Exhibit 4.1


 


Exhibit 4.1 Warrant to Purchase up to
1,326,238 shares of Common Stock


 


WARRANT TO
PURCHASE COMMON STOCK


 


THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT
WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT OR SUCH LAWS.  THIS
INSTRUMENT IS ISSUED SUBJECT TO THE RESTRICTIONS ON TRANSFER AND OTHER
PROVISIONS OF A SECURITIES PURCHASE AGREEMENT BETWEEN THE ISSUER OF THESE
SECURITIES AND THE INVESTOR REFERRED TO THEREIN, A COPY OF WHICH IS ON FILE
WITH THE ISSUER. THE SECURITIES REPRESENTED BY THIS INSTRUMENT MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH SAID AGREEMENT.  ANY SALE OR OTHER TRANSFER NOT IN COMPLIANCE
WITH SAID AGREEMENT WILL BE VOID.


 


WARRANT


to
purchase 

1,326,238


 


Shares
of Common Stock


 


of
International Bancshares Corporation


 


Issue Date: December 23,
2008


 


1.             Definitions. Unless the
context otherwise requires, when used herein the following terms shall have the
meanings indicated.


 


“Affiliate” has the meaning ascribed to it
in the Purchase Agreement.


 


“Appraisal Procedure” means a procedure
whereby two independent appraisers, one chosen by the Company and one by the
Original Warrantholder, shall mutually agree upon the determinations then the
subject of appraisal.  Each party shall
deliver a notice to the other appointing its appraiser within 15 days after the
Appraisal Procedure is invoked.  If
within 30 days after appointment of the two appraisers they are unable to agree
upon the amount in question, a third independent appraiser shall be chosen
within 10 days thereafter by the mutual consent of such first two
appraisers.  The decision of the third
appraiser so appointed and chosen shall be given within 30 days after the
selection of such third appraiser.  If
three appraisers shall be appointed and the determination of one appraiser is
disparate from the middle determination by more than twice the amount by which
the other determination is disparate from the middle determination, then the
determination of such appraiser shall be excluded, the remaining two
determinations shall be averaged and such average shall be binding and
conclusive upon the 



















 


Company and the Original
Warrantholder; otherwise, the average of all three determinations shall be
binding upon the Company and the Original Warrantholder.  The costs of conducting any Appraisal
Procedure shall be borne by the Company.


 


“Board of Directors” means the board of
directors of the Company, including any duly authorized committee thereof.


 


“Business Combination” means a merger,
consolidation, statutory share exchange or similar transaction that requires
the approval of the Company’s stockholders.


 


“business day” means any day except
Saturday, Sunday and any day on which banking institutions in the State of New
York generally are authorized or required by law or other governmental actions
to close.


 


“Capital Stock” means (A) with respect
to any Person that is a corporation or company, any and all shares, interests,
participations or other equivalents (however designated) of capital or capital
stock of such Person and (B) with respect to any Person that is not a
corporation or company, any and all partnership or other equity interests of
such Person.


 


“Charter” means, with respect to any
Person, its certificate or articles of incorporation, articles of association,
or similar organizational document.


 


“Common Stock” has the meaning ascribed to
it in the Purchase Agreement.


 


“Company” means the Person whose name,
corporate or other organizational form and jurisdiction of organization is set
forth in Item 1 of Schedule A hereto.


 


“conversion” has the meaning set forth in Section 13(B).


 


“convertible securities” has the meaning
set forth in Section 13(B).


 


“CPP” has the
meaning ascribed to it in the Purchase Agreement.


 


“Exchange Act” means the Securities Exchange
Act of 1934, as amended, or any successor statute, and the rules and
regulations promulgated thereunder.


 


“Exercise Price” means the amount set forth in
Item 2 of Schedule A hereto.


 


“Expiration Time” has the meaning set forth in
Section 3.


 


“Fair Market Value” means, with respect to any
security or other property, the fair market value of such security or other
property as determined by the Board of Directors, acting in good faith or, with
respect to Section 14, as determined by the Original Warrantholder acting
in good faith. For so long as the Original Warrantholder holds this Warrant or
any portion thereof, it may object in writing to the Board of Director’s
calculation of fair market value within 10 days of receipt of written notice
thereof.  If the Original Warrantholder
and the Company are unable to agree on fair market value during the 10-day
period following the delivery of the Original Warrantholder’s objection, the
Appraisal Procedure may be invoked by either party to


 


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determine Fair
Market Value by delivering written notification thereof not later than the 30th day after delivery of the Original
Warrantholder’s objection.


 


“Governmental Entities” has the meaning ascribed
to it in the Purchase Agreement.


 


“Initial
Number” has the meaning set forth in Section 13(B).


 


“Issue Date” means the date set forth in Item
3 of Schedule A hereto.


