Document:

Form of Restricted Stock Agreement

 Exhibit 10.3 
  
 OPTICAL CABLE CORPORATION 
 1996 STOCK INCENTIVE PLAN 
  
 FY 2005 RESTRICTED STOCK AWARD 
 (Performance Vesting) 
  

									
	 GRANTED TO

	 	 GRANT DATE

	 	 NUMBER OF
 SHARES GRANTED

	 	 PRICE PER
 SHARE

	 	 SOCIAL
 SECURITY
 NUMBER

	 __________
	 	__________	 	__________	 	N/A	 	__________
			
	 	 	 GRANT NUMBER

	 	 VESTING AND RESTRICTION LAPSE SCHEDULE*

	 	 	__________	 	Shares granted hereunder will vest, in accordance with and subject in all respects to the provisions of Sections 3 and 4 below, on October 31 of each year (each such date, a
“Vesting Date”) during the period beginning on October 31, 2005 and ending on October 31, 2010 (the “Award Period”).

	*	Fractional shares shall be carried over to the last vesting period 

  
 OPTICAL CABLE CORPORATION and its successors and assigns (the “Company”) hereby grants to
                     (the “Participant”) effective
                     (the “Grant Date”), a Restricted Stock Award (the “Award”), pursuant to its 1996 Stock Incentive Plan
that is provided along herewith (the “Plan”), covering the above stated number of shares (the “Restricted Shares”) of common stock of the Company (“Common Stock”). 
  
 The Chief Executive Officer proposed this Award and recommended its approval
to the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”), and the Compensation Committee, pursuant to the terms of the Plan, granted the Award to the Participant. 
  
 The Plan is administered by the Compensation Committee, or alternatively and
as appropriate, the Board of Directors (in either case, the “Committee”). Any controversy that arises concerning this Award or the Plan shall be resolved by the Committee as it deems proper, and any decision of the Committee shall be final
and conclusive. 
  
 The terms of the Plan are hereby incorporated
into this Award by this reference. In the case of any conflict between the Plan and this Award, the terms of the Plan shall control. Capitalized terms not defined in this Award shall have the meaning assigned to such terms in the Plan. 

 Now, therefore, in consideration of the foregoing and the mutual covenants hereinafter set forth:

  

	1.	The Company hereby grants to the Participant an Award covering the Restricted Shares, subject to the terms and conditions of this Award and the Plan. 

  

	2.	Unless otherwise determined by the Committee or unless as otherwise provided in Section 4(b) below, the Award will vest, and the restrictions applicable to Restricted Shares shall
lapse (with the shares no longer subject to the restrictions set forth herein being referred to as “Unrestricted Shares”), in accordance with Section 3 below. Except as otherwise provided in the Plan or in Section 4 below or otherwise
determined by the Committee, the Participant must be employed by the Company or a subsidiary at all times from the Grant Date through a Vesting Date in order for part of this Award to vest on such Vesting Date, and the restrictions on that portion
of the Restricted Shares to lapse. 

  

	3.	On each Vesting Date, a portion of the Award shall vest in accordance with the following schedule: 

  

			
	 TSR v RIR

	  	 Portion of Award Vesting

	 If TSR is at least 50% greater than RIR
	  	One quarter of the Award will vest
	 If TSR is 20% greater than RIR
	  	One sixth of the Award will vest
	 If TSR is less than 20% greater than RIR
	  	None of the Award will vest

  
 By way of example, if
the RIR is 10% for any Vesting Date, if the TSR is 15%, then the TSR is 50% greater than the RIR. Note that interpolation, calculated as set forth in Section 3(a) below, will be used to calculate the portion of the Award vesting when TSR is less
than 50% greater than RIR, but more than 20% greater than RIR. 
  
 The above schedule is subject in all respects to the following: 
  
 a. Except as otherwise provided in Section 3(e) and/or Section 4 below, if as of a Vesting Date, the TSR minus the RIR, divided by the absolute value of the RIR is at least 20% (whether or not TSR is positive or
negative), a portion of the Award shall vest (measured as a percentage of the Award) equal to: (i) 16.7% plus (ii) 0.276 multiplied by the total of (y) the TSR less the RIR, divided by the absolute value of the RIR, less (z) 20%; provided that no
more than 25% of the Award shall vest pursuant to the foregoing on any Vesting Date. Calculation results shall be rounded to the nearest tenth. 

