UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,COMISSION

WASHINGTON, D.C. 20549


SCHEDULE 14A


(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuantpursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.)


Filed by the Registrantx        Filed by a Party other than the Registrant¨


Check the appropriate box:

Preliminary Proxy Statement

¨Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

¨Definitive Proxy Statement

¨Definitive Additional Materials

¨Soliciting Material Pursuant to §240.14a-12

Guaranty Bancshares, Inc.


Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to § 240.14a-11(c) or § 240.14a-12

GUARANTY BANCSHARES, INC.                    
(Name of Registrant as Specified Inin Its Charter)


(Name of Person(s) Filing Proxy Statement, if other than the Registrant)


Payment of Filing Fee (Check the appropriate box):

¨No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

 Common Stock, par value $1.00 per share

(2) Aggregate number of securities to which transaction applies:

 61,749

(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 $24.00 (per share price to be paid in the transaction)

(4) Proposed maximum aggregate value of transaction:

 $1,481,976

(5) Total fee paid:

 $175

¨Fee paid previously with preliminary materials.

¨Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:


(2) Form, Schedule or Registration Statement No.:


(3) Filing Party:


(4) Date Filed:




GUARANTY BANCSHARES, INC.

100 W. Arkansas No fee required


Mt.Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1)    Title of each class of securities to which transaction applies:

2)    Aggregate number of securities to which transaction applies:

3)    Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
4)    Proposed maximum aggregate value of transaction:
5)    Total fee paid:                                             

Fee paid previously by written preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

1)    Amount Previously Paid:
2)    Form Schedule or Registration Statement No.:
3)    Filing Party:
4)    Date Filed:




guaranty2018annualmee_image1.gif

201 South Jefferson Street
Mount Pleasant, Texas 75455

(903) 572-9881

                    , 2005

Dear Shareholder:

You are cordially invited to attend the special meeting

NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, MAY 16, 2018
The 2018 Annual Meeting of shareholdersShareholders (the “Meeting”) of Guaranty Bancshares, Inc. (“Guaranty”) on                     , 2005 beginning at              a.m., local time, to be held at the main office of Guaranty Bond Bank at 100 W. Arkansas, Mt. Pleasant, Texas.

At the special meeting, you will be asked to consider and vote on a proposal to approve an Agreement and Plan of Merger which provides for the merger of GB Facilitation, Inc., a newly formed, wholly-owned subsidiary of Guaranty, with and into Guaranty, with Guaranty as the surviving entity in what is commonly referred to as a “going private” transaction. The purpose of the merger is to reduce our number of shareholders of record to fewer than 300, as required for the termination of our registration under the Securities Exchange Act of 1934, as amended (the “Exchange Act”“Company”) and thereby eliminate the burdens and expense required to comply with the reporting and related requirements under those laws.

If the merger agreement is approved and the merger is subsequently completed, shareholders owning fewer than 600 shares of Guaranty common stock (other than shareholders who properly exercise their rights as dissenting shareholders) will receive $24.00 in cash for each share they own as of the effective time of the merger. All other shares will remain outstanding and be unaffected by the merger.

At the special meeting, you will also be asked to consider and vote on a proposal to approve an amendment to Guaranty’s Articles of Incorporation. The amendment would grant us a right of first refusal with respect to certain future transfers of shares of our common stock. This amendment is intended help us control any potential future increases in the number of our record shareholders and enable us to avoid or delay again becoming subject to the reporting requirements under the Exchange Act. Approval of the amendment is contingent upon shareholder approval of the merger agreement and completion of the merger.

Our board of directors believes that the merger agreement and the amendment are in the best interests of Guaranty and our shareholders and unanimously recommends that you vote FOR approval of the merger agreement and FOR approval of the amendment. The approval of the merger agreement and the amendment both require the affirmative vote of the holders of a majority of the outstanding shares of our common stock. Whether or not you plan to attend the special meeting, please complete and return the enclosed proxy card. If you sign, date and return your proxy card without indicating how you want to vote, your proxy will be counted as a vote FOR approval of the merger agreement and FOR approval of the amendment.

The enclosed proxy statement gives you detailed information about the special meeting, the merger, the amendment and related matters. We urge you to carefully read the enclosed proxy statement, including the considerations discussed under “Special Factors,” beginning on page 10 and the appendices to the proxy statement, which include the merger agreement and the amendment. You may also obtain information about Guaranty from documents we have filed with the Securities and Exchange Commission. See “Where You Can Find More Information” on page 54.

On behalf of our Board of Directors, thank you for your continued interest in Guaranty.

Sincerely,

Arthur B. Scharlach, Jr.

Chairman of the Board and

Chief Executive Officer


GUARANTY BANCSHARES, INC.

100 W. Arkansas

Mt. Pleasant, Texas 75455

(903) 572-9881

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD                     , 2005

Notice is hereby given that a special meeting of shareholders of Guaranty Bancshares, Inc., a Texas corporation, will be held at the main office of Guaranty Bond Bank at 100 W.West Arkansas Mt.Street, Mount Pleasant, Texas 75455, on Wednesday, May 16, 2018, beginning at a.m.1:00 p.m. (local time), local time, on                     , 2005, for the following purposes:


1.
To consider and vote upon a proposalelect five Class III directors to approveserve on the Agreement and Planboard of Merger, dated as of June 13, 2005, by and between Guaranty and GB Facilitation, Inc., a Texas corporation and wholly-owned subsidiary of Guaranty (“merger subsidiary”), pursuant to which the merger subsidiary will merge with and into Guaranty, with Guaranty being the surviving corporation;

2.To consider and vote upon an amendment to Guaranty’s Articles of Incorporation which would grant Guaranty a right of first refusal with respect to certain future transfers of shares of Guaranty common stock. The amendment is contingent on shareholder approvaldirectors of the merger agreementCompanyuntil the Company’s 2021 Annual Meeting of Shareholders or until their successors are duly elected and completion of the merger; andqualified;


2.    To ratify the appointment of Whitley Penn LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2018; and

3.To transact such other business as may properly come before the special meetingMeeting or any adjournments or postponementsadjournment(s) thereof.


Guaranty’s shareholders have the right to dissent from the merger and obtain payment in cash of the fair value of their shares of Guaranty common stock under the applicable provisions of Texas law. In order for a shareholder to perfect his or her right to dissent, such shareholder must comply with the provisions of Articles 5.11, 5.12 and 5.13 of the Texas Business Corporation Act regarding the rights of dissenting shareholders. We have attached a copy of Articles 5.11, 5.12 and 5.13 of the Texas Business Corporation Act asAppendix D to the accompanying proxy statement and a summary of these provisions can be found under “Proposal I: Approval of the Merger Agreement—Dissenters’ Rights of Appraisal.”

Only shareholders of record as of theThe close of business on , 2005,March 19, 2018 has been fixedas the record date arefor the determinationof shareholders entitled to notice of and to vote at the special meeting andMeeting or at any adjournments or postponements thereof.

A list of shareholders entitled to vote at the Meeting will be available for inspection by any shareholder at the main office of the Company during ordinary business hours for aperiod of at least ten days prior to the Meeting.

You are cordially invited and urged to attend the Meeting. Regardless of whether you plan to attend the Meeting, you are urged to sign and date the enclosed proxy and return it promptly in the enclosed envelope. If you attendthe Meeting, you may vote in person, regardless of whether you have given your proxy. Your proxy may berevoked at any time before it is voted.

By Order of the Board of Directors,

Arthur B. Scharlach, Jr.

    tyssig.jpg
Ty Abston
Chairman of the Board and

Chief Executive Officer

Mt.& CEO


Mount Pleasant, Texas

                    , 2005

April 5, 2018

Your Vote Is Very Important

YouYOUR VOTE IS IMPORTANT. To ensure your representation at the Meeting, you are cordially invitedurged to attend the special meeting in person. Whether or not you plan to attend the special meeting, please complete, date, and sign the enclosed proxy and mailreturn it promptly in the enclosed envelope. You may revoke your proxy in the manner described in the accompanying envelope at your earliest convenience, regardless of whether you plan to attend the Meeting. No additional postage is necessary if the proxy statementis mailed in the United States. The proxyisrevocable at any time before it isvoted atthe special meeting. If you attend the special meeting, you may vote in person if you wish, even if you have previously returned your proxy card.

The board of directors of Guaranty recommends that you vote FOR approval of the merger agreement and FOR approval of the amendment.Meeting.


PROXY STATEMENT

FOR THE SPECIAL MEETING OF THE

SHAREHOLDERS OF

GUARANTY BANCSHARES, INC.

TO BE HELD ON                     , 2005

This proxy statement is being furnished in connection with the solicitation of proxies by the board of directors of Guaranty Bancshares, Inc. (“Guaranty”) for use at the special meeting of shareholders to be held on                     , 2005 at the main office of Guaranty Bond Bank, 100 W. Arkansas, Mt. Pleasant, Texas beginning at              a.m., local time.

At the special meeting, shareholders of record as of                     , 2005 will vote on (1) a proposal to approve the Agreement and Plan of Merger, dated as of June 13, 2005, by and between Guaranty and GB Facilitation, Inc. (“merger subsidiary”), a newly-formed subsidiary of Guaranty organized for the sole purpose of facilitating the proposed transaction and (2) a proposal to approve an amendment to Guaranty’s Articles of Incorporation. The merger agreement is attached to this proxy statement asAppendix A and the full text of the proposed amendment is attached to this proxy statement asAppendix B.

Pursuant to the merger agreement, merger subsidiary will merge with and into Guaranty, with Guaranty continuing as the surviving corporation. If shareholders approve the merger agreement and the merger is subsequently completed, shareholders owning fewer than 600 shares of Guaranty common stock, in the aggregate, whether of record or in street name (other than shareholders who properly exercise their rights as dissenting shareholders), will receive $24.00 in cash for each share they own as of the effective time of the merger. All other shares will remain outstanding and be unaffected by the merger. After the merger, we anticipate that we will have fewer than 300 shareholders of record. As a result, we will be able to terminate our registration under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and thereby eliminate the significant expense required to comply with the periodic reporting and related requirements of those laws.

The proposed amendment to our Articles of Incorporation would prohibit certain future transfers of Guaranty common stock unless the transferee first offers to sell the shares he or she would like to transfer to Guaranty. The purpose of the amendment is to help us control any potential future increases in the number or our record shareholders to enable us to avoid or delay again becoming subject to the reporting requirements under the Exchange Act. The proposed amendment is contingent on shareholder approval of the merger agreement and completion of the merger.

The merger cannot occur unless the merger agreement is approved by the holders of a majority of the outstanding shares of our common stock. The amendment must also be approved by the holders of a majority of the outstanding shares of our common stock.

Please see “Where You Can Find More Information” on page 54 for additional information about Guaranty on file with the Securities and Exchange Commission (“SEC”).

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of this transaction, passed upon the merits or fairness of this transaction, or passed upon the accuracy or adequacy of the information contained in this proxy statement. Any representation to the contrary is a criminal offense.

Proxy Statement dated                     , 2005 and first mailed to Guaranty shareholders

on or about                     , 2005.


HOW TO OBTAIN ADDITIONAL INFORMATION

This proxy statement incorporates important business and financial information about Guaranty from documents filed with the SEC that have not been included in or delivered with this document. This information is described on page 54 under “Where You Can Find More Information.” You can obtain free copies of this information by writing or calling:

Guaranty Bancshares, Inc.

100 W. Arkansas

Mt. Pleasant, Texas 75455

Attention:  Clifton A. Payne, Chief Financial Officer

Telephone (903) 572-9881

PLEASE NOTE

We have not authorized anyone to provide you with any information other than the information included in this document and the documents to which we refer you. If someone provides you with other information, please do not rely on it as being authorized by us.

Our common stock is not a deposit or bank account and is not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

The words “we,” “our,” and “us,” as used in this proxy statement, refer to Guaranty and its wholly-owned subsidiaries, collectively, unless the context indicates otherwise.

This proxy statement has been prepared as of                     , 2005. There may be changes in the affairs of Guaranty since that date which are not reflected in this document.






IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 16, 2018
This proxy statement, along with our Annual Report to Shareholders, including our Annual Report on Form 10-K for the year ended December 31, 2017, are available free of charge on the following website: www.gnty.com.









