SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
(AMENDMENT NO. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or
240.14a-12
INDEPENDENT BANKSHARES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11:*
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
* Set forth amount on which the filing is calculated and state
how it was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
INDEPENDENT BANKSHARES, INC.
547 Chestnut Street
Abilene, Texas 79602
__________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 27, 1999
An annual meeting of the shareholders of Independent
Bankshares, Inc. (the "Company") will be held at First State
Bank, N.A., Central Branch Lobby, 547 Chestnut Street, Abilene,
Texas, at 4:00 p.m. (Central time), on April 27, 1999 to consider
proposals:
1. To elect four (4) directors to hold office;
2. To approve the adoption of the Company's 1999 Stock
Option Plan; and
3. To transact any other business that may properly come
before the meeting.
The Board of Directors has fixed March 18, 1999, as the
Record Date for the determination of shareholders entitled to
vote at the Annual Meeting.
IT WILL BE HELPFUL TO US IF YOU READ THE PROXY STATEMENT AND
VOTING INSTRUCTIONS ON THE PROXY CARD, AND THEN VOTE BY PROMPTLY
MARKING, SIGNING, DATING AND RETURNING THE ACCOMPANYING PROXY IN
THE ENCLOSED, SELF-ADDRESSED, STAMPED ENVELOPE SO THAT THE
NECESSARY QUORUM MAY BE REPRESENTED AT THE ANNUAL MEETING.
By Order of the Board of Directors
RANDAL N. CROSSWHITE,
Corporate Secretary
Abilene, Texas
March 31, 1999
<PAGE>
INDEPENDENT BANKSHARES, INC.
547 Chestnut Street
Abilene, Texas 79602
_______________________________
PROXY STATEMENT
_______________________________
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement and the accompanying proxy are
solicited on behalf of the Board of Directors of Independent
Bankshares, Inc. The proxies will be voted at the 1999 Annual
Meeting of Shareholders to be held on April 27, 1999, at the time
and place and for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders and at any
adjournment(s) of the Annual Meeting. This Proxy Statement, the
accompanying proxy and the Company's Annual Report to
Shareholders for the year ended December 31, 1998, are first
being sent to shareholders of the Company on or about March 31,
1999.
All properly completed proxies received prior to the Annual
Meeting and not revoked will be voted in accordance with your
instructions. IF NO SUCH INSTRUCTIONS ARE MADE, THE PROXIES WILL
BE VOTED FOR THE ELECTION OF THE NOMINEES UNDER THE CAPTION
"ELECTION OF DIRECTORS" AND FOR THE APPROVAL OF ADOPTION THE
COMPANY'S 1999 STOCK OPTION PLAN UNDER THE CAPTION "STOCK OPTION
PLAN." If any other matters come before the Annual Meeting, the
persons named as proxies will vote upon such matters according to
their judgment.
The Company encourages the personal attendance of its
shareholders at the Annual Meeting. An execution of the
accompanying proxy will not affect a shareholder's right to
attend the Annual Meeting and to vote in person.
Proxies may be revoked if you:
* Deliver a signed, written revocation letter, dated any time
before the proxy is voted, to Mr. Randal N. Crosswhite, Corporate
Secretary, Independent Bankshares, Inc., at the Company's
principal executive offices, 547 Chestnut Street, Abilene, Texas
79602; or
* Sign and deliver a proxy, dated later than the first one to
the Company's Corporate Secretary at the above address; or
* Attend the meeting and vote in person. Attending the Annual
Meeting alone will not revoke your proxy. A revocation letter or
a later-dated proxy will not be effective until received by the
Company at or prior to the Annual Meeting.
In addition to the solicitation of proxies by use of the
mail, officers, directors and regular employees of the Company
may solicit the return of proxies by personal interview, mail,
telephone, facsimile and/or through the Internet. These persons
will not be additionally compensated, but will be reimbursed for
out-of-pocket expenses. The Company will also request brokerage
houses and other custodians, nominees and fiduciaries to forward
solicitation material to the beneficial owners of shares. The
Company will reimburse such persons and the transfer agent for
their reasonable out-of-pocket expenses in forwarding such
materials. The Company bears the cost of the solicitation.
The Annual Report to Shareholders covering the Company's
fiscal year ended December 31, 1998, including audited financial
statements, is enclosed herewith. The Annual Report does not
form any part of the material for the solicitation of proxies.
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<PAGE>
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
GENERAL
The Board of Directors of the Company has fixed March 18,
1999, as the Record Date for the Annual Meeting. Only holders of
record of the outstanding shares of Common Stock ("Common
Shares") at the close of business on the Record Date are entitled
to notice of, and to vote at, the Annual Meeting or any
adjournment(s) of the Annual Meeting. At the close of business on
the Record Date, the Company had issued and outstanding 2,228,780
Common Shares. Each Common Share is entitled to one vote on each
matter brought before the Annual Meeting.
QUORUM AND REQUIRED VOTE; EFFECT OF ABSTENTIONS AND BROKER
NONVOTE
To be elected, directors must receive a plurality of the
Common Shares present and voting in person or by proxy, provided
a quorum exists. A plurality means receiving the largest number
of votes, regardless of whether that is a majority. A quorum
exists if at least a majority of the Common Shares on the Record
Date is present in person or by proxy. All matters other than
election of directors submitted to you at the Annual Meeting will
be decided by a majority of the votes cast on the matter,
provided a quorum exists, except as otherwise provided by law or
our Certificate of Incorporation or Bylaws. Those who fail to
return a proxy or attend the Annual Meeting will not count
towards determining any required plurality, majority or quorum.
Abstentions and broker nonvotes are counted for purposes of
determining the presence or absence of a quorum for the
transaction of business. A broker non-vote occurs when a holder
of Common Shares for the beneficial owner does not vote on the
proposal because such holder does not have discretionary voting
power with respect to that proposal. However, abstentions and
broker non-votes are not counted for purposes of the election of
directors.
SECURITY OWNERSHIP OF MANAGEMENT
The following table and notes to the table set forth
information with respect to Common Shares beneficially owned as
of the Record Date by:
* each director and nominee for director of the Company;
* each executive officer of the Company included in the
Summary Compensation Table set forth under the caption "Executive
Compensation" below;
* each individual selected as an advisory director or director
emeritus of the Company; and
* all directors and executive officers of the Company as a
group.
Amount and
Nature of Percent of
Beneficial Class Owned
Name of Beneficial Owner Ownership(1) Beneficially(2)
--------------------------- ------------ ---------------
John L. Beckham 2,000 0.09%
Lee Caldwell 13,706 0.61
Mrs. Wm. R. (Amber) Cree 4,527 0.20
Randal N. Crosswhite 25,508(3) 1.14
Thomas C. Darden 328(4) 0.01
James G. Fitzhugh 14,406(5) 0.65
Louis S. Gee 45,032(6) 2.02
Michael D. Jarrett 7,220(7) 0.32
Nancy E. Jones 300 0.01
Marshal M. Kellar 1,931(8) 0.09
Tommy McAlister 5,360(9) 0.24
L.H. Mosley* 55,039 2.47
J.E. Smith* 3,875(10) 0.17
Bryan W. Stephenson 108,232(11) 4.84
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<PAGE>
Scott L. Taliaferro 79,961(12) 3.59
James D. Webster, M.D. 885 0.04
C.G. Whitten 6,550 0.29
John A. Wright** 87,250 3.91
All executive officers and
directors a group(18
individuals, including the
executive officers and
directors listed above) 462,110(13) 20.64%
______________
* Advisory Director
** Director Emeritus
(1) Beneficial ownership as reported in the above table has been
determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended. Unless otherwise indicated,
each of the persons named has sole voting and investment power
with respect to the shares reported.
(2) The percentages of Common Stock indicated are based on
2,228,780 Common Shares issued and outstanding on the Record
Date.
(3) Includes Mr. Crosswhite's beneficial ownership of 12,140
shares held by the Company's Employee Stock Ownership/401(k) Plan
(the "Stock Ownership Plan").
(4) Includes Mr. Darden's beneficial ownership of 328 shares
held by the Stock Ownership Plan.
(5) Includes Mr. Fitzhugh's beneficial ownership of 9,605 shares
held by the Stock Ownership Plan.
(6) Includes 14,467 shares owned by Tippett & Gee, Inc. Mr. Gee
is the Chairman of the Board and majority shareholder of Tippett
& Gee, Inc.
(7) Includes Mr. Jarrett's beneficial ownership of 4,970 shares
held by the Stock Ownership Plan.
(8) Includes 1,931 shares owned by M & G Kellar Investment
Limited Partnership, a partnership in which Mr. Kellar is a
general partner.
(9) Includes 3,235 shares owned by McAlister Oil Co., Inc. Mr.
McAlister is President and sole shareholder of McAlister Oil Co.,
Inc. Also includes 689 shares that could be acquired within 60
days through the conversion of the Company's Series C Cumulative
Convertible Preferred Stock ("Series C Preferred Stock") owned by
McAlister Oil Co., Inc.
(10) Includes 1,750 shares owned by Mr. Smith's wife.
(11) Includes 15,808 shares owned by Mr. Stephenson's wife
and minor child and 9,624 shares that could be acquired within 60
days through the conversion of Series C Preferred Stock owned by
Mr. Stephenson's wife. Also includes Mr. Stephenson's beneficial
ownership of 12,657 shares held by the Stock Ownership Plan.
(12) Includes 1,240 shares owned by Mr. Taliaferro's wife.
(13) Includes 10,313 shares that could be acquired within 60
days through the conversion of Series C Preferred Stock. Also
includes such executive officers' beneficial ownership of 39,700
shares held by the Stock Ownership Plan.
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<PAGE>
ITEM 1. ELECTION OF DIRECTORS
NOMINEES
The Bylaws of the Company provide that the Board of
Directors consists of not fewer than seven nor more than 30
members (exclusive of advisory directors) and that the number of
directors, within such limits, is to be determined by resolution
of the Board of Directors at any meeting or by the shareholders
at the Annual Meeting. The Board of Directors has set the Board
at twelve members (exclusive of advisory directors). The
directors are divided into three classes. At each Annual
Meeting, the term of one class expires. Directors in each class
serve for three year terms.
Four directors will be elected at the Annual Meeting to
serve for a three-year term expiring at the Company's Annual
Meeting in the year 2002. Each nominee elected as a Director
will continue in office until his or her successor has been duly
elected and qualified, or until the earliest of his or her death,
resignation or retirement.
The tables below set forth for each nominee for director and
for each continuing director within each class of directors, the
name, age and the principal occupation of each nominee or
continuing director, the directorships of public companies, if
any, held by each nominee or continuing director and the year he
or she first became a director of the Company. Mr. Stephenson is
currently serving as a director in the 2001 class, but will
resign from that class to stand for election to fill a vacancy in
the 2002 Class.
