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                                                                    Exhibit 10.1

                              EMPLOYMENT AGREEMENT

AGREEMENT made this 1ST day of JUNE, 1999 (the "Effective Date"), between Jay
H. Lustig (the "Executive") and National Bancshares Corporation of Texas, a
Texas corporation, (the "Company").

The Board of Directors of the Company (the "Board") desires to provide for
the employment of the Executive as Chairman of the Board ("COB") and the
Executive is willing to commit himself to serve the Company and the Board, on
the terms and conditions herein provided.

In order to effect the foregoing, the Company and the Executive wish to enter
into an employment agreement (the "Agreement") on the terms and conditions
set forth below. Accordingly, in consideration of the premises and the
respective covenants and agreements of the parties herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:

         1.       EMPLOYMENT. The Company hereby agrees subject to the approval
         of the Board to employ the Executive, and the Executive hereby agrees
         to serve the Company, on the terms and conditions set forth herein.

         2. TERM. The term of this Agreement shall commence as of the date
         hereof and shall continue for three years. Upon the expiration of the
         initial three (3) year term, this Agreement shall be automatically
         renewed for successive periods of one (1) year each, unless, not later
         than thirty (30) days prior to the end of the initial term or any
         renewal term, the Company shall have given notice to the Executive or
         the Executive shall have given notice to the Company that either of
         them does not wish to extend this Agreement. The first one (1) year
         renewal period shall commence on the first day immediately following
         the conclusion of the initial three year term.

         3. POSITION AND DUTIES. The Executive shall serve at the pleasure and
         direction of the Board as the Chairman of the Board of the Company and
         shall have such responsibilities, duties and authority reasonably
         accorded to and expected of a Chairman with Executive's skills,
         knowledge and background and as may from time to time be prescribed by
         or pursuant to the Company's Bylaws. The Executive shall devote as much
         time as necessary to effectively carry out his responsibilities of
         maximizing shareholder value, while overseeing the Company's compliance
         with regulatory requirements. Nothing in this agreement shall be
         construed as preventing the Executive from engaging in outside business
         activities or in passive investments when such activities do not
         interfere with the Executive's obligations to the Company.

         4.       PLACE OF PERFORMANCE.  In connection with the Executive's
         employment by the Company, the Executive's place of performance shall
         be not be restricted in any way.

         5.       COMPENSATION OF RELATED MATTERS.

                  (a) SALARY. During the term of the employment set forth in
         Section 2, the Company shall pay to the Executive an annual base salary
         of Eighty Thousand Dollars ($80,000.00), such salary to be paid in
         substantially equal monthly installments. Compensation of the Executive
         by salary payments shall not be deemed exclusive and shall not prevent
         the Executive from participating in any other compensation, tax benefit
         or other benefit plans of the Company.

                  (b) EXPENSES. During the terms of the Executive's employment
         hereunder, the Executive shall be entitled to receive prompt
         reimbursement of all reasonable and customary expenses incurred by the
         Executive in performing services hereunder, including all travel,
         living and/or office expenses while away from home or business at the
         request of and in the service of the Company, provided that such
         expenses are incurred and accounted for in accordance with the policies
         and procedures established by the Company.

                  (c) OTHER BENEFITS. It is agreed that the benefits that the
         Executive and members of his immediate family shall receive shall be
         generally those available to the executive officers of the Company
         (including without limitation such retirement plans, incentive
         compensation plans, medical plans, severance plans, life insurance
         plans and disability plans as the Company may from time to time
         maintain.) The Company and the Executive will agree upon discretionary
         bonus and stock incentive plans based upon performance. The parties
         agree that these benefits shall continue for so long as the Executive
         continues to serve the Company.


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         6.       TERMINATION.  The Executive's  employment  hereunder may be
         terminated without any breach of this Agreement only under the
         following circumstances:

                  (a)      DEATH.  The Executive's employment hereunder shall
                  terminate upon his death.

                  (b) DISABILITY. If, as a result of the Executive's incapacity
         due to physical or mental illness, the Executive shall have been absent
         from his duties hereunder for the entire period of three (3)
         consecutive months, and within thirty (30) days after written Notice of
         Termination (as defined in subsection (e) of the Section 6 is given
         (which may occur before or after the end of such three (3) month
         period, the Executive shall not have returned to the performance of his
         duties hereunder, the Company may terminate the Executive's employment
         hereunder.

                  (c) CAUSE. The Company may terminate the Executive's
         employment hereunder for Cause (as defined herein). For purposes of
         this Agreement, the Company shall have "Cause" to terminate the
         Executive's employment hereunder for (i) the Executive's negligence in
         the performance or intentional nonperformance (continuing for ten (10)
         days after receipt of written notice of need to cure) of any of the
         Executive's responsibilities to the Company hereunder, (ii) the
         Executive's willful commission of any criminal act or fraud with
         respect to the Company or which may affect the reputation of the
         Company adversely, (iii) the Executive's willful dishonesty, (iv) the
         Executive's willful gross misconduct, or (v) the Executive's willful
         violation of a material condition of his employment by the Company
         (continuing for ten (10) days after receipt of written notice of need
         to cure).