TABLE OF CONTENTS

  Page

SUMMARY TERM SHEET

TABLE OF CONTENTS
 1

The Companies

 1

The Merger Agreement

PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON WEDNESDAY, MAY 16, 2018
 

What You will Receive in the Merger

 1

Effects of the Merger on Shareholders

ABOUT THE ANNUAL MEETING
 

Effects of the Merger on Guaranty

 2

Conditions to the Completion of the Merger

PROPOSAL 1 - ELECTION OF DIRECTORS
 3

Material U.S. Federal Income Tax Consequences

General
 3

Reasons for the Merger

Information Regarding Director Nominees
 3

Fairness of the Transaction

 4

Appraisal Rights of Shareholders

CURRENT EXECUTIVE OFFICERS AND DIRECTORS
 4

Proposed Amendment to Articles of Incorporation

General
 4

Special Meeting of Shareholders

Continuing Directors
 5

Shares Entitled to Vote; Quorum and Vote Required

Executive Officers
 5

Effective Time of the Merger

 5

Financing of the Merger

CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
 5

A WARNING ABOUT FORWARD LOOKING STATEMENTS

Board Independence
 6

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

Leadership Structure
 7

SPECIAL FACTORS

Board Meetings
 10

Purpose and Reasons for the Merger

Board Committees
 10

Alternatives Considered

Audit Committee
 12

Background of the Merger

Whitley Penn Fees
 13

Audit Committee Pre-Approval Policies and Procedures

Report of the Audit Committee of the Board of Directors; Fairness of the Merger Proposal

Directors
 16

Determination of Fairness by Merger Subsidiary and Filing Persons

Compensation Committee
 

Opinion of Independent Financial Advisor

Compensation Committee Interlocks and Insider Participation
 

Effects of the Merger on Guaranty

Corporate Governance and Nominating Committee
 23

Effects of the Merger on Shareholders Generally

Director Qualifications
 25

Effects of the Merger on Affiliated Shareholders

KSOP Committee
 27

ExamplesCode of Merger Results

Conduct; Code of Ethics for Chief Executive Officer and Senior Financial Officers
 27

Interests of Executive Officers and Directors in the Merger

Corporate Governance Guidelines
 28

Conduct of Guaranty’s Business AfterShareholder Communications with the Merger

Board
 28

Fees and Expenses

 28

Anticipated Accounting Treatment

EXECUTIVE COMPENSATION AND OTHER MATTERS
 29

Material U.S. Federal Income Tax Consequences

Agreements with Executive Officers
 29

Regulatory Requirements

Summary Compensation Table
 31

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

Outstanding Equity Awards at Fiscal Year-End
 32

CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES

2015 Equity Incentive Plan
 34

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

Employee Bonus Plan
 35

THE SPECIAL MEETING

Employee Stock Ownership Plan
 39

Purpose

Executive Incentive Retirement Plan
 39

39

i


I



Compensation of Directors Page

Shares Entitled to Vote; Quorum and Vote Required

39

Voting Procedures and Revocation of Proxies

40

Attending the Special Meeting

40

Solicitation of Proxies and Expenses

40

PROPOSAL I: APPROVAL OF THE MERGER AGREEMENT

41

Parties to the Merger

41

Structure of the Merger

41

Conversion of Shares in the Merger

41

Effect on Outstanding Options

43

Effective Time of the Merger

43

Exchange of Shares

43

Termination of Exchange Act Registration

43

Source of Funds and Expenses

44

Conditions to the Completion of the Merger

44

Termination of Merger Agreement

44

Dissenters’ Rights of Appraisal

45

PROPOSAL II: APPROVAL OF THE AMENDMENT TO ARTICLES OF INCORPORATION

48

INFORMATION ABOUT GUARANTY AND ITS AFFILIATES

49

Directors and Executive Officers of Guaranty

49

Market for Common Stock and Dividends.

51

Security Ownership of Certain Beneficial Owners and Management

52

Guaranty Common Stock Purchase and Sale Information

53

OTHER MATTERS

54

WHERE YOU CAN FIND MORE INFORMATION

54

Appendix A:

  

Agreement and Plan of Merger

CERTAIN RELATIONSHIPS AND RELATED PERSONS TRANSACTIONS
 A-1
Policies and Procedures Regarding Related Person Transactions

Directed Share Program

Ordinary Banking Relationships
  

Proposed Amendment to Articles of Incorporation

BENEFICIAL OWNERSHIP OF THE COMPANY’S COMMON STOCK BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS OF THE COMPANY
 B-1
Section 16(a) Beneficial Ownership Reporting Compliance

Appendix C:

  

Opinion of Hoefer & Arnett, Incorporated

PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF WHITLEY PENN LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2018
 C-1

Appendix D:

  

Provisions of the Texas Business Corporation Act Relating to Appraisal Rights of Dissenting Shareholders

SHAREHOLDER PROPOSALS AND NOMINATIONS FOR 2019 ANNUAL MEETING
 D-1
COST OF ANNUAL MEETING AND PROXY SOLICITATION
ANNUAL REPORT ON FORM 10-K
OTHER MATTERS

ii



II

SUMMARY TERM SHEET


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PROXY STATEMENT

The following summary term sheet, togetherFOR ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON WEDNESDAY, MAY 16, 2018

We are providing these proxy materials in connection with our 2018 annual meeting of shareholders, to be held at 100 West Arkansas Street, Mount Pleasant, Texas 75455, on Wednesday, May 16, 2018, beginning at 1:00 p.m. (local time). This proxy statement, the “Questions and Answers Aboutnotice of the Special Meetingmeeting and the Merger” following this summary term sheet, highlight selected information from thisenclosed proxy statement and may not contain all of the information that is importantcard are being first sent to you. We urge you to carefully read this entire document and the other documents thatour shareholders on or about April 5, 2018.
When we refer to in this document. These documents will give you a more complete description of the transaction that we are proposing. We have included page references in this summary to direct you to other places in this proxy statement whereto “we,” “our,” “us,” and “the Company,” we are referring to Guaranty Bancshares, Inc., unless the context indicates otherwise. When we refer to “you” and “your,” we are referring to the shareholder reading this proxy statement.


IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE 2018 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON WEDNESDAY, MAY 16, 2018

Pursuant to rules promulgated by the Securities and Exchange Commission (“SEC”), the Company is providing access to its proxy materials both by sending you can find a more complete descriptionthis full set of proxy materials and by notifying you of the documents that we have summarized.

The Companies

Guaranty Bancshares, Inc.

100 W. Arkansas

Mt. Pleasant, Texas 75455

Guaranty, a Texas corporation, is a bank holding company registered underavailability of its proxy materials on the Bank Holding Company ActInternet. You may access the following information at our corporate website, www.gnty.com:

Notice of 1956, as amended. Through its wholly-owned subsidiary, Guaranty Bond Bank, formally known as Guaranty Bank (the “Bank”), Guaranty offers a broad range2018 Annual Meeting of financial productsShareholders to be Held on Wednesday, May 16, 2018;
Proxy Statement for 2018 Annual Meeting of Shareholders to be Held on Wednesday, May 16, 2018;
Form of Proxy; and services
Annual Report to small and medium-sized businesses and consumers through twelve banking locations inShareholders, including the Texas communities of Mt. Pleasant (two offices), Bogata, Commerce, Ft. Stockton, Mount Vernon, Paris, Pittsburg, Sulphur Springs, Talco and Texarkana (two offices). At March 31, 2005, Guaranty had,Annual Report on a consolidated basis, total assets of $552.5 million, total deposits of $444.0 million and shareholders’ equity of $38.5 million.

GB Facilitation, Inc.

100 W. Arkansas

Mt. Pleasant, Texas 75455

The merger subsidiary is a newly-formed Texas corporation organized as a wholly-owned subsidiary of GuarantyForm 10-K for the sole purpose of facilitating the merger. It has engaged in no business activities or operations other than those incident to its formation.

The Merger Agreement (page 41)

We have attached the merger agreement to this document asAppendix A. Please read the merger agreement. It is the legal document that governs the merger.

We propose a merger whereby the merger subsidiary will merge with and into Guaranty. After the merger, we expect our business and operations to continue as they are currently being conducted. We will continue to operate as a bank holding company and the parent corporation for the Bank, but will no longer file reports with the SEC. We expect to complete the merger in the third quarter of 2005.

What You Will Receive in the Merger (page 41)

If the merger is completed, shareholders holding fewer than 600 shares of Guaranty common stock in the aggregate, whether of record or in street name, will receive $24.00 in cash for each share they own as of the effective time of the merger. Shareholders holding 600 or more shares of Guaranty common stock will continue to hold their outstanding shares of Guaranty common stock and will not be entitled to receive any cash payment from us upon completion of the merger.

For purposes of the merger, we may, in our sole discretion, aggregate the outstanding shares held (whether of record or beneficially owned) by any person or persons that we determine to constitute a single holder for purposes of determining the number of shares owned by such holder. Further, under the Exchange Act, securities registered in substantially similar names where we have reason to believe, because of the address or other

indications, that such names represent the same person, may be included as held of record as one person. Accordingly, you may hold shares in street name and in record form, and such shares would be combined for purposes of determining the number of shares you own.

If you are the holder of fewer than 600 shares of our common stock, you will have to surrender your stock certificates representing such shares in order to receive the cash consideration for your shares. Do not send in your certificates until you receive written instructions regarding the certificate exchange process on or after the completion of the merger.

Effects of the Merger on Shareholders (pages 25 and 27)

The merger will have various effects on our shareholders, including:

For shareholders who retain their shares in the merger:

continued ownership of our common stock;

decreased liquidity in our common stock;

decreased access to publicly available information about Guaranty;

a reduction in book value as of March 31, 2005 on a pro forma basis;

an increase in earnings per share forfiscal year ended December 31, 2004 on a pro forma basis and no effect on earnings per share2017.



ABOUT THE ANNUAL MEETING
Q:When and where will the meeting be held?
A:The meeting is scheduled to take place at 1:00 p.m., Central Time, on Wednesday, May 16, 2018, at 100 West Arkansas Street, Mount Pleasant, Texas 75455.
Q:What is the purpose of the meeting?
A:This is the 2018 annual meeting of shareholders of the Company. At the meeting, shareholders will act upon the matter outlined in the notice attached to this proxy statement, including the following:
1.To elect five Class III directors to serve on the board of directors of the Company until the Company’s 2021 annual meeting of shareholders or until their successors are duly elected and qualified;
2.To ratify the appointment of Whitley Penn LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2018; and
3.To transact such other business as may properly come before the meeting or any adjournment(s) thereof.
Q:Who are the nominees for Class III director?
A:The following individuals, who all currently serve as Class III directors, have been nominated for reelection as Class III directors:
James S. Bunch                Weldon C. Miller
Molly Curl                    William D. Priefert
Christopher B. Elliott
The board of directors recommends that you vote FOR the three months ended March 31, 2005 on a pro forma basis; and

a slight increase in their respective percentage ownershipelection of our common stock.

For shareholders receiving cash in the merger:

receipt of $24.00 per share in cash;

loss of their equity and voting interest in Guaranty;

federal income tax liability for any cash received in the merger; and

liquidation of their ownership interest in Guaranty without incurring brokerage costs.

Additional effectseach of the merger on affiliated shareholders (directors, executive officers and 10% or greater shareholders):

eliminationClass III director nominees listed above for election to the board of individual reporting obligations under federal securities laws; anddirectors.

Q:Who is soliciting my vote?
A:Our board of directors is soliciting your vote for the 2018 annual meeting.
Q:What is a proxy?
A:A proxy is a legal designation of another person, the proxy, to vote on your behalf. By completing and returning the enclosed proxy card, or registering your proxy vote by telephone or over the Internet, you are giving the named proxies, who were appointed by our board, the authority to vote your shares in the manner that you indicate on your proxy card or by phone or Internet.
Q:What is a proxy statement?
A:A proxy statement is a document that describes the matters to be voted upon at the meeting and provides additional information about the Company. Pursuant to regulations of the SEC, we are required to provide you with a proxy statement containing certain information when we ask you to sign and return a proxy card to vote your stock at a meeting of the Company’s shareholders.
elimination

Q:Who is entitled to vote at the annual meeting?
A:You are entitled to receive notice of and to vote at the 2018 annual meeting if you owned shares of our common stock at the close of business on March 19, 2018, which is the date that our board of directors has fixed as the record date for the meeting. The record date is established by our board as required by Texas law. On the record date, 11,058,956 shares of our common stock were outstanding.
Q:What are the voting rights of the shareholders?
A:Each holder of common stock is entitled to one vote for each share of common stock registered, on the record date, in such holder’s name on the books of the Company on all matters to be acted upon at the annual meeting. Our certificate of formation prohibits cumulative voting.
The holders of at least a “safe harbor” for dispositions of their shares under federal securities laws.