2002 CLASS--NOMINEES FOR DIRECTOR
TO SERVE UNTIL 2002 ANNUAL MEETING
<TABLE>
<CAPTION>
Year First
Became a Director Principal Occupation
Name and Age of the Company During the Last Five Years
- ---------------------------- ------------------- --------------------------------------------
<S> <C> <C>
Ms. Wm. R. (Amber) Cree (68) 1982 Entrepreneuse
Tommy McAlister (50) 1985 President of McAlister, Inc. (investments)
Bryan W. Stephenson (49) 1989 President and Cheif Executive Officer of the
Company; Chairman of the Board of First
State Bank, N.A. (the "Bank")
James D. Webster, M.D. 1988 Physician, Nephrology Associates
</TABLE>
Unless otherwise indicated on any duly executed and dated
proxy, the proxies will be voted "FOR" the election of the
nominees listed in the table above for the term specified. The
Company does not anticipate that any of the above-named nominees
will refuse or be unable to accept or serve as a director of the
Company for the class and the term specified. However, if any
nominee is unable or unwilling to serve as a director, the
proxies will vote for the election of such other person(s) as may
be nominated by management, unless you indicate to vote
otherwise. Assuming the receipt by each nominee of the
affirmative vote of at least a plurality of the Common Shares
present or represented at the Annual Meeting, the four nominees
receiving the greatest number of votes will be elected as
directors.
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<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF EACH OF THE INDIVIDUALS
NOMINATED FOR ELECTION AS A DIRECTOR
The following directors serve terms expiring at the 2000 and
2001 Annual Meetings of Shareholders:
2000 CLASS--CONTINUING FOR DIRECTORS
TO SERVE UNTIL 2000 ANNUAL MEETING
<TABLE>
<CAPTION>
Year First
Became a Director Principal Occupation
Name and Age of the Company During the Last Five Years
- ------------------------------ ---------------- -------------------------------------------
<S> <C> <C>
Lee Caldwell (64) 1985 Attorney at Law
Randal N. Crosswhite (45) 1995 Senior Vice President, Chief Financial
Officer and Corporate Secretary of the
Company; Director of the Bank
Louis S. Gee (76) 1981 Chairman of the Board and Chief Executive
Office of Tippett & Gee, Inc. (mechanical
engineering)
Marshal M. Kellar (66) 1981 Chairman of the Board of West Texas
Wholesale Supply Company (hardware)
</TABLE>
2001 CLASS-CONTINUING FOR DIRECTORS
TO SERVE UNTIL 2001 ANNUAL MEETING
<TABLE>
<CAPTION>
Year First
Became a Director Principal Occupation
Name and Age of the Company During the Last Five Years
- ------------------------------ ------------------- -----------------------------------------
<S> <C> <C>
John L. Beckham (40) 1998 Attorney at Law, Beckham, Rector &
Eargle, L.L.P.
Nancy E. Jones (49) 1998 Executive Director of the Community
Foundation of Abilene
Scott L. Taliaferro (76) 1980 Chairman of the Board of the Company and
President of Scott Oils, Inc. (oil and
gas drilling)
C.G. Whitten (74) 1980 Attorney at Law, Whitten & Young, P.C.
(1997-Present); previously, Senior Vice
President and General Counsel of
Pittencrieff Communications, Inc.
</TABLE>
ADVISORY DIRECTORS
The Bylaws of the Company provide for advisory directors.
The Board of Directors, at its February 17, 1999, meeting,
selected the following individuals to serve as advisory directors
of the Company:
L.H. Mosley
J.E. Smith
John A. Wright*
______________
* Director Emeritus
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<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors conducts its business through
meetings of the Board of Directors and through its committees.
In accordance with the Bylaws of the Company, the Board of
Directors has established an Executive Committee, an Audit
Committee and, effective February 17, 1999, a Compensation
Committee that performs the function of the Employee Stock
Ownership 401(k) Plan Committee, among other things. During the
year ended December 31, 1998, the Board of Directors held twelve
regular meetings; the Executive Committee held six meetings; the
Audit Committee held one meeting and the Employee Stock Ownership
Plan Committee did not meet. Each director attended at least 75%
of the total number of meetings of the Board of Directors and the
committees on which he or she served, except Lee Caldwell who
attended eight meetings of the Board of Directors, Louis S. Gee
who attended four meetings of the Executive Committee and Marshal
Kellar who attended five meetings of the Board of Directors.
Executive Committee. The Executive Committee exercises all
the powers of the Board of Directors in the management of the
business and affairs of the Company, except for matters related
to the composition of the Board of Directors, changes in the
Bylaws and certain other significant corporate matters. In 1998,
the Executive Committee also functioned as the Compensation
Committee, in that it reviewed and made recommendations to the
Board of Directors concerning major compensation policies and the
compensation of executive officers. Louis S. Gee, Bryan W.
Stephenson, Scott L. Taliaferro, C.G. Whitten, directors, and
John A. Wright, an advisory director, were the members of the
Executive Committee during 1998 and all of such members, other
than John A. Wright who retired from the Board, and John L.
Beckman were appointed members of the Executive Committee for
1999 at the February 17, 1999, meeting of the Board of Directors.
Audit Committee. The Audit Committee recommends to the
Board of Directors the appointment and discharge of the Company's
independent auditors; reviews the completed audit with the
independent auditors regarding the conduct of the audit,
accounting adjustments, recommendations for improving internal
controls and any other significant findings during the audit;
meets periodically with management; monitors accounting and
financial controls; and initiates and supervises special
investigations. Lee Caldwell, a director, and Tommy McAlister
and James D. Webster, M.D., nominees for director, were the
members of the Audit Committee during 1998. Amber Cree, Lee
Caldwell and Tommy McAlister were appointed members of the Audit
Committee for 1999 at the February 17, 1999, meeting of the Board
of Directors.
Compensation Committee. The newly established Compensation
Committee administers management incentive compensation plans,
establishes the compensation of executive officers, determines
major compensation policies, and administers the Stock Ownership
Plan. Nancy Jones, Scott L. Taliaferro and James D. Webster were
appointed members of the Compensation Committee for 1999 at the
February 17, 1999, meeting of the Board of Directors.
ITEM 2. STOCK OPTION PLAN
GENERAL
On February 17, 1999, the Board of Directors adopted,
subject to stockholder approval, the 1999 Stock Option Plan of
Independent Bankshares, Inc., the text of which is attached as
Annex A to this Proxy Statement. Unless the Stock Option Plan is
approved by the stockholders on or before February 16, 2000, it
and all awards granted pursuant to the Stock Option Plan will,
under the terms of the plan, be null and void. The material
features of the Stock Option Plan are discussed below, but the
description is subject to and is qualified in its entirety by the
full text of the Stock Option Plan. The Stock Option Plan
provides for the grant of both incentive and non-qualified stock
options. Incentive stock options granted under the Stock Option
Plan are intended to qualify as "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). See "Material Federal Income Tax
Information" for a discussion of the tax treatment of both
incentive and non-qualified stock options.
PURPOSE
The Company has adopted this plan to promote the interests
of the Company and its shareholders by using investment interests
in the Company to attract, retain and motivate its management and
other persons, to encourage and reward their contributions to the
performance of the Company and to align their interests with the
interests of the Company's shareholders.
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ADMINISTRATION
The Stock Option Plan is administered by the Board of
Directors, which has the power to construe and interpret the
Stock Option Plan and, subject to the provisions of the Stock
Option Plan, to determine the persons to whom and the dates on
which options will be granted, the number of Common Shares to be
subject to each option, the nature of each stock option, the
period for the exercise of each stock option, the exercise price,
the type of consideration to be paid upon exercise of an option
and other terms of the option. The Board of Directors is
authorized to delegate administration of the Stock Option Plan to
a committee composed of not fewer than two members of the Board
of Directors who are non-employee, outside directors. The Board
of Directors has delegated administration of the Stock Option
Plan to the Compensation Committee. The Compensation Committee
reports to the Board of Directors the persons to whom options are
granted, the number of Common Shares subject to each option, and
the terms and conditions of each option. The decisions of the
Compensation Committee with respect to the administration of the
Stock Option Plan are taken pursuant to a majority vote of its
members or by their unanimous written consent.
STOCK SUBJECT TO THE OPTION STOCK OPTION PLAN
If options granted under the Stock Option Plan expire or
otherwise terminate without being exercised, the Common Shares
not purchased pursuant to such options again become available for
issuance under the Stock Option Plan. The maximum number of
Common Shares that may be issued pursuant to the exercise of
options granted under the Stock Option Plan is 60,000 shares.
ELIGIBILITY
Any director (other than non-employee director), officer,
employee, consultant or advisor of the Company or of any
affiliated entity is eligible to participate in the Stock Option
Plan. As of March 15, 1999, approximately 159 persons were
eligible to receive grants under the Stock Option Plan. No
eligible person may be granted any option with respect to more
than 20,000 Common Shares in any one calendar year.
No incentive stock option may be granted under the Stock
Option Plan to any person who, at the time of the grant, owns
stock possessing more than 10% of the total combined voting power
of the Company or any affiliate of the Company, unless:
* the option exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of
grant, and
* the term of the option does not exceed five years from the
date of grant.
The aggregate fair market value, determined at the time of
grant, of the Common Shares with respect to which incentive stock
options granted under the Stock Option Plan are exercisable for
the first time by an optionee during any calendar year (under all
such plans of the Company and its affiliates) may not exceed
$100,000.
TERMS OF OPTIONS
Set forth below is a description of the permissible terms of
options granted under the Stock Option Plan. Individual option
grants may differ as to any or all of the permissible terms
described below.
Exercise Price and Payment. The exercise price of incentive
stock options under the Stock Option Plan:
* may not be less than the fair market value of the Common
Shares subject to the option on the date the option is granted,
and
* may not be less than 110% of such fair market value in the
case of a grant to a person owning more than 10% of the combined
voting power of the Company or any affiliate of the Company.
The exercise price of a non-qualified stock option may not
be less than the fair market value of the Common Shares subject
to the option on the date of the option grant. On March 15, 1999,
the closing price of a Common Share as reported on the American
Stock Exchange was $11.1875 per share. The exercise price of an
option granted under the Stock Option Plan must be paid either:
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<PAGE>
* in cash at the time the option is exercised; or
* at the discretion of the Compensation Committee:
(i) by delivery of other Common Shares of the Company, which
have matured (i.e. have been owned longer than six months),
or
(ii) in any other form of legal consideration acceptable to
the Compensation Committee.
Option Repricing and Adjustment. In the event of a decline
in the value of the Company's Common Shares or an increase or
decrease in the outstanding number of Common Shares, the
Compensation Committee has the authority:
* to offer employees the opportunity to replace outstanding
higher priced options, whether incentive or non-qualified, with
new, lower priced options;
* to reduce or increase the maximum number of Common Shares
subject to the Stock Option Plan; and/or
* to reduce or increase the number of Common Shares subject to
outstanding options.