 For example, if on a Vesting Date the TSR is 14% and RIR is 10%, then the TSR is greater
than the RIR by 40% (i.e., 14% minus 10% is 4%, divided by the absolute value of 10% is 40%); accordingly, the percentage of the Award that vests is 22.2% (16.7% plus 5.5% (0.276 multiplied by (40% less 20%))). Another example would be, if on a
Vesting Date the TSR is
 -3% and the RIR is -4%, then the TSR is greater than the RIR by 25% (i.e., -3% minus -4% is 1%, divided by the absolute value of -4% is 25%); accordingly, the percentage of the Award that vests is 18.1% (16.7% plus 1.4%
(0.276 multiplied by (25% less 20%))). Another example would be, if on a Vesting Date the TSR is 1% and the RIR is -2%, then TSR exceeds RIR by 150% (i.e., 1% minus -2% is 3%, divided by the absolute value of -2% is 150%), accordingly, 25% of the
Award shall vest since that is the maximum that may vest on any Vesting Date. 
  
 b. “TSR” for any Vesting Date means total shareholder return (expressed as a percentage) of the Company, calculated for the 12 month period ending on that Vesting Date (such period, a “Vesting
Period”) based on the net change during such Vesting Period in the published adjusted share price of the Common Stock plus any dividends declared by the Company that are payable to holders of Common Stock during such Vesting Period (i.e., the
“record date” occurs during such Vesting Period). For purposes of determining the TSR as of any Vesting Date, the arithmetic average of the adjusted closing price for the Common Stock as published in the Wall Street Journal (or if
the Wall Street Journal does not publish a price for the Common Stock on the relevant dates, any other reasonably comparable publication of general circulation selected by the Compensation Committee) (the “OCC Closing Price”) for
each of the 20 trading days immediately preceding such Vesting Date (provided that if such Vesting Date is a trading day, the 20 trading days shall include such Vesting Date) shall be compared to the arithmetic average of the OCC Closing Price for
each of the 20 trading days immediately preceding the October 31 immediately preceding such Vesting Date (provided that if such October 31 is a trading day, the 20 trading days shall include such October 31). 
  
 c. “RIR” for any Vesting Date means the total
return (expressed as a percentage) of the Russell 2000® Index, calculated for the 12 month period ending on that Vesting Date based on the net change during such Vesting Period year in the published adjusted value of the Russell 2000® Index. For purposes of determining RIR as of any Vesting Date, the arithmetic average
of the adjusted closing value of the Russell 2000®
Index as published in the Wall Street Journal (or, if the Wall Street Journal does not publish the Russell 2000® Index on the relevant dates, any other reasonable publication of general circulation or web site selected by the Compensation Committee) (the “RI
Closing Value”) for each of the 20 trading days immediately preceding the Vesting Date (provided that if such Vesting Date is a trading day, the 20 trading days shall include the Vesting Date) shall be compared to the arithmetic average of the
RI Closing Value for each of the 20 trading days immediately preceding the October 31 immediately preceding such Vesting Date (provided that if such October 31 is a trading day, the 20 trading days shall include such October 31). In the event the
Russell 2000® Index is not available as required
for the preceding calculation, the Compensation Committee shall select a published index that is reasonably comparable to the Russell 2000® Index for purposes of the preceding calculation. 
  
 d. Participant shall not be entitled to receive more than the total number of Restricted Shares shown as the “Number of Shares
Granted” set forth at the top of this 

 document. Thus, by way of example, if TSR exceeds RIR by 50% or more during each of the first four years
of the Award Period and one quarter of the Award vests in each of those years, no additional shares will vest during the last two years of the Award Period. 
  
 e. Any Restricted Shares covered by the Award that have not vested in accordance herewith or pursuant to Section 4 below on or before
October 31, 2010, shall be irrevocably forfeited, subject to the immediately following sentence. Notwithstanding anything herein to the contrary, on October 31, 2010, all Restricted Shares covered by the Award shall immediately vest and all
restrictions on the remaining Restricted Shares shall lapse if the average annual TSR over the six year Award Period is at least 20% greater than the average annual RIR over the six year Award Period. 
  

	4.	        a. Unless otherwise determined by the Committee or unless as otherwise provided in Section 4(b) below, in the event that
Participant’s employment with the Company and/or any subsidiaries terminates before the Award is fully vested and the restrictions on all of the Restricted Shares have lapsed, Participant will, upon the date of Participant’s termination of
employment (as reasonably fixed and determined by the Company), forfeit the remainder of the Restricted Shares and the Company will be the owner of such remaining Restricted Shares and will have the right, without further action by Participant, to
transfer such remaining Restricted Shares into its name. 

