EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT is made this 4th day of June, 2008 (“Effective Date”),
by and between Southside Bank ("the Company”), and Julie Shamburger (the
“Employee”).

INTRODUCTION

The Board of Directors of the Company (the “Board”) has determined that it is in
the best interests of the Company to retain the Employee’s services and to
reinforce and encourage the continued attention and dedication of the Employee
to her assigned duties.

AGREEMENT

WHEREAS, during her employment, Employee will establish and maintain relations
and contacts with the clients, employees, and suppliers of the Company, all of
which constitute valuable goodwill of the Company's business; and

WHEREAS, during her employment, Employee will learn and will have access to
important Confidential Information and Trade Secrets (as defined herein) related
to the Company's business; and

WHEREAS, Employee and the Company desire to enter into this Agreement in order
to memorialize the terms and conditions of Employee's employment.

NOW, THEREFORE, in consideration of Employee's employment with the Company, a
wholly owned subsidiary of Southside Bancshares, Inc. (“SBSI”) and in
consideration of the additional promises and the mutual covenants herein
contained, the Company and the Employee hereby agree as follows:

1.    Employment. Upon the terms and subject to the conditions contained in this
Agreement, the Employee is hereby deemed to be employed under the terms of this
Agreement on the Effective Date as an Executive Vice President of the Company.
The Employee agrees to provide full-time services for the Company during the
term of this Agreement. The Employee agrees to devote her best efforts to the
business of the Company, and shall perform her duties in a diligent,
trustworthy, and business-like manner, all for the purpose of advancing the
business of the Company. Notwithstanding the above, the Employee may engage in
other business interests or investments which do not conflict with the interests
of Company or materially prevent the Employee from performing her contemplated
services hereunder on behalf of the Company.

2.    Duties. In her capacity as an Executive Vice President of the Company, the
Employee shall have such responsibilities and shall render such services as
shall be assigned to her from time to time by the Chief Executive Officer of the
Company, which shall be consistent with the responsibilities of similarly
situated executives of comparable companies in similar lines of business. The
Employee’s duties may, from time to time, be changed or modified at the
discretion of the Chief Executive Officer.

3.    Employment Term. Unless earlier terminated in accordance with Section 5
hereof, the Employee’s employment shall be for a two (2) year term (the “Initial
Term”), beginning on the Effective Date. Beginning on the first anniversary of
the Effective Date and on each anniversary of the Effective Date thereafter,
Employee's employment with Company shall, without further action by the Employee
or the Company, be extended by an additional one-year period (with any such
extended period being referred to as the "Extended Term"); provided, however,
that either party may cause Employee's employment to cease to extend
automatically by giving written notice to the other party not less than ninety
(90) days prior to the next annual anniversary of the Effective Date. Upon such
notice, Employee's employment shall terminate upon the expiration of the Initial
Term or the then-current Extended Term, including any prior extensions. If
Company elects to terminate the automatic extension, Section 9 shall no longer
be applied following termination of employment. For purposes of this Agreement,
the entire period of Employee's employment shall be referred to as the
"Employment Period."

4.    Compensation and Benefits.

(a)    Base Salary. As of the Effective Date of this Agreement, the Company
agrees to pay the Employee during the term of this Agreement an initial base
salary of $120,000.00 per year (the "Base Salary"), payable in accordance with
Company’s normal payroll practices with such payroll deductions and withholdings
as are required by law or are otherwise authorized by Employee. The Employee’s
Base Salary shall be reviewed no less frequently than annually by the
Compensation Committee of the Board of Directors of SBSI (the “Compensation
Committee”). During the term of

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this Agreement, it is agreed that Company may not reduce Employee’s Base Salary
in any calendar year by an amount in excess of five (5%) percent of the Base
Salary unless such reduction is part of a general reduction in compensation
among employees of the same or similar category.

(b)    Annual Incentive Payment. In addition to other compensation to be paid
under this Section 4, each year during the Employment Period the Employee shall
be eligible to receive an annual incentive payment (the “Annual Incentive
Payment”), which shall not be less than 12.5% of Base Salary. The amount
actually awarded and paid to the Employee each year will be determined by the
Compensation Committee and may be based on specific performance criteria to be
identified under a separate communication. Any payments made under this section
shall be paid no later than March 15 of the following calendar year.

(c)    Incentive, Savings and Retirement Plans. During the Employment Period,
the Employee shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs made available by the Company
to officers of comparative level with Employee (the "Peer Executives").

(d)    Welfare Benefit Plans. During the Employment Period, the Employee and the
Employee’s eligible dependents shall be eligible for participation in, and shall
receive all benefits under, the welfare benefit plans, practices, policies and
programs provided by the Company (including, without limitation, medical,
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) (“Welfare Plans”) to the
extent applicable generally to Peer Executives.

(e)    Fringe Benefits. During the Employment Period, to the extent approved by
the Board of Directors, the Employee shall be entitled to fringe benefits in
accordance with the plans, practices, programs and policies of the Company on
the same basis as other Peer Executives.

(f)    Vacation. During the Employment Period, the Employee will be entitled to
such period of paid vacation as may be provided under any plans, practices,
programs and policies of the Company available to other Peer Executives;
provided, however, that Employee shall be entitled to a minimum of four (4)
weeks paid vacation.

(g)    Reimbursement of Expenses. During the Employment Period, the Company
shall reimburse the Employee in accordance with Company’s expense reimbursement
policies for all reasonable, ordinary and necessary business expenses incurred
by the Employee in the course of her duties conducted on behalf of the Company.
In addition, the Company may pay the Employee’s annual dues at a local country
club, and expenses related to the Employee’s use of such country club for
matters related to the business of the Company. The Company shall also reimburse
Employee’s reasonable expenses for continuing education courses necessary to
maintain any certifications or licenses Employee may hold.