Option Exercise. Options are exercisable in whole shares,
and fractional share interests are disregarded. Not less than 100
Common Shares (or such other amount as is set forth in the
applicable stock option documents) may be purchased at one time
and options must be exercised in multiples of 100 Common Shares
unless the number purchased is the total number at the time
available under the terms of the stock option. Options granted
under the Stock Option Plan may become exercisable in cumulative
increments ("vest") as determined by the Compensation Committee.
An option is exercised only by written notice from the optionee
to the Company accompanied by payment in full of the option
price. The Compensation Committee has the power to accelerate
vesting of an option in whole or in part even if the option had
not become exercisable on or prior to the date of employment
termination.
Term. The maximum term of options under the Stock Option
Plan is ten years from the date of grant. The Stock Option Plan
provides for earlier termination of an option due to the
optionee's termination of employment. Options under the Stock
Option Plan generally expire on the date of the optionee's
termination of employment with the Company or any affiliate of
the Company for just cause. However, options may be exercised for
up to six months after an optionee's employment relationship with
the Company and its affiliates terminates due to permanent
disability, death or retirement. In all other cases options
expire within thirty days after employment is terminated.
RESTRICTIONS ON TRANSFER
Incentive stock options granted under the Stock Option Plan
may not be transferred except:
* by will or by the laws of descent and distribution, and may
be exercised during the lifetime of the person to whom the option
is granted only by such person, such person's guardian or legal
representative;
* in case of dissolution of marriage pursuant to a qualified
domestic relations order unless such transfer will violate
Section 422(b)(5) of the Code; or
* if such transfer does not result in a change in beneficial
ownership.
EFFECT OF CERTAIN CORPORATE EVENTS
If any change is made in the Common Shares subject to the
Stock Option Plan and any option granted under the Stock Option
Plan (through merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, reverse stock
split, spin-off, sale or exchange of all or substantially all of
the assets of the Company, or other distribution with respect to
such Common Shares), the Stock Option Plan and options will be
appropriately adjusted as to the type(s) and the maximum number
of securities subject to the Stock Option Plan, and the type(s),
number of securities and price per security subject to such
options.
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<PAGE>
In the event of a merger or consolidation, in which Common
Shares are converted into other property, and such merger or
consolidation does not involve a change in control of the
Company, each option under the Stock Option Plan becomes
exercisable only for the kind and amount of such property that a
holder of an option is entitled to receive immediately prior to
the merger or reorganization.
In the event of a merger or consolidation involving any
change in control of the Company, the Stock Option Plan and
options (whether or not vested) will automatically terminate.
However, if in connection with a merger or consolidation a
provision is made in writing for the continuance of the Stock
Option Plan, any surviving corporation agrees to either assume
options outstanding under the Stock Option Plan or substitute
similar options for those outstanding under the Stock Option
Plan, or outstanding options will continue in full force and
effect. The Stock Option Plan and options shall not automatically
terminate if the Board of Directors provides in writing for the
acceleration of the vesting of the outstanding options or their
cancellation and conversion into a right to receive other
property that a holder of the option would have been entitled to
receive prior to the merger or consolidation.
DURATION, AMENDMENT AND TERMINATION
The Board of Directors may suspend or terminate the Stock
Option Plan at any time. Unless terminated earlier, the Stock
Option Plan will expire on February 16, 2009.
The Board of Directors may also amend the Stock Option Plan
at any time. No shareholder approval of any amendment is required
unless: (i) such approval is required by applicable law, rule or
regulation; or (ii) an amendment to the Stock Option Plan would:
* materially increase the number of shares reserved for
options under the Stock Option Plan;
* materially increase the benefits accruing to the recipients;
* extend the final date upon which stock options may be
granted under the Stock Option Plan;
* materially modify the requirements as to eligibility for
participation; or
* affect the Stock Option Plan's compliance with the Rule 16b-
3 of the Securities Exchange Act of 1934 or the Code.
No amendment, suspension or termination will alter, impair
or adversely affect any right or obligation with respect to any
option previously granted under the Stock Option Plan without the
written consent of an optionee.
MATERIAL FEDERAL INCOME TAX INFORMATION
The following summary is intended only as a general guide as
to the United States federal income tax consequences under
current law with respect to participation in the Stock Option
Plan, and does not attempt to describe all possible federal
state, local or international tax consequences of such
participation. The tax rules are complex and subject to
change, and a taxpayer's particular circumstances may be
such that some variation of the described rules is applicable.
Incentive Stock Options. Incentive stock options under the
Stock Option Plan are intended to be eligible for the favorable
federal income tax treatment accorded "incentive stock options"
under the Code. There are no federal income tax consequences to
the optionee or the Company by reason of the grant or exercise of
an incentive stock option. However, the exercise of an incentive
stock option may increase the optionee's alternative minimum tax
liability. The Company has no outstanding incentive stock
options.
Non-Qualified Stock Options. Generally, there are no tax
consequences to the optionee or the Company upon the grant of a
non-qualified stock option. Upon the exercise of a non-qualified
stock option, the optionee will recognize taxable ordinary income
equal to the excess of the stock's fair market value on the date
of exercise over the option exercise price. Generally, with
respect to employees, the Company is required to withhold taxes
in an amount based on the ordinary income recognized. Subject to
the requirement of reasonable compensation, the provisions of
Section 162(m) of the Code and the satisfaction of a tax-
reporting obligation, the Company generally will be entitled to a
business expense deduction equal to the ordinary income
recognized by the optionee upon exercise. Upon disposition
-9-
<PAGE>
of the stock, the optionee will recognize a capital gain or loss equal
to the difference between the selling price and the sum of the
amount paid for the stock plus the amount recognized as ordinary
income upon exercise of the option. Such gain or loss will be
long or short-term depending on whether the stock was held for
more than one year. Slightly different rules may apply to
optionees who acquire stock subject to certain repurchase options
or who are subject to Section 16(b) of the Exchange Act of 1934.
As of the date hereof, the Company had no outstanding non-
qualified options.
Potential Limitation on Company Deduction. Section 162(m) of
the Code denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the
extent that compensation exceeds $1,000,000 for a covered
employee. It is possible that compensation attributable to stock
options, when combined with all other types of compensation
received from the Company by a covered employee, may cause this
limitation to be exceeded for a particular year.
Certain kinds of compensation, including qualified
"performance-based compensation," are disregarded for purposes of
the deduction limitation. In accordance with applicable Treasury
regulations issued under Section 162(m) of the Code, compensation
attributable to stock options will qualify as performance-based
compensation, provided that either the option is granted by a
committee comprised solely of "outside directors" and is granted
(or exercisable) only upon the achievement (as certified in
writing by the committee) of an objective performance goal
established by the committee while the outcome is substantially
uncertain and the material terms of which goal were approved by
the stockholders or
* the option plan contains a per-employee limitation on the
number of shares for which options may be granted during a
specified period,
* the per-employee limitation is approved by the stockholders,
* the option is granted by a Compensation Committee comprised
solely of "outside directors" (as defined in Section 162(m) of
the Code) and
* the exercise price of the option is no less than the fair
market value of the stock on the date of grant.
Other Tax Consequences. The foregoing discussion is intended
to be a general summary only of the material federal income tax
aspects of options granted under the Stock Option Plan. Tax
consequences may vary depending on the particular circumstances.
In addition, administrative and judicial interpretations of the
application of the federal income tax laws are subject to change.
Furthermore, no information is given with respect to foreign,
state or local taxes that may be applicable. Participants in the
Stock Option Plan who are residents of or are employed in a
country other than the United States may be subject to taxation
in accordance with the tax laws of that particular country in
addition to or in lieu of United States federal income taxes.
ITEM 3
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors of the Company is not aware of any
matters, other than those referred to in the accompanying Notice
of Annual Meeting of Shareholders, which properly may come before
the Annual Meeting. However, if any other matter should be
properly presented for consideration and voting at the Annual
Meeting or any adjournment(s) thereof, it is the intention of the
persons named as proxies on the enclosed proxy card to vote the
proxy cards in accordance with their judgment.
-10-
<PAGE>
EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
The table below sets forth at the date of this Proxy
Statement the name, age, current positions with the Company,
principal occupation during the last five years of each principal
executive officer of the Company and the year he first became an
executive officer of the Company:
<TABLE>
<CAPTION>
Executive
Officer of
the Company or
Current Position with the Branch President Principal Occupation
Name and Age Company or the Bank of the Bank Since During Last Five Years
- ------------------------- ------------------------- ----------------- -----------------------
<S> <C> <C> <C>
Bryan W. Stephenson (49) President, Chief 1985 President and Chief
Executive Officer and Executive Officer of
Director of the Company the Company
and Chief Executive
Officer and Chairman of
the Board of the Bank
Carl E. Campbell (50) Azle Branch President of 1998 Azle Branch President
the Bank of the Bank; previously
President of Azle State
Bank, Azle, Texas
Randal N. Crosswhite (45) Senior Vice President, 1985 Senior Vice President,
Chief Financial Officer, Chief Financial Officer
Corporate Secretary and and Corporate Secretary
Director of the Company of the Company
and Director of the Bank
Thomas C. Darden (42) Lubbock Branch President 1997 Lubbock Branch
of the Bank and Director President of the Bank
of the Bank (1997-present);
previously, Executive
Vice President of
Plains National Bank,
Lubbock, Texas
James G. Fitzhugh (49) Abilene Branch President 1985 Abilene Branch
of the Bank and Director President of the Bank
of the Bank (1997-present);
previously President of
the Bank
Michael D. Jarrett (49) Odessa Branch President 1992 Odessa Branch President
of the Bank and Director of the Bank (1997-
of the Bank present); previously,
President of First
State Bank, N.A.,
Odessa, a former
subsidiary bank
</TABLE>
TERM OF OFFICE
Executive officers of the Company are elected by the Board
of Directors at its annual meeting and hold office until the next
annual meeting of the Board of Directors or until their
respective successors are duly elected and have qualified. The
Branch Presidents of the Bank are elected by the board of
directors of the Bank at its annual meeting and hold office until
the next annual meeting of such board of directors or until their
respective successors are duly elected and have qualified.
-11-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding
compensation paid during each of the Company's last three fiscal
years to the Company's Chief Executive Officer and other
executive officers of the Company (including those who are
employed by the Company's direct and indirect subsidiaries) whose
cash compensation exceeded $100,000 during the fiscal year ended
December 31, 1998 (the "named executive officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
-------------
Annual Compensation Other Annual Securities
Fiscal ------------------------- Compensation Underlying
Name and Principal Position Year Salary Bonus ($)(1) Options
- ------------------------------ -------- ----------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Bryan W. Stephenson 1998 $ 150,000 $ 20,000 $ 4,4000 $ 0
President, Chief Executive 1997 135,000 20,000 3,500 0
Officer and Director of the 1996 135,000 20,000 6,600 0
Company
Michael D. Jarrett 1998 101,500 7,500 3,600 0
Branch President and Director 1997 97,500 7,500 3,500 0
of the Bank 1996 92,500 5,000 3,300 0
Thomas C. Darden 1998 98,600 5,000 3,600 0
Branch President and Director 1997(2) 71,700 0 2,400 0
of the Bank 1996 -- -- -- 0
Randal N. Crosswhite 1998 96,000 5,000 4,200 0
Senior Vice President, Chief 1997 92,000 5,000 3,500 0
Financial Officer, Corporate 1996 85,000 5,000 6,600 0
Secretary and Director of the
Company
_________________________
(1) Constitutes directors fees paid by the Bank and its predecessors.