 


“Market Price” means, with respect to a
particular security, on any given day, the last reported sale price regular way
or, in case no such reported sale takes place on such day, the average of the
last closing bid and ask prices regular way, in either case on the principal
national securities exchange on which the applicable securities are listed or
admitted to trading, or if not listed or admitted to trading on any national
securities exchange, the average of the closing bid and ask prices as furnished
by two members of the Financial Industry Regulatory Authority, Inc.
selected from time to time by the Company for that purpose.  “Market Price” shall be determined without
reference to after hours or extended hours trading. If such security is not
listed and traded in a manner that the quotations referred to above are
available for the period required hereunder, the Market Price per share of
Common Stock shall be deemed to be (i) in the event that any portion of
the Warrant is held by the Original Warrantholder, the fair market value per
share of such security as determined in good faith by the Original
Warrantholder or (ii) in all other circumstances, the fair market value
per share of such security as determined in good faith by the Board of
Directors in reliance on an opinion of a nationally recognized independent
investment banking corporation retained by the Company for this purpose and
certified in a resolution to the Warrantholder. 
For the purposes of determining the Market Price of the Common Stock on
the “trading day” preceding, on or following the occurrence of an event, (i) that
trading day shall be deemed to commence immediately after the regular scheduled
closing time of trading on the New York Stock Exchange or, if trading is closed
at an earlier time, such earlier time and (ii) that trading day shall end
at the next regular scheduled closing time, or if trading is closed at an
earlier time, such earlier time (for the avoidance of doubt, and as an example,
if the Market Price is to be determined as of the last trading day preceding a
specified event and the closing time of trading on a particular day is 4:00 p.m.
and the specified event occurs at 5:00 p.m. on that day, the Market Price
would be determined by reference to such 4:00 p.m. closing price).


 


“Ordinary Cash Dividends” means a regular
quarterly cash dividend on shares of Common Stock out of surplus or net profits
legally available therefor (determined in accordance with generally accepted
accounting principles in effect from time to time), provided that Ordinary Cash Dividends shall not include any
cash dividends paid subsequent to the Issue Date to the extent the aggregate
per share dividends paid on the outstanding Common Stock in any quarter exceed
the amount set forth in Item 4 of Schedule A hereto, as adjusted for any stock
split, stock dividend, reverse stock split, reclassification or similar
transaction.


 


“Original Warrantholder” means the United
States Department of the Treasury.  Any
actions specified to be taken by the Original Warrantholder hereunder may only
be taken by such Person and not by any other Warrantholder.


 


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“Permitted Transactions” has the meaning set
forth in Section 13(B).


 


“Person” has the meaning given to it in Section 3(a)(9) of
the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act.


 


“Per Share Fair Market Value” has the
meaning set forth in Section 13(C).


 


“Preferred Shares” means the perpetual
preferred stock issued to the Original Warrantholder on the Issue Date pursuant
to the Purchase Agreement.


 


“Pro Rata Repurchases” means any purchase
of shares of Common Stock by the Company or any Affiliate thereof pursuant to (A) any
tender offer or exchange offer subject to Section 13(e) or 14(e) of
the Exchange Act or Regulation 14E promulgated thereunder or (B) any other
offer available to substantially all holders of Common Stock, in the case of
both (A) or (B), whether for cash, shares of Capital Stock of the Company,
other securities of the Company, evidences of indebtedness of the Company or
any other Person or any other property (including, without limitation, shares
of Capital Stock, other securities or evidences of indebtedness of a
subsidiary), or any combination thereof, effected while this Warrant is
outstanding.  The “Effective Date” of a Pro Rata Repurchase
shall mean the date of acceptance of shares for purchase or exchange by the
Company under any tender or exchange offer which is a Pro Rata Repurchase or
the date of purchase with respect to any Pro Rata Repurchase that is not a
tender or exchange offer.


 


“Purchase Agreement” means the Securities
Purchase Agreement — Standard Terms incorporated into the Letter Agreement,
dated as of the date set forth in Item 5 of Schedule A hereto, as amended from
time to time, between the Company and the United States Department of the
Treasury (the “Letter Agreement”),
including all annexes and schedules thereto.


 


“Qualified Equity Offering” has the meaning
ascribed to it in the Purchase Agreement.


 


“Regulatory Approvals” with respect to the
Warrantholder, means, to the extent applicable and required to permit the
Warrantholder to exercise this Warrant for shares of Common Stock and to own
such Common Stock without the Warrantholder being in violation of applicable
law, rule or regulation, the receipt of any necessary approvals and
authorizations of, filings and registrations with, notifications to, or
expiration or termination of any applicable waiting period under, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder.


 


“SEC” means the U.S. Securities and
Exchange Commission.


 


“Securities Act” means the Securities Act
of 1933, as amended, or any successor statute, and the rules and
regulations promulgated thereunder.


 


“Shares” has the meaning set forth in Section 2.


 


“trading day” means (A) if the shares of
Common Stock are not traded on any national or regional securities exchange or
association or over-the-counter market, 
a business day or (B) if the shares of Common Stock are traded on
any national or regional securities exchange or 


 


4

















 


association or over-the-counter
market, a business day on which such relevant exchange or quotation system is
scheduled to be open for business and on which the shares of Common Stock (i) are
not suspended from trading on any national or regional securities exchange or
association or over-the-counter market for any period or periods aggregating
one half hour or longer; and (ii) have traded at least once on the
national or regional securities exchange or association or over-the-counter
market that is the primary market for the trading of the shares of Common
Stock.