  
 b. If a Triggering Event (as defined in Section 4 (c) below) occurs while Participant is employed by the Company (or if Participant’s employment is terminated during the pendency of an event that, if consummated,
would lead to a Triggering Event), but before the Award is fully vested and the restrictions applicable to all of the Restricted Shares have lapsed, then the date upon which the Triggering Event (or the date of the termination of Participant’s
employment if Participant’s employment is terminated during the pendency of an event that, if consummated, would lead to a Triggering Event) occurs will be the Vesting Date with respect to the unvested portion of the Award, and such unvested
portion of the Award shall thereupon immediately vest and all restrictions on the remaining Restricted Shares shall lapse. 
  
 c. For purposes of this Award, a “Triggering Event” occurs if, after the date of this Award, (i) any person, including a
“group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the owner or beneficial owner of Company securities having 50% or more of the combined voting power of the then outstanding Company securities that may
be cast for the election of the Company’s directors; or (ii) as the direct or indirect result of, or in connection with, a tender or exchange offer, a merger or other business combination, a sale of assets, a contested election of directors, or
any combination of these events, the persons who were directors of the Company before such events cease to constitute a majority of the Corporation’s Board, or any successor’s board, within three years of the last of such transactions. For
purposes of this Award, a Triggering Event occurs on the date on which an event described in (i) or (ii) occurs. If a Triggering Event occurs on account of a series of transactions or events, the Triggering Event occurs on the date of the last of
such transactions or events. 

	5.	Participant will not sell, transfer, pledge, hypothecate or otherwise dispose of any Restricted Shares (or any interest in such shares) prior to the Vesting Date as to which the
restrictions applicable to such shares lapse. 

  

	6.	Prior to a Vesting Date, the Company will, at its option, reflect Participant’s ownership of the Restricted Shares in book-entry form with the Company’s transfer agent or
through the issuance of one or more stock certificates. If the Company elects to reflect ownership through the issuance of stock certificates, such certificates will be held in escrow with the Corporate Secretary of the Company in accordance with
the provisions of this Award and the Plan. Subject to terms of this Award and the Plan, Participant will have all rights of a shareholder with respect to the Restricted Shares while they are held in escrow or in book-entry form, including, without
limitation, the right to vote the Restricted Shares and receive any cash dividends declared on such shares. If, from time to time prior to the date that the Award is fully vested and the restrictions on all of the Restricted Shares have lapsed,
there is (i) any stock dividend, stock split or other change in the Restricted Shares, or (ii) any merger or sale of all or substantially all of the assets or other acquisition of the Company, any and all new, substituted or additional securities to
which Participant is entitled by reason of his ownership of the Restricted Shares shall be held on his behalf by the Company in book-entry form or through the issuance of one or more stock certificates and held in escrow pursuant to this section
until vesting pursuant to the schedule applicable to the underlying Restricted Shares, at which time all restrictions shall lapse. 

  

	7.	As described in the Plan, in the event of certain corporate transactions or other actions or events, the Committee may take such actions with respect to this Award as it deems
appropriate and consistent with the Plan. 

  

	8.	Participant understands that Participant (and not the Company) is responsible for any tax liability that may arise as a result of the transaction contemplated by this Award.
Participant understands that Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”) taxes as ordinary income the difference between the amount paid for the Restricted Shares and the fair market value of the Restricted
Shares as of the date the restrictions on such shares lapse. Participant understands that Participant may elect to be taxed at the time of the Award, rather than when the restrictions lapse, by filing an election under Section 83(b) of the Code with
the Internal Revenue Service within 30 days from the Grant Date. 

  

	9.	As a condition of accepting this Award, Participant agrees to make arrangements for the payment of withholding of income taxes and employment taxes upon the vesting of the Award and
the lapse of restrictions on the Restricted Shares. Until adequate arrangements have been made, certificates representing Unrestricted Shares will not be issued to Participant. Participant may satisfy applicable withholding taxes by any manner
permitted by the Plan, subject to the consent of the Committee, including, (i) delivering a sufficient number of shares of already owned Common Stock (which have been owned by Participant for more than six (6) months), and/or (ii) having the Company
retain a sufficient number of shares from the distribution to be made to Participant. 

	10.	The fact that the Participant has been granted this Award will not affect or qualify the right of the Company or a subsidiary to terminate the Participant’s employment at any
time. 

  

	11.	If any provision of this Award should be deemed void or unenforceable for any reason, it shall be severed from the remainder of the agreement, which shall otherwise remain in full
force and effect. 

  

	12.	The Company may, in its discretion, delay delivery of a certificate required upon vesting of the Award until (i) the admission of such shares to list on any stock exchange
(including NASDAQ) on which the Common Stock may then be listed, (ii) the completion of any registration or other qualification of such shares under any state or federal law, ruling, or regulation of any governmental regulatory body that the Company
shall, in its sole discretion, determine if necessary or advisable, and (iii) the Company shall have been advised by counsel that it has complied with all applicable legal requirements. 