(2) Mr. Darden joined the Company in April 1997.
</TABLE>
STOCK OPTION GRANTS/EXERCISES IN FISCAL 1998
No stock options were granted to, or exercised by, the Chief
Executive Officer or the named executive officers during fiscal
1998. The Company has never granted stock appreciation rights.
DIRECTOR COMPENSATION
In 1998, each non-employee director and advisory director
was paid $250 for each regular directors' meeting of the Company
attended and $100 for each meeting of the Executive Committee and
Audit Committee attended. The Board of Directors has set
director and committee fees for 1999 at $250 per meeting of the
Board and $100 per meeting of the Executive Committee, the Audit
Committee and the Compensation Committee.
TRANSACTIONS WITH MANAGEMENT
The Bank had, during the period from January 1, 1998, to
March 18, 1999, and expects to have in the future, loan
transactions with directors of the Company and the Bank and their
respective associates, which includes any immediate family member
or any corporation or firm of which such person is an executive
officer or partner or is, directly or indirectly, the beneficial
owner of 10% or more of any class of equity securities or any
trusts of which such person serves as trustee or in which he or
she has a substantial beneficial interest. These loan
transactions have been made in the ordinary course of the Bank's
business and have been and will continue to be on substantially
the same terms, including interest rates, collateral and repayment,
as those prevailing at the time for comparable transactions with
unaffiliated persons and did not involve more than the normal
risk of collectibility or present other unfavorable features.
-12-
<PAGE>
All loans made to directors and nominees for director of the
Company and their respective associates are believed to be in
compliance with the Financial Institutions Regulatory and
Interest Rate Control Act of 1978.
INDEPENDENT ACCOUNTANTS
On July 15, 1998, the Board of Directors of the Company
approved the recommendation of the Audit Committee of the Board
of Directors that the firm of PricewaterhouseCoopers L.L.P. be
engaged as the Company's independent public accountants for the
year ended December 31, 1998.
The Board of Directors of the Company has not yet selected
independent auditors to examine the Company's financial
statements for the year ended December 31, 1999. Representatives
of PricewaterhouseCoopers L.L.P., who audited the Company's
financial statements for the year ended December 31, 1998, are
expected to be present at the Annual Meeting with the opportunity
to make a statement if they desire to do so and to be available
to respond to appropriate questions.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE
ACT OF 1934
Officers, directors and beneficial owners of more than ten
percent of the Common Stock must file initial reports of
ownership and reports of changes in ownership with the Securities
and Exchange Commission and American Stock Exchange pursuant to
Section 16(a). We have reviewed the reports from officers and
directors. Based on this review, the Company believes that all
filing requirements during 1998 were met.
VOTING STOCK OWNED BY BENEFICIAL OWNER
The following entity is known by the Company to own
beneficially more than five percent of the Company's Common Stock
on the Record Date.
Number Percent of
Name and Address of Shares (1) Class (2)
--------------------------- --------------- ------------
Independent Bankshares, Inc. 158,159 7.10%
Stock Ownership Plan
P.O. Box 3296
Abilene, Texas 79604
_______________
(1) Beneficial ownership as reported in the above table has been
determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended. Unless otherwise indicated,
each of the persons named has sole voting and investment power
with respect to the shares reported.
(2) The percentages of Common Stock indicated are based on
2,228,780 shares of Common Stock issued and outstanding on the
Record Date.
SHAREHOLDER PROPOSALS
Shareholders may present proposals for inclusion in the
proxy statement for consideration at its 2000 Annual Meeting of
Shareholders. Such proposals must be received by the Company by
November 28, 1999 and must comply with the requirements of Rule
14a-8 of the Securities Exchange Act of 1934.
-13-
<PAGE>
COPIES OF THE ANNUAL REPORT ON FORM 10-K
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
THE COMPANY, WITHOUT CHARGE, WILL PROVIDE TO EACH
SHAREHOLDER, ON WRITTEN REQUEST, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K, BUT WITHOUT EXHIBITS, REQUIRED TO BE FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1998. WRITTEN REQUESTS FOR SUCH FORM 10-K
SHOULD BE DIRECTED TO MR. RANDAL N. CROSSWHITE, SENIOR VICE
PRESIDENT AND CORPORATE SECRETARY, INDEPENDENT BANKSHARES, INC.,
547 CHESTNUT STREET, ABILENE, TEXAS 79602.
By Order of the Board of Directors
Randal N. Crosswhite,
Corporate Secretary
Abilene, Texas
March 31, 1999
IT IS IMPORTANT TO US THAT YOU RETURN YOUR PROXY PROMPTLY.
IF YOU DO NOT EXPECT TO ATTEND THE ANNUAL MEETING AND WISH YOUR
STOCK TO BE VOTED, THEN YOU SHALL DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
-14-
<PAGE>
INDEPENDENT BANKSHARES, INC.
547 Chestnut Street
Abilene, Texas 79602
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Randal N. Crosswhite, Scott
L. Taliaferro and C.G. Whitten and each or any of them, as
Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and vote, as
designated below, all of the shares of the Common Stock of
Independent Bankshares, Inc. (the "Company") held of record by
the undersigned on March 18, 1999, at the Annual Meeting of
Shareholders to be held on April 27, 1999, or any adjournment(s)
thereof.
1. Proposal to elect as directors of the Company the
following persons, to hold office in the class and
for the term indicated or until their successors have
been duly elected and have qualified.
[ ] FOR all nominees listed below (except as marked to the
contrary below)
[ ] WITHHOLD AUTHORITY to vote all nominees listed below
2002 Class - Class of Directors to hold office
until the 2002 Annual Meeting:
William R. (Amber) Cree, Tommy McAlister, Bryan W. Stephenson,
James D. Webster
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space
provided below.)
______________________________________
(Please sign on the other side)
(Continued from front)
2. Proposal to approve the adoption of the Company's 1999
Stock Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the meeting.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Please execute this proxy as your name appears hereon. When
shares are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full
corporate name by the president or other authorized officer. If
a partnership, please sign in partnership name by authorized
persons. Please mark, sign, date and return this proxy promptly
using the enclosed envelope.
This proxy, when properly executed,
will be voted in the manner
directed herein by the undersigned
shareholder(s). If no direction is
made, this proxy will be voted
"for" the election of the nominees
under proposal 1 , "for" the
approval the adoption of the 1999
Stock Option Plan under proposal 2
and in the discretion of the
proxies with respect to any other
matter that is properly presented
at the meeting.
DATED:______________________, 1999
_________________________________
Signature
_________________________________
Signature if Held Jointly
<PAGE>
ANNEX A
INDEPENDENT BANKSHARES, INC.
1999 STOCK OPTION PLAN
Adopted Effective February 17, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I PURPOSE OF PLAN.......................................1
ARTICLE II EFFECTIVE DATE AND TERM OF PLAN......................1
2.1 Term of Plan..........................................1
2.2 Effect on Stock Options...............................1
2.3 Shareholder Approval..................................1
ARTICLE III SHARES SUBJECT TO PLAN..............................1
3.1 Number of Shares......................................1
3.2 Source of Shares......................................1
3.3 Availability of Unused Shares.........................1
3.4 Adjustment Provisions.................................1
3.5 Reservation of Shares.................................2
ARTICLE IV ADMINISTRATION OF PLAN...............................2
4.1 Administering Body....................................2
4.2 Authority of Administering Body.......................3
4.3 No Liability..........................................3
4.4 Amendments............................................3
4.5 Other Compensation Plans..............................4
4.6 Plan Binding on Successors............................4
4.7 References to Successor Statutes,
Regulations and Rules...............................4
4.8 Issuances for Compensation Purposes Only..............4
4.9 Invalid Provisions....................................4
4.10 Governing Law.........................................4
ARTICLE V GENERAL AWARD PROVISIONS..............................4
5.1 Participation in the Plan.............................4
5.2 Stock Option Documents................................5
5.3 Exercise of Stock Options.............................5
5.4 Payment For Stock Options.............................5
5.5 No Employment Rights..................................5
5.6 Restrictions Under Applicable
Laws and Regulations................................6
5.7 Additional Conditions.................................6
5.8 No Privileges of Stock Ownership......................7
5.9 Nonassignability......................................7
5.10 Information to Optionees..............................7
5.11 Withholding Taxes.....................................7
5.12 Legends on Stock Options and
Stock Certificates..................................8
5.13 Effect of Termination of Employment on Stock
Options.............................................8
5.14 Limits on Stock Options to Certain Eligible
Persons.............................................8
ARTICLE VI STOCK OPTIONS........................................9
6.1 Nature of Stock Options...............................9
6.2 Option Exercise Price.................................9
6.3 Option Period and Vesting.............................9
6.4 Special Provisions Regarding Incentive Stock
Options.............................................9
ARTICLE VII REORGANIZATIONS.....................................9
7.1 Corporate Transactions Not Involving a Change in
Control.............................................9
7.2 Corporate Transactions Involving a Change in
Control............................................10
ARTICLE VIII DEFINITIONS.......................................10
i
<PAGE>
INDEPENDENT BANKSHARES, INC.
1999 STOCK OPTION PLAN
_______________________________________________________
ARTICLE I
---------
PURPOSE OF PLAN
The Company has adopted this Plan to promote the interests of the
Company and its shareholders by using investment interests in the
Company to attract, retain and motivate its management and other
persons, to encourage and reward their contributions to the
performance of the Company and to align their interests with the
interests of the Company's shareholders. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them
in Article VIII.
ARTICLE II
----------
EFFECTIVE DATE AND TERM OF PLAN
2.1 TERM OF PLAN. This Plan became effective as of the
Effective Date and shall continue in effect until the Expiration
Date, at which time this Plan shall automatically terminate.
2.2 EFFECT ON STOCK OPTIONS. Stock Options may be granted
during the Plan Term, but no Stock Options may be granted after
the Plan Term. Notwithstanding the foregoing, each Stock Option
properly granted under this Plan during the Plan Term shall
remain in effect after termination of this Plan until such Stock
Option has been exercised, terminated or expired in accordance
with its terms and the terms of this Plan.
2.3 SHAREHOLDER APPROVAL. This Plan shall be approved by
the Company's shareholders within 12 months after the Effective
Date. The effectiveness of any Stock Options granted prior to
such shareholder approval shall be subject to such shareholder
approval.
ARTICLE III
-----------
SHARES SUBJECT TO PLAN
3.1 NUMBER OF SHARES. The maximum number of shares of
Common Stock that may be issued pursuant to Stock Options granted
under this Plan shall be 60,000, subject to adjustment as set
forth in Section 3.4.