 


“U.S. GAAP” means United States generally
accepted accounting principles.


 


“Warrantholder” has the meaning set forth
in Section 2.


 


“Warrant” means this Warrant, issued
pursuant to the Purchase Agreement.


 


2.             Number of Shares; Exercise Price.
This certifies that, for value received, the United States Department of the
Treasury or its permitted assigns (the “Warrantholder”)
is entitled, upon the terms and subject to the conditions hereinafter set
forth, to acquire from the Company, in whole or in part, after the receipt of
all applicable Regulatory Approvals, if any, up to an aggregate of the number
of fully paid and nonassessable shares of Common Stock set forth in Item 6 of
Schedule A hereto, at a purchase price per share of Common Stock equal to the
Exercise Price.  The number of shares of
Common Stock (the “Shares”) and
the Exercise Price are subject to adjustment as provided herein, and all
references to “Common Stock,” “Shares” and “Exercise Price” herein shall be
deemed to include any such adjustment or series of adjustments.


 


3.             Exercise of Warrant; Term.
Subject to Section 2, to the extent permitted by applicable laws and regulations,
the right to purchase the Shares represented by this Warrant is exercisable, in
whole or in part by the Warrantholder, at any time or from time to time after
the execution and delivery of this Warrant by the Company on the date hereof,
but in no event later than 5:00 p.m., New York City time on the tenth
anniversary of the Issue Date (the “Expiration
Time”), by (A) the surrender of this Warrant and Notice of
Exercise annexed hereto, duly completed and executed on behalf of the
Warrantholder, at the principal executive office of the Company located at the
address set forth in Item 7 of Schedule A hereto (or such other office or
agency of the Company in the United States as it may designate by notice in
writing to the Warrantholder at the address of the Warrantholder appearing on
the books of the Company), and (B) payment of the Exercise Price for the
Shares thereby purchased:


 


(i)            by
having the Company withhold, from the shares of Common Stock that would
otherwise be delivered to the Warrantholder upon such exercise, shares of
Common stock issuable upon exercise of the Warrant equal in value to the
aggregate Exercise Price as to which this Warrant is so exercised based on the
Market Price of the Common Stock on the trading day on which this Warrant is exercised
and the Notice of Exercise is delivered to the Company pursuant to this Section 3,
or


 


(ii)           with the consent of
both the Company and the Warrantholder, by tendering in cash, by certified or
cashier’s check payable to the order of the Company, or by wire transfer of
immediately available funds to an account designated by the Company.


 


5

















 


If the
Warrantholder does not exercise this Warrant in its entirety, the Warrantholder
will be entitled to receive from the Company within a reasonable time, and in
any event not exceeding three business days, a new warrant in substantially
identical form for the purchase of that number of Shares equal to the
difference between the number of Shares subject to this Warrant and the number
of Shares as to which this Warrant is so exercised.  Notwithstanding anything in this Warrant to
the contrary, the Warrantholder hereby acknowledges and agrees that its
exercise of this Warrant for Shares is subject to the condition that the
Warrantholder will have first received any applicable Regulatory Approvals.


 


4.             Issuance of Shares;
Authorization; Listing. Certificates for Shares issued upon exercise of
this Warrant will be issued in such name or names as the Warrantholder may designate
and will be delivered to such named Person or Persons within a reasonable time,
not to exceed three business days after the date on which this Warrant has been
duly exercised in accordance with the terms of this Warrant.  The Company hereby represents and warrants
that any Shares issued upon the exercise of this Warrant in accordance with the
provisions of Section 3 will be duly and validly authorized and issued,
fully paid and nonassessable and free from all taxes, liens and charges (other
than liens or charges created by the Warrantholder, income and franchise taxes
incurred in connection with the exercise of the Warrant or taxes in respect of
any transfer occurring contemporaneously therewith). The Company agrees that
the Shares so issued will be deemed to have been issued to the Warrantholder as
of the close of business on the date on which this Warrant and payment of the
Exercise Price are delivered to the Company in accordance with the terms of
this Warrant, notwithstanding that the stock transfer books of the Company may
then be closed or certificates representing such Shares may not be actually
delivered on such date.  The Company will
at all times reserve and keep available, out of its authorized but unissued
Common Stock, solely for the purpose of providing for the exercise of this
Warrant, the aggregate number of shares of Common Stock then issuable upon
exercise of this Warrant at any time. 
The Company will (A) procure, at its sole expense, the listing of
the Shares issuable upon exercise of this Warrant at any time, subject to
issuance or notice of issuance, on all principal stock exchanges on which the
Common Stock is then listed or traded and (B) maintain such listings of
such Shares at all times after issuance. 
The Company will use reasonable best efforts to ensure that the Shares
may be issued without violation of any applicable law or regulation or of any
requirement of any securities exchange on which the Shares are listed or
traded.


