Document:

Exhibit 10.6

 

TERMINATION
AGREEMENT

 

This Termination Agreement (the “Agreement”) is made and entered into
as of May 26, 2005, by and between Michael E. Little (“Little”), Wm. Stacy
Locke (“Locke”), Pioneer Drilling Company (“Pioneer”) and WEDGE Energy Services,
L.L.C. (“WEDGE” and, collectively with Little and Locke, the “Shareholders”).

 

WHEREAS, the Shareholders and Pioneer are parties to the Voting
Agreement dated as of May 11, 2000 (the “Voting Agreement”);

 

WHEREAS, Pioneer and WEDGE are parties to the Debenture Purchase
Agreement dated as of July 3, 2002, as amended by the First Amendment to
Debenture Agreement dated as of December 23, 2002 (the “Debenture Purchase
Agreement”);

 

WHEREAS, in March 2005, Pioneer issued and sold 6,945,000 shares
of its common stock and WEDGE and Little, participating as selling shareholders,
sold 6,945,000 and 600,000 shares of Pioneer common stock, respectively,
pursuant to an underwritten public offering (the “Offering”); and

 

WHEREAS, as a result of the Offering, WEDGE now beneficially owns less
than 10% of the total issued and outstanding shares of common stock of Pioneer
on a fully diluted basis calculated in accordance with the “treasury method”;

 

NOW, THEREFORE, the parties hereto hereby agree as follows:

 

ARTICLE I
- TERMINATION

 

1.1           Termination
of Voting Agreement.  The
Voting Agreement and the obligations of Pioneer and the Shareholders thereunder
are hereby terminated in their entirety, effective as of the date hereof.  Any registration rights relating to shares of
common stock of Pioneer granted by Pioneer to Little under the Voting Agreement
or under any other agreement are hereby terminated in their entirety, effective
as of the date hereof.

 

1.2           Termination
of Debenture Purchase Agreement. 
The Debenture Purchase Agreement and the obligations of Pioneer and
WEDGE thereunder are hereby terminated in their entirety, effective as of the
date hereof.

 

ARTICLE II
- MISCELLANEOUS

 

2.1           Counterparts;
Delivery by Facsimile.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument. The delivery of an executed counterpart of this Agreement by
facsimile shall be deemed to be valid delivery thereof.

 

2.2           Severability.
If any provision of this Agreement is held invalid or unenforceable, all other
provisions will not be affected. With respect to the provision held invalid or
unenforceable, the parties to this Agreement will amend this Agreement as
necessary to effect the original intent of the parties
to this Agreement as closely as possible.

 

 

2.3           Governing Law.
This Agreement shall be governed by and construed in accordance with the laws
of the state of Texas, without regard to principles of conflict of laws thereof
that would result in the application of the laws of any other jurisdiction.

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT
BLANK]

 

 

IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly signed as of the date first above written.

 

	
   

  	
  PIONEER
  DRILLING COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Wm.
  Stacy Locke

  	
   

  
	
   

  	
   

  	
  Wm. Stacy
  Locke

  	
   

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael
  E. Little

  	
   

  
	
   

  	
   

  	
  Michael E.
  Little

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Wm.
  Stacy Locke 

  	
   

  
	
   

  	
   

  	
  Wm. Stacy
  Locke

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WEDGE ENERGY
  SERVICES, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard
  E. Blohm, Jr.

  	
   

  
	
   

  	
   

  	
  Name:
  Richard E. Blohm, Jr.

  	
   

  
	
   

  	
   

  	
  Title: Vice
  President2005
STOCK OPTION PLAN

FOR

EUROBANCSHARES,
INC.

 

Section
1.  Purpose. The
purpose of this 2005 STOCK OPTION PLAN FOR EUROBANCSHARES, INC. is to advance
the interests of EuroBancshares, Inc., a Puerto Rico corporation (the
“Company”), by providing an additional incentive to attract and retain qualified
and competent employees, upon whose efforts and judgment the success of the
Company is largely dependent, through the encouragement of stock ownership in
the Company.

 

Section
2.  Definitions. As used
herein, the following terms shall have the meanings indicated:

 

(a)  “Administrator” shall
mean, the persons described in Section
12 which
are authorized to administer the Plan at the time of reference. 

 

(b)  “Available
Shares” shall
mean, at each time of reference, the total number of Shares described in
Section
3 with
respect to which the Administrator may grant an Option, all of which Available
Shares shall be held in the Company’s treasury or shall be made available from
authorized and unissued Shares.

 

(c)  “Bank” shall
mean Eurobank, a commercial bank organized under the laws of the Commonwealth of
Puerto Rico.

 

(d)  “Board” shall
mean the Board of Directors of the Company.