Effectsmajority of the Merger on Guaranty (page 23)

As a result of the merger:

we will no longer be classified as a public company and will suspend indefinitely our filing of annual and periodic reports and proxy statements with the SEC;

our common stock will no longer be quoted on the Nasdaq Stock Market or any other exchange;

the number of record shareholders, measured as of May 25, 2005, will be reduced from approximately 430 to approximately 184, and the number of outstanding shares of our common stock will decrease from 2,826,012must be represented at the annual meeting, in person or by proxy, in order to approximately 2,764,263;

the percentage of ownership of our common stock beneficially held by executive officers and directors (12 persons) asconstitute a group as of May 25, 2005, will increase from 33.39% to approximately 34.12%;

diluted earnings per share of our common stockquorum for the year ended December 31, 2004 would increase by approximately 5.65% from $1.24 ontransaction of business. At any annual meeting, whether or not a historical basis to approximately $1.31 on a pro forma basis and diluted earnings per share forquorum is present, the three months ended March 31, 2005 of $0.33 will remain unchanged on a pro forma basis;

total shareholders’ equity as of March 31, 2005 would be reduced from approximately $38.5 million on a historical basis to approximately $37.0 million on a pro forma basis, assuming 61,749 shares are cashed out in the merger;

the book value per share of our common stock as of March 31, 2005 would be reduced from $13.20 per share on a historical basis to approximately $12.94 per share on a pro forma basis, assuming 61,749 shares are cashed out in the merger; and

the reduction in our shareholders’ equity described above will cause a corresponding decrease in our regulatory capital ratios. Assuming 61,749 shares are cashed out in the merger, our leverage capital ratio would decrease from 8.62% as of March 31, 2005 to approximately 8.35% on a pro forma basis; our tier 1 capital to risk-weighted assets ratio would be reduced from 12.60% as of March 31, 2005 to approximately 12.23% on a pro forma basis; and our total risk-based capital ratio would decrease from 13.78% as of March 31, 2005 to approximately 13.42% on a pro forma basis.

Conditions to the Completionchairman of the Merger (page 44)

The completion of the merger depends upon the satisfaction of a number of conditions, unless waived, including:

approval of the merger agreement byannual meeting or the holders of a majority of the issued and outstanding shares of our common stock;

all ofstock, present in person or represented by proxy and entitled to vote at the representations and warranties made inannual meeting, may adjourn the merger agreement must be true and correct in all material respects as of the effectiveannual meeting from time of the merger;

absence of pendingto time without notice or threatened litigation regarding the merger; andother announcement.

Q:What is the difference between a shareholder of record and a “street name” holder?
A:These terms describe how your shares are held. If your shares are registered directly in your name with Computershare Trust Company, N.A., our stock transfer agent, you are considered the shareholder of record with respect to those shares. The proxy statement and proxy card have been sent directly to you by Computershare Trust Company, N.A. at our request.
that the aggregate number of shares to be cashed out in the merger, plus the number of shares held by shareholders who delivered their notice to exercise their rights to dissent from the merger pursuant to the provisions of the Texas Business Corporation Act (“TBCA”), does not exceed 100,000 shares.

Material U.S. Federal Income Tax Consequences (page 29)

The receipt of cash in the merger will be taxable for United States federal income tax purposes. You will be treated as either having soldIf your shares are held in a stock brokerage account or by a bank or other nominee, the nominee is considered the shareholder of our common stock forrecord of those shares. You are considered the cash received or as having received the cash as a dividend. In general, your receiptbeneficial owner of cash in exchange forthese shares, and your shares of our common stock will be treated as a sale or exchangeare held in “street name.” The proxy statement and you will recognize gain or loss in an amount equal to the cash received less your adjusted tax basis of your shares exchanged for such cash if you actually and constructively own no shares of our common stock immediately after the exchange. If you actually or constructively own shares of our common stock after the exchange, your receipt of cash in exchange for your shares of our common stock may be taxed as a dividend. Shareholders who do not receive cash should not recognize any gain or loss on continuing to hold their shares of Guaranty common stock as a result of the merger.

For a more complete description of the United States federal income tax consequencesproxy card have been forwarded to you as a result ofby your nominee. As the merger, please read the discussion under “Special Factors—Material U.S. Federal Income Tax Consequences.”

Reasons for the Merger (page 10)

Our principal reasons for effecting the merger are:

the direct and indirect cost savings of approximately $350,000 per year that we expect to experience as a result of the deregistration of our common stock under the Exchange Act; and

our belief that our shareholders have not benefited proportionately from the costs relating to the registration of our common stock, principally as a result of the thin trading market for our stock.

Fairness of the Transaction (page 16)

We believe that the merger is fair to our unaffiliated shareholders who will receive cash in the merger and to our unaffiliated and affiliated shareholders who will retain their shares. Our Board of Directors has approved the merger agreement and the transactions contemplated thereby. The Board’s opinion is based on several factors, which are summarized beginning on page 16. These factors include:

Independent Valuation: According to an independent valuation prepared by Hoefer & Arnett, Incorporated (“Hoefer & Arnett”), the fair value of our common stock as of May 17, 2005 was $24.00 per share.

Opinion of Independent Financial Advisor: Hoefer & Arnett has delivered its opinion to our Board of Directors that the $24.00 per share price to be paid in the merger is fair, from a financial point of view, to our shareholders, both those who will receive cash in the merger and those who will retain their shares in the merger. A copy of the opinion is attached asAppendix C. See “Special Factors—Opinion of Independent Financial Advisor” on page 20 for additional information.

Historical Market Prices of Guaranty Common Stock: The low and high sales prices of our common stock reported by the Nasdaq Stock Market over the past two years have ranged from $16.40 to $24.00 per share, with trades during the first six months of 2005 ranging from $17.50 to $23.38. See “Information about Guaranty and its Affiliates—Guaranty Common Stock Purchase and Sale Information” on page 53, and “—Market for Common Stock and Dividends” on page 51 for more specific information regarding prices at which our shares have been sold.

Premium to Book Value: The price per share to be paid in the merger reflects a multiple of 1.82 times our March 31, 2005 book value per share, representing a 81.82% premium over book value.

Going Concern Value: The price per share to be paid in the merger reflects Guaranty as a going concern and was not based on an amount that might be realized in a sale of 100% of our stock, since the merger will not result in a change in control of Guaranty.

Earnings Multiple: The price per share to be paid in the merger reflects a multiple of 19.35 times our earnings per share for the year ended December 31, 2004.

Liquidity Event: The merger will allow our shareholders owning fewer than 600 shares to liquidate their holdings without incurring brokerage costs. The Board believes this provides a benefit to our shareholders, particularly given the limited trading volume for our shares.

Appraisal Rights of Shareholders (page 45)

As a shareholder of Guaranty, under the provisions of the TBCAbeneficial owner, you have the right to dissent fromdirect your nominee concerning how to vote your shares by using the merger. voting instructions your nominee included in the mailing or by following its instructions for voting.

Q.What is a broker non-vote?
A.A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner. Your broker has discretionary authority to vote your shares with respect to the ratification of the appointment of Whitley Penn LLP as our independent registered public accounting firm (Proposal 2). In the absence of specific instructions from you, your broker does not have discretionary authority to vote your shares with respect to the election of Class III directors to our board (Proposal 1).


Q:What should I do if I receive more than one set of voting materials?
A:You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. Similarly, if you are a shareholder of record and hold shares in a brokerage account, you will receive a proxy card for shares held in your name and a voting instruction card for shares held in “street name.” Please complete, sign, date and return each proxy card and voting instruction card that you receive to ensure that all your shares are voted.
Q:    What is “householding” and how does it affect me?
A:With respect to eligible shareholders who share a single address, we are sending only one copy of the notice and proxy statement to that address unless we have received instructions to the contrary from any shareholder at that address. Eligible shareholders will continue to have access and receive separate proxy cards. This practice, known as “householding,” is designed to reduce our printing and postage costs. However, a shareholder of record residing at such address who wishes to receive a separate copy of the notice and proxy statement in the future may contact us by mail at Guaranty Bancshares, Inc., 201 South Jefferson Avenue, Mount Pleasant, Texas 75455, Attn: Corporate Secretary, or by phone at (903) 572-9881. Eligible shareholders of record receiving multiple copies of the notice and proxy statement can request householding by contacting us in the same manner. Shareholders who own shares through a bank, broker or other nominee can request householding by contacting the bank, broker or other nominee.
Q:What do I need to do now?
A:After you have thoroughly read and considered the information contained in this proxy statement, you simply need to vote your shares of common stock, either in person or by proxy, at the annual meeting. The process for voting your shares depends on how your shares are held as described above.
If you are a record holder on the merger is approvedrecord date for the annual meeting, you may vote by proxy or you may attend the shareholdersannual meeting and consummated, any shareholder who properly perfects his rightvote in person. If you are a record holder and want to dissentvote your shares by proxy, you have three ways to vote:
simply indicate on the merger will be entitledproxy card(s) applicable to receive an amount of cash equal to the fair value of his or her shares rather than the consideration provided by the merger agreement.

Proposed Amendment to Articles of Incorporation (page 48)

The proposed amendment to the Articles of Incorporation is designed to grant us a right to purchase the shares of ouryour common stock that a shareholder desireshow you want to transfer if that transfer would result in an increasevote and sign, date and mail your proxy card(s) in the number of our record shareholders. The amendment is intended to help us control any potential future increases in the number of our record shareholders and enable us to avoid or delay again becoming subject to the reporting requirements under the Exchange Act.

The amendment would be effective when Guaranty files articles of amendment with the Secretary of State of Texas. In accordance with Texas law, the restriction imposed by the amendment would not be binding with respect to shares issued before shareholder approval of the amendment unless the shareholder voted for approval of the amendment. We intend to file the articles of amendment promptly following completion of the merger.

The amendment is contingent on shareholder approval of the merger agreement and completion of the merger. The merger is not contingent on shareholder approval of the amendment.

If the amendment is approved and becomes effective, if you are the holder of 600 or more shares of our common stock and you voted in favor of the amendment, we will ask that you surrender your stock certificate(s) representing your shares to receive a new stock certificate(s) which will include information regarding the transfer restriction.

Special Meeting of Shareholders (page 39)

The special meeting of Guaranty shareholders will be held on                 , 2005, at          a.m., local time, at the main office of Guaranty Bond Bank at 100 W. Arkansas, Mt. Pleasant, Texas. At the special meeting, you will be asked:

to consider and vote upon a proposal to approve the merger agreement that provides for the merger of the merger subsidiary with and into Guaranty;

to consider and vote upon a proposal to approve the amendment to our Articles of Incorporation that grants us a right of first refusal with respect to certain future transfers of our common stock; and

to act on any other matters that may be submitted to a vote at the special meeting or any adjournments or postponements of the special meeting.

Shares Entitled to Vote; Quorum and Vote Required (page 39)

Approval of the merger agreement and the amendment each require the approval of the holders of a majority of the outstanding shares of our common stock. As of the close of business on                 , 2005, there were              shares of our common stock entitled to notice of and to vote at the special meeting. All holders of record of our common stock as of                 , 2005, will receive a copy of this proxy statement and are entitled to vote at the special meeting.

Effective Time of the Merger (page 43)

The merger will become effective at the date and time specified in the certificate of merger to be issued by the Secretary of State of Texas. If our shareholders approve the merger agreement at the special meeting, and if the other conditions to the parties’ obligations to effect the merger are met or waived by the party entitled to do so, we anticipate that the merger will be completed in the third quarter of 2005, although delays could occur.

Financing of the Merger (page 44)

We estimate that approximately $1.5 million will be required to pay for the shares to be exchanged in the merger and that the expenses related to the merger will be approximately $120,000. We intend to use existing cash generated from our operations to fund the merger. Although it is not anticipated that we will need funds in excess of cash on hand to finance the merger, if additional funds are required, it is likely we will borrow such funds from one of our correspondent banks.

A WARNING ABOUT FORWARD LOOKING STATEMENTS

We have made forward-looking statements within in the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act in this proxy statement (and in documents to which we refer you in this proxy statement) that are subject to risks and uncertainties. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of invoking these safe harbor provisions. You can identify these statements from our use of the words “anticipate,” “believe,” “continue,” “expect,” “estimate,” “intend,” “may,” “will,” “should” and similar expressions. These forward-looking statements include information about possible or assumed future results of our operations after the transaction is completed. Important factors that could cause actual results or developments to differ materially from estimates or projections contained in our forward-looking statements include, without limitation:

general business and economic conditions in the markets we serve may change or be less favorable than anticipated;

deposit attrition, operating costs, customer loss and business disruption may be greater than expected;

competition among financial services companies may increase;

changes in the interest rate environment may reduce our interest margins;

changes in market rates and prices may impact the value of our securities, loans, deposits and other financial instruments;

our actual cost savings resulting from the transaction are less than expected or we are unable to realize those cost savingsenclosed pre-addressed postage-paid envelope as soon as expected;

legislative or regulatory changes may adversely affect our businesses;

personal or commercial customers’ bankruptcies increase;

changes may occurpossible to ensure that it will be received in the securities markets; and

operational risks may occur, including data processing system failures or fraud.