5.    Termination of Employment. The Employee’s employment may be terminated at
any time by either party for the reasons set forth in this Section 5.

(a)    Termination by the Employee. Employee may terminate her employment during
the Employment Period for Good Reason (but only in the event of a Change in
Control, as defined in Section 7 hereof), or for no reason. For the purpose of
this Agreement, “Good Reason” shall mean:

(i)    Without the Employee’s express written consent, the assignment to the
Employee of any duties or responsibilities inconsistent in any material respect
with the Employee’s position (including status, offices, titles and reporting
relationships), authority, duties or responsibilities as in effect of the
Effective Date, or any other action by the Company which results in a diminution
in such position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of notice thereof
given by the Employee;

(ii)    A reduction by the Company in the Employee’s Base Salary;

(iii)    The failure by the Company (a) to continue in effect any compensation
plan in which the Employee participates as of the Effective Date that is
material to the Employee’s total compensation, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, or (b) to continue the Employee’s participation therein
(or in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the level of the
Employee’s participation relative to other participants;

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(iv)    Any failure of the Company to obtain the assumption of, or the agreement
to perform, this Agreement by any successor as contemplated in Section 13(b)
hereof;

(v)    The material breach by the Company of any other provision of this
Agreement; or

(vi)    The Company requiring the Employee to be based anywhere other than Smith
County, or, in the event the Employee consents to any relocation, the failure by
the Company to pay (or to reimburse the Employee) for all reasonable moving
expenses incurred by the Employee relating to a change of the Employee’s
principal residence in connection with such relocation and to indemnify the
Employee against any loss realized on the sale of the Employee’s principal
residence in connection with any such change of residence.

Good Reason shall not include the Employee’s death or Disability or Retirement;
provided that the Employee’s mental or physical incapacity following the
occurrence of an event described in clause (i) - (vi) above shall not affect the
Employee’s ability to terminate for Good Reason. The Employee’s continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder. Any good faith
determination of Good Reason made by the Employee shall be deemed prima facie
evidence that qualifies for termination for Good Reason but such determination
by the Employee may be contested and disputed by the Company. The Company shall
have an opportunity to cure any claimed event of Good Reason within 30 days of
receiving written notice from the Employee and the Board’s good faith
determination of cure shall be binding. The Company shall notify the Employee of
the timely cure of any claimed event of Good Reason and the manner in which such
cure was effected, and any Notice of Termination delivered by the Employee based
on such claimed Good Reason shall be deemed withdrawn and shall not be effective
to terminate the Agreement.

(b)    Termination by the Company. The Company may terminate the Employee’s
employment during the Employment Period with or without Cause. For purposes of
this Agreement, “Cause” shall mean:

(i) Employee’s material failure to perform Employee’s duties with the Company
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for performance is delivered to Employee by the
Company which specifically identifies the manner in which the Company believes
that Employee has intentionally and materially failed to perform Employee’s
duties; or

(ii) Employee’s engaging in any illegal conduct or misconduct that is materially
and demonstrably injurious to the Company, its financial condition, or its
reputation; or

(iii) Employee’s engaging in any act or omission that constitutes, on the part
of the Employee, fraud, theft, misappropriation, embezzlement, breach of
fiduciary duty or dishonesty; or

(iv) Entry of an order by any state or federal regulatory agency either removing
Employee from Employee’s position with the Company or its affiliates or
prohibiting Employee from participating in the conduct of the affairs of the
Company; or

(v) Employee’s failure to cure a material breach of any provision of this
Agreement after a written demand for cure is delivered to Employee by the
Company.

Termination for Cause shall only occur after the Board, in its sole and absolute
discretion, has made a full and thorough determination of “Cause.”

Additionally, Employee's employment may be terminated by Company as a result of
a Change in Control, as defined in Section 7 hereof. Such a termination of
employment shall be treated the same as a termination without Cause for purposes
of Section 6 of this Agreement.
    
(c)    Death, Retirement or Disability. The Employee’s employment shall
terminate automatically upon the death or Retirement of the Employee during the
Employment Period. For purposes of this Agreement, “Retirement” shall mean
normal retirement as defined in the Company’s then-current retirement plan, or
if there is no such retirement plan, “Retirement” shall mean voluntary
termination after attaining age 65. If the Company determines in good faith that
the Disability of the Employee has occurred during the Employment Period
(pursuant to the definition of Disability

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set forth below), it may give to the Employee written notice of its intention to
terminate the Employee’s employment. In such event, the Employee’s employment
with the Company shall terminate effective on the 30th day after receipt of such
written notice by the Employee (the “Disability Effective Date”), provided that,
within the 30 days after such receipt, the Employee shall not have returned to
full-time performance of the Employee’s duties. For purposes of this Agreement,
“Disability” shall mean the inability of the Employee, as determined by the
Board, to perform the essential functions of her regular duties and
responsibilities, with or without reasonable accommodation, due to a medically
determinable physical or mental illness which has lasted (or can reasonably be
expected to last) for a period of six (6) consecutive months.

(d)    Notice of Termination. Any termination by the Company for Cause, or by
the Employee for Good Reason in the event of a Change in Control, shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 13(d) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Employee's employment under the
provision so indicated and (iii) specifies the termination date. The failure by
the Employee or the Company to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Employee or the Company, respectively, hereunder or
preclude the Employee or the Company, respectively, from asserting such fact or
circumstance in enforcing the Employee's or the Company's rights hereunder.