 

(e)  “Company” shall
mean EuroBancshares, Inc., a Puerto Rico corporation. 

 

(f)  “Cause” shall
mean the occurrence of any of the following events: 

 

(i)  The
determination by the Board in the exercise of its reasonable judgment, after
consultation with its legal counsel, that an Optionee has committed an act or
acts constituting (i) a felony or other crime, whether a felony or a
misdemeanor, involving moral turpitude, dishonesty or theft, (ii) dishonesty or
disloyalty with respect to the Company, or (iii) fraud;

 

(ii)  The
determination by the Board in the exercise of its reasonable judgment, after
consultation with its legal counsel, that an Optionee of the Company has
committed a breach or violation of his or her employment agreement with the
Company (if any), and fails to cure such breach or violation within the time
specified in such employment agreement; 

 

(iii)  The
determination by the Board, after consultation with its legal counsel, that an
Optionee has engaged in gross misconduct in the course and scope of his
employment or service with the Company including indecency, immorality, gross
insubordination, dishonesty, unlawful harassment or discrimination, or use of
illegal drugs; or 

 

1

 

(iv)  In the
event an Optionee is prohibited from engaging in the business of banking by any
governmental regulatory agency having jurisdiction over the
Company.

 

For the
purpose of this Plan, no act, or failure to act, on the part of the Optionee
shall be deemed “intentional” unless done, or omitted to be done, by the
Optionee not in good faith and without reasonable belief that his action or
omission was in the best interest of the Bank or the Company. Notwithstanding
the foregoing, the Optionee shall not be deemed to have been terminated for
“Cause” hereunder unless and until there shall have been delivered to the
Optionee a copy of a resolution duly adopted by the affirmative vote of a
majority of the Board then in office (with the Optionee abstaining if a member
thereof) at a meeting of the Board called and held for such purpose (after at
least ten (10) days notice to the Optionee and an opportunity for the Optionee,
together with his counsel, to be heard before the Board), finding that in the
good faith opinion of the Board the Optionee had committed an act set forth
above and specifying the particulars thereof in detail. The number of votes
needed to constitute a majority shall be determined based on the total number of
members of the Board then serving, including any abstaining member. Nothing
herein shall limit the right of the Optionee or his beneficiary to contest the
validity or propriety of any such determination.

 

(g)  “Change
in Control” shall
mean:

 

(i)  a
dissolution or liquidation of the Company or the Bank; 

 

(ii)  a merger
or consolidation (other than a merger effecting a re-incorporation of the Bank
or the Company in another state or territory or any other merger or
consolidation in which the shareholders of the surviving corporation and their
proportionate interests therein immediately after the merger or consolidation
are substantially identical to the shareholders of the Bank or the Company and
their proportionate interests therein immediately prior to the merger or
consolidation) in which the Bank or the Company is not the surviving corporation
(or survives only as a subsidiary of another corporation in a transaction
in which the shareholders of the parent of the Bank or the Company and their
proportionate interests therein immediately after the transaction are not
substantially identical to the shareholders of the Bank or the Company and their
proportionate interests therein immediately prior to the transaction; provided,
however, that the Board may at any time prior to such a merger or consolidation
provide by resolution that there has been no Change in Control and that the
foregoing provisions of this parenthetical shall not apply if a majority of the
Board of such parent immediately after the transaction consists of individuals
who constituted a majority of the Board immediately prior to the
transaction); or

 

(iii)  a
transaction in which any person or entity (other than a shareholder of the Bank
or the Company on the date of the Option Agreement) becomes the owner of fifty
percent (50%) or more of the total combined voting power of all classes of stock
of the Bank or the Company (provided, however, that the Board may at any time
prior to such transaction provide by resolution that there has been no Change in
Control and that this Section (f)(iii) shall
not apply if such acquiring person is a corporation and a majority of the Board
of the acquiring corporation immediately after the transaction consists of
individuals who constituted a majority of the Board immediately prior to the
acquisition of such fifty percent (50%) or more total combined voting
power).

 

2

 

(h)  “Date
of Exercise” shall
mean the later of: (i) the date on which the Company has received written notice
of the exercise, in whole or in part, of the Option, and (ii) the date on which
full payment of (A) the aggregate Exercise Price of the Option Shares being
acquired, and (B) applicable tax withholding, has been made.

 

(i)  “Date
of Grant” shall
mean the date on which the Administrator takes formal action to grant an Option,
provided that it is followed, as soon as reasonably possible, by written notice
to the Eligible Person receiving the Option, and by the Administrator providing
the Optionee with an Option Agreement. 

 

(j)  “Director” shall
mean a member of the Board. 