A forward-looking statement may include a statementadvance of the assumptionsannual meeting;

call 1-800-652-VOTE (8683) using a touch-tone telephone and follow the instructions provided on the call; or bases underlying
go to the forward-looking statement. We believe we have chosen these assumptions or baseswebsite www.envisionreports.com/GNTY and follow the instructions for Internet voting on that website.
Your proxy card must be received by the Company by no later than the time the polls close for voting at the annual meeting for your vote to be counted at the annual meeting. Please note that telephone and Internet voting will close at 12:00 a.m., Central Time, on Wednesday, May 16, 2018.
Voting your shares by proxy will enable your shares of common stock to be represented and voted at the annual meeting if you do not attend the annual meeting and vote your shares in good faith and that they are reasonable. However, we caution you that assumptions or bases almost always vary from actual results, and the differences between assumptions or bases and actual results can be material. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this proxy statement, any supplement to this proxy statement and the documents we have incorporated by reference. We will not update these statements unless the securities laws require us to do so.

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

person.


Q:What will happen in the merger?

A:Q:In the merger, the merger subsidiary will be merged with and into Guaranty, with Guaranty being the surviving corporation. As a result of the merger, shareholders who own fewer than 600 shares of our common stock, except for shares owned by shareholders who properly exercise their rights as dissenting shareholders, will receive $24.00 in cash for each share owned as of the effective time of the merger. Shareholders who own 600 or more shares of our common stock will continue to hold shares of our common stock and will not receive any cash in connection with the merger. The merger agreement, a copy of which is attached hereto asAppendix A, has specific provisions regarding the treatment of shares held in street name. Please read the discussion under “Proposal I: Approval of the Merger Agreement—Conversion of Shares in the Merger” for a description of these provisions generally as well as the terms of the merger agreement.

Q:When do you expect the merger to be completed?

A:We are working toward completing the merger as quickly as possible, and we expect the merger to be completed during the third quarter of 2005, although delays could occur.

Q:What are the shareholders being asked to vote upon?

A:The shareholders are being asked to approve (1) the merger agreement providing for the merger of the merger subsidiary with and into Guaranty and (2) an amendment to the Articles of Incorporation granting us a right of first refusal with respect to certain future transfers of our common stock. If successfully completed, the merger will reduce the number of our shareholders, which will enable us to discontinue our reporting requirements under the Exchange Act, thereby eliminating the significant expense related to those reporting requirements. If the amendment is approved, it would grant us a right of first refusal with respect to certain future transfers of shares of our common stock, and is intended to help us control any potential future increases in the number of our record shareholders, and enable us to avoid or delay again becoming subject to the reporting requirements under the Exchange Act.

Q:What votes are required for approval?

A:Approval of the merger agreement and the amendment each requires the affirmative vote of a majority of shares of our common stock outstanding on                     , 2005.

Q:How does the board of directors recommend that I vote?vote my shares?

A:OurThe board of directors has approved and adopted the merger agreement and the amendment and recommends that you vote FOR approval of the merger agreement and FOR approval of the amendment.a vote:

In considering

FOR the recommendationelection of each of the boardfive Class III director nominees, and
FOR the proposal to ratify the appointment of directors, you should be aware that the members of our Board and the executive officers (12 persons) beneficially own approximately 33.39% of the outstanding shares of our common stock as of May 25, 2005 and all of such persons are expected to continue as shareholders and beneficially own approximately 34.12% of our common stock following the merger. Also, our current executive officers and directors will continueWhitley Penn LLP as our executive officers and directors following the merger. See “Special Factors—Interests of Executive Officers and Directors in the Merger” and “Information About Guaranty and its Affiliates—Security Ownership of Certain Beneficial Owners and Management.”

independent registered public accounting firm for 2018.
Q:What happens
Q:How will my shares be voted if I transferreturn a signed and dated proxy card, but don’t specify how my shares after the record date?will be voted?

A:TheIf you are a record date for the special meeting is earlier than the expected date of the merger. Therefore, if you transfer your shares of Guaranty common stock after the record date, but prior to the merger, you will retain the right to vote at the special meeting, but the right to receive any merger consideration will transfer with the shares of common stock.

Q:What do I need to do now?

A:After you have thoroughly reviewed thisholder who returns a completed proxy statement, simply indicate on your proxy card that does not specify how you want to vote your shares on one or more proposals, the proxies will vote your shares for each proposal as to which you provide no voting instructions, and sign, date and complete your proxy card and mail itsuch shares will be voted in the enclosed envelope so that your shares can be represented at the special meeting.following manner:

FOR the election of each of the five Class III director nominees, and
FOR the proposal to ratify the appointment of Whitley Penn LLP as our independent registered public accounting firm for 2018.
If you are a “street name” holder and do not provide voting instructions on one or more proposals, your bank, broker or other nominee will be unable to vote those shares, except that the nominee will have discretion to vote on the ratification of the appointment of Whitley Penn LLP (Proposal 2).
Q:
Q:What happens if I don’t return a proxy card?are my choices when voting?

A:Because approval
Election of the merger agreement and approval of the amendmentClass III Directors (Proposal 1). You may vote FOR or AGAINST, or you may ABSTAIN from voting, with respect to each require the approval of at least a majority of the outstanding shares of our common stock entitled to vote, the failure to return your proxy card has the same effect as if you voted against the merger agreement and against the amendment, unlessdirector nominee.
Ratification of Whitley Penn LLP (Proposal 2). You may vote FOR or AGAINST the proposal, or you may ABSTAIN from voting on the proposal.
Q:Can I attend the special meeting and vote in person.person?

Q:
A:
May IYes. All shareholders are invited to attend the annual meeting. Shareholders of record on the record date for the annual meeting can vote in person?

A:Yes. You may attendperson at the specialannual meeting and may vote. If your shares of common stock are held in “street name,” then you are not the shareholder of record. In order for you to vote the shares that you beneficially own and that are held in “street name” in person rather than signing and mailingat the annual meeting, you must bring a legal proxy card. However, to ensurefrom the broker, bank or other nominee that was the record holder of your shares are representedheld in “street name” as of 5:00 p.m. (Central Time) on the record date, confirming that you were the beneficial owner of those shares as of 5:00 p.m. (Central Time) on the record date, stating the number of shares of which you were the beneficial owner that were held for your benefit at that time by that broker, bank or other nominee and appointing you as the record holder’s proxy to vote the shares covered by that proxy at the specialannual meeting please complete, date and sign the enclosed proxy card and return it in the enclosed envelope.



Q:
Q:May I change my vote after I have mailedsubmitted my signed proxy card?

A:Yes. Just send by mail a written revocation or a later-dated, completed and signed proxy card before the special meeting or attend the special meeting and notify the secretaryRegardless of the specialmethod used to cast a vote, if a shareholder is a holder of record, he or she may change his or her vote by:
delivering to us prior to the annual meeting a written notice of revocation addressed to: Sondra Cunningham, Corporate Secretary, 201 South Jefferson Avenue, Mount Pleasant, Texas 75455;
completing, signing and returning a new proxy card with a later date than your original proxy card prior to such time that the proxy card for any such holder of common stock must be received, and any earlier proxy will be revoked automatically;
logging onto the Internet website specified on your proxy card in the same manner you would to submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case if you are eligible to do so and following the instructions indicated on the proxy card; or
attending the annual meeting and voting in person, and any earlier proxy will be revoked. However, simply attending the annual meeting without voting will not revoke your proxy.
If your shares are held in “street name” and you desire to change any voting instructions you have previously given to the record holder of the shares of which you are the beneficial owner, you should contact the broker, bank or other nominee holding your shares in “street name” in order to direct a change in the manner your shares will be voted.
Q:What vote is required to approve each item?
A:
Election of Class III Directors (Proposal 1). Because this is an uncontested election, meaning the number of nominees is equal to the number of directors to be elected, each nominee will be elected to the board of directors if the nominee receives a majority of the votes cast, which means that you wantthe five Class III director nominees must each receive more votes “for” than “against” to be elected. If any of the nominees fail to obtain a majority of the votes cast, such director will continue to serve until the board of directors acts to either fill the director’s position until a replacement can be elected or to reduce the size of the board, which shall occur no more than 90 days after the annual meeting.
Ratification of Whitley Penn LLP (Proposal 2). The proposal to ratify Whitley Penn LLP as our independent registered public accounting firm for 2018 will be adopted if the votes cast in favor of the proposal exceed the votes cast against the proposal.
Q:How are broker non-votes and abstentions treated?
A:Brokers, as holders of record, are permitted to vote in person. You mayon certain routine matters, but not change your vote by facsimile or telephone.

Q:If my shares are held in “street name” by myon non-routine matters. A broker how will my shares be voted?

A:Yournon-vote occurs when a broker will vote your shares only if you provide instructions on how to vote. You should instruct your broker howdoes not have discretionary authority to vote yourthe shares followingand has not received voting instructions from the directions your broker provides.beneficial owner of the shares. The only routine matter to be presented at the annual meeting is the ratification of the appointment of Whitley Penn LLP as our independent registered public accounting firm (Proposal 2). If you hold shares in street name and do not provide voting instructions to your broker, yourthose shares will not be voted, which will have the same effectcounted as a vote against the merger agreement and a vote against the amendment to our Articles of Incorporation.broker non-votes for all non-routine matters.

A broker non-vote or a withholding of authority to vote with respect to one or more nominees for director will not have the effect of a vote against such nominee or nominees because broker non-votes and abstentions are counted for purposes of determining the presence or absence of a quorum, but are not counted as votes cast at the annual meeting. Any abstentions will not have the effect of a vote against the proposals to ratify the appointment of Whitley Penn LLP as our independent


registered public accounting firm. Because the ratification of the appointment of the independent registered public accounting firm is considered a routine matter and a broker or other nominee may generally vote on routine matters, no broker non-votes are expected to occur in connection with this proposal.
Q:Will my shares held in “street name” or another form of record ownership be combined for voting purposes with shares I hold of record?

A:Q:No. Because any shares you may hold in street name will be deemed to be held by a different shareholder than any shares you hold of record, any such shares will not be combined for voting purposes with shares you hold of record. Similarly, if you own shares in various registered forms, such as jointly with your spouse, as trustee of a trust or as custodian for a minor, you will receive, and will need to sign and return, a separate proxy card for those shares because they are held in a different form of record ownership. Shares held by corporation or business entity must be voted by an authorized officer of the entity, and shares held in an IRA account must be voted under the rules governing the account.

Q:Do I have any dissenters’ or appraisal rights with respect to avoid participating inany of the merger?matters to be voted on at the annual meeting?

A:Yes. You haveNo. None of our shareholders has any dissenters’ or appraisal rights with respect to the rightmatters to withholdbe voted on at the annual meeting.
Q:What are the solicitation expenses and who pays the cost of this proxy solicitation?
A:Our board is asking for your voteproxy, and we will pay all of the costs of soliciting shareholder proxies. We may use officers and employees of the Company to ask for the merger agreement, dissent from the merger and seek the fair value of your sharesproxies, as described below. The Company will reimburse banks, brokerage houses and other custodians, nominees and fiduciaries for their reasonable expense in “Proposal I: Approvalforwarding the proxy materials to beneficial owners of the Merger Agreement—Dissenters’ Rights of Appraisal” beginning on page 45. The fair value may be more or less than the value of ourCompany’s common stock being paid in the merger. In order to perfect your rights to dissent, you must provide us written notice of your intent to dissent from the merger prior to the special meeting and you must not vote in favor of the merger agreement.stock.

Q:If I am receiving cash in the merger, when will I get my money?

A:Q:After the special meeting and the closing of the merger, we will mail you instructions on how to exchange your stock certificate(s) for cash. After you sign the forms provided and return your stock certificate(s), we will send you your payment.

Q:What if I hold shares in street name?

A:Any shares you hold in street name will be added to the number of any shares you may hold directly in record name in determining the number of shares you hold. You will be entitled to receive the cash amount payable in the merger only if you certify to Guaranty that the total number of shares you hold (whether held of record or in street name) is fewer than 600. The merger agreement has detailed provisions regarding the treatment of shares held in street name. Please read the discussion under “Proposal I: Approval of the Merger Agreement—Conversion of Shares in the Merger” for a description of these provisions generally as well as the terms of the merger agreement.