 


5.             No Fractional Shares or Scrip.
No fractional Shares or scrip representing fractional Shares shall be issued
upon any exercise of this Warrant.  In
lieu of any fractional Share to which the Warrantholder would otherwise be
entitled, the Warrantholder shall be entitled to receive a cash payment equal
to the Market Price of the Common Stock on the last trading day preceding the
date of exercise less the pro-rated Exercise Price for such fractional share.


 


6.             No Rights as Stockholders;
Transfer Books. This Warrant does not entitle the Warrantholder to any voting
rights or other rights as a stockholder of the Company prior to the date of
exercise hereof. The Company will at no time close its transfer books against
transfer of this Warrant in any manner which interferes with the timely
exercise of this Warrant.


 


6

















 


7.             Charges, Taxes and Expenses.
Issuance of certificates for Shares to the Warrantholder upon the exercise of
this Warrant shall be made without charge to the Warrantholder for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company.


 


8.             Transfer/Assignment.


 


(A)          Subject to compliance with clause (B) of
this Section 8, this Warrant and all rights hereunder are transferable, in
whole or in part, upon the books of the Company by the registered holder hereof
in person or by duly authorized attorney, and a new warrant shall be made and
delivered by the Company, of the same tenor and date as this Warrant but
registered in the name of one or more transferees, upon surrender of this
Warrant, duly endorsed, to the office or agency of the Company described in Section 3.  All expenses (other than stock transfer
taxes) and other charges payable in connection with the preparation, execution
and delivery of the new warrants pursuant to this Section 8 shall be paid
by the Company.


 


(B)           The transfer of the Warrant and the
Shares issued upon exercise of the Warrant are subject to the restrictions set
forth in Section 4.4 of the Purchase Agreement.  If and for so long as required by the
Purchase Agreement, this Warrant shall contain the legends as set forth in
Sections 4.2(a) and 4.2(b) of the Purchase Agreement.


 


9.             Exchange and Registry of Warrant.
This Warrant is exchangeable, upon the surrender hereof by the Warrantholder to
the Company, for a new warrant or warrants of like tenor and representing the
right to purchase the same aggregate number of Shares.  The Company shall maintain a registry showing
the name and address of the Warrantholder as the registered holder of this
Warrant. This Warrant may be surrendered for exchange or exercise in accordance
with its terms, at the office of the Company, and the Company shall be entitled
to rely in all respects, prior to written notice to the contrary, upon such
registry.


 


10.           Loss, Theft, Destruction or
Mutilation of Warrant. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and in the case of any such loss, theft or destruction, upon receipt
of a bond, indemnity or security reasonably satisfactory to the Company, or, in
the case of any such mutilation, upon surrender and cancellation of this
Warrant, the Company shall make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing
the right to purchase the same aggregate number of Shares as provided for in
such lost, stolen, destroyed or mutilated Warrant.


 


11.           Saturdays, Sundays, Holidays, etc.
If the last or appointed day for the taking of any action or the expiration of
any right required or granted herein shall not be a business day, then such
action may be taken or such right may be exercised on the next succeeding day
that is a business day.


 


12.           Rule 144 Information. The
Company covenants that it will use its reasonable best efforts to timely file
all reports and other documents required to be filed by it under the Securities
Act and the Exchange Act and the rules and regulations promulgated by the
SEC thereunder (or, if the Company is not required to file such reports, it
will, upon the request of any


 


7

















 


Warrantholder,
make publicly available such information as necessary to permit sales pursuant
to Rule 144 under the Securities Act), and it will use reasonable best
efforts to take such further action as any Warrantholder may reasonably
request, in each case to the extent required from time to time to enable such
holder to, if permitted by the terms of this Warrant and the Purchase
Agreement, sell this Warrant without registration under the Securities Act
within the limitation of the exemptions provided by (A) Rule 144
under the Securities Act, as such rule may be amended from time to time,
or (B) any successor rule or regulation hereafter adopted by the SEC.
Upon the written request of any Warrantholder, the Company will deliver to such
Warrantholder a written statement that it has complied with such requirements.


 


13.           Adjustments and Other Rights.
The Exercise Price and the number of Shares issuable upon exercise of this
Warrant shall be subject to adjustment from time to time as follows; provided, that if more than one subsection
of this Section 13 is applicable to a single event, the subsection shall
be applied that produces the largest adjustment and no single event shall cause
an adjustment under more than one subsection of this Section 13 so as to
result in duplication:


 


(A)          Stock Splits, Subdivisions,
Reclassifications or Combinations. If the Company shall (i) declare
and pay a dividend or make a distribution on its Common Stock in shares of
Common Stock, (ii) subdivide or reclassify the outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or reclassify
the outstanding shares of Common Stock into a smaller number of shares, the
number of Shares issuable upon exercise of this Warrant at the time of the
record date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be proportionately adjusted
so that the Warrantholder after such date shall be entitled to purchase the
number of shares of Common Stock which such holder would have owned or been
entitled to receive in respect of the shares of Common Stock subject to this
Warrant after such date had this Warrant been exercised immediately prior to
such date.  In such event, the Exercise
Price in effect at the time of the record date for such dividend or distribution
or the effective date of such subdivision, combination or reclassification
shall be adjusted to the number obtained by dividing (x) the product of (1) the
number of Shares issuable upon the exercise of this Warrant before such
adjustment and (2) the Exercise Price in effect immediately prior to the
record or effective date, as the case may be, for the dividend, distribution,
subdivision, combination or reclassification giving rise to this adjustment by (y) the
new number of Shares issuable upon exercise of the Warrant determined pursuant
to the immediately preceding sentence.