 

(k)  “Eligible
Person(s)” shall
mean those persons who are Employees or Directors of the Company, a Related
Corporation or the Bank. In addition, but only with respect to Nonstatutory
Options, the term “Eligible Person(s)” shall include Consultants. For purposes
of this Plan, “Consultants” refers to persons engaged to provide services to the
Company or the Bank as independent contractors whether or not such engagement is
pursuant to a written agreement.

 

(l)  “Employee(s)” shall
mean those persons who are employees of the Company, a Related Corporation, or
the Bank, as determined under the Code.

 

(m)  “Fair
Market Value” shall
mean:

 

(i)  If Shares
of the same class are listed or admitted to unlisted trading privileges on any
national or regional securities exchange at the date of determining the Fair
Market Value, the last reported sale price on such exchange on the last business
day prior to the date in question; 

 

(ii)  If Shares
of the same class are not listed or admitted to unlisted trading privileges as
provided in Section (m)(i) and
sales prices for such shares in the over-the-counter market are reported by the
National Association of Securities Dealers, Incorporated Automated Quotations,
Incorporated (“NASDAQ”) National Market System at the date of determining the
Fair Market Value, the last reported sale price so reported on the last business
day prior to the date in question; 

 

(iii)  If Shares
of the same class are not listed or admitted to unlisted trading privileges as
provided in Section (m)(i) and
sales prices for such shares are not reported by the NASDAQ National Market
System as provided in Section (m)(ii), and bid
and asked prices therefor in the over-the-counter market are reported by NASDAQ
(or, if not so reported, by the National Quotation Bureau Incorporated or the
OTC Bulletin Board) at the date of determining the Fair Market Value, the
average of the closing bid and asked prices on the last business day prior to
the date in question; or

 

3

 

(iv)  If Shares
of the same class are not listed or admitted to unlisted trading privileges as
provided in Section (m)(i) and
sales prices or bid and asked prices for such shares are not reported by NASDAQ
(or the National Quotation Bureau Incorporated or the OTC Bulletin Board) as
provided in Section (m)(ii) or
Section (m)(iii) at the
date of determining the Fair Market Value, the value determined in good faith by
the Board; provided, however, that with respect to Incentive Options, in no
event shall the value be less than the book value per share determined according
to the financial statements of the Company for the taxable year immediately
prior to the date such Incentive Options are granted.

 

(n)  “Internal
Revenue Code” or
“Code” shall
mean the Puerto Rico Internal Revenue Code of 1994, as it now exists or may be
amended from time to time.

 

(o)  “Incentive
Option” shall
mean Options that are intended to satisfy the requirements of Section 1046 of
the Code.

 

(p)  “Nonstatutory
Option” shall
mean Options that are not intended to satisfy the requirements of Section 1046
of the Code.

 

(q)  “Option” shall,
unless otherwise specifically noted, mean any stock option granted under this
Plan, which Option shall refer to a right to purchase Shares, granted pursuant
to the Plan. 

 

(r)  “Option
Agreement” shall
mean an agreement between an Optionee and the Company containing the terms and
conditions of the Option.

 

(s)  “Option
Shares” shall
mean Shares subject to the Option of reference at the time of
reference.

 

(t)  “Optionee” shall
mean a person to whom an Option is granted or any successor to the rights of
such Option under this Plan by reason of the death of a natural person to whom
an Option is granted under this Plan. 

 

(u)  “Owner” shall
mean the person (including, without limitation, the Optionee) who owns the
Purchased Shares at the time of reference.

 

(v)  “Plan” shall
mean this 2005 Stock Option Plan for EuroBancshares, Inc.

 

(w)  “Purchased
Shares” shall
mean Shares which have been acquired through the exercise of the
Option.

 

4

 

(x)  “Related
Corporation” shall
mean either:

 

(i)  any
corporation in an unbroken chain of corporations ending with the employer
corporation if, on the Date of Grant, each of the corporations other than the
employer corporation owns stock possessing eighty percent (80%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain; or

 

(ii)  any
corporation in an unbroken chain of corporations beginning with the employer
corporation if, at the Date of Grant, each of the corporations other than the
last corporation in the chain owns stock possessing eighty percent (80%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.

 

(y)  
“Separation” or
“Separates” shall
mean the date on which Optionee ceases to have an employment relationship with
the Company or the Bank for any reason, including death or disability;
provided,
however, a
Separation will not be considered to have occurred while an Employee is on sick
leave, military leave, or any other leave of absence approved by the Company, if
the period of such leave does not exceed ninety (90) days, or, if longer, so
long as the Employee’s right to reemployment with the Company is guaranteed
either by statute or by contract.