(e)    Date of Termination. "Date of Termination" means (i) if the Employee's
employment is terminated by the Company for Cause, or by the Employee for Good
Reason in the event of a Change in Control, the date of termination as specified
in the Notice of Termination, (ii) if the Employee's employment is terminated by
the Company other than for Cause, the Date of Termination shall be either the
date on which the Company notifies the Employee of such termination or a date
otherwise specified by the Company, (iii) if the Employee's employment is
terminated by reason of death, Retirement or Disability, the Date of Termination
shall be the date of the death or Retirement of the Employee or the Disability
Effective Date, as the case may be, and (iv) if the Employee's employment is
terminated by the Employee without Good Reason in the event of a Change in
Control, the Date of Termination shall be at least two (2) weeks from the date
that the Employee notifies the Company of her resignation (during which two (2)
week period Employee may be required, in the discretion of Company, to continue
to perform services on behalf of Company).

6.    Obligations of the Company upon Termination.

(a)    Termination by Employee except for Good Reason in the event of a Change
in Control; Termination by Company with Cause. If, during the Employment Period,
the Employee terminates her employment without Good Reason or the Company
terminates Employee's employment with Cause, Employee shall be entitled to
receive her accrued but unpaid Base Salary up to and including the Date of
Termination as well as all previously vested benefits. Employee shall not be
entitled to receive any additional compensation or benefits from Company.

(b)    Termination by the Company without Cause; Termination by Employee for
Good Reason in the event of a Change in Control. If, during the Employment
Period, the Company terminates the Employee’s employment without Cause
(excluding termination for death, Retirement or Disability) or as a result of a
Change in Control (as defined in Section 7 of this Agreement), or the Employee
terminates her employment for Good Reason in the event of a Change in Control,
and in any case only provided that Employee executes a release in a form
mutually acceptable to the parties (the “Release”), then the following shall
occur:

(i)    the Company shall provide to the Employee in a single lump sum cash
payment within 30 days after the Date of Termination, or if later, within five
days after the Release becomes effective and nonrevocable, the aggregate of the
following amounts, to the extent not previously paid to the Employee:

(a) the Employee’s accrued but unpaid Base Salary through the Date of
Termination;
(b) a pro-rata bonus for the year in which the Date of Termination occurs,
computed as the product of (x) the Employee’s Target Bonus (as defined by
Company policy) for such year and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of Termination, and
the denominator of which is 365;
(c) any accrued pay in lieu of unused vacation (in accordance with the Company’s
vacation policy);

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(d) unless the Employee has a later payout date that is required in connection
with the terms of a deferral plan or agreement, any vested compensation
previously deferred by the Employee (together with any amount equivalent to
accrued interest or earnings thereon); and
(e) a severance payment equal to the monthly salary for the remainder of the
Initial Term or the then-current Extended Term, whichever is applicable, plus
the sum of ten thousand dollars ($10,000).
Provided, however, that in lieu of Section 6(b)(i)(e), the severance payment in
the event of a Change of Control shall be calculated pursuant to clause (x) or
(y) below, as applicable:
(x)    if the Date of Termination occurs more than six (6) months prior to the
closing of a pending event that results in a Change of Control or more than two
(2) years after the occurrence of a Change of Control, the severance payment
shall be the product of two times the sum of (1) the Employee’s Base Salary in
effect as of the Date of Termination (ignoring any decrease in the Employee’s
Base Salary unless consented to by the Employee), and (2) the greater of the
average of the annual bonuses earned by the Employee for the two fiscal years in
which annual bonuses were paid immediately preceding the year in which the Date
of Termination occurs, or the Employee’s Target Bonus for the year in which the
Date of Termination occurs; or
(y)    if the Date of Termination occurs within six months prior or within two
years after the occurrence of a Change of Control, the severance payment shall
be the product of two times the sum of (1) the Employee’s Base Salary in effect
as of the Date of Termination, and (2) the greater of the average of the annual
bonuses earned by the Employee for the two fiscal years in which annual bonuses
were paid immediately preceding the year in which the Date of Termination
occurs, or the Employee’s Target Bonus for the year in which the Date of
Termination occurs.
(ii)    all grants of stock options and other equity awards granted by the
Company or the SBSI Compensation Committee, and held by the Employee as of the
Date of Termination will become immediately vested and exercisable as of the
Date of Termination and, to the extent necessary, this Agreement is hereby
deemed an amendment of any such outstanding stock option or other equity award;
and

(iii)    to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Employee any other amounts or benefits required to
be paid or provided or which the Employee is eligible to receive under any plan,
program, policy or practice of the Company to the extent provided to Peer
Executives prior to the Date of Termination (such other amounts and benefits
shall be hereinafter referred to as the “Other Benefits”).

(c)    Death. If the Employee’s employment is terminated by reason of Employee’s
death during the Employment Period, then this Agreement will terminate without
further obligations to Employee, other than for payment to Employee's estate or
beneficiaries of Employee's accrued but unpaid Base Salary up to and including
the Date of Termination as well as Other Benefits. Employee's estate or
beneficiaries shall not be entitled to receive any additional compensation or
benefits from Company. With respect to the provision of Other Benefits, the term
Other Benefits as used in this Section 6(c) shall include, without limitation,
and Employee's estate or beneficiaries shall be entitled after the Date of
Termination to receive, death and other benefits under such plans, programs,
practices and policies relating to death, if any, as are applicable to Employee
on the Date of Termination.

(d)    Retirement. If Employee’s employment is terminated by reason of
Employee’s Retirement during the Employment Period, this Agreement shall
terminate without further obligations to Employee, other than for payment of
accrued but unpaid Base Salary up to and including the Date of Termination and
the timely payment or provision of Other Benefits. With respect to the provision
of Other Benefits, the term Other Benefits as used in this Section 6(d) shall
include, without limitation, and Employee shall be entitled after the Date of
Termination to receive, retirement and other benefits under such plans,
programs, practices and policies relating to retirement, if any, as are
applicable to Employee on the Date of Termination.