  

	13.	Any notice to be given under the terms of this Award shall be addressed to Optical Cable Corporation, to the attention of the Chief Financial Officer, 5290 Concourse Drive, Roanoke,
VA 24019, and any notice to be given to Participant or to his or her personal representative shall be addressed to him or her at the address set forth below or to such other address as either party may, hereafter, designate in writing to the other.
Notices shall be deemed to have been duly given if mailed, postage prepaid, addressed as aforesaid. 

  

	14.	You may accept this Award, subject to the registration and listing of the shares issueable under the Plan, by signing and returning the enclosed copy of this Award. Your signature
will also evidence your agreement to the terms and conditions set forth herein and to which this Award is subject. 

  

	15.	Along with this Award, you hereby acknowledge receipt of a copy of the Plan and the Prospectus for the Plan. Also, if you have previously been granted an award under the Plan, you
hereby acknowledge that you have received all of the reports, proxy statements and other communications generally distributed to the holders of the Company’s securities since the date(s) of such grant(s) and no later than the times of such
distributions. 

 IN WITNESS WHEREOF, the Company has caused this Award to be signed, as of the Grant Date shown above.

  

			
	 OPTICAL CABLE CORPORATION

		
	 By:
	 	  

  
 I hereby
acknowledge receipt of this Award, the Plan, and the Prospectus for the Plan, and I agree to conform to all terms and conditions of this Award and the Plan. 
  

			
	  

	 	  

	 Name
	 	 Date

		
	  

	 	  

	 Signature
	 	 AddressAmended and Restated Employment Agreement (David Zalman)

 Exhibit 10.1 
  
 AMENDED AND RESTATED 
 EMPLOYMENT AGREEMENT 
  
 This Amended and Restated Employment Agreement (“Agreement”), dated as of January 1, 1998 (the “Effective Date”) and amended and restated on January 18, 2005 is by and between Prosperity Bank (formerly known as First
Prosperity Bank), a Texas banking association (the “Bank”), and David Zalman, an individual residing in El Campo, Wharton County, Texas (the “Employee”). This Agreement amends and restates the Employment Agreement dated as of
January 1, 1998 by and between the Bank and Employee (the “Original Agreement”). 
  
 W I T N E S S E T H: 
  
 WHEREAS,
the Board of Directors of the Bank and the Board of Directors of Prosperity Bancshares, Inc. (the “Company”), upon recommendation of the Compensation Committee of the Board of Directors of the Company, desires to modify the Original
Agreement to (i) clarify the payments Employee is entitled to receive in the event of Employee’s death or Disability (as defined in Section 8.3 hereof), (ii) clarify the provisions related to certain benefits paid to the Employee upon a Change
in Control (as defined in Section 8.6 of the hereof), specifically with respect to the amount of “parachute payments” Employee may receive and (iii) revise certain benefit amounts and the age of Employee at which this Agreement shall not
extend beyond; and 
  
 WHEREAS, Section 11 of the Original
Agreement provides that it may be amended by a written agreement signed by the parties thereto; and 
  
 WHEREAS, the Board of Directors of the Bank and the Company believe it to be advisable and in the best interests of the Bank and of the Employee to
clarify the Original Agreement and to ensure that the Employee receives all of the payments to which he is entitled under the Agreement and any other contracts, agreements or plans sponsored by the Company or any of its affiliates in the event of
Employee’s death, Employee’s disability or a Change in Control, subject to the limitations set forth herein; 
  
 NOW THEREFORE, to assure the Bank of the Employee’s continued service, the availability of his full attention and dedication to the Bank currently
and in the event of any threatened or pending Change in Control and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Bank and the Employee hereby agree as follows: 
  
 1. Employment. On the terms and subject to the conditions set forth
in this Agreement, the Bank hereby employs Employee, and engages the services of the Employee to serve as President of the Bank, and Employee hereby accepts employment with the Bank according to the terms set forth in this Agreement. 
  
 2. Duties. Employee is hereby employed and shall work at the location
of the Bank or at such other place or places as may be directed by the Bank. The Employee shall have the position (including status, offices, titles and reporting requirements), authority, duties, and responsibilities usually associated with the
president of a bank having assets similar in nature and value to the assets of the Bank. 

 3. Term. The term of this Agreement shall be as follows: 
  
 3.1 Term. The term (“Term”) of this Agreement shall
commence on the Effective Date and continue for a period of three years. 
  
 3.2 Extensions. At the conclusion of each anniversary of the execution date of this Agreement or any extensions thereof, the Term of this Agreement shall automatically be extended for an additional year, unless
this Agreement is terminated in accordance with Section 7 hereof; provided however, that the Agreement shall not extend beyond the year in which Employee turns sixty-seven (67) years of age. 
  