 

(z)  “Share(s)” shall
mean a share or shares of the common stock of the Company, and, following a
Change in Control, without limitation, shall include and refer to the number and
class of securities that would have been issuable to an Optionee in consummation
of such Change in Control had such Optionee’s Option been exercised immediately
prior to such Change in Control. 

 

(aa)  “Spread” shall
mean the excess of: (i) the fair market value (for federal income tax reporting
purposes, as determined by the Administrator in its sole discretion) on the Date
of Exercise of the Shares acquired, over (ii) the Exercise Price of the Shares
acquired.

 

(bb)  “US
Code” shall
mean the United States Internal Revenue Code of 1986, as amended.

 

(cc)  “Vested,
Vesting, Unvested” and
similar references, shall mean the number of Option Shares which have Vested,
become nonforfeitable, and are exercisable under the terms of the Plan or the
Option Agreement, or both, at the time of reference.

 

Section
3.  Available
Shares.

 

(a)  As of the
Effective Date, 700,000 Shares shall automatically, and without further action,
become Available Shares to be granted as Options. Of this total Available
Shares, 440,000 Shares are specifically set aside for the purpose of granting
Incentive Options under the Plan. To the extent any Option shall terminate,
expire or be canceled, (including, without limitation, a cancellation described
in Section
3(b)), the
Available Shares subject to such Option shall remain Available
Shares.

 

5

 

(b)  Without
limitation, the Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected Optionee, the
cancellation of any or all outstanding Options of such Optionee and to grant, in
substitution, to such Optionee new Options covering the same or different number
of Shares; provided,
however, that
substituted Incentive Options shall comply with the requirements of Section
4(e) and
Section
4(f) and the
requirements of Code Section 1046.

 

Section
4.  Conditions
for Grant of Options.

 

(a)  Each
Option shall be evidenced by an Option Agreement that may contain any term
deemed necessary or desirable by the Administrator, provided such terms are not
inconsistent with this Plan or any applicable law. Optionees shall be those
persons selected by the Administrator from Eligible Persons; provided,
however, that only
Employees or Directors of the Company, a Related Corporation or the Bank may
receive grants of Incentive Options under the Plan. If an Optionee receives both
Incentive Options and Nonstatutory Options, a separate Option Agreement shall be
issued for each type of Option granted. Each Option Agreement relating to an
Incentive Option granted under this Plan shall contain such limitations and
restrictions upon the exercise of the Incentive Option to which it relates as
shall be necessary for the Incentive Option to which such Option Agreement
relates to constitute a qualified stock option, as defined in Section 1046 of
the Code. If this Plan or any Option Agreement does not contain any provision
required to be included herein under Section 1046 of the Code, that
provision shall be deemed to be incorporated herein with the same force and
effect as if that provision had been set out at length herein; provided,
however, that,
to the extent any Option that is intended to qualify as an Incentive Option
cannot so qualify, that Option (to that extent) shall be deemed a Nonstatutory
Option for all purposes of this Plan and any Option Agreement. 

 

(b)  In
granting Options, the Administrator shall take into consideration the
contribution the person has made or may make to the success of the Company and
the Bank and such other factors as the Administrator shall determine. The
Administrator shall also have the authority to consult with and receive
recommendations from officers and other personnel of the Company with regard to
these matters. The Administrator may from time to time in granting Options under
the Plan prescribe such other terms and conditions concerning such Options as it
deems appropriate, including, without limitation, relating an Option to
achievement of specific goals established by the Administrator or the continued
employment of the Optionee for a specified period of time, provided that such
terms and conditions are not more favorable to an Optionee than those expressly
permitted herein.

 

(c)  The
Administrator in its sole discretion shall determine in each case whether
periods of military or governmental service shall constitute a continuation of
employment for the purposes of this Plan or any Option.

 

(d)  Neither
the Plan nor any Option granted under the Plan shall confer upon any person any
right to continuance of employment by the Company or the Bank; provided,
further, that
nothing herein shall be deemed to limit the ability of the Company or the Bank
to enter into any other compensation arrangement(s) with any Eligible
Person.

 

6

 

(e)  Notwithstanding
any other provision herein contained, no Optionee may receive an Incentive
Option under the Plan if such Optionee, on the Date of Grant, owns Shares
possessing more than ten percent (10%) of the total combined voting power of all
classes of Shares, unless the Exercise Price for such Incentive Option is at
least one hundred ten percent (110%) of the Fair Market Value of the Shares on
the Date of Grant, and such Incentive Option is not exercisable after the date
five (5) years from the Date of Grant.

 

(f)  The
aggregate Fair Market Value (determined with respect to each Incentive Option as
of the Date of Grant) of the Option Shares with respect to which Incentive
Options are exercisable for the first time by an Optionee during any calendar
year under all plans of the Company, or any other related employer shall not
exceed $100,000.