(e)    Disability. If the Employee’s employment is terminated by reason of
Employee’s Disability during the Employment Period, then this Agreement will
terminate without further obligations to Employee, other than for payment

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of Employee's accrued but unpaid Base Salary up to and including the Date of
Termination as well as Other Benefits. Employee shall not be entitled to receive
any additional compensation or benefits from Company. With respect to the
provision of Other Benefits, the term Other Benefits as used in this
Section 6(e) shall include, without limitation, and Employee shall be entitled
after the Date of Termination to receive, disability and other benefits under
such plans, programs, practices and policies relating to disability, if any, as
are applicable to Employee on the Date of Termination.

(f)    Expiration of Employment Period. If the Employee’s employment shall be
terminated due to the expiration of the Employment Period as provided for in
Section 3, this Agreement shall terminate without further obligations to the
Employee, other than for payment of Employee's accrued but unpaid Base Salary up
to and including the Date of Termination and the timely payment or provision of
Other Benefits. Employee shall not be entitled to receive any additional
compensation or benefits from Company.

(g)    Internal Revenue Code Section 280G.

(i) Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) (a "Payment"
would be subject to the excise tax imposed by Section 4999 of the Code (the
"Excise Tax"), then, prior to the making of any Payment to the Employee, a
calculation shall be made comparing (i) the net benefit to the Employee of the
Payment after payment of the Excise Tax, to (ii) the net benefit to the Employee
if the Payment had been limited to the extent necessary to avoid being subject
to the Excise Tax. If the amount calculated under (i) above is less than the
amount calculated under (ii) above, then the Payment shall be limited to the
extent necessary to avoid being subject to the Excise Tax (the “Reduced
Amount”). In that event, the Employee shall direct which Payments are to be
modified or reduced.

(ii) Unless otherwise agreed upon by the Company and the Employee, all
determinations required to be made under this Section 6(g), including the
assumptions to be used in arriving at such determination, shall be made by an
independent accounting firm mutually acceptable to the Company and the Employee
(the "Accounting Firm") which shall provide detailed supporting calculations
both to the Company and the Employee within 15 business days of the receipt of
notice from the Employee that there has been a Payment, or such earlier time as
is requested by the Company. All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive

(h)    Limitation of Benefits. Notwithstanding any other provision of this
Agreement, nothing shall obligate the Company to make any payment to the
Employee that is prohibited by the provisions of 12 U.S.C. § 1828(k) or the
implementing regulations of the FDIC; provided, however, the Company shall
exercise commercially reasonable efforts to obtain the approval of the Board of
Governors of the Federal Reserve System, and the concurrence of the FDIC, to
make the payments provided herein (or, to the extent that they will not approve
payment in full, such lesser portion as shall be acceptable to them).

7.    Change in Control. For purposes of this Agreement, “Change in Control”
shall mean the occurrence of any one of the following: a Change in the Actual
Control of the Company or SBSI as described in Section 7(i), a Change in
Effective Control, as described in Section 7(ii), and a Change in the Ownership
of the Company’s or SBSI's Assets, as described in Section 7(iii).

(i)    Change in Actual Control shall mean the acquisition by any one person, or
more than one person acting as a group (as defined in subsection (iv), below) of
ownership of stock of the Company or SBSI that, together with stock held by such
person or group, constitutes more than 50 percent of the total fair market value
or total voting power of the stock of the Company or SBSI, respectively.
However, if any one person, or more than one person acting as a group, is
considered to own more than 50 percent of the total fair market value or total
voting power of the stock of the Company or SBSI, the acquisition of additional
stock by the same person or persons is not considered to cause a change in the
ownership of the Company or SBSI, respectively, or to cause a Change in the
Effective Control (within the meaning of Section 7(a)(ii)) of the Company or
SBSI, respectively. An increase in the percentage of stock owned by any one
person, or persons acting as a group, as a result of a transaction in which the
Company or SBSI acquires its stock in exchange for property will be treated as
an acquisition of stock for purposes of this section. Notwithstanding the
foregoing, the acquisition of the common stock of SBSI by any direct or indirect
subsidiary or affiliate of the Company shall not be considered to cause a Change
in Control.

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(ii)    Change in Effective Control shall mean: (A) the acquisition by any one
person, or more than one person acting as a group (as defined in Section (iv),
below), during any 12-month period of stock of the Company or SBSI possessing 35
percent or more of the total voting power of the stock of the Company or SBSI,
respectively; or (B) the replacement, of a majority of members of the Company’s
board of directors during any 12-month period by directors whose appointment or
election is not endorsed by a majority of the members of the Company’s board of
directors prior to the date of election in accordance with Treasury Regulation §
1.409A-1(g)(5)(iv)(A)(2). Notwithstanding the foregoing, (x) if any one person,
or more than one person acting as a group, is considered to effectively control
the Company or SBSI (within the meaning of this subsection (ii)), the
acquisition of additional control of the Company or SBSI, respectively, by the
same person or persons is not considered to cause a Change in Control and (y)
the acquisition of the common stock of SBSI by any direct or indirect subsidiary
or affiliate of the Company shall not be considered to cause a Change in
Control.

(iii)    Change in the Ownership of the Company’s or SBSI's Assets shall mean
the acquisition by any one person, or more than one person acting as a group (as
defined in subsection (iv), below), during any 12-month period of assets from
the Company or SBSI that have a total gross fair market value equal to or more
than 40 percent of the total gross fair market value of all of the assets of the
Company or SBSI, respectively, immediately prior to such acquisition or
acquisitions.  Notwithstanding the foregoing, there is no change in control
event under this section when there is a transfer to an entity that is
controlled by the Company or the shareholders of the Company immediately after
the transfer.