 4. Compensation and Benefits. The compensation and other benefits
payable to Employee under this Agreement shall constitute the full consideration to be paid to Employee for all services to be rendered by Employee to the Bank. 
  
 4.1 Base Salary. During the first year of the Term of this Agreement, the Bank shall pay Employee a base salary
(“Base Salary”) of $180,000 per annum, commencing on the date of execution of this Agreement. The Employee’s Base Salary shall be payable in accordance with the Bank’s customary policies, subject to payroll and withholding
deductions as may be required by law and other deductions applied generally to employees of the Bank for insurance or other employee benefit plans. 
  
 4.2 Annual Review. The Employee’s Base Salary shall be reviewed annually by the Executive Committee of the Board of Directors of the Bank and
may be increased from time to time at the discretion of the Board of Directors. 
  
 4.3 Reimbursement of Expenses. Employee shall be reimbursed for any and all reasonable costs and expenses incurred by Employee in performance of his services and duties as specified in this Agreement or
incurred by Employee on behalf of, or in furtherance of the business of, the Bank, including, but not limited to business expenses incurred in connection with travel and entertainment; provided, however, that Employee shall submit to the Bank
supporting receipts and information satisfactory to the Bank with respect to such reasonable costs and expenses. The Employee shall also be provided with the use of an automobile of Employee’s selection with a purchase cost not exceeding
$65,000, and the Bank will reimburse all operating expenses incurred by Employee for use of such automobile in carrying out Employee’s duties for the Bank. Upon termination of this Agreement, Employee shall be entitled to purchase the
automobile from the Bank by payment of the NADA trade-in value of such automobile. 
  
 4.4 Benefits. During the term of Employee’s employment, he shall be entitled (i) to receive health insurance benefits with the same coverages and deductibles as are currently in effect with respect to
Employee and his spouse (subject to the availability of such benefits at a reasonable cost), (ii) to participate in the Bank’s other benefit plans to such extent as determined by the Board of Directors of the Bank, (iii) to participate in the
Bank’s other policies, including vacation and sick leave. 
  

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 5. Conflicts of Interests; Covenant Not to Compete. 
  
 5.1 Employee shall, during the term of this Agreement, devote his time,
attention, energies and business efforts to his duties as an employee of the Bank and to the business of the Bank. Employee shall not, during the term of this Agreement, directly or indirectly, for and on behalf of himself or any person, firm,
partnership, corporation or other legal entity, own, manage, operate, control, invest in, make loans on advances to, guarantee the obligations of or participate in the ownership or management or operations of or be employed by or otherwise engage in
the operation of any business that is in competition in any manner whatsoever with the business of the Bank. 
  
 6. Confidential Information. 
  
 6.1 As used herein, “Confidential Information” means all technical and business information (including financial statements and related books
and records, personnel records, customer lists, arrangements with customers and suppliers, manuals and reports) of the Bank and its affiliates which is of a confidential and/or proprietary character and which is either developed by Employee (alone
or with others) or to which Employee has had access during his employment. Employee shall, both during and after his employment with the Bank, protect and maintain the confidential and/or proprietary character of all Confidential Information.
Employee shall not, during or after termination of his employment, directly or indirectly, use (for himself or another) or disclose any Confidential Information, for so long as it shall remain proprietary or protectible as confidential, except as
may be necessary for the performance of his duties under this Agreement. 
  
 7. Termination. 
  
 7.1
Termination of Agreement. Except as may otherwise be provided herein, this Agreement may terminate prior to the end of the Term upon the occurrence of: 
  

(a) Thirty (30) days after written notice of termination is given by either party to the other; or 
  
 (b) Employees’s death or, at the Bank’s option,
upon Employee’s becoming Disabled (as defined in Section 8.3 hereof). 
  
 Any
notice of termination given by Employee to the Bank under Section 7.1(a) above shall specify whether such termination is made with or without Good Reason-Change in Control (as defined in Section 8.5 hereof). Any notice of termination given by the
Bank to Employee under Section 7.1(a) above shall specify whether such termination is with or without Cause (as defined in Section 8.4 hereof. 
  