 

Section
5.  Exercise
Price. Subject
to Section
4(e), the
Exercise Price per Share of an Option shall be one hundred percent (100%) of the
Fair Market Value of the shares at the Date of Grant.

 

Section
6.  Payment
of Exercise Price and Withholding. The
Exercise Price of any Option Shares, and the amount that the Administrator
determines to be necessary for the Company to withhold in accordance with
applicable federal or state income tax withholding requirements, shall be paid
solely in cash, by certified or cashier’s check, by money order or wire transfer
a wire transfer of immediately available funds; provided,
however, that
the Administrator, in its sole discretion, may accept a personal check in full
or partial payment of the Exercise Price and withholding; provided,
further, that to
the extent, if any, expressly permitted by the terms of the Option Agreement,
and not to any greater extent, the Exercise Price, or the withholding, or both,
may be paid by the surrender of Shares, including Vested but unexercised Option
Shares and Purchased Shares. If either (or both) the Exercise Price or the
withholding is paid with Shares, including Vested but unexercised Option Shares
and Purchased Shares, the amount of such payment will be equal to the Fair
Market Value of the Shares, Option Shares, or Purchased Shares surrendered;
provided,
however, that
the Optionee must indicate his or her intention to surrender a certain number,
or dollar value, of Shares, Option Shares, or Purchased Shares in payment of the
Exercise Price, or withholding, or both, in his or her required written notice
of exercise.

 

Section
7.  Exercisability
of Options.

 

(a)  Any
Option shall become exercisable in such amounts and at such intervals as the
Administrator shall provide in any Option Agreement, except as otherwise
provided in this Section
7,
provided in each case that the Option has not expired on the Date of
Exercise.

 

(b)  The
expiration date of an Option shall be determined by the Administrator at the
Date of Grant, but in no event shall an Incentive Option be exercisable after
the expiration of ten (10) years from the Date of Grant (subject to Section
4(e)).

 

(c)  Without
limitation, the Administrator may in its sole discretion accelerate the date on
which any Shares shall become Vested, including that, subject to the
Administrator’s right under Section
8(b), all
Unvested Options may, as set forth in the Option Agreement, become Vested and
fully exercisable upon a Change in Control of the Company.

 

7

 

(d)  Notwithstanding
any provisions hereof to the contrary, if any Option is accelerated under
Subsection 7(c), the portion of such Option that may be exercised to acquire
Shares that the Optionee would not be entitled to acquire but for such
acceleration, or the Unvested Shares which become Vested (the “Acceleration
Shares”), is limited to that number of Acceleration Shares that can be acquired
without causing the Optionee to have an “excess parachute payment” as determined
under Section 280G of the US Code, determined by the Administrator, in its sole
discretion, by taking into account all of the Optionee’s “parachute payments”
determined under Section 280G of the US Code. If as a result of this Subsection
7(d), the Optionee may not acquire all of the Acceleration Shares, then the
Acceleration Shares that the Optionee may acquire shall be the Unvested Shares
whose date of Vesting is nearest the date of acceleration, it being the intent
hereof to accelerate the maximum number of Unvested Option Shares which may be
accelerated without causing Optionee to have an excess parachute payment.

 

Section
8.  Termination
of Option Period.

 

(a)  Unless
otherwise provided in the Option Agreement, the unexercised portion of such
Option shall automatically and without notice terminate and become null and void
at the time of the earliest to occur of the following:

 

(i)  the
ninetieth (90th) day after the date on which Optionee Separates, other than
Separation for Cause;

 

(ii)  the date
on which the Optionee Separates, if the Administrator, in its sole discretion,
determines that such Separation is, or was, for Cause;

 

(iii)  the tenth
(10th) anniversary of the Date of Grant of the Incentive Option; or

 

(iv)  one (1)
year after the date on which the Optionee Separates, if the Administrator, in
its sole discretion, determines that such Separation is, or was, for reason of
disability.

 

Without
limitation, the Administrator, in its sole discretion, may extend the date on
which, absent such extension, an Option would terminate, but not beyond the date
specified in Subsection (8)(a)(iii).

 

(b)  Except to
the extent expressly provided to the contrary in the Option Agreement, the
Administrator, in its sole discretion may, by giving written notice (a
“Cancellation Notice”), cancel, effective upon the date of the consummation of
any Change in Control, all or any of the Vested portion of such Option that
remains unexercised on such date. Such Cancellation Notice shall be given a
reasonable period of time (but not less than 15 days) prior to the proposed date
of such cancellation, and may be given either before or after shareholder
approval (if any is required) of the Change in Control, and may be condition on
the actual occurrence of the Change in Control. 