(iv)    Persons acting as a group. For purposes of this Section 7, persons will
not be considered to be acting as a group solely because they purchase or own
stock of the same corporation at the same time, or as a result of the same
public offering. However, persons will be considered to be acting as a group if
they are owners of a corporation that enters into a merger, consolidation,
purchase or acquisition of stock, or similar business transaction with the
corporation. If a person, including an entity, owns stock in both corporations
that enter into a merger, consolidation, purchase or acquisition of stock, or
similar transaction, such shareholder is considered to be acting as a group with
other shareholders in a corporation prior to the transaction giving rise to the
change and not with respect to the ownership interest in the other corporation.

8.    Delivery of Documents upon Termination. The Employee shall deliver to the
Company or its designee at the termination of the Employee’s employment all
correspondence, memoranda, notes, records, drawings, sketches, plans, customer
lists, product compositions, and other documents and all copies thereof, made,
composed or received by the Employee, solely or jointly with others, that are in
the Employee’s possession, custody, or control at termination and that are
related in any manner to the past, present, or anticipated business or any
member of the Company.

9.    Restrictions on Conduct.

(a)    General. Employee and the Company understand and agree that the purpose
of the provisions of this Section 9 is to protect the legitimate business
interests of the Company, as more fully described below, and is not intended to
eliminate Employee’s post-employment competition with the Company per se, nor is
it intended to impair or infringe upon Employee’s right to work, earn a living,
or acquire and possess property from the fruits of her labor. Employee hereby
acknowledges that Employee has received good and valuable consideration for the
post-employment restrictions set forth in this Section 9 in the form of her
employment and the compensation and benefits provided for herein. Employee
hereby further acknowledges that the post-employment restrictions set forth in
this Section 9 are reasonable and that they do not, and will not, unduly impair
her ability to earn a living after the termination of this Agreement.

In addition, the parties acknowledge: (A) that Employee’s services under this
Agreement require special expertise and talent in the provision of Competitive
Services (as defined herein) and that Employee will have substantial contacts
with customers, suppliers, advertisers, vendors and employees of the Company;
(B) that pursuant to this Agreement, Employee will be placed in a position of
trust and responsibility and she will have access to a substantial amount of
Confidential Information and Trade Secrets (as defined herein) and that the
Company is placing her in such position and giving her access to such
information in reliance upon her agreement not to compete with the Company
during the Restricted Period (as defined herein); (C) that due to her management
duties, Employee will be the repository of a substantial portion of the goodwill
of the Company and would have an unfair advantage in competing with the Company
for business from its customers; (D) that due to Employee’s special experience
and talent, the loss of Employee’s services to the Company under this Agreement
cannot reasonably or adequately be compensated solely by damages in an action at
law; (E) that Employee is capable of competing with the Company; and (F) that
Employee is capable of obtaining gainful, lucrative and desirable employment
that does not violate the restrictions contained in this Agreement.

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Therefore, subject to the limitations of reasonableness imposed by law, Employee
shall be subject to the restrictions set forth in this Section 9.

(b)    Definitions.    
“Competitive Services” means chief accounting officer.

“Confidential Information” means all information regarding the Company, its
activities, business or clients that is the subject of reasonable efforts by the
Company to maintain its confidentiality and that is not generally disclosed by
practice or authority to persons not employed by the Company, but that does not
rise to the level of a Trade Secret. “Confidential Information” shall include,
but is not limited to, financial plans and data concerning the Company;
management planning information; business plans; operational methods; market
studies; marketing plans or strategies; product development techniques or plans;
customer lists; details of customer contracts; current and anticipated customer
requirements; past, current and planned research and development; business
acquisition plans; and new personnel acquisition plans. “Confidential
Information” shall not include information that has become generally available
to the public by the act of one who has the right to disclose such information
without violating any right or privilege of the Company. This definition shall
not limit any definition of “confidential information” or any equivalent term
under state or federal law.

“Person” means any individual or any corporation, partnership, joint venture,
limited liability company, association or other entity or enterprise.

“Principal or Representative” means a principal, owner, partner, shareholder,
joint venturer, investor, member, trustee, director, officer, manager, employee,
agent, representative or consultant.

“Protected Customers” means any Person to whom the Company sold its products or
services or solicited to sell its products or services during the Employment
Period.

“Protected Employees” means employees of the Company who were employed by the
Company at any time during the Employment Period.

“Restricted Period” means the Employment Period and a period extending six (6)
months from the termination of Employee’s employment with the Company for any
reason whatsoever.

"Restricted Territory" means Smith County, Texas.

“Restrictive Covenants” means the restrictive covenants contained in Section
9(c) hereof.

“Trade Secret” means all information, without regard to form, including, but not
limited to, technical or nontechnical data, a formula, a pattern, a compilation,
a program, a device, a method, a technique, a drawing, a process, financial
data, financial plans, product plans, distribution lists or a list of actual or
potential customers, advertisers or suppliers which is not commonly known by or
available to the public and which information: (A) derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and (B) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy. Without limiting the
foregoing, Trade Secret means any item of confidential information that
constitutes a “trade secret(s)” under applicable common law or statutory law.