 8. Obligations of the Bank Upon Termination. 
  
 8.1 Cause and Other than for Good Reason-Change in Control. If the Bank terminates this Agreement with Cause (as defined in Section 8.4) pursuant
to Section 7.1(a) above, or if Employee terminates this Agreement without Good Reason-Change in Control pursuant to Section 7.1(a) hereof, this Agreement shall terminate without further obligations to 

  

 -3- 

 
Employee, other than those obligations owing or accrued to, vested in, or earned by Employee through the date of termination, including, but not limited to:

  
 (a) to the extent not theretofore paid,
Employee’s Base Salary in effect at the time of such termination through the date of termination; and 
  
 (b) in the case of compensation previously deferred by Employee, all amounts previously deferred (together with any accrued interest
thereon) and not yet paid by the Bank and any accrued vacation pay not yet paid by the Bank; and 
  
 (c) all other amounts or benefits owing or accrued to, vested in, earned by Employee through the date of termination under the then
existing or applicable plans, programs, arrangements, and policies of Bank. 
  
 The aggregate amount of such obligations owing or accrued to, vested in, or earned by Employee through the date of termination shall be paid by the Bank to Employee in cash in one lump sum within thirty (30) days after the date of
termination. 
  
 8.2 Good Reason-Change in Control; Other than
for Cause Before or After a Change in Control. If Employee terminates this Agreement with Good Reason-Change in Control pursuant to Section 7.1(a) hereof, or if the Bank terminates this Agreement without Cause before or after the occurrence of a
Change in Control pursuant to Section 7.1(a) hereof, the Bank shall pay to Employee cash in one lump sum within thirty (30) days after the date of termination the aggregate of the following amounts (the “Change in Control-Lump Sum
Payment”): 
  
 (i) to the extent not
theretofore paid, Employee’s Base Salary at the annual rate in effect at the time of such termination through the date of termination; and 
  
 (ii) to the extent not theretofore paid, any bonus through the date of termination; and 
  
 (iii) in the case of compensation previously deferred by
Employee, all amounts previously deferred (together with any accrued interest thereon) and not yet paid by the Bank, and any accrued vacation pay not yet paid by the Bank; and 
  
 (iv) all other amounts or benefits owing or accrued to, vested in, or earned by Employee through the date of
termination under the then existing or applicable plans, programs, arrangements, and policies of the Bank; and 
  
 (v) an amount equal to three (3) times the Employee’s Base Salary in effect at the time of such termination. 
  
 8.3 Death or Disability. 
  
 (a) If Employee’s employment is terminated under
Section 7.1(b) hereof by reason of Employee’s death, the Bank shall pay to Employee’s legal representatives, 

  

 -4- 

 
within thirty (30) days after the date of Employee’s death, cash in one lump sum equal to aggregate of the following amounts: 
  
 (i) to the extent not theretofore paid, Employee’s Base
Salary at the annual rate in effect at the time of death through the date of death; and 
  
 (ii) in the case of compensation previously deferred by Employee, all amounts previously deferred (together with any accrued interest
thereon) and not yet paid by the Bank, and any accrued vacation pay not yet paid by the Bank; and 
  
 (iii) all other amounts or benefits owing or accrued to, vested in, or earned by Employee through the date of death under the then
existing or applicable plans, programs, arrangements, and policies of the Bank; and 
  
 (iv) an amount equal to three (3) times the Employee’s Base Salary in effect at the time of death. 
  
 Anything in this Agreement to the contrary notwithstanding, the
Employee’s legal representatives or beneficiaries shall be entitled to receive benefits provided under the then existing or applicable plans, programs, or arrangements and policies of the Bank relating to death. 
  
 (b) If Employee’s employment is terminated under
Section 7.1(b) hereof by reason of Employee’s Disability, the Bank shall pay to Employee, within thirty (30) days after the date of termination by reason of Employee’s Disability, cash in one lump sum equal to the aggregate of the
following amounts (other than with respect to clause (iv) if an annuity is purchased): 
  
 (i) to the extent not theretofore paid, Employee’s Base Salary at the annual rate in effect at the time of such termination through
the date of such termination; and 
  
 (ii) in the
case of compensation previously deferred by Employee, all amounts previously deferred (together with any accrued interest thereon) and not yet paid by the Bank, and any accrued vacation pay not yet paid by the Bank; and 
  
 (iii) all other amounts or benefits owing or accrued to,
vested in, or earned by Employee through the date of termination under the then existing or applicable plans, programs, arrangements, and policies of the Bank; and 
  
 (iv) an amount equal to the higher of (a) three (3) times the Employee’s Base Salary then in effect or
(b) three (3) times Employee’s average base salary over the preceding five calendar years to be paid, at the Employee’s option, in a lump sum cash payment or through the purchase of an annuity, with a purchase price equal to such amount,
of a type to be selected by Employee, subject to approval by the Company’s Compensation Committee, which approval shall not be unreasonably withheld. 
  