 

8

 

Section
9.  Adjustment
of Shares Subject to Option.

 

(a)  If at any
time while the Plan is in effect or unexercised Options are outstanding, there
shall be any increase or decrease in the number of issued and outstanding Shares
through the declaration of a stock dividend or through any recapitalization
resulting in a stock split-up, combination or exchange of Shares, then in such
event:

 

(i)  appropriate
adjustment shall be made in the maximum number of Shares then subject to being
optioned under the Plan, so that the same proportion of the Company’s issued and
outstanding Shares shall continue to be subject to being so optioned;
and

 

(ii)  appropriate
adjustment shall be made in the number of Shares and the Exercise Price thereof,
so that the same proportion of the Company’s issued and outstanding Shares shall
remain subject to purchase at the same aggregate Exercise Price.

 

(b)  The
Administrator may change the terms of Options outstanding under this Plan, with
respect to the Exercise Price or the number of Option Shares, or both, when, in
the Administrator’s sole discretion, such adjustments become appropriate by
reason of any corporate transaction and, without limitation, following a Change
in Control: (i) the Option Shares assumed shall be appropriately adjusted,
immediately after such Change in Control, to continue to be Option Shares as
defined herein, and (ii) there shall be an appropriate adjustment in the
Exercise Price so that the Shares shall remain subject to purchase at the same
aggregate Exercise Price; provided,
however, that no
adjustments shall be made to Incentive Options unless: (x) the excess of the
aggregate Fair Market Value of the Option Shares immediately after such
adjustment over the aggregate Exercise Price of the Incentive Option is not more
than the excess of the Fair Market Value of all Options Shares immediately
before the adjustment over the aggregate Exercise Price of the Incentive
Options; and (y) the new or adjusted Incentive Options do not give the Optionee
additional benefits that the Optionee did not have prior to
adjustment.

 

(c)  Subject
to the terms and conditions of, and within the limitations of, the Plan, the
Board of Directors may modify, extend, or renew outstanding Options granted
under the Plan or accept the surrender of Options outstanding under the Plan (to
the extent not previously exercised) and authorize the granting of substitute
Options (to the extent not previously exercised). Except as provided in
Section
9(b), no
modification of an Option granted under the Plan shall, without the consent of
the Optionee, alter or impair any rights or obligations under any Option
previously granted under the Plan to such Optionee under the Plan, except as may
be necessary, with respect to Incentive Options, to satisfy the requirements of
Section 1046 of the Code.

 

(d)  Except as
otherwise expressly provided herein, the issuance by the Company of shares of
its capital stock of any class, or securities convertible into shares of capital
stock of any class, either in connection with direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to the number of Available Shares or the number of or Exercise Price of Option
Shares.

 

9

 

(e)  Without
limiting the generality of the foregoing, the existence of outstanding Options
granted under the Plan shall not affect in any manner the right or power of the
Company to make, authorize or consummate: (i) any or all adjustments,
recapitalizations, reorganizations or other changes in the Company’s capital
structure or its business; (ii) any merger or consolidation of the Company;
(iii) any issue by the Company of debt securities, or preferred or
preference stock that would rank above the Shares subject to outstanding
Options; (iv) the dissolution or liquidation of the Company; (v) any
sale, transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a
similar character or otherwise.

 

Section
10.  Transferability
of Options and Shares. Each
Option Agreement shall provide that such Option shall not be transferable by the
Optionee otherwise than by will or the laws of descent and distribution and that
so long as an Optionee lives, only such Optionee or his guardian or legal
representative shall have the right to exercise such Option.

 

Section
11.  Issuance
of Shares. No
person shall be, or have any of the rights or privileges of, a shareholder of
the Company with respect to any of the Option Shares unless and until
certificates representing such Option Shares shall have been issued and
delivered to such person. In the event that an Optionee exercises both an
Incentive Option, or portion of one, and a Nonstatutory Stock Option, or a
portion of one, separate certificates shall be issued, one for the Shares
subject to the Incentive Option and one for the Shares subject to the
Nonstatutory Stock Option. As a condition of any transfer of the certificate of
Purchased Shares, the Administrator may obtain such other agreements or
undertakings, if any, as the Administrator may deem necessary or advisable to
assure compliance with any provision of the Plan, the Option Agreement or any
law or regulation including, but not limited to, the following:

 

(a)  A
representation, warranty or agreement by the Optionee to the Company at the time
any Option is exercised that the Optionee is acquiring the Purchased Shares to
be issued to the Optionee for investment and not with a view to, or for sale in
connection with, the distribution of any such Purchased Shares; and

 

(b)  A
representation, warranty or agreement to be bound by any legends that are, in
the opinion of the Administrator, necessary or appropriate to comply with the
provisions of any securities laws deemed by the Administrator to be applicable
to the issuance of the Shares and are endorsed upon the Purchased Share
certificates.