 


(B)           Certain Issuances of Common Shares
or Convertible Securities. Until the earlier of (i) the date on which
the Original Warrantholder no longer holds this Warrant or any portion thereof
and (ii) the third anniversary of the Issue Date, if the Company shall
issue shares of Common Stock (or rights or warrants or other securities
exercisable or convertible into or exchangeable (collectively, a “conversion”) for shares of Common Stock)
(collectively, “convertible securities”)
(other than in Permitted Transactions (as defined below) or a transaction to
which subsection (A) of this Section 13 is applicable) without
consideration or at a consideration per share (or having a conversion price per
share) that is less than 90% of the Market Price on the last trading day
preceding the date of the agreement on pricing such shares (or such convertible
securities) then, in such event:


 


8
















 


(A)          the number of Shares
issuable upon the exercise of this Warrant immediately prior to the date of the
agreement on pricing of such shares (or of such convertible securities) (the “Initial Number”) shall be increased to the
number obtained by multiplying the Initial Number by a fraction (A) the
numerator of which shall be the sum of (x) the number of shares of Common
Stock of the Company outstanding on such date and (y) the number of
additional shares of Common Stock issued (or into which convertible securities
may be exercised or convert) and (B) the denominator of which shall be the
sum of (I) the number of shares of Common Stock outstanding on such date
and (II) the number of shares of Common Stock which the aggregate
consideration receivable by the Company for the total number of shares of
Common Stock so issued (or into which convertible securities may be exercised
or convert) would purchase at the Market Price on the last trading day
preceding the date of the agreement on pricing such shares (or such convertible
securities); and


 


(B)           the Exercise Price payable upon exercise of the Warrant
shall be adjusted by multiplying such Exercise Price in effect immediately
prior to the date of the agreement on pricing of such shares (or of such
convertible securities) by a fraction, the numerator of which shall be the
number of shares of Common Stock issuable upon exercise of this Warrant prior
to such date and the denominator of which shall be the number of shares of
Common Stock issuable upon exercise of this Warrant immediately after the
adjustment described in clause (A) above.


 


For purposes
of the foregoing, the aggregate consideration receivable by the Company in
connection with the issuance of such shares of Common Stock or convertible
securities shall be deemed to be equal to the sum of the net offering price
(including the Fair Market Value of any non-cash consideration and after
deduction of any related expenses payable to third parties) of all such
securities plus the minimum aggregate amount, if any, payable upon exercise or
conversion of any such convertible securities into shares of Common Stock; and “Permitted Transactions” shall mean
issuances (i) as consideration for or to fund the acquisition of
businesses and/or related assets, (ii) in connection with employee benefit
plans and compensation related arrangements in the ordinary course and
consistent with past practice approved by the Board of Directors, (iii) in
connection with a public or broadly marketed offering and sale of Common Stock
or convertible securities for cash conducted by the Company or its affiliates
pursuant to registration under the Securities Act or Rule 144A thereunder
on a basis consistent with capital raising transactions by comparable financial
institutions and (iv) in connection with the exercise of preemptive rights
on terms existing as of the Issue Date. 
Any adjustment made pursuant to this Section 13(B) shall
become effective immediately upon the date of such issuance.


 


(C)           Other Distributions. In case
the Company shall fix a record date for the making of a distribution to all
holders of shares of its Common Stock of securities, evidences of indebtedness,
assets, cash, rights or warrants (excluding Ordinary Cash Dividends, dividends
of its Common Stock and other dividends or distributions referred to in Section 13(A)),
in each such case, the Exercise Price in effect prior to such record date shall
be reduced immediately thereafter to the price determined by multiplying the
Exercise Price in effect immediately prior to the reduction by the quotient of (x) the
Market Price of the Common Stock on the last trading day preceding the first
date on which the Common Stock trades regular way on the principal


 