                  (d) TERMINATION BY THE EXECUTIVE. This Agreement may be
         terminated by the Executive should the Company fail to observe or
         perform any of the provisions of this Agreement required to be observed
         or performed by the Company. The Executive shall give the Company
         written notice of the breaches or failure on the Company's part and the
         Company shall have thirty (30) days within which to cure such
         violation. Any violation cured within this thirty (30) day period shall
         be as though it had never existed. Any violation that continues to
         exist at the end of the thirty (30) day period shall, at the
         Executive's option, give rise to the termination of this Agreement
         except as otherwise provided herein.

                  (e) Any termination of the Executive's employment by the
         Company or by the Executive (other than termination pursuant to
         subsection 6(a) hereof) shall be communicated by written Notice of
         Termination to the other party hereto in accordance with Section 11.
         For purposes of this Agreement, a "Notice of Termination" shall mean a
         notice which shall indicate the specific termination provision of this
         Agreement relied upon and shall set forth in reasonable detail the
         facts and circumstances claimed to provide a basis for termination of
         the Executive's employment under the provisions so indicated.

                  (f) "Date of Termination" shall mean (i) if the Executive's
         employment is terminated by his death, the date of his death, (ii) if
         the Executive's employment is terminated pursuant to subsection 6(b)
         above, thirty (30) days after Notice of Termination is given and
         effective (provided that the Executive shall not have returned to the
         performance of his duties on a full-time basis during such thirty (30)
         day period), (iii) if the Executive's employment is terminated pursuant
         to subsection 6(c) above, the date specified in the Notice of
         Termination, and (iv) if the Executive's employment is terminated for
         any other reason, the date on which a Notice of Termination is given.

         7.       COMPENSATION UPON TERMINATION OR DURING DISABILITY.

                  (a) During any period that the Executive fails to perform his
         duties hereunder as a result of incapacity due to physical or mental
         illness, the Executive shall continue to receive his full salary at the
         rate then in effect for such period until his employment is terminated
         pursuant to subsection 6(b) hereof (a "Disability Termination"); and,
         after such Disability Termination, the Company shall pay to the
         Executive one hundred percent (100%) of the salary he would have
         otherwise received under Section 5 hereof for the partial term
         remaining in the then current term of this Agreement plus an additional
         amount calculated pursuant to subsection 7(d)(B), and payment so made
         to the Executive shall be in addition to, and not in lieu of, any
         disability benefits payable under policies or programs maintained by
         the Company.

                  (b) If the Executive's employment is terminated by his death,
         the Company shall pay any amounts due to the Executive under Section 5
         through the date of his death, and the Company shall thereafter pay his
         legal representative or any beneficiary designated by him in writing
         one hundred percent (100%) of the salary he would have otherwise
         received under Section 5 hereof for the partial term remaining in the
         then current term of this Agreement plus an additional amount
         calculated pursuant to subsection 7(d)(B). Any payment under this
         subsection 7(b) shall be in addition to, and not in lieu of, any
         periodic payments of death benefits payable under policies or


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         programs maintained by the Company.

                  (c) If the Executive's employment shall be terminated by the
         Company for Cause or by the Executive other than pursuant to subsection
         6(d), the Company shall pay the Executive any amounts due under Section
         5 through the Date of Termination;

                  (d) If (i) the Executive's employment is terminated by the
         Company for any reason other than for Cause, (ii) the Company elects
         not to renew this Agreement pursuant to Section 2 hereof, or (iii) the
         Executive shall terminate his employment pursuant to subsection 6(d),
         then the Company shall pay to the Executive the following:

                           (A) any and all amounts due under Section 5(a)
                           through the Date of Termination; and

                           (B) the greater of the amount of salary the Executive
                           would have otherwise received under Section 5 hereof
                           for the partial term remaining in the then current
                           term of this Agreement or six (6) months salary at
                           the rate then in effect for such period. This amount
                           shall be paid as a lump sum to the Executive within
                           thirty (30) days of the termination of his
                           employment.

         8. INDEMNIFICATION. To the fullest extent authorized or permitted by
         the laws of the State of Texas as from time to time is effect, the
         Company shall hold harmless and indemnify the Executive against any and
         all judgments, penalties (including excise and similar taxes), fines,
         settlements and reasonable expenses (including, but not limited to
         attorneys' fees), incurred in connection with any actual or threatened
         action or proceeding, whether civil or criminal, to which the Executive
         is made or is threatened to be made a party by reason of the fact that
         the Executive then is or was a director or officer of the Company or
         then serves or has served any other corporation, partnership, joint
         venture, trust, employee benefit plan or other enterprise in any
         capacity at the request of the Company. To the fullest extent so
         permitted, the foregoing shall apply to actions by or in the right of
         the Company and shall in any actual or threatened proceeding require
         the Company to advance expenses on behalf of the Executive as said
         expenses are incurred.