Q:What if I cannot find my stock certificate?

A:The materials we will send you will include an affidavit and indemnity agreement that you will need to sign attesting to the loss of your certificate. Guaranty and its transfer agent will also require that you provide a bond to cover any potential loss to Guaranty.

Q:How will Guaranty be operated after the merger?

A:After the merger, Guaranty will continue to operate as a bank holding company and the parent corporation for the Bank, but will no longer file reports with the SEC. Guaranty expects its business and operations to continue as they are currently being conducted and, except as disclosed inIs this proxy statement the merger is not anticipatedonly way that proxies are being solicited?
A:No. In addition to have any effect upon the conductsolicitation of Guaranty’s business and operations. Our board of directors believes the going-private transaction is consistent with Guaranty’s vision of remaining a community-oriented banking company. As a resultproxies by use of the merger, shareholdersmail, if deemed advisable, directors, officers and regular employees of Guaranty who receive cashthe Company may solicit proxies personally or by telephone or other means of communication, without being paid additional compensation for their sharessuch services.
Q:Are there any other matters to be acted upon at the annual meeting?
A:Management does not intend to present any business at the annual meeting for a vote other than the matters set forth in the mergernotice, and management has no information that others will no longer havedo so. The proxy also confers on the proxies the discretionary authority to vote with respect to any matter presented at the annual meeting for which advance notice was not received by the Company in accordance with the Company’s Third Amended and Restated Bylaws, or the Bylaws. If other matters requiring a continuing interest asvote of the shareholders properly come before the annual meeting, it is the intention of Guarantythe persons named in the accompanying form of proxy to vote the shares represented by the proxies held by them in accordance with applicable law and will not share in any future earnings and growth of Guaranty.their judgment on such matters.

Q:
Where can I find the voting results of the annual meeting?
Preliminary voting results will be announced at the annual meeting. Final voting results will be tallied by the inspector of election after the vote at the annual meeting. We will publish the final voting results in a Current Report on Form 8-K, which we are required to file with the Securities and Exchange Commission within four business days following the annual meeting.
Q:Who can help answer my questions?

A:The information provided above in this “Question and Answer” format is for your convenience only and is merely a summary of the information contained in this proxy statement. We urge you to carefully read this entire proxy statement and the accompanying annual report. If you have additional questions about the mergerproxy statement or the specialannual meeting, you should contact Clifton A. Payne atSondra Cunningham, Corporate Secretary, Guaranty Bancshares, Inc., 100 W. Arkansas, Mt.201 South Jefferson Avenue, Mount Pleasant, Texas 75455, telephone (903) 572-9881.




SPECIAL FACTORS

PROPOSAL 1 - ELECTION OF DIRECTORS
Purpose and Reasons for the Merger

The primary purpose

General
Our board of the merger is to enable us to terminate the registrationdirectors currently consists of our common stock under Section 12(g) of the Exchange Act. Although we intend to keep our shareholders informed regarding our business operations and financial results after the merger, we anticipate that such termination will enable us to save significant legal, accounting and administrative expenses relating to our public disclosure and reporting requirements under the Exchange Act. As a secondary matter, it is likely to decrease the administrative expense we incur in servicing a large number of record shareholders who own relatively small numbers of shares.

We had approximately 430 record shareholders as of May 25, 2005, but approximately 84.89% of the outstanding shares as of that date were held by approximately 43 shareholders. As a result, there is a limited market for our shares and our Board of Directors believes there is little likelihood that a more active market will develop. However, because we have more than 300 shareholders of record and our common stock is registered under Section 12(g) of the Exchange Act, we are required to comply13 directors. In accordance with the disclosure and reporting requirements under the Exchange Act and the Sarbanes-Oxley ActCompany’s Certificate of 2002 (the “Sarbanes-Oxley Act”). These requirements include preparing and filing current and periodic reports with the SEC regarding our business, financial condition, Board of Directors and management team, having these reports reviewed by outside counsel and independent auditors and documenting our internal controls in preparation for an internal control audit to be filed with the SEC.

After the merger, we intend to keep our shareholders informed about our business operations and financial results by delivering annual audited financial statements and quarterly unaudited financial statements to them. We also plan to post these financial statements on our website atwww.gnty.com, which also contains other information about our business. Moreover, our business operations are primarily conducted through our banking subsidiary, Guaranty Bond Bank (the “Bank”), which is required to file quarterly financial reports with the Federal Deposit Insurance Corporation (“FDIC”). These reports are available online atwww.fdic.gov.

We are currently required to comply with many of the same securities law requirements that apply to large public companies with substantially greater compliance resources. Our resources are more limited, however, and securities law compliance activities represent a significant administrative and financial burden to a company of our relatively small size and market capitalization. Our efforts to comply with these requirements also cause us to incur less tangible, but nonetheless significant, costs in management time and attention that could otherwise be deployed toward revenue enhancing activities. The cost of compliance is substantial, representing an estimated direct and indirect annual cost to us approximately $350,000. In light of this expense and the limited trading volume in our common stock, our Board of Directors believes that we and our shareholders receive little relative benefit from being registered under the Exchange Act.

In light of the relatively small benefit we believe our shareholders have received as a result of our status as a public company, we believe the merger will provide a more efficient means of using our capital to benefit our shareholders. At present, we believe that our limited trading market and the resulting inability of our shareholders to have the desired degree of liquidity in their investment in our common stock through an efficient market has resulted in little relative benefit for our shareholders as compared to the costs of maintaining our registration.

The merger is designed to substantially reduce the number of our shareholders of record. As of May 25, 2005, we had approximately 246 shareholders who owned fewer than 600 shares of record. By reducing our number of record shareholders to fewer than 300 thereby allowing us to terminate our registration under the Exchange Act and suspend our reporting obligations, the merger will result in a reduction of the significant administrative, accounting, and legal expenses incurred in complying with disclosure, reporting and compliance requirements under the Exchange Act and the Sarbanes-Oxley Act.

In addition to relieving us of the administrative burden and costs associated with our public disclosure and otherwise complying with the periodic reporting requirements of the Exchange Act as well as decreasing the expense and burden of dealing with our high number of shareholders holding small positions in our common stock, the merger will also allow us:

to permit cashed-out shareholders to receive cash for their shares, without having to pay brokerage commissions, at a fair price that represents a premium of 24.35% over the most recent closing price of our common stock prior to announcement of the merger and a premium 15.61% over the median sales price in the three month period prior to announcement of the merger. If the merger is completed, our executive officers and directors (and all other holders of 600 or more shares) will benefit by a slight increase in their percentage ownership of our common stock and an increase in diluted earnings per share on an annual basis, although the net book value of their holdings will decrease; and

to increase management’s flexibility to consider and initiate actions that may produce long-term benefits and growth without the pressure and expectation to produce quarterly earnings per share growth.

Our Board of Directors considered that some shareholders may prefer to continue as shareholders of a public company. There are many advantages to being a public company, including a more active trading market and the enhanced ability to use company stock to raise capital or make acquisitions. With respect to the trading market, there is a limited market for our common stock and therefore, we have not been able to effectively take advantage of this benefit. Another potential advantage of being a public company is the ability to access capital to meet additional capital needs. Since becoming a public company in 1998, however, we have not made any public offerings of common stock or any other equity or debt securities. We used our common stock as consideration for only one acquisition which occurred in 1999.

Nonetheless, the Board believes that the disadvantages of having us continue to be a public company outweigh the advantages of being a public company. The Board has no present intention to raise capital through sales of securities in a public offering or to acquire other business entities using our stock as the consideration for any such acquisition. Accordingly, we are not likely to make use of any advantage that our status as a public company may offer.

We incur significant direct costs attributable to our compliance with the SEC’s filing and reporting requirements imposed on public companies. We also incur substantial indirect costs as a result of, among other things, the executive time spent to prepare and review such filings. Although it is impossible to specifically quantify these indirect costs, we estimate that our management and staff spend an average of 33% of their time (equating to approximately 20 days per quarter) on activities directly related to compliance with federal securities laws such as preparing and reviewing SEC-compliant financial statements and periodic reports, maintaining and overseeing our disclosure and internal controls, monitoring and reporting transactions and other data related to insiders’ stock ownership and consulting with independent auditors and counsel on compliance matters. Our direct and indirect costs related to being a public company are estimated to approximate $350,000 annually, as follows:

Direct Costs

    

Independent registered public accounting firm

  $70,000

SEC counsel

   25,000

Accounting/internal controls consulting fees

   50,000

Internal compliance costs

   55,000

Indirect Costs

    

Management staff and time

  $150,000
   

Total Costs

  $350,000
   

It is important to note that in addition to the above-referenced estimated annual cost savings, the merger and termination of our Exchange Act registration would result in a significant cost savings due to Guaranty not being

subject to new internal control audit requirements imposed by Section 404 of the Sarbanes-Oxley Act. Preparing Guaranty to comply with Section 404 of the Sarbanes-Oxley Act would require significant expenditures during 2006, including costs related to computer software and hardware, fees to third parties for compliance planning, assessment, documentation and testing and costs related to management and other employees. These costs are estimated to be approximately $300,000.

Alternatives Considered

The 600 share level for shareholders to be cashed out was chosen by management and recommended to our Board of Directors based on an analysis of our shareholder list as of May 25, 2005. Lower threshold numbers were considered and rejected as it was believed they would have created an unacceptably high risk that the transaction would not yield the desired result of having fewer than 300 shareholders of record. Because shareholders are free to buy or transfer shares until the effective time of the merger, we expect that some shareholders will acquire additional shares before the effective time through market purchases or other transactions in order to own more than the threshold number of shares and thus remain a shareholder after the merger. Because the number of shareholders above the threshold could increase before the effective time, it was necessary to select a threshold high enough to allow for possible changes in the composition of the shareholder list without defeating the purpose of the proposed transaction.

In making our determination, we considered other means of achieving the same result, but rejected these alternatives because we believed that the merger would be simplest, most cost-effective manner and would be most likely to achieve the desired result. These other alternatives considered included:

Issuer Tender Offer. We considered an issuer tender offer to repurchase shares of our outstanding common stock. Because acceptance of the tender offer would be voluntary, the results would be unpredictable and we were uncertain as to whether this alternative would result in participation by a sufficient number of record shareholders to accomplish the going private objective. Accordingly, we rejected this alternative.

Reverse Stock Split. We also considered the use of a process known as a reverse stock split as an alternative to the merger. In a reverse stock split, we would reduce the number of issued and outstanding shares of our common stock through an amendment to our articles of incorporation, so that shareholders owning a certain number of shares would own less than one full share of our common stock, and we would pay cash for the resulting fractional share interests. While the reverse stock split and the merger would both achieve the same objective of reducing the number of record shareholders in a predictable manner, we chose the merger because we concluded that a reverse stock split would cost us more in that we would have to pay cash to large shareholders for their fractional shares, even though they would remain shareholders after the transaction. We also considered structuring the transaction as a reverse stock split coupled with (1) an offer to sell additional shares of our common stock to shareholders who would own at least one share following the reverse stock split, or (2) a forward stock split, but we determined these structures to be too complicated and expensive.

Share Reclassification. In addition, the Board considered a share reclassification, which would involve authorization of new class of preferred stock and the exchange by certain shareholders of common stock for the new preferred stock. However, the Board rejected this alternative because it would not provide any liquidity for shareholders owning a small number of shares and would not reduce our costs with respect to servicing a large number of shareholders.

Purchase of Shares in the Open Market. We also considered purchasing shares of our common stock in the open market. We rejected this alternative because we concluded that it was highly unlikely that we could acquire shares from a sufficient number of holders to accomplish the going private objective.

We did not consider other methods to reduce expenses other than going private because (1) these types of transactions are inconsistent with the narrower purpose of the proposed transaction, which is to discontinue our SEC reporting obligations and (2) we were not aware of other methods of achieving expense reductions that were

comparable with those reductions possible through the merger. In addition, we did discuss the possibility of a third party buyout, but we did not pursue this course of action because no third party offer presently existed and we believe that we can best maximize shareholder value by remaining an independent banking organization. Remaining independent will enable us to focus our growth in our target markets and capitalize on our local market presence, which we believe will enhance our earnings.

Other Considerations. In approving and recommending the proposed merger transaction, our directors were aware of potential conflicts of interest, or appearances of conflicts of interest issues. The transaction will result in an increase in the percentage of ownership of all directors and executive officers. As a group, our directors and officers beneficially own approximately 33.39% of the outstanding shares of our common stock and following the effective time of the merger, our directors and executive officers would beneficially own approximately 34.12% of the shares. However, this benefit is shared proportionally by all remaining shareholders. In addition, it is expected that the transaction will, after it is concluded, reduce the risk of litigation and liability to which directors and officers of public companies are exposed.