9

















 


national
securities exchange on which the Common Stock is listed or admitted to trading
without the right to receive such distribution, minus the amount of cash and/or
the Fair Market Value of the securities, evidences of indebtedness, assets,
rights or warrants to be so distributed in respect of one share of Common Stock
(such amount and/or Fair Market Value, the “Per
Share Fair Market Value”) divided by (y) such Market Price on
such date specified in clause (x); such adjustment shall be made successively
whenever such a record date is fixed.  In
such event, the number of Shares issuable upon the exercise of this Warrant
shall be increased to the number obtained by dividing (x) the product of (1) the
number of Shares issuable upon the exercise of this Warrant before such
adjustment, and (2) the Exercise Price in effect immediately prior to the
distribution giving rise to this adjustment by (y) the new Exercise Price
determined in accordance with the immediately preceding sentence.  In the case of adjustment for a cash dividend
that is, or is coincident with, a regular quarterly cash dividend, the Per
Share Fair Market Value would be reduced by the per share amount of the portion
of the cash dividend that would constitute an Ordinary Cash Dividend. In the
event that such distribution is not so made, the Exercise Price and the number
of Shares issuable upon exercise of this Warrant then in effect shall be
readjusted, effective as of the date when the Board of Directors determines not
to distribute such shares, evidences of indebtedness, assets, rights, cash or
warrants, as the case may be, to the Exercise Price that would then be in
effect and the number of Shares that would then be issuable upon exercise of
this Warrant if such record date had not been fixed.


 


(D)          Certain Repurchases of Common Stock.
In case the Company effects a Pro Rata Repurchase of Common Stock, then the
Exercise Price shall be reduced to the price determined by multiplying the
Exercise Price in effect immediately prior to the Effective Date of such Pro
Rata Repurchase by a fraction of which the numerator shall be (i) the
product of (x) the number of shares of Common Stock outstanding
immediately before such Pro Rata Repurchase and (y) the Market Price of a
share of Common Stock on the trading day immediately preceding the first public
announcement by the Company or any of its Affiliates of the intent to effect
such Pro Rata Repurchase, minus (ii) the aggregate purchase price of the
Pro Rata Repurchase, and of which the denominator shall be the product of (i) the
number of shares of Common Stock outstanding immediately prior to such Pro Rata
Repurchase minus the number of shares of Common Stock so repurchased and (ii) the
Market Price per share of Common Stock on the trading day immediately preceding
the first public announcement by the Company or any of its Affiliates of the
intent to effect such Pro Rata Repurchase. 
In such event, the number of shares of Common Stock issuable upon the
exercise of this Warrant shall be increased to the number obtained by dividing (x) the
product of (1) the number of Shares issuable upon the exercise of this
Warrant before such adjustment, and (2) the Exercise Price in effect
immediately prior to the Pro Rata Repurchase giving rise to this adjustment by (y) the
new Exercise Price determined in accordance with the immediately preceding
sentence.  For the avoidance of doubt, no
increase to the Exercise Price or decrease in the number of Shares issuable
upon exercise of this Warrant shall be made pursuant to this Section 13(D).


 


(E)           Business Combinations. In case
of any Business Combination or reclassification of Common Stock (other than a
reclassification of Common Stock referred to in Section 13(A)), the
Warrantholder’s right to receive Shares upon exercise of this Warrant shall be
converted into the right to exercise this Warrant to acquire the number of
shares of stock or other securities or property (including cash) which the
Common Stock issuable (at the time of such Business Combination or
reclassification) upon exercise of this Warrant immediately prior to such 


 


10

















 


Business Combination or
reclassification would have been entitled to receive upon consummation of such
Business Combination or reclassification; and in any such case, if necessary,
the provisions set forth herein with respect to the rights and interests
thereafter of the Warrantholder shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to the Warrantholder’s right to
exercise this Warrant in exchange for any shares of stock or other securities
or property pursuant to this paragraph. 
In determining the kind and amount of stock, securities or the property
receivable upon exercise of this Warrant following the consummation of such
Business Combination, if the holders of Common Stock have the right to elect
the kind or amount of consideration receivable upon consummation of such
Business Combination, then the consideration that the Warrantholder shall be
entitled to receive upon exercise shall be deemed to be the types and amounts
of consideration received by the majority of all holders of the shares of
common stock that affirmatively make an election (or of all such holders if
none make an election).


 


(F)           Rounding of Calculations; Minimum
Adjustments. All calculations under this Section 13 shall be made to
the nearest one-tenth (1/10th) of a cent or to the nearest one-hundredth
(1/100th) of a share, as the case may be. 
Any provision of this Section 13 to the contrary notwithstanding,
no adjustment in the Exercise Price or the number of Shares into which this
Warrant is exercisable shall be made if the amount of such adjustment would be
less than $0.01 or one-tenth (1/10th) of a share of Common Stock, but any such
amount shall be carried forward and an adjustment with respect thereto shall be
made at the time of and together with any subsequent adjustment which, together
with such amount and any other amount or amounts so carried forward, shall
aggregate $0.01 or 1/10th of a share of Common Stock, or more.


 


(G)           Timing of Issuance of Additional
Common Stock Upon Certain Adjustments. In any case in which the provisions
of this Section 13 shall require that an adjustment shall become effective
immediately after a record date for an event, the Company may defer until the
occurrence of such event (i) issuing to the Warrantholder of this Warrant
exercised after such record date and before the occurrence of such event the
additional shares of Common Stock issuable upon such exercise by reason of the
adjustment required by such event over and above the shares of Common Stock
issuable upon such exercise before giving effect to such adjustment and (ii) paying
to such Warrantholder any amount of cash in lieu of a fractional share of
Common Stock; provided, however, that the Company upon request
shall deliver to such Warrantholder a due bill or other appropriate instrument
evidencing such Warrantholder’s right to receive such additional shares, and
such cash, upon the occurrence of the event requiring such adjustment.


