with the Securities Act of 1933 as then in effect, and may require that
the participant agree that any sale of the shares will be made only in such
manner permitted by law.  A legend to
this effect may be affixed to the certificates evidencing such shares.  A participant shall have the rights of a
stockholder only as to shares actually acquired by him under the Plan.


 


13.                                 Corporate
Merger, Consolidation, Reorganization, etc.


 


(a)                                  In
the event of a dissolution or liquidation of the Corporation or a merger or
consolidation in which the Corporation is not the surviving corporation, any
outstanding options hereunder may be terminated by the Corporation as of the
effective date of such dissolution, liquidation, merger or consolidation by
giving notice to each holder thereof or his or her personal representative of
its intention to do so and by permitting the exercise during a period of not
more than a specified number of days determined by the Board next preceding
such effective date, or the Expiration Date, whichever is earlier, of all of
such outstanding options in whole or in part without regard to the provisions
of Section 7 hereof.  Subject to the
preceding sentence, if the Corporation is reorganized or merged or consolidated
with another corporation, while unexercised options are outstanding under the
Plan, and the Corporation is not the surviving corporation, there shall be
substituted for the Common Stock subject to the unexercised and outstanding
options an appropriate number of shares of each class of stock or other
securities of the reorganized or merged or consolidated corporation which were
distributed to shareholders of the Corporation in respect of the Common Stock.  Such substitution may be accomplished by the
assumption of such options by the surviving corporation or the substitution for
the old options of new options by the surviving corporation.


 


(b)                                 The
existence of the Plan and any options granted hereunder shall not affect in any
way the right or power of the Board or the stockholders of the Company to make
or authorize any adjustment, recapitalization, reorganization, reclassification
or other change in the Company’s capital structure or its business, any merger,
consolidation or separation of the Company, any issue of bonds, debentures,
preferred or prior preference stocks ahead of or affecting Common Stock or the
rights thereof, the dissolution or liquidation of the Company or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding.


 


14.                                 Amendment
of the Plan.  The Board of Directors
of the Corporation may from time to time alter, amend, suspend or discontinue
the Plan and make rules for its administration, except that the Board shall
not amend the Plan in any manner which would have the effect of preventing
options issued under the Plan from being “incentive stock options” as defined
in Section 422 of the Internal Revenue Code of 1986 (as amended).


 


15.                                 Options
Discretionary.  The granting of
options under the Plan shall be entirely discretionary and nothing in the Plan
shall be deemed to give any key employee any right to participate in the Plan
or to receive options.


 


16.                                 Stockholder
Approval.  The Plan will be submitted
to the Common Stock stockholders of the Corporation within twelve (12) months
of the date of the adoption of the Plan by the Board.


 


17.                                 Termination
of Plan.  This Plan shall terminate
ten (10) years after its approval by the Common Stock stockholders or
adoption by the Board, whichever is earlier. 
Any option outstanding under this Plan at the time of its termination
shall remain in effect until the option shall have been exercised or the
Expiration Date, whichever is earlier.


 


18.                                 Replacement Options. 
The Corporation may grant options under the Plan on terms differing from


 





















 


those provided for in
this Plan where such options are granted in substitution for options held by
employees of other corporations who have become employees of the Corporation or
a subsidiary as the result of a merger, consolidation or other reorganization
of the employing corporation with the Corporation or subsidiary, or the
acquisition by the Corporation or a subsidiary of the business, property or
stock of the employing corporation.  The
Committee may direct that the substitute options be granted on such terms and
conditions as the Committee considers appropriate in the circumstances.


 


19.                                 Adoption
of Plan by Board.  The undersigned
hereby certifies that this Plan is the true and correct 2005 Texas Regional
Bancshares, Inc., Incentive Stock Option Plan of the Corporation voted
upon and adopted at a meeting of the Board of Directors duly held on the 8th
day of February, 2005.