 -5- 

 Anything in this Agreement to the contrary notwithstanding, the Employee or the Employee’s legal
representatives or beneficiaries shall be entitled to receive benefits provided under the then existing or applicable plans, programs, or arrangements and policies of the Bank relating to disability. As used herein, “Disabled” shall mean
total disability as determined pursuant to the Bank’s long term disability plan or, if no such plan shall be in effect, by the Board of Directors of the Bank in accordance with their reasonable business judgment and the normal personnel
practices of the Bank. 
  
 8.4 Cause. As used in this
Agreement, the term “Cause” means (i) willful misconduct by Employee, (ii) the gross neglect by Employee of his duties as an employee, officer or director of the Bank which continues for more than thirty (30) days after written notice from
the Bank to Employee specifically identifying the gross negligence of Employee and directing Employee to discontinue same, (iii) the commission by Employee of an act, other than an act taken in good faith within the course and scope of
Employee’s employment, which is directly detrimental to the Bank and which act exposes the Bank to material liability, (iv) the Employee having been indicted for or convicted of any felony or other crime involving moral turpitude, or (v)
current illegal use of narcotics, illegal drugs or controlled substances by Employee, or the current use of alcohol by the Employee to an extent which materially impairs the performance of Employee’s duties. 
  
 8.5 Good Reason-Change in Control. As used in this Agreement, the term
“Good Reason-Change in Control” means after the occurrence of a Change in Control (as defined in Section 8.6) and a determination by Employee that any one or more of the following events has occurred: 
  
 (a) the assignment by the Bank to Employee of duties that
are inconsistent with the position of President at the time of such assignment, or the removal by the Bank from Employee of those duties usually appertaining to the position of President at the time of such removal; or 
  
 (b) a change by the Bank, without Employee’s prior
written consent, in Employee’s responsibilities to the Bank as such responsibilities existed at the time of the occurrence of such Change in Control (or as such responsibilities may thereafter exist from time to time as a result of changes in
such responsibilities made with Employee’s prior written consent); or 
  
 (c) the failure of the Bank to continue to provide Employee with office space, related facilities and support personnel (including, but not limited to, administrative and secretarial assistance) that are both
commensurate with the position of President and Employee’s responsibilities to and position with the Bank at the time of the occurrence of such Change in Control and not materially dissimilar to the office space, related facilities and support
personnel provided to other key executive officers of the Bank; or 
  
 (d) a reduction by the Bank in the amount of Employee’s Base Salary specified in Section 4.1(a) (or as subsequently increased) and as in effect at the time of the occurrence of such Change in Control, or a
failure of the Bank to pay such Base Salary to the Employee at the time and in the manner specified in Section 4.1(a) of this Agreement; or 
  

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 (e) the relocation, without Employee’s prior written consent, of the Bank’s
principal executive offices to a location outside the county in which such offices are located at the time of the occurrence of such Change in Control; or 
  
 (f) the failure of the Bank to obtain the assumption by any successor to the Bank of the obligations imposed upon the Bank under this
Agreement, as required by Section 15 of this Agreement; or 
  
 (g) the employment of Employee under this Agreement is terminated by the Bank without Cause; or 
  
 (h) the Bank notifies Employee of the Bank’s intention not to observe or perform one or more of the obligations of the Bank under
this Agreement; or 
  
 (i) the Bank breaches any
provision of this Agreement. 
  
 8.6 Change in Control. As
used herein, the term “Change in Control” shall mean the occurrence with respect to Prosperity Bancshares, Inc. (“Bancshares”) or the Bank of any of the following events: (a) the acquisition of all or substantially all of the
assets of Bancshares or the Bank, (b) the acquisition of securities representing 25% or more of the issued and outstanding voting securities of Bancshares or the Bank or (c) Bancshares or the Bank is acquired pursuant to a merger, consolidation or
other corporate reorganization. 
  
 8.7 Limitation of
Payments. Notwithstanding anything in this Agreement to the contrary, if Employee is a “disqualified individual” (as defined in Section 280G(c) of the Internal Revenue Code of 1986, as amended (the “Code”)) and the payments
provided for in this Agreement, together with any other payments which Employee has the right to receive from the Company or the Bank, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), and Employee is
not subject to any agreement providing for “gross-up” payments to Employee of such amounts as may be necessary to pay any applicable excise tax under Section 4999 of the Code and any applicable income tax relating thereto, the total amount
of all such payments that constitute “parachute payments” shall be reduced to an amount that is one dollar ($1.00) less than three (3) times Employee’s “base amount” (as defined in Section 280G(b)(3) of the Code) so that no
portion of such payments to Employee shall be subject to the excise tax imposed by Section 4999 of the Code; provided, however, that such reduction shall occur only if such reduction will result in a greater net after-tax payment to Employee than
would the payment of all such amounts without reduction (taking into account any applicable excise tax under Section 4999 of the Code and any applicable income tax). 
  