 

Section
12.  Administration
of the Plan.

 

(a)  The Plan
shall be administered by the Administrator, which shall be the Board except to
the extent (if any) that the Board has delegated some or all of its authority to
a one or more officers or Directors, or both, in which event, other than the
power to appoint the Administrator, and as otherwise limited by the Board, in
writing, in the document delegating such its authority, such selected persons
shall function as the Administrator for all purposes hereof. In the event that
the Shares are registered under Section 12 of the Securities and Exchange Act of
1934, as amended (the “Act”), the Board shall appoint a committee that will
serve as the Administrator which is to be comprised of at least three (3)
persons, all of which shall be “outside directors,” such that the Plan, in all
applicable respects, and transactions related to the Plan, will qualify for the
exemptions from Section 16(b) of the Act provided by Rule 16b-3. “Outside
director” shall mean a number of the Board who qualifies as an “outside
director” under the regulations promulgated under Section 162 of the US Code and
as a “non-employee director” under Rule 16b-3 promulgated under the
Act.

 

10

 

(b)  The
Administrator, from time to time, may adopt rules and regulations for carrying
out the purposes of the Plan. The determinations and the interpretation and
construction of any provision of the Plan by the Administrator shall be final
and conclusive.

 

(c)  Any and
all decision or determinations of the Administrator shall be made either: (i) by
a majority vote of the members of the Administrator at a meeting; or (ii)
without a meeting by the written approval of a majority of the members of the
Administrator. 

 

(d)  Subject
to the express provisions of this Plan, the Administrator shall have the
authority, in its sole and absolute discretion: (i) to adopt, amend, and rescind
administrative and interpretive rules and regulations relating to this Plan or
any Options; (ii) as provided in Section
9(a) and
(b), upon
certain events to make appropriate adjustments to the Exercise Price and number
of Option Shares; and (iv) to make all other determinations and perform all
other acts necessary or advisable for administering this Plan, including the
delegation of such ministerial acts and responsibilities as the Administrator
deems appropriate. The Administrator may correct any defect or supply any
omission or reconcile any inconsistency in this Plan or any Option Agreement in
the manner and to the extent it shall deem expedient to carry it into effect,
and it shall be the sole and final judge of such expediency. The Administrator
shall have full discretion to make all determinations on the matters referred to
in this Section
12(d), and
such determinations shall be final, binding and conclusive.

 

Section
13.  Government
Regulations. This
Plan, Options and the obligations of the Company to sell and deliver Purchased
Shares, shall be subject to all applicable laws, rules and regulations, and to
such approvals by any governmental agencies as may be required; including,
without limitation, compliance with 12 U.S.C. § 1828(k) and regulations
promulgated thereunder.

 

Section
14.  Miscellaneous.

 

(a)  The
proceeds received by the Company from the sale of Option Shares shall be used
for general corporate purposes.

 

(b)  The grant
of an Option shall be in addition to any other compensation paid to the Optionee
or other stock option plans of the Company or other benefits with respect to
Optionee’s position or agency with the Company. 

 

(c)  The
members of the Board and the Administrator (if not the Board) shall not be
liable for any act, omission, or determination taken or made in good faith with
respect to this Plan or any Option, and members of the Board and the
Administrator shall, in addition to all other rights of indemnification and
reimbursement, be entitled to indemnification and reimbursement by the Company
in respect of any claim, loss, damage, or expense (including attorneys’ fees,
the costs of settling any suit, provided such settlement is approved by
independent legal counsel selected by the Company, and amounts paid in
satisfaction of a judgment, except a judgment based on a finding of bad faith)
arising from such claim, loss, damage, or expense to the full extent permitted
by law and under any directors’ and officers’ liability or similar insurance
coverage that may from time to time be in effect.

 

11

 

(d)  Any
issuance or transfer of Purchased Shares to an Optionee, or to his legal
representative, heir, legatee, or distributee, in accordance with the provisions
of this Plan or the applicable Option Agreement, shall, to the extent thereof,
be in full satisfaction of all claims of such persons under the Plan. The
Administrator may require any Optionee, legal representative, heir, legatee or
distributee as a condition precedent to such payment or issuance or transfer of
Shares, to execute a release and receipt for such payment or issuance or
transfer of Shares in such form as it shall determine.

 

(e)  Neither
the Board, the Administrator, nor the Company guarantees Shares from loss or
depreciation.