(c)    Restrictive Covenants.
(i)    Covenant Not to Compete. In consideration of the compensation and
benefits being paid and to be paid by the Company to Employee hereunder,
Employee hereby agrees that, during the Restricted Period, Employee will not,
without prior written consent of the Company, directly or indirectly, sell or
otherwise provide Competitive Services within the Restricted Territory on her
own behalf or as a Principal or Representative of any other Person; provided,
however, that the provisions of this Agreement shall not be deemed to prohibit
the ownership by Employee of not more than five percent (5%) of any class of
securities of any corporation having a class of securities registered pursuant
to the Securities Exchange Act of 1934, as amended.
(ii)    Restriction on Disclosure and Use of Confidential Information and Trade
Secrets. Employee understands and agrees that the Confidential Information and
Trade Secrets constitute valuable assets of the

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Company and may not be converted to Employee’s own use. Accordingly, Employee
hereby agrees that Employee shall not, directly or indirectly, at any time
during the Restricted Period, reveal, divulge, or disclose to any Person not
expressly authorized by the Company any Confidential Information, and Employee
shall not, directly or indirectly, at any time during the Restricted Period, use
or make use of any Confidential Information in connection with any business
activity other than that of the Company. Throughout the term of this Agreement
and at all times after the date that this Agreement terminates for any reason,
Employee shall not directly or indirectly transmit or disclose any Trade Secret
of the Company to any Person, and shall not make use of any such Trade Secret,
directly or indirectly, for herself or for others, without the prior written
consent of the Company. The parties acknowledge and agree that this Agreement is
not intended to, and does not, alter either the Company’s rights or Employee’s
obligations under any applicable state or federal statutory or common law
regarding trade secrets and unfair trade practices.

Anything herein to the contrary notwithstanding, Employee shall not be
restricted from disclosing or using Confidential Information that is required to
be disclosed by law, court order or other legal process; provided, however, that
in the event disclosure is required by law, Employee shall provide the Company
with prompt notice of such requirement so that the Company may seek an
appropriate protective order prior to any such required disclosure by Employee.
(iii)    Nonsolicitation of Protected Employees. Employee understands and agrees
that the relationship between the Company and each of its Protected Employees
constitutes a valuable asset of the Company and may not be converted to
Employee’s own use. Accordingly, Employee hereby agrees that during the
Restricted Period, Employee shall not directly or indirectly, on Employee’s own
behalf or as a Principal or Representative of any Person, solicit or induce any
Protected Employee to terminate her or her employment relationship with the
Company or to enter into employment with any other Person.
(iv)    Restriction on Relationships with Protected Customers. Employee
understands and agrees that the relationship between the Company and each of its
Protected Customers constitutes a valuable asset of the Company and may not be
converted to Employee’s own use. Accordingly, Employee hereby agrees that,
during the Restricted Period, Employee shall not, without the prior written
consent of the Company, directly or indirectly, on Employee’s own behalf or as a
Principal or Representative of any Person, solicit, divert, take away or attempt
to solicit, divert or take away a Protected Customer; provided, however, that
the prohibition of this covenant shall apply only to Protected Customers with
whom Employee had Material Contact on the Company’s behalf during the Employment
Period. For purposes of this Agreement, Employee had “Material Contact” with a
Protected Customer if (a) she had business dealings with the Protected Customer
on the Company’s behalf; (b) she was responsible for supervising or coordinating
the dealings between the Company and the Protected Customer; or (c) she obtained
Trade Secrets and/or Confidential Information about the customer as a result of
her association with the Company.

(d)    Enforcement of Restrictive Covenants.

(i)    Rights and Remedies Upon Breach. In the event Employee breaches, or
threatens to commit a breach of, any of the provisions of the Restrictive
Covenants, the Company shall have the following rights and remedies, which shall
be independent of any others and severally enforceable, and shall be in addition
to, and not in lieu of, any other rights and remedies available to the Company
at law or in equity:

(A)    the right and remedy to enjoin, preliminarily and permanently and without
the necessity of posting bond, Employee from violating or threatening to violate
the Restrictive Covenants and to have the Restrictive Covenants specifically
enforced by any court of competent jurisdiction, it being agreed that any breach
or threatened breach of the Restrictive Covenants would cause irreparable injury
to the Company and that money damages would not provide an adequate remedy to
the Company;

(B)    the right and remedy to require Employee to account for and pay over to
the Company all compensation, profits, monies, accruals, increments or other
benefits derived or received by Employee as the result of any transactions
constituting a breach of the Restrictive Covenants; and

(C)    the right and remedy to require Employee to pay the reasonable attorneys’
fees incurred by Company in enforcing the Restrictive Covenants.

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(ii)    Severability of Covenants. Employee acknowledges and agrees that the
Restrictive Covenants are reasonable and valid in time and scope and in all
other respects. The covenants set forth in this Agreement shall be considered
and construed as separate and independent covenants. Should any part or
provision of any covenant be held invalid, void or unenforceable in any court of
competent jurisdiction, such invalidity, voidness or unenforceability shall not
render invalid, void or unenforceable any other part or provision of this
Agreement.

(iii)    Reformation. The parties hereunder agree that it is their intention
that the Restrictive Covenants be enforced in accordance with their terms to the
maximum extent possible under applicable law. If any portion of the foregoing
provisions is found to be invalid or unenforceable by a court of competent
jurisdiction, the invalid or unreasonable term shall be redefined, or a new
enforceable term provided, such that the intent of the Company and Employee in
agreeing to the provisions of this Agreement will not be impaired and the
provision in question shall be enforceable to the fullest extent of applicable
law.

10.    Publicity and Advertising. The Employee agrees that the Company may use
the Employee’s name, picture, or likeness for any advertising, publicity, or
other business purpose at any time, during the term of the Agreement by the
Company and may continue to use materials generated during the term of the
Agreement for a period of 6 months thereafter. The Employee shall receive no
additional consideration if the Employee’s name, picture or likeness is so used.
The Employee further agrees that any negatives, prints or other material for
printing or reproduction purposes prepared in connection with the use of the
Employee’s name, picture or likeness by the Company shall be and are the sole
property of the Company.