3.2 SOURCE OF SHARES. The Common Stock to be issued under
this Plan will be made available, at the discretion of the Board,
either from authorized but unissued shares of Common Stock or
from previously issued shares of Common Stock reacquired by the
Company, including without limitation shares purchased on the
open market.
3.3 AVAILABILITY OF UNUSED SHARES. Shares of Common Stock
subject to unexercised portions of any Stock Option granted under
this Plan that expire, terminate or are canceled, and shares of
Common Stock issued pursuant to Stock Options under this Plan
that are reacquired by the Company pursuant to the terms of the
Stock Options under which such shares were issued, will again
become available for the grant of further Stock Options under
this Plan.
3.4 ADJUSTMENT PROVISIONS.
(a) If (i) the outstanding shares of Common Stock of the
Company are increased, decreased or exchanged for a different
number or kind of shares or other securities, or if additional
shares or new or different shares or other securities are
distributed in respect of such shares of Common Stock (or any
stock or securities received with respect to such Common Stock),
through merger, consolidation, sale or exchange of all or
<PAGE>
substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split,
reverse stock split, spin-off or other distribution with respect
to such shares of Common Stock (or any stock or securities
received with respect to such Common Stock), or (ii) the value of
the outstanding shares of Common Stock of the Company is reduced
by reason of an extraordinary cash dividend, an appropriate and
proportionate adjustment may be made in (1) the maximum number
and kind of shares subject to this Plan as provided in
Section 3.1, (2) the number and kind of shares or other
securities subject to then outstanding Stock Options and/or
(3) the price for each share or other unit of any other
securities subject to then outstanding Stock Options.
(b) No fractional interests will be issued under this Plan
resulting from any adjustments.
(c) To the extent any adjustments relate to stock or
securities of the Company, such adjustments shall be made by the
Administering Body, whose determination in that respect shall be
final, binding and conclusive.
(d) The grant of Stock Options pursuant to this Plan shall
not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its
business or assets.
(e) No adjustment to the terms of an Incentive Stock Option
shall be made unless such adjustment either (i) would not cause
such Option to lose its status as an Incentive Stock Option or
(ii) is agreed to in writing by the Administering Body and the
Recipient.
3.5 RESERVATION OF SHARES. The Company will at all times
reserve and keep available such number of shares of Common Stock
as shall equal at least the number of shares of Common Stock
subject to then outstanding Stock Options issuable in shares of
Common Stock under this Plan.
ARTICLE IV
----------
ADMINISTRATION OF PLAN
4.1 ADMINISTERING BODY.
(a) Subject to the provisions of Section 4.1(b)(ii), this
Plan shall be administered by the Board or by the Stock Option
Plan Committee of the Board appointed pursuant to Section 4.1(b).
(b) (i) The Board in its sole discretion may from time to
time appoint a Stock Option Plan Committee of not less than two
Board members to administer this Plan and, subject to applicable
law, to exercise all of the powers, authority and discretion of
the Board under this Plan. The Board may from time to time
increase or decrease (but not below two) the number of members of
the Stock Option Plan Committee, remove from membership on the
Stock Option Plan Committee all or any portion of its members,
and/or appoint such person or persons as it desires to fill any
vacancy existing on the Stock Option Plan Committee, whether
caused by removal, resignation or otherwise. The Board may
disband the Stock Option Plan Committee at any time and revest in
the Board the administration of this Plan.
(ii) Notwithstanding the foregoing provisions of this
Section 4.1(b) to the contrary, so long as the Company remains an
Exchange Act Registered Company, (1) the Board shall appoint the
Stock Option Plan Committee, (2) this Plan shall be administered
by the Stock Option Plan Committee and (3) each member of the
Stock Option Plan Committee shall be a Non-employee Director,
and, in addition, if Stock Options are to be made to persons
subject to Section 162(m) of the IRC and such Stock Options are
intended to constitute Performance-Based Compensation, then each
member of the Stock Option Plan Committee shall, in addition to
being a Non-employee Director, be an Outside Director.
(iii) The Stock Option Plan Committee shall report
to the Board the names of Eligible Persons granted Stock Options,
the number of shares of Common Stock covered by each Stock Option
and the terms and conditions of each such Stock Option.
A-2
<PAGE>
4.2 AUTHORITY OF ADMINISTERING BODY.
(a) Subject to the express provisions of this Plan, the
Administering Body shall have the power to interpret and construe
this Plan and any Stock Option Documents or other documents
defining the rights and obligations of the Company and Optionees
hereunder and thereunder, to determine all questions arising
hereunder and thereunder, to adopt and amend such rules and
regulations for the administration hereof and thereof as it may
deem desirable, and otherwise to carry out the terms of this Plan
and such Stock Option Documents and other documents. The
interpretation and construction by the Administering Body of any
provisions of this Plan or of any Stock Option shall be
conclusive and binding. Any action taken by, or inaction of, the
Administering Body relating to this Plan or any Stock Options
shall be within the absolute discretion of the Administering Body
and shall be conclusive and binding upon all persons. Subject
only to compliance with the express provisions hereof, the
Administering Body may act in its absolute discretion in matters
related to this Plan and any and all Stock Options.
(b) Subject to the express provisions of this Plan, the
Administering Body may from time to time in its discretion select
the Eligible Persons to whom, and the time or times at which,
Stock Options shall be granted, the nature of each Stock Option,
the number of shares of Common Stock that make up or underlie
each Stock Option, the period for the exercise of each Stock
Option, and such other terms and conditions applicable to each
individual Stock Option as the Administering Body shall
determine. The Administering Body may grant at any time new
Stock Options to an Eligible Person who has previously received
Stock Options whether such prior Stock Options are still
outstanding, have previously been exercised as a whole or in
part, or are canceled in connection with the issuance of new
Stock Options. The Administering Body may grant Stock Options
singly, in combination or in tandem with other Stock Options, as
it determines in its discretion. Any and all terms and
conditions of the Stock Options, including exercise price, may be
established by the Administering Body without regard to existing
Stock Options.
(c) Any action of the Administering Body with respect to
the administration of this Plan shall be taken pursuant to a
majority vote of the authorized number of members of the
Administering Body or by the unanimous written consent of its
members; provided, however, that (i) if the Administering Body is
the Stock Option Plan Committee and consists of two members, then
actions of the Administering Body must be unanimous and (ii) if
the Administering Body is the Board, actions taken at a meeting
of the Board shall be valid if approved by directors constituting
a majority of the required quorum for such meeting.
4.3 NO LIABILITY. No member of the Board or the Stock
Option Plan Committee or any designee thereof will be liable for
any action or inaction with respect to this Plan or any Stock
Option or any transaction arising under this Plan or any Stock
Option, except in circumstances constituting bad faith of such
member.
4.4 AMENDMENTS.
(a) The Administering Body may, insofar as permitted by
applicable law, rule or regulation, from time to time suspend or
discontinue this Plan or revise or amend it in any respect
whatsoever, and this Plan as so revised or amended will govern
all Stock Options hereunder, including those granted before such
revision or amendment; provided, however, that no such revision
or amendment shall alter, impair or diminish any rights or
obligations under any Stock Option previously granted under this
Plan, without the written consent of the Optionee. Without
limiting the generality of the foregoing, the Administering Body
is authorized to amend this Plan to comply with or take advantage
of amendments to applicable laws, rules or regulations, including
amendments to the Securities Act, Exchange Act or the IRC or any
rules or regulations promulgated thereunder. No shareholder
approval of any amendment or revision shall be required unless
(i) such approval is required by applicable law, rule or
regulation or (ii) an amendment or revision to this Plan would
materially increase the number of shares subject to this Plan (as
adjusted under Section 3.4), materially modify the requirements
as to eligibility for participation in this Plan, extend the
final date upon which Stock Options may be granted under this
Plan, or otherwise materially increase the benefits accruing
to Recipients in a manner not specifically contemplated herein,
or affect this Plan's compliance with Rule 16b-3 or applicable
provisions of or regulations under the IRC, and shareholder
approval of the amendment or revision is required to comply
with Rule 16b-3 or applicable provisions of or rules under the IRC.
(b) The Administering Body may, with the written consent of
an Optionee, make such modifications in the terms and conditions
of a Stock Option as it deems advisable. Without limiting the
generality of the
A-3
<PAGE>
foregoing, the Administering Body may, in its discretion with
the written consent of Optionee, at any time and from time to
time after the grant of any Stock Option accelerate or extend
the vesting or exercise period of any Stock Option as a whole
or in part, and adjust or reduce the exercise price of Stock
Options held by such Optionee by cancellation of such Stock
Options and granting of Stock Options at lower or exercise prices
or by modification, extension or renewal of such Stock Options.
In the case of Incentive Stock Options, Recipients acknowledge
that extensions of the exercise period may result in the loss of
the favorable tax treatment afforded incentive stock options
under Section 422 of the IRC.
(c) Except as otherwise provided in this Plan or in the
applicable Stock Option Document, no amendment, revision,
suspension or termination of this Plan will, without the written
consent of the Optionee, alter, terminate, impair or adversely
affect any right or obligation under any Stock Option previously
granted under this Plan.
4.5 OTHER COMPENSATION PLANS. The adoption of this Plan
shall not affect any other stock option, incentive or other
compensation plans in effect for the Company, and this Plan shall
not preclude the Company from establishing any other forms of
incentive or other compensation for employees, directors,
advisors or consultants of the Company, whether or not approved
by shareholders.
4.6 PLAN BINDING ON SUCCESSORS. This Plan shall be binding
upon the successors and assigns of the Company.
4.7 REFERENCES TO SUCCESSOR STATUTES, REGULATIONS AND RULES.
Any reference in this Plan to a particular statute, regulation or
rule shall also refer to any successor provision of such statute,
regulation or rule.
4.8 ISSUANCES FOR COMPENSATION PURPOSES ONLY. This Plan
constitutes an "employee benefit plan" as defined in Rule 405
promulgated under the Securities Act. Stock Options to eligible
employees or directors shall be granted for any lawful
consideration, including compensation for services rendered,
promissory notes or otherwise. Stock Options to consultants and
advisors shall be granted only in exchange for bona fide services
rendered by such consultants or advisors and such services must
not be in connection with the offer and sale of securities in a
capital-raising transaction.
4.9 INVALID PROVISIONS. In the event that any provision of
this Plan is found to be invalid or otherwise unenforceable under
any applicable law, such invalidity or unenforceability shall not
be construed as rendering any other provisions contained herein
invalid or unenforceable, and all such other provisions shall be
given full force and effect to the same extent as though the
invalid and unenforceable provision were not contained herein.
4.10 GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of
Texas, without giving effect to the principles of the conflicts
of laws thereof.
ARTICLE V
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GENERAL AWARD PROVISIONS
5.1 PARTICIPATION IN THE PLAN.
(a) A person shall be eligible to receive grants of Stock
Options under this Plan if, at the time of the grant of the Stock
Option, such person is an Eligible Person.
(b) Incentive Stock Options may be granted only to Eligible
Persons meeting the employment requirements of Section 422 of the
IRC.