 

(f)  All
expenses incident to the administration, termination, or protection of this Plan
or any Option Agreement, including, but not limited to, legal and accounting
fees, shall be paid by the Company; provided,
however, the
Company may recover any and all damages, fees, expenses and costs arising out of
any actions taken by the Company to enforce its rights under this Plan or any
Option Agreement.

 

(g)  Records
of the Company shall be conclusive for all purposes under this Plan or any
Option, unless determined by the Administrator to be incorrect.

 

(h)  The
Company shall, upon request or as may be specifically required under this Plan
or any Option Agreement, furnish or cause to be furnished all of the information
or documentation that is necessary or required by the Administrator to perform
its duties and functions under this Plan or any Option Agreement.

 

(i)  The
Company assumes no liability to any Optionee or his legal representatives,
heirs, legatees or distributees for any act of, or failure to act on the part
of, the Administrator.

 

(j)  Any
action required of the Company relating to this Plan or any Option shall be by
resolution of its Administrator or by a person authorized to act by written
delegation of the Administrator.

 

(k)  If any
provision of this Plan, or any Option Agreement, is held to be illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions of this Plan or any Option, but such provision shall be
fully severable, and the Plan or Option Agreement, as applicable, shall be
construed and enforced as if the illegal or invalid provision had never been
included in the Plan or Option Agreement, as applicable.

 

(l)  Whenever
any notice is required or permitted under this Plan, such notice must be in
writing and personally delivered or sent by mail or delivery by a nationally
recognized courier service. Any notice required or permitted to be delivered
under this Plan shall be deemed to be delivered on the date on which it is
personally delivered, or, if mailed, whether actually received or not, on the
third business day after it is deposited in the United States mail, certified or
registered, postage prepaid, addressed to the person who is to receive it at the
address that such person has previously specified in accordance with this
Section
14(l), or, if
by courier, seventy-two (72) hours after it is sent, addressed as described in
this Section
14(l). The
Company or the Optionee may change, at any time and from time to time, by
written notice to the other, the address that it or he had previously specified
for receiving notices. Until changed in accordance with this Plan, the Company
and the Optionee shall be deemed to have specified as its and his address for
receiving notices, as to the Company, its principal executive offices in San
Juan, Puerto Rico, and, as to this Optionee, the most current address of the
Optionee set forth in the Company’s employment records.

 

12

 

(m)  Any
person entitled to notice under this Plan may waive such notice.

 

(n)  This Plan
shall be binding upon the Optionee, his legal representatives, heirs, legatees
and distributees upon the Company, its successors, and assigns, and upon the
Board and its successors.

 

(o)  The
titles and headings of Sections are included for convenience of reference only
and are not to be considered in construction of this Plan’s
provisions.

 

(p)  All
questions arising with respect to the provisions of this Plan shall be
determined by application of the laws of the Commonwealth of Puerto Rico to the
maximum extent permitted under applicable law.

 

(q)  Words
used in the masculine shall apply to the feminine where applicable, and wherever
the context of this Plan dictates, the plural shall be read as the singular and
the singular as the plural.

 

(r)  Without
limitation, the amount received by an Optionee as a result of the exercise of
the Option shall not constitute compensation with respect to which any other
employee benefits of the Company are determined, including, again without
limitation, benefits under any bonus, pension, profit-sharing, retirement, life
insurance, severance, or salary continuation plan.

 

Section
15.  Amendment
and Discontinuation of the Plan. The
Board may from time to time amend the Plan, and the Administrator may amend any
Option Agreement; provided,
however, that
subject to changes in law or other legal requirements that would permit
otherwise, or except to the extent provided in Section
8 and
Section
9, no such
amendment may substantially impair any Option previously granted to any Optionee
without the consent of such Optionee; provided
further, that, as
applied to Incentive Options and absent shareholder approval, no amendment to
the Plan shall change the class of Employees that constitute Eligible Persons
nor shall any amendment alter the amount of Available Shares with respect to
Incentive Options. 

 

13

 

Section
16.  Effective
Date and Termination Date. This
Plan shall become effective on the later of the date that the Plan is approved
by shareholders of the Company, or the date the Plan is approved by the Board of
Directors of the Company (provided that the shareholders of the Company have
previously approved this Plan). The Plan shall automatically terminate on the
tenth (10th) anniversary of the effective date, unless terminated sooner;
provided, however, that subject to Section
8(a)(iii), the
termination of the Plan shall not terminate or have any other effect on any
outstanding and unexercised Options.

 

[Signature
Page Follows]

 

14

Executed
this 12th day of May 2005. 

 

	 	 	 
	 	EUROBANCSHARES,
  INC.
	 
 	 
 	 
 
		By:  	
      /s/ 

	 	
      

      Rafael
      Arrillaga-Torréns, Jr.

      President
      and Chief Executive Officer

	 	

 

15

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