While the foregoing narration of the factors considered by our Board of Directors is intended to discuss in reasonable detail the material factors on which the Board relied, it does not necessarily reflect all factors involved in the process. In view of the variety of factors considered in connection with the Board’s evaluation of the merger proposal, we did not find it practicable to quantify or otherwise assign relative weights to the specific factors considered in reaching our determination. We considered all the factors as a whole in reaching our determination. In addition, individual members of our Board of Directors may have given different weights to different factors.

The merger proposal is being made at this time because the sooner the proposal can be implemented, the sooner we will cease to incur the expenses and burdens associated with the reporting requirements of the Exchange Act and the sooner shareholders who are to receive cash in the merger will receive and be able to reinvest or otherwise make use of such cash payments. We determined that the merger proposal was the best choice for the shareholders and us. We estimate that following the proposed merger approximately 184 shareholders of record will remain, which will leave us comfortably below the maximum of 300 shareholders of record necessary to terminate our registration under the Exchange Act and no longer be subject to the related reporting requirements.

Background of the Merger

Overview. We were incorporated as a business corporation under the laws of the State of Texas in 1980 to serve as a holding company for Guaranty Bond Bank, formally known as Guaranty Bank, which was chartered in 1913, and for Talco State Bank, which was chartered in 1912 and merged into the Bank in 1997. We offer a broad range of financial products and services to small and medium-sized businesses and consumers through twelve banking locations in the Texas communities Mt. Pleasant (two offices), Bogata, Commerce, Ft. Stockton, Mount Vernon, Paris, Pittsburg, Sulphur Springs, Talco and Texarkana (two offices). Our headquarters are located at 100 W. Arkansas, Mt. Pleasant, Texas 75455, and our telephone number is (903) 572-9881.

The Bank owns interests in five entities which complement our business, the first three of which are wholly-owned: (1) Guaranty Leasing Company, which finances equipment leases and has engaged in certain leveraged lease transactions; (2) Guaranty Company, which owns real estate for future Bank expansion; (3) GB Com, Inc., a nominee company; (4) BSC Securities, L.C., which provides brokerage services; and, (5) Independent Bank Services, L.C., which performs compliance, loan review, internal audit and electronic data processing audit functions. These entities are accounted for in our consolidated financial statements using the equity method of accounting and are included in other assets on the balance sheet.

As of May 25, 2005, there were 2,826,012 shares of Guaranty common stock issued and outstanding and held by 430 record holders. Approximately 246 of these record shareholders held fewer than 600 shares (not including beneficial owners whose shares may be registered in “street” name). Collectively, these 246 record holders own an aggregate of approximately 50,036 shares, representing approximately 1.77% of our outstanding shares. Additionally, based on available information, we estimate that approximately 11,713 shares are held in

street name by brokers or other nominees for the benefit of approximately 48 owners who hold, in the aggregate, fewer than 600 shares of our common stock. These shares will also be cashed out in the merger.

Board of Directors. Our common stock started trading on the National Market System of the Nasdaq Stock Market on May 21, 1998 and we have filed reports under the Exchange Act since 1998. These reports include annual, quarterly and current reports presenting and analyzing our business, financial condition, results of operations and management structure; ongoing reports regarding insiders’ stock transactions and potential short-swing profit liability; and proxy statements disclosing information about our directors and executive officers, their compensation and our corporate governance process. Although our public reporting obligations have existed since 1998, the Sarbanes-Oxley Act of 2002 has added several reporting and procedural requirements that have become effective at various points during the past two years. As a result of the Sarbanes-Oxley Act, we have become subject to heightened compliance and documentation requirements in a variety of areas, including disclosure and internal controls, internal and external audit relationships, and the duties and qualifications of our Board committees. We have also become subject to accelerated and expanded disclosure requirements relating to our corporate and trading activities. As a result of these new requirements, our cost of compliance has increased, particularly relative to our limited personnel resources and market capitalization. We anticipate further significant increases resulting from the upcoming requirement that we prepare and file with the SEC an audited report as to our internal controls for fiscal 2006. See “—Purpose and Reasons for the Merger” on page 10.

As a result of these requirements under the Sarbanes-Oxley Act, in January of 2005 our Board of Directors began to discuss generally the relative benefits and costs, both direct and indirect, relating to continuing our status as a public company.

At the April 2005 Board meeting, our Board formally discussed issues related to continuing our status as a public company, including the alternatives available to effect a going private transaction. Based on these discussions, our Board authorized management to continue to investigate a going-private transaction by reviewing an updated shareholder list, obtaining a valuation of our common stock, hiring financial advisors to prepare a fairness opinion regarding the cash price to be paid in a going private transaction if one was ultimately approved and exploring financing alternatives. Following this meeting, our Chairman and the Chief Financial Officer examined our shareholder list to evaluate the effects of various cash-out thresholds and the costs involved with a going private transaction. Members of our management also discussed the process of going private with outside counsel, including the reverse stock split, merger, share reclassification, open market purchase and tender offer alternatives. We selected Hoefer & Arnett as our financial advisors for this transaction based on (1) its reputation and experience in rendering valuations and fairness opinions, (2) its knowledge of the financial services industry and our business and (3) the overall terms, including fees, of the engagement.

On May 17, 2005, the Board held a regular meeting at which it again discussed information regarding the alternative methods to accomplish a going private transaction, the appropriate cash-out threshold and the advantages and disadvantages of a going private transaction as summarized in “—Alternatives Considered” on page 12 and “—Purpose and Reasons for the Merger” on page 10. The Board also discussed our financial position and the use of cash or borrowings to finance the transaction.

On June 7, 2005, the Board held a special meeting at which it renewed its discussions as to whether it was in our best interests and the best interests of our shareholders to engage in the going private transaction. After lengthy discussion, the Board unanimously determined that we would go forward with the going private proposal in the form of a merger with a newly-formed, wholly-owned subsidiary. The Board also determined that the source of funds for payment to cash-out shareholders would be from our existing cash; provided that if funds were required in excess of cash on hand, management was authorized to borrow such funds.

On May 27, 2005, Hoefer & Arnett delivered to our Chairman and our Chief Financial Officer its final written valuation report, dated May 17, 2005, which described Hoefer & Arnett’s analyses in detail. This valuation report was presented to the Board of Directors at the June 7, 2005 special Board meeting (see “—Opinion of Independent Financial Advisor” on page 20 for a summary of the valuation). Hoefer & Arnett’s independent valuation report provided that the fair value of our common stock was $24.00 per share and included

a detailed explanation of the financial analyses supporting the fair value determination and the methods utilized in preparing its valuation. The valuation report also included a general discussion of approaches to valuation and an analysis of our financial condition. Additionally, the valuation report included an overview of approaches to value utilized by Hoefer & Arnett in making its determination of value, historical trading information for a “guideline comparison” (or a peer group) of publicly traded banks engaged in the same or similar lines of business as Guaranty, with financial assets under $1.0 billion and a return on assets of greater than 0.0% located in the southwestern region of the U.S., and financial information from public bank holding companies.

At the June 7, 2005 meeting, the Board also considered:

the alternatives presented under “—Alternatives Considered” on page 12;

the benefits and disadvantages of the merger as described under “—Purpose and Reasons for the Merger” on page 10;

the effects of the merger as described under “—Effects of the Merger on Guaranty” on page 23, “—Effects of the Merger on Shareholders Generally” on page 25 and “—Effects of the Merger on Affiliated Shareholders” on page 27; and

the historical market prices of our common stock as described on page 51.

In determining the number of shares a shareholder needed to own in order to remain a shareholder after the merger, the Board’s primary consideration was how best to achieve the goal of becoming a private company while cashing out the fewest number of shareholders. The Board considered using 500 shares as the minimum number of shares a shareholder needed to own in order to continue as a shareholder after the merger. It was determined, however, that 500 shares was too low of a threshold because it did not provide a large enough cushion below 300 in the event shareholders acquired additional shares to remain a shareholder or otherwise changed their holdings in our common stock. Thus, although more expensive, the Board selected 600 shares as the minimum number of shares required to remain as shareholder because it represented a breakpoint among shareholders and provided a sufficient cushion in order to ensure that, after completion of the merger, the number of record shareholders would be less than the 300 shareholder limit necessary to terminate our registration under the Exchange Act, while at the same time providing that a relatively small number of shares (estimated at approximately 61,749, or 2.19% of our outstanding shares at the time of the meeting) would be cashed out in the proposed merger.

At the June 7, 2005 special Board meeting, the Board discussed the possibility that our number of record shareholders could increase following the merger as a result of certain share transfers, whether by sale, gift or otherwise. Under the provisions of the Exchange Act, if, after completion of the merger, the number of our shareholders of record did increase to 300 or greater, then we would be required to resume our reporting obligations under the Exchange Act. The Board discussed an amendment to our Articles of Incorporation to give us a right of first refusal to purchase any shares of our common stock that are to be transferred in a manner that would result in an increase in the number of our record holders, although we would not be obligated to purchase any such shares. The purpose of the amendment is to help us control any potential future increases in the number of our record shareholders to enable us to delay or avoid again becoming subject to the reporting requirements under the Exchange Act.

At the June 7, 2005 special Board meeting, legal counsel advised the Board with respect to certain matters related to the transaction, including possibly forming an independent committee comprised of independent members of the Board to review and evaluate the proposed transaction on behalf of the shareholders as well as possibly structuring the transaction to include “neutralized voting,” whereby separate approval by a majority of those shareholders who are not executive officers or directors of Guaranty would be required in order to consummate the transaction. Following discussion, the Board unanimously determined not to form an independent committee to evaluate the proposed transaction because a majority of our Board of Directors is comprised of independent members and all of the directors (including all of our independent directors) held an

interest in the transaction as shareholders who owned at least 600 shares of Guaranty’s common stock. The Board also unanimously determined not to offer neutralized voting since the Board believed that a neutralized voting requirement would usurp the power of the holders of a majority of our outstanding shares to consider and approve the merger agreement as provided under Texas law, our charter documents and the terms of the merger agreement. We also considered such provision unnecessary in light of the rights of shareholders, whether affiliated or unaffiliated, to dissent from the merger under Texas corporate law, regardless of the number of shares that they own. While the Board of Directors believes that this procedural safeguard was not necessary in rendering its determination, the Board did consider thatFormation, the members of the Boardboard of directors are divided into three classes as equal in number of directors as possible: Class I, Class II and our executive officers beneficially own approximately 33.39%Class III. The members of our outstanding common stock and would beneficially own an increased percentageeach class are elected for a term of office to expire at the third succeeding annual meeting of shareholders following their election. The term of office of the merger. However, because affiliated and unaffiliated shareholders are treated identically undercurrent Class III directors expires at the annual meeting. The terms of the transaction as proposed, the Board did not believe that this procedural safeguard was a necessary measure.

After a discussion of these factors,Class I and Hoefer & Arnett’s May 17, 2005 valuation report, our Board of Directors, including the independentClass II directors unanimously approved the merger agreement pursuant to which shareholders owning fewer than 600 shares would receive cash for their shares of our common stock. Given the involuntary nature of the merger and the fact that the range of low and high sale prices for Guaranty common stock reported by the Nasdaq Stock Market during the period from January 1, 2005 through June 6, 2005 was $17.50 to $23.38, the Board set the cash-out price at $24.00. The Board also made a determination that the merger was fair, from a financial and procedural point of view, to our unaffiliated shareholders receiving cash under the merger agreement and to our affiliated and unaffiliated shareholders retaining their shares, and directed that the merger agreement be submitted to the shareholders with a recommendation for approval. The Board also unanimously approved the proposed amendment to our Articles of Incorporation.

On June 7, 2005, Hoefer & Arnett also delivered its oral opinion to the Board stating that the $24.00 per share price to be paid in the merger was fair, from a financial point of view, to our shareholders, both those who will receive cash and those who will retain their shares in the merger. (See “—Opinion of Independent Financial Advisor”). In rendering its opinion, Hoefer & Arnett reviewed, among other things, its written valuation report dated May 17, 2005. Hoefer & Arnett subsequently delivered its written opinion, dated as of June 7, 2005. The written opinion was dated June 7, 2005, approximately three weeks later than the valuation report, because Hoefer & Arnett could not prepare an opinion as to the fairness of the $24.00 per share cash out price until the Board established the cash-out price, which, as described above, did not occur until the June 7, 2005 special Board meeting.