(c) Notwithstanding anything to the contrary herein, the
Administering Body may, in order to fulfill the purposes of this
Plan, modify grants of Stock Options to Recipients who are
foreign nationals or employed outside of the United States to
recognize differences in applicable law, tax policy or local
custom.
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5.2 STOCK OPTION DOCUMENTS.
(a) Each Stock Option granted under this Plan shall be
evidenced by an agreement duly executed on behalf of the Company
and by the Recipient or, in the Stock Option Plan Committee's
discretion, a confirming memorandum issued by the Company to the
Recipient, setting forth such terms and conditions applicable to
the Stock Option as the Stock Option Plan Committee may in its
discretion determine. Stock Option Documents may but need not be
identical and shall comply with and be subject to the terms and
conditions of this Plan, a copy of which shall be provided to
each Recipient and incorporated by reference into each Stock
Option Document. Any Stock Option Document may contain such
other terms, provisions and conditions not inconsistent with this
Plan as may be determined by the Stock Option Plan Committee.
(b) In case of any conflict between this Plan and any Stock
Option Document, this Plan shall control.
5.3 EXERCISE OF STOCK OPTIONS. No Stock Option shall be
exercisable except in respect of whole shares, and fractional
share interests shall be disregarded. Not less than 100 shares
of Common Stock (or such other amount as is set forth in the
applicable Stock Option Documents) may be purchased at one time
and Stock Options must be exercised in multiples of 100 unless
the number purchased is the total number at the time available
for purchase under the terms of the Stock Option. A Stock Option
shall be deemed to be exercised when the Secretary or other
designated official of the Company receives written notice of
such exercise from the Optionee, together with payment of the
exercise price made in accordance with Section 5.4 and any
amounts required under Section 5.11. Notwithstanding any other
provision of this Plan, the Administering Body may impose, by
rule and/or in Stock Option Documents, such conditions upon the
exercise of Stock Options (including without limitation
conditions limiting the time of exercise to specified periods) as
may be required to satisfy applicable regulatory requirements,
including without limitation Rule 16b-3 and Rule 10b-5 under the
Exchange Act, and any amounts required under Section 5.12 or
other applicable section of or regulation under the IRC.
5.4 PAYMENT FOR STOCK OPTIONS.
(a) The exercise price or other payment for a Stock Option
shall be payable upon the exercise of a Stock Option pursuant to
a Stock Option granted hereunder by delivery of legal tender of
the United States or payment of such other consideration as the
Administering Body may from time to time deem acceptable in any
particular instance.
(b) The Company may assist any person to whom Stock Options
are granted hereunder (including without limitation any officer
or director of the Company) in the payment of the exercise price
or other amounts payable in connection with the receipt or
exercise of that Stock Option, by lending such amounts to such
person on such terms and at such rates of interest and upon such
security (if any) as shall be approved by the Administering Body.
(c) In the discretion of the Administering Body, Stock
Options may be exercised by matured capital stock of the Company
(i.e., owned longer than six months) delivered in transfer to the
Company by or on behalf of the person exercising the Stock Option
and duly endorsed in blank or accompanied by stock powers duly
endorsed in blank, with signatures guaranteed in accordance with
the Exchange Act if required by the Administering Body (valued at
Fair Market Value as of the exercise date); or such other
consideration as the Administering Body may from time to time in
the exercise of its discretion deem acceptable in any particular
instance; provided, however, that the Administering Body may, in
the exercise of its discretion, (i) allow exercise of Stock
Options in a broker-assisted or similar transaction in which the
exercise price is not received by the Company until promptly
after exercise, and/or (ii) allow the Company to loan the exercise
price to the Optionee, if the exercise will be followed by a
prompt sale of some or all of the underlying shares and a portion
of the sale proceeds is dedicated to full payment of the exercise
price and amounts required pursuant to Section 5.11.
5.5 NO EMPLOYMENT RIGHTS. Nothing contained in this Plan
(or in Stock Option Documents or in any other documents related
to this Plan or to Stock Options granted hereunder) shall confer
upon any Eligible Person or Recipient any right to continue in
the employ of the Company or any Affiliated Entity or constitute
any contract or agreement of employment or engagement, or
interfere in any way with the right of the Company or any
Affiliated Entity to reduce such person's compensation or other
benefits or to terminate the employment or engagement of
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such Eligible Person or Recipient, with or without cause. Except as
expressly provided in this Plan or in any statement evidencing
the grant of Stock Options pursuant to this Plan, the Company
shall have the right to deal with each Recipient in the same
manner as if this Plan and any such statement evidencing the
grant of Stock Options pursuant to this Plan did not exist,
including without limitation with respect to all matters related
to the hiring, discharge, compensation and conditions of the
employment or engagement of the Recipient. Any questions as to
whether and when there has been a termination of a Recipient's
employment or engagement, the reason (if any) for such
termination, and/or the consequences thereof under the terms of
this Plan or any statement evidencing the grant of Stock Options
pursuant to this Plan shall be determined by the Administering
Body and the Administering Body's determination thereof shall be
final and binding.
5.6 RESTRICTIONS UNDER APPLICABLE LAWS AND REGULATIONS.
(a) All Stock Options granted under this Plan shall be
subject to the requirement that, if at any time the Company shall
determine, in its discretion, that the listing, registration or
qualification of the shares subject to Stock Options granted
under this Plan upon any securities exchange or under any
federal, state or foreign law, or the consent or approval of any
government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such Stock
Options or the issuance, if any, or purchase of shares in
connection therewith, such Stock Options may not be exercised as
a whole or in part unless and until such listing, registration,
qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.
During the term of this Plan, the Company will use its reasonable
efforts to seek to obtain from the appropriate regulatory
agencies any requisite qualifications, consents, approvals or
authorizations in order to issue and sell such number of shares
of its Common Stock as shall be sufficient to satisfy the
requirements of this Plan. The inability of the Company to
obtain from any such regulatory agency having jurisdiction
thereof the qualifications, consents, approvals or authorizations
deemed by the Company to be necessary for the lawful issuance and
sale of any shares of its Common Stock hereunder shall relieve
the Company of any liability in respect of the nonissuance or
sale of such stock as to which such requisite authorization shall
not have been obtained.
(b) The Company shall be under no obligation to register or
qualify the issuance of Stock Options or underlying shares under
the Securities Act or applicable state securities laws. Unless
the issuance of Stock Options and underlying shares have been
registered under the Securities Act and qualified or registered
under applicable state securities laws, the Company shall be
under no obligation to issue any Stock Options or underlying
shares of Common Stock covered by any Stock Options unless the
Stock Options and underlying shares may be issued pursuant to
applicable exemptions from such registration or qualification
requirements. In connection with any such exempt issuance, the
Administering Body may require the Optionee to provide a written
representation and undertaking to the Company, satisfactory in
form and scope to the Company and upon which the Company may
reasonably rely, that such Optionee is acquiring such Stock
Options and underlying shares for such Optionee's own account as
an investment and not with a view to, or for sale in connection
with, the distribution of any such shares of stock, and that such
person will make no transfer of the same except in compliance
with any rules and regulations in force at the time of such
transfer under the Securities Act and other applicable law, and
that if shares of stock are issued without such registration, a
legend to this effect (together with any other legends deemed
appropriate by the Administering Body) may be endorsed upon the
securities so issued. The Company may also order its transfer
agent to stop transfers of such shares. The Administering Body
may also require the Optionee to provide the Company such
information and other documents as the Administering Body may
request in order to satisfy the Administering Body as to the
investment sophistication and experience of the Optionee and as
to any other conditions for compliance with any such exemptions
from registration or qualification.
5.7 ADDITIONAL CONDITIONS. Any Stock Option may also be
subject to such other provisions (whether or not applicable to
any other Stock Option or Optionee) as the Administering Body
determines appropriate including without limitation provisions to
assist the Optionee in financing the purchase of Common Stock
through the exercise of Stock Options, provisions for the
forfeiture of or restrictions on resale or other disposition of
shares of Common Stock acquired under any form of benefit,
provisions giving the Company the right to repurchase shares of
Common Stock acquired under any form of benefit in the event the
Optionee elects to dispose of such shares, and provisions to
comply with federal and state securities laws and federal and
state income tax withholding requirements.
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<PAGE>
5.8 NO PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise
set forth herein, an Optionee shall have no rights as a
shareholder with respect to any shares issuable or issued in
connection with the Stock Option until the date of the receipt by
the Company of all amounts payable in connection with exercise of
the Stock Option and performance by the Optionee of all
obligations thereunder. Status as an Eligible Person shall not
be construed as a commitment that any Stock Option will be
granted under this Plan to an Eligible Person or to Eligible
Persons generally. No person shall have any right, title or
interest in any fund or in any specific asset (including shares
of capital stock) of the Company by reason of any Stock Option
granted hereunder. Neither this Plan (or any documents related
hereto) nor any action taken pursuant hereto (or thereto) shall
be construed to create a trust of any kind or a fiduciary
relationship between the Company and any Person. To the extent
that any Person acquires a right to receive Stock Options
hereunder, such right shall be no greater than the right of any
unsecured general creditor of the Company.
5.9 NONASSIGNABILITY. No Stock Option granted under this
Plan shall be assignable or transferable except (a) by will or by
the laws of descent and distribution, or (b) subject to the final
sentence of this Section 5.9, upon dissolution of marriage
pursuant to a qualified domestic relations order or, in the
discretion of the Administering Body and under circumstances that
would not adversely affect the interests of the Company, pursuant
to a nominal transfer that does not result in a change in
beneficial ownership; provided, however, that the Administering
Body may in the applicable Stock Option Document evidencing Stock
Options granted hereunder or at any time thereafter provide that
Stock Options granted hereunder may be transferred without
consideration by the Recipient, subject to such rules as the
Administering Body may adopt to preserve the purposes of the
Plan, to one or more Permitted Transferees; provided further,
that the Recipient gives the Administering Body advance written
notice describing the terms and conditions of the proposed
transfer and the Administering Body notifies the Recipient in
writing that such transfer would comply with the requirements of
the Plan and any applicable Stock Option Document. The terms of
any Stock Option transferred to Permitted Transferees in
accordance with the immediately preceding sentence shall apply to
the Permitted Transferee, except that (a) Permitted Transferees
shall not be entitled to transfer any Stock Options, other than
by will or the laws of descent and distribution; and (b)
Permitted Transferees shall not be entitled to exercise any
transferred Stock Options unless there shall be in effect a
registration statement on an appropriate form covering the shares
of Common Stock to be acquired pursuant to the exercise of such
Stock Option if the Administering Body determines that such a
registration statement is necessary or appropriate. During the
lifetime of an Optionee, Stock Options shall be exercisable only
by the Optionee or such person's guardian or legal
representative.