 


(H)          Completion of Qualified Equity
Offering. In the event the Company (or any successor by Business
Combination) completes one or more Qualified Equity Offerings on or prior to December 31,
2009 that result in the Company (or any such successor ) receiving aggregate
gross proceeds of not less than 100% of the aggregate liquidation preference of
the Preferred Shares (and any preferred stock issued by any such successor to
the Original Warrantholder under the CPP), the number of shares of Common Stock
underlying the portion of this Warrant then held by the Original Warrantholder
shall be thereafter reduced by a number of shares of Common Stock equal to the
product of (i) 0.5 and (ii) the number of shares underlying


 


11

















 


the Warrant on the Issue Date (adjusted to take into account all other
theretofore made adjustments pursuant to this Section 13).


 


(I)            Other Events. For so long as
the Original Warrantholder holds this Warrant or any portion thereof, if any event
occurs as to which the provisions of this Section 13 are not strictly
applicable or, if strictly applicable, would not, in the good faith judgment of
the Board of Directors of the Company, fairly and adequately protect the
purchase rights of the Warrants in accordance with the essential intent and
principles of such provisions, then the Board of Directors shall make such
adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board of Directors, to protect such purchase rights as
aforesaid.  The Exercise Price or the
number of Shares into which this Warrant is exercisable shall not be adjusted
in the event of a change in the par value of the Common Stock or a change in
the jurisdiction of incorporation of the Company.


 


(J)            Statement Regarding Adjustments.
Whenever the Exercise Price or the number of Shares into which this Warrant is
exercisable shall be adjusted as provided in Section 13, the Company shall
forthwith file at the principal office of the Company a statement showing in
reasonable detail the facts requiring such adjustment and the Exercise Price
that shall be in effect and the number of Shares into which this Warrant shall
be exercisable after such adjustment, and the Company shall also cause a copy
of such statement to be sent by mail, first class postage prepaid, to each
Warrantholder at the address appearing in the Company’s records.


 


(K)          Notice of Adjustment Event. In
the event that the Company shall propose to take any action of the type
described in this Section 13 (but only if the action of the type described
in this Section 13 would result in an adjustment in the Exercise Price or
the number of Shares into which this Warrant is exercisable or a change in the
type of securities or property to be delivered upon exercise of this Warrant),
the Company shall give notice to the Warrantholder, in the manner set forth in Section 13(J),
which notice shall specify the record date, if any, with respect to any such
action and the approximate date on which such action is to take place.  Such notice shall also set forth the facts
with respect thereto as shall be reasonably necessary to indicate the effect on
the Exercise Price and the number, kind or class of shares or other securities
or property which shall be deliverable upon exercise of this Warrant.  In the case of any action which would require
the fixing of a record date, such notice shall be given at least 10 days prior
to the date so fixed, and in case of all other action, such notice shall be
given at least 15 days prior to the taking of such proposed action. Failure to
give such notice, or any defect therein, shall not affect the legality or
validity of any such action.


 


(L)           Proceedings Prior to Any Action
Requiring Adjustment. As a condition precedent to the taking of any action
which would require an adjustment pursuant to this Section 13, the Company
shall take any action which may be necessary, including obtaining regulatory,
New York Stock Exchange, NASDAQ Stock Market or other applicable national
securities exchange or stockholder approvals or exemptions, in order that the
Company may thereafter validly and legally issue as fully paid and
nonassessable all shares of Common Stock that the Warrantholder is entitled to
receive upon exercise of this Warrant pursuant to this Section 13.


 


12

















 


(M)         Adjustment Rules. Any adjustments
pursuant to this Section 13 shall be made successively whenever an event
referred to herein shall occur.  If an
adjustment in Exercise Price made hereunder would reduce the Exercise Price to
an amount below par value of the Common Stock, then such adjustment in Exercise
Price made hereunder shall reduce the Exercise Price to the par value of the
Common Stock.


 


14.           Exchange. At any time
following the date on which the shares of Common Stock of the Company are no
longer listed or admitted to trading on a national securities exchange (other
than in connection with any Business Combination), the Original Warrantholder
may cause the Company to exchange all or a portion of this Warrant for an
economic interest (to be determined by the Original Warrantholder after
consultation with the Company) of the Company classified as permanent equity
under U.S. GAAP having a value equal to the Fair Market Value of the portion of
the Warrant so exchanged.  The Original
Warrantholder shall calculate any Fair Market Value required to be calculated
pursuant to this Section 14, which shall not be subject to the Appraisal
Procedure.


 


15.           No Impairment. The Company
will not, by amendment of its Charter or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant and in taking of all such action as may be
necessary or appropriate in order to protect the rights of the Warrantholder.