Recommendation of the Board of Directors; Fairness of the Merger Proposal

The structure and terms of the merger were determined by our current management and our Board of Directors. Our Board of Directors currently consists of eleven (11) persons, seven (7) of whom are independent directors and four (4) of whom are officers of Guaranty or the Bank. We retained Hoefer & Arnett, an independent financial advisor experienced in the financial analysis of and valuation of financial institutions, to value our common stock. The cash consideration to be paid for our common stock under the merger was determined by us, based, in part, on Hoefer & Arnett’s valuation report.

After considerable discussion, our Board of Directors unanimously determined and believes that the merger agreement is in the best interests of us and our shareholders. In reaching its conclusion, our Board of Directors also determined that the transaction is in the best interests of and substantively fair to unaffiliated shareholders who will receive cash in the merger as well as those shareholders who will retain their shares of common stock after the merger. Our Board of Directors also believes that the process by which the transaction was approved is fair to all of our shareholders, including unaffiliated shareholders receiving cash in the merger and unaffiliated shareholders who will retain their shares after the merger. Further, our Board unanimously approved the merger agreement, which included the $24.00 per share price to be paid to shareholders whose shares are cashed out in the merger. All of the members of our Board of Directors and our executive officers have expressed an intention

to vote in favor of the merger agreement for the reasons described below. As of May 25, 2005, our directors and executive officers (12 persons) owned a total of 904,314 shares of our common stock, or approximately 32.00% (not including any shares that may be acquired pursuant to the exercise of stock options) of the total shares entitled to voteexpire at the special meeting. Accordingly, only the approvalannual meeting of shareholders owning an additional              shares is necessary for the approval of the merger agreementin 2019 and for approval of the amendment

Our Board of Directors considered a number of factors in deciding to approve the merger agreement. The Board’s primary reason for effecting the merger is to accomplish the going private transaction so that our shares will no longer be registered under the Exchange Act. We considered the views of management and that cost savings of approximately $350,000 per year could be achieved if we terminated the registration of our common stock under the Exchange Act, including indirect savings resulting from reductions in the time and effort currently required of management to comply with the reporting and other requirements associated with continued registration of our common stock under the Exchange Act. We also considered the effect that terminating the registration of our common stock, the related de-listing of our common stock from the Nasdaq Stock Market and the proposed amendment to our Articles of Incorporation would have on the market for our common stock and the ability of shareholders to buy and sell shares. However, we determined that even as a publicly-traded company, there is a limited market for the shares of our common stock, especially for sales of large blocks of such shares, and that our shareholders derive little benefit from our status as a publicly-held company. We determined that the cost savings and reduced burden on management to be achieved by terminating registration of our common stock under the Exchange Act outweighed any potential detriment from terminating such registration.

We considered numerous factors in reaching our conclusion as to the fairness of the merger to all of our shareholders, including the effects described under “—Effects of the Merger on Guaranty” on page 23, “—Effects of the Merger on Shareholders Generally” on page 25, “—Effects of the Merger on Affiliated Shareholders” on page 27 and “—Purposes and Reasons for the Merger” on page 10. The Board also reviewed the federal income tax and pro forma financial effects of the merger on us and our shareholders. We did not assign any specific weights to the factors listed below. Moreover, in their considerations individual directors may have given differing weights to different factors.

Opinion of Independent Financial Advisor. Our Board of Directors considered the valuation report prepared by Hoefer & Arnett dated May 17, 2005, as well as the written fairness opinion dated June 7, 2005, to the effect that, as of the date of such opinion and based upon and subject to certain matters stated therein, the cash consideration to be paid in the merger is fair, from a financial point of view, to our shareholders, including unaffiliated shareholders who will receive cash in the merger as well as those shareholders who will retain their shares after the merger. The Board of Directors also reviewed and considered the financial analyses supporting the opinion of the financial advisor. You should read the discussion under “—Opinion of Independent Financial Advisor” and the copy of the opinion of Hoefer & Arnett, which is attached asAppendix C to this proxy statement.

Historical Market Prices of Our Common Stock.Our common stock is listed on the Nasdaq Stock Market System under the symbol “GNTY”.During the 12 months prior to the public announcement of the proposed merger, the stock traded infrequently. We reviewed the closing price for our common stock on the Nasdaq Stock Market from January 1, 2004 to June 6, 2005, which ranged from $17.05 to $24.00 per share. You should read the discussion under “Information About Guaranty and its Affiliates—Market for Common Stock and Dividends” for more information about our stock prices. The closing price of our common stock on June 6, 2005, the day immediately prior to the public announcement of the merger, was $19.35. Based upon the limited trading history and the prices of our common stock prior to the public announcement of the merger, the Board of Directors believes that the price of $24.00 is fair to all of our shareholders.

Premium to Book Value. As of March 31, 2005, our book value per share was $13.20. Although book value was a factor that was considered by our Board of Directors, among others, in determining the

consideration to be paid to cashed-out shareholders in the merger, the Board of Directors determined that it was not directly relevant because it was the Board’s view that our value as a going concern is greater than our book value. However, the Board of Directors noted that the per share cash price of $24.00 payable in the merger reflected a multiple of 1.82 times our March 31, 2005, book value per share.

Going Concern Value. In determining the cash amount to be paid to cashed-out shareholders in the merger, our Board of Directors valued our shares on the basis of a going concern, without giving effect to any anticipated effects of the merger. Also, the Board of Directors did not consider the amount per share that might be realized in a sale of 100% of our stock, as our Board of Directors determined that consideration of such an amount was inappropriate in the context of a transaction that would not result in a change of control of Guaranty. In determining the going concern value of our shares, the Board of Directors adopted the analyses and conclusions of our financial advisor, which are described under “—Opinion of Independent Financial Advisor”.

Earnings. Our Board of Directors reviewed our earnings for the previous three years. For the three years ended December 31, 2002, 2003 and 2004, we reported net income of approximately $4.4 million, $3.8 million and $3.7 million,2020, respectively. The Board also considered our earnings of $983,000 for the first quarter of 2005. Our Board of Directors believes that our earnings over the last three years and the first three months in 2005 provide a basis for a reasonable expectation of future performance and an expectation of future benefits. Based upon its review, the Board of Directors believes that the $24.00 per share price is fair.

Liquidity Event. Our Board of Directors considered the opportunity that the merger presents for shareholders owning fewer than 600 shares to liquidate their holdings without incurring brokerage costs, particularly given the limited trading volume for shares of our common stock at a price that represents a premium over historical sales prices.

We also recognized that the merger consideration to be paid to the cashed-out shareholders in the merger reflected a premium over the closing prices for our common stock on the Nasdaq Stock Market prior to the announcement of the merger.

The Board of Directors also considered historical prices paid by Guaranty to repurchase its shares. Since July 2003, we have repurchased a total of 114,580 shares at purchase prices ranging from $19.50 to $22.40 in open market transactions.

The Board of Directors did not consider transactions in our common stock which occurred following the announcement of the transaction. Additionally, certain of our directors and executive officers have engaged in transactions involving shares of our common stock in the open market in the two years prior to the announcement of the going private transaction. While the Board of Directors did consider these trades in general terms in its review of the historical prices of our common stock, the Board of Directors did not distinguish between transactions in our common stock involving directors and executive officers and those not involving such persons.

Although it is quite rare for an insured depository institution to go into voluntary liquidation, the base valuation technique that relates to our book value is, for the most part, an assumed liquidation value. Since the price to be paid to the cash-out shareholders in the merger is in excess of our book value and because we will continue to operate our business following completion of the merger, we did not consider our liquidation value an important factor in determining the fairness of the merger.

No firm offers have been made by an unaffiliated person during the preceding two years for (1) the merger or consolidation of us into or with such person, (2) the sale or other transfer of all or any substantial part of our assets or (3) the purchase of a number of shares of our common stock that would enable the holder thereof to exercise control of us.

The transaction is not structured so that approval of at least a majority of unaffiliated shareholders is required. Our Board determined that any such voting requirement would usurp the power of the holders of a majority of our outstanding shares to consider and approve the merger agreement as provided under Texas law, our charter documents and the terms of the merger agreement. We also considered such a provision unnecessary in light of the rights of shareholders, whether affiliated or unaffiliated to dissent from the merger pursuant to Texas corporate law, regardless of the number of shares they own. See “Proposal I: Approval of the Merger Agreement—Dissenters’ Rights of Appraisal.”

A majority of our Board of Directors is comprised of independent members, and, accordingly, there was no need to form a special committee or retain any unaffiliated representative(s) to represent unaffiliated shareholders, as our Board of Directors was able to adequately balance the competing interests of the non-continuing shareholders and the continuing shareholders in accordance with their fiduciary duties. Although all of the members of our Board of Directors own more than 600 shares of our common stock, the 600 share cutoff set in the merger agreement was determined without regard to the directors’ share ownership. As this represented the sole potential conflict of interest and the Board members will be treated identically to all other shareholders in the merger, we did not feel that any additional protections that may be afforded by a special committee would be significant. See “Special Factors—Interests of Executive Officers and Directors in the Merger” and “Special Factors—Conduct of Guaranty’s Business After the Merger.”

We have not made any provision in connection with the merger to grant unaffiliated shareholders access to our corporate files or to obtain counsel or appraisal services at our expense. With respect to unaffiliated shareholders’ access to our corporate files, we determined that this proxy statement, together with our other filings with the SEC, provide adequate information for unaffiliated shareholders to make an informed decision with respect to the merger. We also considered the fact that under Texas corporate law, and subject to certain conditions set forth under Texas law, shareholders have the right to review our relevant books and records of account. We did not consider these steps necessary to ensure the fairness of the merger proposal. We determined that such steps would be costly and would not provide any meaningful additional benefits. We noted the fact that the financial advisor engaged by us considered and rendered its opinion as to the fairness, from a financial point of view, of the consideration payable in the merger to our shareholders, including shareholders who will receive cash in the merger and those who will retain their shares after the merger.

After consideration of the factors described above, the Board believes that the transaction is substantively fair, notwithstanding the absence of such an unaffiliated shareholder approval requirement, independent committee or unaffiliated representative. The Board also believes that the transaction is procedurally fair because, after consideration of all aspects of the proposed transaction as described above, all of the directors, including all of the members of the Board who are not employees of Guaranty, approved the merger and the merger agreement.

Determination of Fairness by Merger Subsidiary and Filing Persons

The merger subsidiary was formed for the purpose of facilitating the going private transaction. Its sole shareholder is Guaranty and its sole director and executive officer is Arthur B. Scharlach, Jr., who is also our Chairman of the Board and Chief Executive Officer. Under certain applicable rules and regulations promulgated by the SEC, our directors and executive officers are deemed to be “filing persons” for the purposes of the going private transaction. As a result, each filing person is required to state whether he or she reasonably believes that the transaction is fair to unaffiliated security holders. The filing persons consist of the following individuals: Tyson T. Abston, Martin Bell, Johnny O. Conroy, Jonice Crane, C.A. Hinton, Sr., Carl Johnson, Jr., Kirk Lee, Weldon Miller, Clifton A. Payne, Bill Priefert, Arthur B. Scharlach, Jr. and Gene Watson (collectively, the “Filing Persons”).

In forming their belief as to the fairness of the transaction to the unaffiliated shareholders, the merger subsidiary and each of the Filing Persons relied upon the factors considered by and have expressly adopted the analysis and conclusions of the Board of Directors of Guaranty, including the analyses performed and opinion delivered by Hoefer & Arnett. See “—Recommendation of the Board of Directors; Fairness of the Merger

Proposal.” Based on those factors, the merger subsidiary and each of the Filing Persons reasonably believes that the merger agreement and the process by which the transaction was approved are fair to each of the unaffiliated shareholders, including those who will receive cash in the merger and those who will retain their shares of common stock. Neither the merger subsidiary nor any of the Filing Persons have received any report, opinion or appraisal from an outside party that is materially related to the merger other than the report of Hoefer & Arnett. The belief of each of the Filing Persons is their individual belief and does not constitute investment advice. If shareholders are unsure of whether to vote in favor of the merger agreement, they should consider the recommendation of the Board of Directors or consult with their personal financial advisor.

Opinion of Independent Financial Advisor

Our board of directors retained Hoefer & Arnett as its financial advisor in connection with the merger because Hoefer & Arnett is a nationally recognized investment banking firm with substantial expertise in transactions similar to the proposed transaction and is familiar with us and our business. The firm is a member of the National Association of Securities Dealers (NASD) with direct access to inter-dealer markets in NASD Automated Quotation (NASDAQ) and Over-the-Counter (OTC) securities, and makes markets in securities under its symbol HOFR. As part of its investment banking activities, Hoefer & Arnett is regularly engaged in the independent valuation of financial institutions and securities in connection with mergers, acquisitions, underwritings, sales and distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes.