Notwithstanding the foregoing, (a) no Stock Option owned by an
Optionee subject to Section 16 of the Exchange Act may be
assigned or transferred in any manner inconsistent with Rule 16b-
3, and (b) Incentive Stock Options (or other Stock Options
subject to transfer restrictions under the IRC) may not be
assigned or transferred in violation of Section 422(b)(5) of the
IRC (or any comparable or successor provision) or the regulations
thereunder, and nothing herein is intended to allow such
assignment or transfer.
5.10 INFORMATION TO OPTIONEES.
(a) The Administering Body in its sole discretion shall
determine what, if any, financial and other information shall be
provided to Optionees and when such financial and other
information shall be provided after giving consideration to
applicable federal and state laws, rules and regulations,
including without limitation applicable federal and state
securities laws, rules and regulations.
(b) The furnishing of financial and other information that
is confidential to the Company shall be subject to the Optionee's
agreement that the Optionee shall maintain the confidentiality of
such financial and other information, shall not disclose such
information to third parties, and shall not use the information
for any purpose other than evaluating an investment in the
Company's securities under this Plan. The Administering Body may
impose other restrictions on the access to and use of such
confidential information and may require an Optionee to
acknowledge the Optionee's obligations under this Section 5.10(b)
(which acknowledgment shall not be a condition to the Optionee's
obligations under this Section 5.10(b)).
5.11 WITHHOLDING TAXES. Whenever the granting, vesting or
exercise of any Stock Option granted under this Plan, or the
transfer of any shares issued upon exercise of any Stock Option,
gives rise to tax or tax withholding liabilities or obligations,
the Administering Body shall have the right to require the
Optionee to remit to
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<PAGE>
the Company an amount sufficient to satisfy any federal, state and
local withholding tax requirements prior to issuance of such shares.
The Administering Body may, in the exercise of its discretion, allow
satisfaction of tax withholding requirements by accepting delivery of
stock of the Company or by withholding a portion of the stock otherwise
issuable in connection with Stock Options.
5.12 LEGENDS ON STOCK OPTIONS AND STOCK CERTIFICATES. Each
Stock Option Document and each certificate representing shares
acquired upon exercise of Stock Options shall be endorsed with
all legends, if any, required by applicable federal and state
securities and other laws to be placed on the Stock Option
Document and/or the certificate. The determination of which
legends, if any, shall be placed upon Stock Option Documents or
the certificates shall be made by the Administering Body in its
sole discretion and such decision shall be final and binding.
5.13 EFFECT OF TERMINATION OF EMPLOYMENT ON STOCK OPTIONS.
(a) Termination for Just Cause. Subject to Section
5.13(c), and except as otherwise provided in a written agreement
between the Company and the Optionee which may be entered into at
any time before or after termination of employment of the
Recipient, in the event of a Just Cause Dismissal of a Recipient,
all of the Optionee's unexercised Stock Options, whether or not
vested, shall expire and become unexercisable as of the date of
such Just Cause Dismissal.
(b) Termination Other than for Just Cause Dismissal.
Subject to Section 5.13(c) and except as otherwise provided in a
written agreement between the Company and the Optionee, which may
be entered into at any time before or after termination of
employment, in the event of a Recipient's termination of
employment for:
(i) any reason other than for Just Cause Dismissal,
death, Permanent Disability or normal retirement, the Optionee's
Stock Options, whether or not vested, shall expire and become
unexercisable as of the earlier of (A) the date such Stock
Options would expire in accordance with their terms had the
Recipient remained employed and (B) 30 days after the date of
employment termination.
(ii) death, Permanent Disability or normal retirement,
the Optionee's unexercised Stock Options shall, whether or not
vested, expire and become unexercisable as of the earlier of
(A) the date such Stock Options would expire in accordance with
their terms had the Recipient remained employed and (B) six
months after the date of employment termination.
(c) Alteration of Vesting and Exercise Periods.
Notwithstanding anything to the contrary in Section 5.13(a) or
Section 5.13(b), the Administering Body may in its discretion
designate shorter or longer periods to exercise Stock Options
following a Recipient's termination of employment; provided,
however, that any shorter periods determined by the Administering
Body shall be effective only if provided for in the instrument
that evidences the grant to the Optionee of such Stock Options or
if such shorter period is agreed to in writing by the Optionee.
Notwithstanding anything to the contrary herein, Stock Options
shall be exercisable by an Optionee following such Optionee's
termination of employment only to the extent that installments
thereof had become exercisable on or prior to the date of such
termination; and provided, further, that the Administering Body
may, in its discretion, elect to accelerate the vesting of all or any
portion of any Stock Options that had not become exercisable on
or prior to the date of such termination.
(d) Leave of Absence. In the case of any employee on an
approved leave of absence, the Administering Body may make such
provision respecting continuance of Stock Options as the
Administering Body in its discretion deems appropriate, except
that in no event shall a Stock Option be exercisable after the
date such Stock Option would expire in accordance with its terms
had the Recipient remained continuously employed.
5.14 LIMITS ON STOCK OPTIONS TO CERTAIN ELIGIBLE PERSONS.
Notwithstanding any other provision of this Plan, in order for
the compensation attributable to Stock Options hereunder to
qualify as Performance-Based Compensation, no one Eligible Person
shall be granted any Stock Options with respect to more than
20,000 shares of Common Stock in any one calendar year. The
limitation set forth in this Section 5.14 shall be subject to
adjustment as provided in Section 3.4 or under Article VII, but
only to the extent such adjustment would not affect the status of
compensation attributable to Stock Options granted hereunder as
Performance-Based Compensation.
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ARTICLE VI
----------
STOCK OPTIONS
6.1 NATURE OF STOCK OPTIONS. Stock Options may be
Incentive Stock Options or Non-qualified Stock Options.
6.2 OPTION EXERCISE PRICE. The exercise price for each
Stock Option shall be determined by the Administering Body as of
the date such Stock Option is granted. The exercise price shall
be no less than the Fair Market Value of the Common Stock subject
to the Option. The Administering Body may, with the consent of
the Optionee and subject to compliance with statutory or
administrative requirements applicable to Incentive Stock
Options, amend the terms of any Stock Option to provide that the
exercise price of the shares remaining subject to the Stock
Option shall be reestablished at a price not less than 100% of
the Fair Market Value of the Common Stock on the effective date
of the amendment. No modification of any other term or provision
of any Stock Option that is amended in accordance with the
foregoing shall be required, although the Administering Body may,
in its discretion, make such further modifications of any such
Stock Option as are not inconsistent with this Plan.
6.3 OPTION PERIOD AND VESTING. Stock Options granted
hereunder shall vest and may be exercised as determined by the
Administering Body, except that exercise of such Stock Options
after termination of the Recipient's employment shall be subject
to Section 5.13. Each Stock Option granted hereunder and all
rights or obligations thereunder shall expire on such date as
shall be determined by the Administering Body, but not later than
10 years after the date the Stock Option is granted and shall be
subject to earlier termination as provided herein or in the Stock
Option Document. The Administering Body may, in its discretion
at any time and from time to time after the grant of a Stock
Option, accelerate vesting of such Option as a whole or in part
by increasing the number of shares then purchasable, provided
that the total number of shares subject to such Stock Option may
not be increased. Except as otherwise provided herein, a Stock
Option shall become exercisable, as a whole or in part, on the
date or dates specified by the Administering Body and thereafter
shall remain exercisable until the expiration or earlier
termination of the Stock Option.
6.4 SPECIAL PROVISIONS REGARDING INCENTIVE STOCK OPTIONS.
(a) Notwithstanding anything in this Article VI to the
contrary, the exercise price and vesting period of any Stock
Option intended to qualify as an Incentive Stock Option shall
comply with the provisions of Section 422 of the IRC and the
regulations thereunder. As of the Effective Date, such
provisions require, among other matters, that (i) the exercise
price must not be less than the Fair Market Value of the
underlying stock as of the date the Incentive Stock Option is
granted, and not less than 110% of the Fair Market Value as of
such date in the case of a grant to a Significant Shareholder;
and (ii) that the Incentive Stock Option not be exercisable after
the expiration of five years from the date of grant in the case
of an Incentive Stock Option granted to a Significant
Shareholder.
(b) The aggregate Fair Market Value (determined as of
the respective date or dates of grant) of the Common Stock for
which one or more Options granted to any Recipient under this
Plan (or any other option plan of the Company or any of its
subsidiaries or affiliates) may for the first time become
exercisable as Incentive Stock Options under the federal tax laws
during any one calendar year shall not exceed $100,000.
(c) Any Options granted as Incentive Stock Options
pursuant to this Plan that for any reason fail or cease to
qualify as such shall be treated as Non-qualified Stock Options.
ARTICLE VII
-----------
REORGANIZATIONS
7.1 CORPORATE TRANSACTIONS NOT INVOLVING A CHANGE IN CONTROL.
If the Company shall consummate any Reorganization not involving a
Change in Control in which holders of shares of Common Stock are
entitled to receive in respect of such shares any securities, cash
or other consideration (including without limitation a different
number of shares of Common Stock), each Stock Option outstanding
under this Plan shall thereafter be exercisable, in accordance with
this Plan, only for the kind and amount of securities, cash and/or
other consideration receivable upon such Reorganization by a holder
of the same number of shares of Common Stock as
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are subject to that Stock Option immediately prior to such
Reorganization, and any adjustments will be made to the terms of
the Stock Option in the sole discretion of the Administering Body
as it may deem appropriate to give effect to the Reorganization.
7.2 CORPORATE TRANSACTIONS INVOLVING A CHANGE IN CONTROL. As of
the effective time and date of any Change in Control, this Plan
and any then outstanding Stock Options (whether or not vested)
shall automatically terminate unless (a) provision is made in
writing in connection with such transaction for the continuance
of this Plan and for the assumption of such Stock Options, or for
the substitution for such Stock Options of new awards covering
the securities of a successor entity or an affiliate thereof,
with appropriate adjustments as to the number and kind of
securities and exercise prices, in which event this Plan and such
outstanding Stock Options shall continue or be replaced, as the
case may be, in the manner and under the terms so provided; or
(b) the Board otherwise has provided or shall provide in writing
for such adjustments as it deems appropriate in the terms and
conditions of the then-outstanding Stock Options (whether or not
vested), including without limitation (i) accelerating the
vesting of outstanding Stock Options and/or (ii) providing for
the cancellation of Stock Options and their automatic conversion
into the right to receive the securities, cash and/or other
consideration that a holder of the shares underlying such Stock
Options would have been entitled to receive upon consummation of
such Change in Control had such shares been issued and
outstanding immediately prior to the effective date and time of
the Change in Control (net of the appropriate option exercise
prices). If, pursuant to the foregoing provisions of this
Section 7.2, this Plan and the Stock Options shall terminate by
reason of the occurrence of a Change in Control without provision
for any of the actions described in clause (a) or (b) hereof,
then any Optionee holding outstanding Stock Options shall have
the right, at such time immediately prior to the consummation of
the Change in Control as the Board shall designate, to exercise
the Optionee's Stock Options to the full extent not theretofore
exercised, including any installments which have not yet become
vested.