 


16.           Governing Law. This Warrant will be governed by and construed in
accordance with the federal law of the United States if and to the extent such
law is applicable, and otherwise in accordance with the laws of the State of
New York applicable to contracts made and to be performed entirely within such
State. Each of the Company and the Warrantholder agrees (a) to submit to
the exclusive jurisdiction and venue of the United States District Court for
the District of Columbia for any civil action, suit or proceeding arising out
of or relating to this Warrant or the transactions contemplated hereby, and (b) that
notice may be served upon the Company at the address in Section 20 below
and upon the Warrantholder at the address for the Warrantholder set forth in
the registry maintained by the Company pursuant to Section 9 hereof.  To the extent permitted by applicable law,
each of the Company and the Warrantholder hereby unconditionally waives trial
by jury in any civil legal action or proceeding relating to the Warrant or the
transactions contemplated hereby or thereby.


 


17            Binding Effect. This Warrant
shall be binding upon any successors or assigns of the Company.


 


18.           Amendments. This Warrant may
be amended and the observance of any term of this Warrant may be waived only
with the written consent of the Company and the Warrantholder.


 


19.           Prohibited Actions. The
Company agrees that it will not take any action which would entitle the
Warrantholder to an adjustment of the Exercise Price if the total number of
shares of Common Stock issuable after such action upon exercise of this
Warrant, together with 


 


13

















 


all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon the exercise of
all outstanding options, warrants, conversion and other rights, would exceed
the total number of shares of Common Stock then authorized by its Charter.


 


20.           Notices. Any notice, request,
instruction or other document to be given hereunder by any party to the other
will be in writing and will be deemed to have been duly given (a) on the
date of delivery if delivered personally, or by facsimile, upon confirmation of
receipt, or (b) on the second business day following the date of dispatch
if delivered by a recognized next day courier service. All notices hereunder
shall be delivered as set forth in Item 8 of Schedule A hereto, or pursuant to
such other instructions as may be designated in writing by the party to receive
such notice.


 


21.           Entire Agreement. This
Warrant, the forms attached hereto and Schedule A hereto (the terms of which
are incorporated by reference herein), and the Letter Agreement (including all
documents incorporated therein), contain the entire agreement between the
parties with respect to the subject matter hereof and supersede all prior and
contemporaneous arrangements or undertakings with respect thereto.


 


[Remainder of page intentionally left blank]


 


14

















 


[Form of
Notice of Exercise]


	
   

  	
  DATE:

  	
   

  	
   

  



 


TO:         International Bancshares Corporation


 


RE:          Election to Purchase Common Stock


 


The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby agrees to subscribe for and purchase the number of shares of
the Common Stock set forth below covered by such Warrant.  The undersigned, in accordance with Section 3
of the Warrant, hereby agrees to pay the aggregate Exercise Price for such shares
of Common Stock in the manner set forth below. A new warrant evidencing the
remaining shares of Common Stock covered by such Warrant, but not yet
subscribed for and purchased, if any, should be issued in the name set forth
below.


 


	
  Number of Shares of Common Stock

  	
   

  	
   

  



 


	
  Method of Payment of Exercise Price (note
  if cashless exercise pursuant to Section 3(i) of the Warrant or
  cash exercise pursuant to

  
	
  Section 3(ii) of the Warrant,
  with consent of the Company and the Warrantholder)

  	
   

  



 


	
  Aggregate Exercise Price:

  	
   

  	
   

  



 




	
   

  	
  Holder:

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
						






 


15

















 


IN WITNESS WHEREOF, the Company
has caused this Warrant to be duly executed by a duly authorized officer.


 


Dated: December 23, 2008.


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
  International
  Bancshares Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dennis
  E. Nixon

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Dennis E.
  Nixon

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Imelda
  Navarro

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Imelda
  Navarro

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Treasurer

  
						



 


[Signature
Page to Warrant]


 


16

















 


SCHEDULE
A


 


Item 1


 


Name: International Bancshares Corporation


Corporate or other organizational form: Corporation


Jurisdiction of organization: Texas


 


Item 2:


 


Exercise Price: $24.43


 


Item 3:


 


Issue Date: December 23, 2008


 


Item 4


 


Amount of last dividend declared prior to the Issue Date: $0.33 per
share of Common stock paid on October 15, 2008.


 


Item 5


 


Date of Letter Agreement between the Company and the United States
Department of the Treasury: December 23, 2008


 


Item 6


 


Number of shares of Common Stock: 1,326,238


 


Item 7


 


Company’s address:


1200 San Bernardo


Laredo, Texas 78040


 


Item 8


 


Notice information:


Dennis E. Nixon


President


International Bancshares Corporation


1200 San Bernardo


Laredo, Texas 78040


956-722-7611 (Phone)


956- 726-6616 (Fax)


 


Cary Plotkin Kavy


Cox Smith Matthews Incorporated


112 East Pecan Street, Suite 1800


San Antonio, Texas 78205


210-554-5250 (Phone)


210-226-8395 (Fax)


 


17