11.    Dispute Resolution. Subject to the Company’s right to seek injunctive
relief in court as provided in Section 9 of this Agreement, any dispute,
controversy or claim arising out of or in relation to or connection to this
Agreement, including without limitation any dispute as to the construction,
validity, interpretation, enforceability or breach of this Agreement, including
a claim for indemnification under Section 12, shall be resolved either as
provided by applicable law, or, at the option of either party, by impartial
binding arbitration. In the event that either the Company or the Employee
demands arbitration, the Employee and the Company agree that such arbitration
shall be the exclusive, final and binding forum for the ultimate resolution of
such claims, subject to any rights of appeal that either party may have under
the Federal Arbitration Act and/or under applicable state law dealing with the
review of arbitration decisions.

(a)    Arbitration. Arbitration shall be heard and determined by one arbitrator,
who shall be impartial and who shall be selected by mutual agreement of the
parties; provided, however, that if the dispute involves more than $1,000,000,
then the arbitration shall be heard and determined by three (3) arbitrators. If
three (3) arbitrators are necessary as provided above, then (i) each side shall
appoint an arbitrator of its choice within thirty (30) days of the submission of
a notice of arbitration and (ii) the party-appointed arbitrators shall in turn
appoint a presiding arbitrator of the tribunal within thirty (30) days following
the appointment of the last party-appointed arbitrator. If any party fails or
refuses to appoint an arbitrator, the arbitration shall proceed with one (1)
arbitrator.

(b)    Demand for Arbitration. In the event that the Employee or the Company
initially elects to file suit in any court, the other party will have 60 days
from the date that it is formally served with a summons and a copy of the suit
to notify the party filing the suit of the non-filing party’s demand for
arbitration. In that case, the suit must be dismissed by consent of the parties
or by the court on motion, and arbitration commenced with the arbitrators. In
situations where suit has not been filed, either the Employee or the Company may
initiate arbitration by serving a written demand for arbitration upon the other
party. Such a demand must be served within twelve months of the events giving
rise to the dispute. Any claim that is not timely made will be deemed waived.

(c)    Proceedings. Unless otherwise expressly agreed in writing by the parties
to the arbitration proceedings:

(i)    The arbitration proceedings shall be held in Tyler, TX;

(ii)    The arbitrators shall be and remain at all times wholly independent and
impartial;

(iii)    The arbitration proceedings shall be conducted in accordance with the
Employment Arbitration Rules of the American Arbitration Association, as amended
from time to time;

(iv)    Any procedural issues not determined under the arbitral rules selected
pursuant to item (iii) above shall be determined by the law of the place of
arbitration, other than those laws which would refer the matter to another
jurisdiction;

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(v)    The costs of the arbitration proceedings (including attorneys’ fees and
costs) shall be borne in the manner determined by the arbitrators;

(vi)    The arbitrators may grant any remedy or relief that would have been
available to the parties had the matter been heard in court;

(vii)    The decision of the arbitrators shall be reduced to writing; final and
binding without the right of appeal; the sole and exclusive remedy regarding any
claims, counterclaims, issues or accounting presented to the arbitrators; made
and promptly paid in United States dollars free of any deduction or offset; and
any costs or fees incident to enforcing the award shall to the maximum extent
permitted by law, be charged against the party resisting such enforcement;

(viii)    The award shall include interest from the date of any breach or
violation of this Agreement, as determined by the arbitral award, and from the
date of the award until paid in full, at 6% per annum; and

(ix)    Judgment upon the award may be entered in any court having jurisdiction
over the person or the assets of the party owing the judgment or application may
be made to such court for a judicial acceptance of the award and an order of
enforcement, as the case may be.

(d)    Acknowledgment of Parties. The Company and Employee understand and
acknowledge that this Agreement means that neither can pursue an action against
the other in a court of law regarding any employment dispute, except for claims
involving workers’ compensation benefits or unemployment benefits, and except as
set forth elsewhere in this Agreement, in the event that either party notifies
the other of its demand for arbitration under this Agreement. The Company and
Employee understand and agree that this Section 11, concerning arbitration,
shall not include any controversies or claims related to any agreements or
provisions (including provisions in this Agreement) respecting confidentiality,
proprietary information, non-competition, non-solicitation, trade secrets, or
breaches of fiduciary obligations by the Employee, which shall not be subject to
arbitration.

(e)    Consultation. Employee has been advised of the Employee’s right to
consult with an attorney prior to entering into this Agreement.

12.    Indemnification. The Company shall indemnify, defend, protect and hold
harmless Employee, from and against all actions, suits or proceedings (whether
civil, criminal, administrative, arbitrative or investigative) (collectively,
“Proceedings”), and all other claims, demands, losses, damages, liabilities,
judgments, awards, penalties, fines, settlements, costs and expenses (including
court costs and reasonable attorneys’ fees), arising out of the management of
the Company or Employee’s service. This indemnity shall apply to matters that
arise out of the negligence, strict liability or other fault or responsibility
by Employee, provided however, that this indemnity shall not apply to matters
arising out of the gross negligence, willful misconduct, bad faith or
intentional breach of this Agreement by Employee.
(a)    Advance Payment. The right to indemnification conferred in Section 12
shall include the right to be paid or reimbursed by the Company the reasonable
expenses incurred by Employee who was, is or is threatened to be made a named
defendant or respondent in a Proceeding in advance of the final disposition of
the Proceeding and without any determination as to Employee’s ultimate
entitlement to indemnification; provided, however, that the payment of such
expenses incurred by Employee in advance of the final disposition of a
Proceeding, shall be made only upon delivery to the Company of a written
affirmation by Employee of Employee’s good faith belief that Employee has met
the standard of conduct necessary for indemnification under this Section 12 and
a written undertaking, by or on behalf of Employee, to repay all amounts so
advanced if it shall ultimately be determined that such indemnified Employee is
not entitled to be indemnified under this Section 12 or otherwise. The Company
shall also pay or reimburse Employee for reasonable expenses in connection with
Employee's appearance as a witness or other participation in a Proceeding.