ARTICLE VIII
------------
DEFINITIONS
Capitalized terms used in this Plan and not otherwise
defined shall have the meanings set forth below:
"ADMINISTERING BODY" shall mean the Board as long as no
Stock Option Plan Committee has been appointed and is in effect
and shall mean the Stock Option Plan Committee as long as the
Stock Option Plan Committee is appointed and in effect.
"AFFILIATED ENTITY" means any Parent Corporation or
Subsidiary Corporation.
"BOARD" means the Board of Directors of the Company.
"CHANGE IN CONTROL" means the following and shall be deemed
to occur if any of the following events occur:
(a) Any Person becomes after the Effective Date the
beneficial owner (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of either the then
outstanding shares of Common Stock or the combined voting power
of the Company's then outstanding securities entitled to vote
generally in the election of directors; or
(b) Individuals who, as of the effective date hereof,
constitute the Board of Directors of the Company (the "Incumbent
Board") cease for any reason to constitute at least a majority of
the Board of Directors of the Company, provided that any
individual who becomes a director after the effective date hereof
whose election, or nomination for election by the Company's
shareholders, is approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
to be a member of the Incumbent Board unless that individual was
nominated or elected by any Person having the power to exercise,
through beneficial ownership, voting agreement and/or proxy, 20%
or more of either the outstanding shares of Common Stock or the
combined voting power of the Company's then outstanding voting
securities entitled to vote generally in the election of
directors, in which case that individual shall not be considered
to be a member of the Incumbent Board unless such individual's
election or nomination for election by the Company's shareholders
is approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board; or
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(c) Consummation by the Company of the sale or other
disposition by the Company of all or substantially all of the
Company's assets or a reorganization or merger or consolidation
of the Company with any other person, entity or corporation,
other than
(i) a reorganization or merger or consolidation that
would result in the voting securities of the Company
outstanding immediately prior thereto (or, in the case of a
reorganization or merger or consolidation that is preceded
or accomplished by an acquisition or series of related
acquisitions by any Person, by tender or exchange offer or
otherwise, of voting securities representing 5% or more of
the combined voting power of all securities of the Company,
immediately prior to such acquisition or the first
acquisition in such series of acquisitions) continuing to
represent, either by remaining outstanding or by being
converted into voting securities of another entity, more
than fifty percent (50%) of the combined voting power of the
voting securities of the Company or such other entity
outstanding immediately after such reorganization or merger
or consolidation (or series of related transactions
involving such a reorganization or merger or consolidation),
or
(ii) a reorganization or merger or consolidation
effected to implement a recapitalization or reincorporation
of the Company (or similar transaction) that does not result
in a material change in beneficial ownership of the voting
securities of the Company or its successor; or
(d) Approval by the shareholders of the Company or any
order by a court of competent jurisdiction of a plan of
liquidation of the Company.
Notwithstanding the foregoing, a Change in Control of the type
described in paragraph (b), (c) or (d) shall be deemed to be
completed on the date it occurs, and a Change in Control of the
type described in paragraph (a) shall be deemed to be completed
as of the date the entity or group attaining 30% or greater
ownership has elected its representatives to the Company's Board
of Directors and/or caused its nominees to become officers of the
Company with the authority to terminate or alter the terms of
employee's employment.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par
value $0.25 per share, as constituted on the Effective Date of
this Plan, and as thereafter adjusted as a result of any one or
more events requiring adjustment of outstanding Stock Options
under Section 3.4 above.
"COMPANY" means Independent Bankshares, Inc., a Texas
corporation.
"EFFECTIVE DATE" means February 17, 1999, which is the date
this Plan was adopted by the Board.
"ELIGIBLE PERSON" shall include directors (other than non-
employee directors of the Company), officers, employees,
consultants and advisors of the Company or of any Affiliated
Entity.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCHANGE ACT REGISTERED COMPANY" means that the Company has
any class of any equity security registered pursuant to
Section 12 of the Exchange Act.
"EXPIRATION DATE" means the tenth anniversary of the
Effective Date.
"FAIR MARKET VALUE" of a share of the Company's capital
stock as of a particular date shall be: (a) if the stock is
listed on an established stock exchange or exchanges (including
for this purpose, the Nasdaq National Market), the average of the
highest and lowest sale prices of the stock quoted for such date
as reported in the Transactions Index of each such exchange, as
published in The Wall Street Journal and determined by the
Administering Body, or, if no sale price was quoted in any such
Index for such date, then as of the next preceding date on which
such a sale price was quoted; or (b) if the stock is not then
listed on an exchange or the Nasdaq
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National Market, the average of the closing bid and asked prices
per share for the stock in the over-the-counter market as quoted
on The Nasdaq Small Cap Market on such date (in the case of (a) or
(b), subject to adjustment as and if necessary and appropriate to
set an exercise price not less than 100% of the Fair Market Value
of the stock on the date an option is granted); or (c) if the stock
is not then listed on an exchange or quoted in the over-the-counter
market, an amount determined in good faith by the Administering Body;
provided, however, that (i) when appropriate, the Administering
Body, in determining Fair Market Value of capital stock of the
Company, may take into account such other factors as it may deem
appropriate under the circumstances and (ii) if the stock is
traded on the Nasdaq Small Cap Market and both sales prices and
bid and asked prices are quoted or available, the Administering
Body may elect to determine Fair Market Value under either clause
(i) or (ii) above. Notwithstanding the foregoing, the Fair
Market Value of capital stock for purposes of grants of Incentive
Stock Options shall be determined in compliance with applicable
provisions of the IRC.
"IMMEDIATE FAMILY" means the Recipient's spouse, children or
grandchildren (including adopted and stepchildren and
grandchildren).
"INCENTIVE STOCK OPTION" means a Stock Option that qualifies
as an incentive stock option under Section 422 of the IRC, or any
successor statute thereto.
"IRC" means the Internal Revenue Code of 1986, as amended.
"JUST CAUSE DISMISSAL" shall mean a termination of a
Recipient's employment for any of the following reasons: (a) the
Recipient violates any reasonable rule or regulation of the
Board, the Company's Chief Executive Officer or the Recipient's
superiors that results in damage to the Company or which, after
written notice to do so, the Recipient fails to correct within a
reasonable time; (b) any willful misconduct or gross negligence
by the Recipient in the responsibilities assigned to the
Recipient; (c) any willful failure to perform the Recipient's job
as required to meet Company objectives; (d) any wrongful conduct
of a Recipient which has an adverse impact on the Company or
which constitutes a misappropriation of Company assets; (e) the
Recipient's performing services for any other person or entity
that competes with the Company while the Recipient is employed by
the Company, without the written approval of the Chief Executive
Officer of the Company; or (f) any other conduct that the
Administering Body determines constitutes Just Cause for
Dismissal; provided, however, that if a Recipient is party to an
employment agreement with the Company providing for just cause
dismissal (or some comparable notion) of Recipient from Recipient's
employment with the Company, "Just Cause Dismissal" for purposes of
this Plan shall have the same meaning as ascribed thereto or to such
comparable notion in such employment agreement.
"NON-EMPLOYEE DIRECTOR" means any director of the Company
who qualifies as a "non-employee director" within the meaning of
Rule 16b-3.
"NON-QUALIFIED STOCK OPTION" means a Stock Option that is
not an Incentive Stock Option.
"OPTIONEE" means a Recipient or the Recipient's successor in
interest.
"OUTSIDE DIRECTOR" means an "outside director" as defined in
the regulations adopted under Section 162(m) of the IRC.
"PARENT CORPORATION" means any Parent Corporation as defined
in Section 424(e) of the IRC.
"PERFORMANCE-BASED COMPENSATION" means performance-based
compensation as described in Section 162(m) of the IRC. If the
amount of compensation an Eligible Person will receive under any
Stock Option is not based solely on an increase in the value of
Common Stock after the date of grant or award, the Stock Option
Plan Committee, in order to qualify Stock Options as performance-
based compensation under Section 162(m) of the IRC, can condition
the grant, award, vesting or exercisability of such Stock Options
on the attainment of a preestablished, objective performance
goal. For this purpose, a preestablished, objective performance
goal may include one or more of the following performance
criteria: (a) book value; (b) earnings per share; (c) return on
equity; (d) total shareholder return; (e) return on capital;
(f) return on assets or net assets; (g) income or net income;
(h) net interest income; (i) net margin; (j) attainment of
stated goals related to the Company's capitalization, costs,
financial condition or results of operations; and (k) any other
similar performance criteria.
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"PERSON" means any person, entity or group, within the
meaning of Section 13(d) or 14(d) of the Exchange Act, but
excluding (a) the Company and its subsidiaries, (b) any employee
stock ownership or other employee benefit plan maintained by the
Company that is qualified under ERISA and (c) any underwriter or
underwriting syndicate that has acquired the Company's securities
solely in connection with a public offering thereof.
"PERMANENT DISABILITY" shall mean that the Recipient becomes
physically or mentally incapacitated or disabled so that the
Recipient is unable to perform substantially the same services as
the Recipient performed prior to incurring such incapacity or
disability (the Company, at its option and expense, being
entitled to retain a physician to confirm the existence of such
incapacity or disability, and the determination of such physician
to be binding upon the Company and the Recipient), and such
incapacity or disability continues for a period of three
consecutive months or six months in any 12-month period or such
other period(s) as may be determined by the Stock Option Plan
Committee with respect to any Stock Option, provided that for
purposes of determining the period during which an Incentive
Stock Option may be exercised pursuant to Section 5.13(b)(ii)
hereof, Permanent Disability shall mean "permanent and total
disability" as defined in Section 22(e) of the IRC.
"PERMITTED TRANSFEREE" means (a) the Recipient's Immediate
Family; (b) a trust solely for the benefit of the Recipient
and/or his or her Immediate Family; or (c) a partnership or
limited liability company the partners or shareholders of which
are limited to the Recipient and his or her Immediate Family.
"PLAN" means this 1999 Stock Option Plan of the Company.
"PLAN TERM" means the period during which this Plan remains
in effect (commencing on the Effective Date and ending on the
Expiration Date).
"RECIPIENT" means a person who has received Stock Options
under this Plan.
"REORGANIZATION" means any merger, consolidation or other
reorganization.
"RULE 16b-3" means Rule 16b-3 under the Exchange Act.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"SIGNIFICANT SHAREHOLDER" is an individual who, at the time
a Stock Option is granted to such individual under this Plan,
owns more than 10% of the combined voting power of all classes of
stock of the Company or of any Parent Corporation or Subsidiary
Corporation (after application of the attribution rules set forth
in Section 424(d) of the IRC).
"STOCK OPTION" means a right to purchase stock of the
Company granted under Article VI of this Plan to an Eligible
Person.
"STOCK OPTION DOCUMENT" means the agreement or confirming
memorandum setting forth the terms and conditions of Stock
Options.
"STOCK OPTION PLAN COMMITTEE" means the committee appointed
by the Board to administer this Plan pursuant to Section 4.1.
"SUBSIDIARY CORPORATION" means any Subsidiary Corporation as
defined in Section 424(f) of the IRC.
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