         9. CONFIDENTIAL INFORMATION. The Executive recognizes that as a key
         employee of the Company, the Executive has and will continue to occupy
         a position of trust with respect to such business information of a
         secret or confidential nature which is or will become the property of
         the Company or any of its subsidiaries or affiliates and which has been
         or will be used by or imparted to the Executive from time to time in
         the course of the Executive's duties. The Executive therefore agrees
         that for so long as any such information of a secret or confidential
         nature shall remain confidential or otherwise remain wholly or
         partially protectable, either during the course of the Executive's
         employment or thereafter, the Executive will not at any time use,
         divulge, or furnish or make accessible to any person outside of the
         Company (or any subsidiaries or affiliates thereof) any such
         information.

         10. BINDING AGREEMENT. This Agreement and all rights of the Executive
         hereunder shall inure to the benefit of and be enforceable by the
         Executive's personal or legal representatives, executors,
         administrators, successors, heirs, distributes, devisees and legatees.
         If the Executive should die while any amounts would still be payable to
         him hereunder if he continued to live, all such amounts, unless
         otherwise provided herein, shall be paid in accordance with the terms
         of this Agreement to the Executive's designated beneficiary set forth
         in a written Beneficiary Designation filed with the Company or, it
         there be no such designated beneficiary, to the Executive's estate.

         11. NOTICE. For purposes of this Agreement, notices, demands, request
         and all other communications provided for in this Agreement shall be in
         writing and shall be deemed to have been duly given when delivered or
         (unless otherwise specified) mailed by the United States certified or
         registered mail, return receipt requested, postage prepaid, addressed
         as follows:

                                            If to the Executive:

                                            Jay H. Lustig
                                            P.O. Box 505
                                            Belle Vernon, PA  15012

                                            If to the Company:

                                            National Bancshares Corporation
                                            of Texas 12400 Highway 281 North
                                            San Antonio, TX 78216


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         or to such other address as any party may have furnished to the others
         in writing in accordance herewith, except that notices of change of
         address shall be effective only upon receipt.

         12. MISCELLANEOUS. No provisions of this Agreement may be modified,
         waived or discharged unless such waiver, modification or discharge is
         agreed to in writing signed by the Executive and such officer of the
         Company as may be specifically designated by the Board. No waiver by
         either party hereto at any time of any breach by the other party hereto
         of, or compliance with, any condition or provisions of the Agreement to
         be performed by such other party shall be deemed a waiver of similar or
         dissimilar provisions or conditions as the same time or at any prior to
         subsequent time. The validity, interpretation, construction and
         performance of this Agreement shall be governed by the laws of the
         State of Texas without regard to its conflicts of law principles. The
         paragraph headings contained in this Agreement are for reference
         purposes only and shall not affect in any way the meaning or
         interpretation of this Agreement.

         13.      VALIDITY.  The  invalidity or  unenforceability  of any
         provision or provisions of this Agreement shall not affect the validity
         or enforceability of any other provisions of this Agreement, which
         shall remain in full force and effect.

         14.      COUNTERPARTS.  This  Agreement may be executed in one or more
         counterparts, each of which shall be deemed to be an original but all
         of which together will constitute one and the same instrument.

         15. ARBITRATION. Any dispute or controversy arising under or in
         connection with this Agreement shall be settled exclusively by
         arbitration, conducted before a panel of three (3) arbitrators in San
         Antonio, Texas in accordance with the rules of the American Arbitration
         Association then in effect. The arbitrators do not have the authority
         to add to, detract from or modify any provisions hereof. The
         arbitrators do have the Authority to order reinstatement and/or
         back-pay in the event the arbitrators determine that the Executive was
         not terminated for Cause, as defined on subsection 6(c) hereof. Each
         party shall have an opportunity to present evidence on the issues in
         dispute before the arbitrator and each party may be represented by
         legal counsel. A decision by a majority of the arbitration panel shall
         be final and binding. Judgement may be entered on the arbitrator's
         award in any court having jurisdiction. The arbitrators shall decide
         which party will bear the expenses of such arbitration (including
         attorneys' fees) .

         16. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of
         the parties hereto in respect of the subject matter contained herein
         and supersede all other prior agreements, promises, covenants,
         arrangements, communications, representations or warranties whether
         oral or written, by any officer, employee or representative of any
         party hereto; and any prior agreement of the parties hereto in respect
         of the subject matter contained herein is hereby terminated and
         canceled.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date and
year first above written.

                                            NATIONAL BANCSHARES CORPORATION OF
                                            TEXAS  (THE "COMPANY")

                                            BY:
                                                ----------------------
                                            MARVIN E. MELSON
                                            PRESIDENT

                                            --------------------------
                                            JAY H. LUSTIG
                                            (THE "EXECUTIVE")


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