 9. Notices. Any notice under this Agreement must be in writing and may be given by certified or registered mail,
postage prepaid, addressed to the party or parties to be notified with return receipt requested, or by delivering the notice in person. For purposes of notice, the address of Employee or any administrator, executor or legal representative of
Employee or his estate, as the case may be, shall be the last address of the Employee on the records of the Bank. The address of the Bank shall be its principal business address. 
  

 -7- 

 10. Controlling Law. This Agreement shall be governed by the laws of the State of Texas.

  
 11. Entire Agreement. This Agreement contains the
entire agreement of the parties and may only be amended in writing signed by both parties; provided, that no amendment to this Agreement shall be effective unless authorized by resolution of the Board of Directors and signed on behalf of the Bank by
a duly authorized officer of the Bank other than Employee. 
  
 12.
Remedies, Modification and Separability. Employee and the Bank agree that Employee’s breach of Sections 5 and 6 of this Agreement will result in irreparable harm to the Bank, that no adequate remedy at law is available, and that the Bank
shall be entitled to injunctive relief; however, nothing herein shall prevent the Bank from pursuing any other remedies at law or at equity available to the Bank. Should a court of competent jurisdiction declare any of the covenants set forth in
Sections 5 or 6 unenforceable, the court shall be empowered to modify or reform such covenants so as to provide relief reasonably necessary to protect the interests of the Bank and Employee and to award injunctive relief, or damages, or both, to
which the Bank may be entitled. If any provision of this Agreement is declared by a court of last resort to be invalid, the Bank and Employee agree that such declaration shall not affect the validity of the other provisions of this Agreement. If any
provision of this Agreement is capable to two constructions, one of which would render the provision void and the other of which would render the provision valid, then the provision shall have the construction which renders it valid. 
  
 13. Preservation of Business; Fiduciary Responsibility. Employee shall
use his best efforts to preserve the business and organization of the Bank, to keep available to the Bank the services of its present employees and to preserve the business relations of the Bank with suppliers, distributors, customers and others.
Employee shall not commit any act which would injure the Bank. Employee shall observe and fulfill proper standards of fiduciary responsibility attendant upon his Office. 
  
 14. Assignments. This Agreement is personal to Employee and without the prior written consent of the Bank shall not
be assignable by Employee other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Employee’s legal representatives and heirs. This Agreement shall inure to the benefit of
and be binding upon the Bank and its successors and assigns. The Bank shall require any corporation, entity, individual or other person who is the successor (whether direct or indirect, by purchase, merger, consolidation, reorganization, or
otherwise) to all or substantially all of the business or assets of the Bank to expressly assume and agree to perform, by a written agreement in form and substance satisfactory to Employee, all of the obligations of the Bank under this Agreement. As
used in this Agreement, the term “Bank” shall mean the Bank as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, written agreement, or
otherwise. 
  
 15. Waiver of Breach. The waiver by the Bank
of a breach of any provision of this Agreement by Employee shall not operate or be construed as a waiver by the Bank of any subsequent breach of Employee. 
  

 -8- 

 16. Revocation of Previous Employment Agreements. Any and all previous employment agreements
existing between the Bank and Employee are revoked and canceled. 
  
 17. Headings. The section headings in this Agreement are for convenience of reference and shall not be used in the interpretation or construction of this Agreement. 
  
 18. Attorney’s Fees. In the event Bank or Employee breaches any term or provision of this Agreement and the
other party employs an attorney or attorneys to enforce the terms of this Agreement, then the breaching or defaulting party agrees to pay the other party the reasonable attorney’s fees and costs incurred to enforce this Agreement. 

 
 19. Execution. This Agreement may be executed in multiple
counterparts each of which shall be deemed an original and all of which shall constitute one instrument. 
  
 [SIGNATURE PAGE FOLLOWS] 
  

 -9- 

 Employee acknowledges that he has read this Agreement and understands that signing this Agreement is a
condition of employment. 
  
 IN WITNESS WHEREOF, this Agreement is
executed as of the 18th day of January, 2005. 
  

							
	“EMPLOYEE”	 	 	 	“BANK”
			
	 	 	 	 	Prosperity Bank
				
	 /s/ David Zalman

	 	 	 	By:	 	 /s/ James D. Rollins III

	David Zalman	 	 	 	Name:	 	James D. Rollins III
	 	 	 	 	Title:	 	Vice Chairman
				
	 	 	 	 	By:	 	 /s/ Peter Fisher

	 	 	 	 	Name:	 	Peter Fisher
	 	 	 	 	Title:	 	Vice Chairman and General Counsel

  

 -10-

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