(b)    Nonexclusivity of Rights. The right to indemnification and the
advancement and payment of expenses conferred in this Section 12 shall not be
exclusive of any other right which Employee, indemnified pursuant to Section 12,
may have or hereafter acquire under any Law or Agreement.

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13.    Miscellaneous Provisions.

(a)    Third-Party Beneficiaries. The parties acknowledge and agree that the
Company and SBSI, and its direct and indirect subsidiaries and affiliated
companies are intended to be beneficiaries of this Agreement and shall have
every right to enforce the terms and provisions of this Agreement in accordance
with the provisions of this Agreement.

(b)    Successors of the Company. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Employee, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as the Employee would be entitled hereunder if the
Employee terminated her employment for Good Reason in the event of a Change in
Control, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, “Company” as here in before defined
shall include any successor to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.

(c)    Employee’s Heirs, etc. The Employee may not assign the Employee’s rights
or delegate the Employee’s duties or obligations hereunder without the written
consent of the Company. This Agreement shall inure to the benefit of and be
enforceable by the Employee’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee should die while any amounts would still be payable to the Employee
hereunder as if she had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Employee’s designee or, if there be no such designee, to the Employee’s
estate.

(d)    Notices. Any notice or communication required or permitted under the
terms of this Agreement shall be in writing and shall be delivered personally,
or sent by registered or certified mail, return receipt requested, postage
prepaid, or sent by nationally recognized overnight carrier, postage prepaid, or
sent by facsimile transmission to the Company at the Company’s principal office
and facsimile number in Tyler, TX or to the Employee at the address and
facsimile number, if any, appearing on the books and records of the Company.
Such notice or communication shall be deemed given (a) when delivered if
personally delivered; (b) five mailing days after having been placed in the
mail, if delivered by registered or certified mail; (c) the business day after
having been placed with a nationally recognized overnight carrier, if delivered
by nationally recognized overnight carrier, and (d) the business day after
transmittal when transmitted with electronic confirmation of receipt, if
transmitted by facsimile. Any party may change the address or facsimile number
to which notices or communications are to be sent to it by giving notice of such
change in the manner herein provided for giving notice. Until changed by notice,
the following shall be the address and facsimile number to which notices shall
be sent:
If to the Company, to:         Southside Bank
1201 South Beckham
Tyler, Texas 75701

FAX:    903-592-3692
TELE:    903-531-7111

If to the Employee, to:         JULIE SHAMBURGER
3913 Glendale
Tyler, TX 75701

FAX:    903-592-3692
TELE:    903-531-7111

(e)    Amendment or Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Employee and such officer as may be specifically
designated by the Board (which shall not include the Employee). No waiver by
either party hereto at any time of any breach by the other party hereto of or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or

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at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party that are not set forth expressly in this Agreement.

(f)    Invalid Provisions. Should any portion of this Agreement be adjudged or
held to be invalid, unenforceable or void, such holding shall not have the
effect of invalidating or voiding the remainder of this Agreement and the
parties hereby agree that the portion so held invalid, unenforceable or void
shall if possible, be deemed amended or reduced in scope, or otherwise be
stricken from this Agreement to the extent required for the purposes of validity
and enforcement thereof.

(g)    Unreasonable Compensation. If any portion of the Compensation and
Benefits provided by this Agreement should be deemed to be unreasonable or
disproportionate to the services the Employee provides (under 12 C.F.R. 364 or
other applicable law), the Company shall reduce such Compensation and Benefits
to the maximum amount that would be reasonable or proportionate.

(h)    Survival of the Employee’s Obligations. The Employee’s obligations under
this Agreement shall survive regardless of whether the Employee’s employment by
the Company is terminated, voluntarily or involuntarily, by the Company or the
Employee, with or without Cause. Employee acknowledges that new, independent and
valuable benefits have been received by Employee by virtue of this Agreement and
such constitutes consideration for Employee’s agreements herein.

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

(j)    Governing Law. This Agreement and any action or proceeding related to it
shall be governed by and construed under the laws of the State of Texas.

(k)    Captions and Gender. The use of Captions and Section headings herein is
for purposes of convenience only and shall not effect the interpretation or
substance of any provisions contained herein. Similarly, the use of the
masculine gender with respect to pronouns in this Agreement is for purposes of
convenience and includes either sex who may be a signatory.

(l)    Effect on Prior Agreements. This Agreement, and any attachments,
represent the entire understanding between the parties hereto and supersedes in
all respects any other prior Agreement or understanding between the Company and
the Employee regarding the Employee’s employment, provided, however, that if the
Company determines, after a review of the final regulations issued under Section
409A of the Code and all applicable IRS guidance, that this Agreement should be
further amended to avoid triggering the tax and interest penalties imposed by
Section 409A of the Code, the Company may amend this Agreement to the extent
necessary to avoid triggering the tax and interest penalties imposed by Section
409A of the Code.

(m)    Independent Consideration. Employee acknowledges that this Agreement is
fully supported by new and independent consideration to Employee and fully meets
the requirements of Texas laws as they relate to employment agreements that
contain non-compensation agreements. Employee agrees to all of the terms of this
Agreement as part of receiving the new and independent consideration extended to
Employee under this Agreement.

IN WITNESS WHEREOF, the Employee and a duly authorized Company officer have
signed this Agreement as of the date first written above.
        
THE EMPLOYEE:
SOUTHSIDE BANK
 
 
/s/ Julie Shamburger
By:
/s/ B.G. Hartley
 
 
JULIE SHAMBURGER
Title:
 Chairman and CEO
 
 

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