Hoefer & Arnett rendered to our Board of Directors of a written opinion on June 7, 2005, that the fair value of the outstanding common stock of Guaranty for the purpose of effecting a cash-out merger to go private was $24.00 per share and the consideration to be received is fair, from a financial point of view, to our shareholders that will be cashed out and to our shareholders that will remain following the merger. A copy of Hoefer & Arnett’s opinion dated as of the date of this proxy statement is attached asAppendix C to this proxy statement and should be read in its entirety.

No limitations were imposed by our Board of Directors upon Hoefer & Arnett with respect to the investigations made or procedures followed in rendering its opinion. Hoefer & Arnett’s fairness opinion is based on the financial analysis described below. Hoefer & Arnett’s fairness opinion is for the use and benefit of our Board of Directors in connection with its consideration of the proposed transaction. Hoefer & Arnett’s fairness opinion is not intended to be and does not constitute a recommendation to any shareholder as to how such shareholder should vote with respect to the proposed transaction. Hoefer & Arnett’s fairness opinion does not address our underlying business decision to proceed with the proposed transaction.

In arriving at its opinion, Hoefer & Arnett reviewed and analyzed, among other things, the following:

a draft of the Agreement and Plan of Merger;

our annual reports on Form 10-K for the years ended December 31, 2004, December 31, 2003 and December 31, 2002;

our quarterly reports on Form 10-Q for the quarters ended March 31, 2005, September 30, 2004, June 30, 2004 and March 31, 2004;

certain other information relating to us, including financial forecasts provided to Hoefer & Arnett or discussed with Hoefer & Arnett by us and information from meetings with our management to discuss past and current operations, financial condition and prospects, as well as the results of regulatory examinations;

the publicly reported historical prices and trading activity for our common stock;

the market price of selected publicly traded banking institutions; and

certain other information, financial studies, analyses and investigations and financial, economic and market criteria which Hoefer & Arnett deemed relevant.

In conducting its review and in rendering its opinion, Hoefer & Arnett relied upon and assumed the accuracy and completeness of the financial and other information provided to it or publicly available, and did not attempt to independently verify the same. Hoefer & Arnett relied upon our management as to the reasonableness of the financial and operating forecasts and projections (and the assumptions and bases therefor) provided to it, and Hoefer & Arnett assumed that such forecasts and projections reflect the best currently available estimates and judgments of our management.

We do not publicly disclose internal management forecasts, projections or estimates of the type furnished to Hoefer & Arnett in connection with its analysis of the financial terms of the proposed transaction, and such forecasts and estimates were not prepared with a view towards public disclosure. These forecasts and estimates were based on numerous variables and assumptions which are inherently uncertain and which may not be within the control of management, including without limitation to, the general economic, regulatory and competitive conditions. Accordingly, actual results could vary materially from those set forth in such forecasts and estimates.

Hoefer & Arnett did not make or obtain any evaluations or appraisals of our assets or liabilities. Hoefer & Arnett is not an expert in the valuation of allowances for loan losses and it did not make an independent evaluation of our adequacy of the allowance for loan losses, nor did it did it review any individual loan credit files. Hoefer & Arnett assumed that the allowance for loan losses set forth in our financial statements was adequate to cover such losses. For purposes of its opinion, Hoefer & Arnett assumed that the merger would have the tax, accounting and legal effects described in the merger agreement. Hoefer & Arnett’s opinion as expressed herein is limited to the fairness of the proposed transaction, from a financial point of view, to our shareholders.

The opinion expressed by Hoefer & Arnett was based upon market, economic and other relevant considerations as they existed and have been evaluated as of the date of the opinion and the information made available to it through that date. Events occurring after the date of issuance of the opinion including, but not limited to, changes affecting the securities markets, the results of operations or material changes in assets or liabilities, could materially affect the assumptions used in preparing the opinion. Hoefer & Arnett assumed that all of the representations and warranties contained in the merger agreement and any related agreements are true and correct, that each party to such agreements will perform all of the covenants required to be performed by such party under such agreements and that the conditions precedent in the merger agreement are not waived.

Summary of Analysis. The following is a summary of the material financial analyses performed by Hoefer & Arnett in connection with the preparation of its opinion and does not purport to be a complete description of all the analyses performed by Hoefer & Arnett. The summary includes information presented in tabular format, which should be read together with the text that accompanies those tables. Hoefer & Arnett believes that its analyses must be considered as a whole and that selecting portions of such analyses and the factors considered therein, without considering all factors and analyses, could create an incomplete view of the analyses and the processes underlying its opinion. The preparation of a fairness opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis or summary description. In its analyses, Hoefer & Arnett made numerous assumptions with respect to industry performance, business and economic conditions, and other matters, many of which are beyond the control of Guaranty and Hoefer & Arnett. Any estimates contained in Hoefer & Arnett’s analyses are not necessarily indicative of future results or values, which may be significantly more or less favorable than such estimates. Estimates of values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold.

Article 5.12 of the TBCA defines “fair value” as the value of the shares as of the day immediately preceding the meeting at which the corporate action is adopted, excluding any appreciation or depreciation in anticipation of the proposed action. This definition is broadly accepted and used in courts of law and it is the basis upon which Hoefer & Arnett has relied in determining the fair value of Guaranty’s common stock.

In arriving at its opinion as to the fair value of the appraised stock, Hoefer & Arnett considered the nature and history of Guaranty. Hoefer & Arnett considered the competitive environment in which Guaranty operates, the economic outlook for its trade area and for the banking industry in general, the book value and financial

condition of Guaranty, its future earnings and dividend paying capacity and Guaranty future business prospects. Hoefer & Arnett considered previous sales of Guaranty common stock, the market and trading volume in Guaranty common stock, the size of the block of stock being valued, the market price of selected publicly traded banking institutions and the premiums paid in the acquisition of publicly traded banking institutions.

Stock Trading History. Hoefer & Arnett reviewed previous trades of Guaranty common stock, which is thinly traded on the Nasdaq Stock Market (under the symbol “GNTY”). For the period between January 1, 2005 and May 17, 2005, the average daily trading volume for Guaranty was 1,346 shares (0.05% of the outstanding common shares) and on many days there were no trades in the Guaranty common stock. From January 1, 2005 to May 17, 2005, as reported by the Nasdaq Stock Market, the low price was $20.59 per share, the high price was $23.38 per share, the closing price on May 17, 2005 was $21.35 per share and the average closing price during the period was $21.51 per share.

Analysis of Publicly Traded Banking Organizations. Hoefer & Arnett reviewed selected publicly traded banking organizations that are located in the southwestern region of the United States with total assets under $1 billion and a return on assets greater than 0.00% (the “Selected Public Companies”). Hoefer & Arnett compared financial performance ratios at Guaranty with financial performance ratios of the banking organizations making up the Selected Public Companies.

The following table compares selected performance and financial ratios of Guaranty at March 31, 2005 with the median ratios for the Selected Public Companies:

   Guaranty

  Selected Public
Companies


 

Total Assets

  $552.5 million $460.8 million

Return on Assets

   0.72%  1.00%

Return on Equity

   10.14%  10.97%

Equity to Assets

   6.98%  8.62%

Nonperforming Assets to Assets

   0.54%  0.25%

Hoefer & Arnett reviewed the multiples of price to stated book value, price to tangible book, price to earnings and dividend yield and calculated the median multiples for the Selected Public Companies. The median multiples were then applied to Guaranty’s balance sheet information as of March 31, 2005, 2004 earnings, estimated 2005 earnings and estimated 2005 common dividends to derive an imputed range of values of Guaranty’s common stock. The following table sets forth the median multiples as well as the imputed values based upon those median multiples:

   Median Multiple

  Implied Value

Price / Book Value

  1.51x $19.93

Price / Tangible Book Value

  1.58x $19.59

Price / 2004 Earnings

  15.1x $18.66

Price / Est. 2005 Earnings

  15.1x $22.10

Dividend Value

  1.49% $29.53

As illustrated in the above table, Hoefer & Arnett derived a range of imputed values of Guaranty common stock of $18.66 to $29.53, based upon the median multiples for the Selected Public Companies.

Discounted Cash Flow Analysis.Using a discounted cash flow analysis, Hoefer & Arnett estimated the net present value of the future streams of after-tax cash flow that Guaranty could produce to benefit a potential investor, referred to as dividendable net income, and added a terminal value. Hoefer & Arnett estimated a potential investor’s cash flow based upon future dividends and a residual value. To calculate the residual value, Hoefer & Arnett assumed the sale of the stock at the end of five years. Hoefer & Arnett used the current trading multiples for both book and earnings to provide appropriate residual values and utilized a discount rate of 12%. This discounted cash flow analysis indicated implied values of $18.65 per share and $21.72 per share.

Based on Hoefer & Arnett’s review and analysis of the factors influencing value and utilizing the asset, market and income approaches without any discounts, it is the opinion of Hoefer & Arnett that, the fair value of the outstanding common stock of Guaranty as of June 7, 2005 was $24.00 per share.

Based upon a fair value of $24.00 per share, Hoefer & Arnett calculated the following ratios:

Fair value / March 31, 2005 book value

1.82x

Fair value / March 31, 2005 tangible book value

1.94x

Fair value / 2004 earnings

19.35x

Accretion/Dilution Analysis. Hoefer & Arnett analyzed the financial implications of the merger to the Guaranty shareholders that will remain following the merger. This analysis indicated the level of accretion to earnings per share that a shareholder of Guaranty would achieve on a pro forma basis including assumed cost savings. Based on conversations with Guaranty management, Hoefer & Arnett assumed that 61,749 shares will be cashed out, transaction costs of $120,000, an opportunity cost of capital of 6.00% and cost savings of approximately $350,000 per annum as a result of not having to comply with the reporting requirements under the Exchange Act and other requirements of being a public company. The table below summarizes these results:

   2004 Earnings

 

Guaranty Standalone

  $1.24 

Pro Forma

   1.28 

% Accretion

   3.23%

Hoefer & Arnett provided investment banking and financial advisory services to Guaranty in 1998 in connection with its initial public offering for which it received customary fees. Hoefer & Arnett provides a full range of financial advisory and securities services and, in the course of its normal trading activities, may effect transactions and hold securities of Guaranty for its own account and for the accounts of customers.

We will pay Hoefer & Arnett a fee of $15,000 in connection with Hoefer & Arnett’s acting as our financial advisor and rendering its opinion, which is not contingent upon the completion of the merger. In addition, we have agreed to indemnify Hoefer & Arnett against certain liabilities and expenses arising out of or incurred in connection with its engagement, including liabilities and expenses which may arise under the federal securities laws.

Effects of the Merger on Guaranty

The merger will have various effects on Guaranty, as described below.

Reduction in the Number of Shareholders of Record. We believe that the merger will reduce the number of record shareholders from approximately 430 to approximately 184. As noted earlier, in addition to the approximately 50,036 shares held by shareholders of record owning fewer than 600 shares, we assume that beneficial owners of approximately 11,713 shares held in street name will receive cash for their shares in the merger. Accordingly, the number of outstanding shares of our common stock will decrease from 2,826,012, as of the record date, to approximately 2,764,263 after the merger.

Decrease in Book Value and Effect on Earnings Per Share. Based on the fact that (1) the price to be paid in the merger to holders of fewer than 600 shares of common stock will be $24.00 per share, (2) the maximum number of shares of common stock expected to be cashed out as a result of the merger is 61,749, (3) the total cost to Guaranty (including expenses estimated to be approximately $120,000) of effecting the merger is expected to be approximately $1.6 million and (4) at March 31, 2005, shareholders’ equity was $38.5 million, or $13.20 per share, we expect that, as a result of the merger:

our shareholders’ equity as of March 31, 2005 will be reduced from approximately $38.5 million on a historical basis to approximately $37.0 million on a pro forma basis;

the book value per share of our common stock as of March 31, 2005 will be reduced from $13.20 per share on a historical basis to approximately $12.94 per share on a pro forma basis;

we will utilize existing cash on hand as well as funds generated from our operations to purchase the cashed-out shares and any dissenting shares, as well as to pay the fees and expenses incurred in connection with the merger, which management anticipates not to exceed $1.6 million, assuming 61,749 shares are repurchased; and

diluted earnings per share of our common stock for the year ended December 31, 2004 will increase from $1.24 on a historical basis to approximately $1.31 on a pro forma basis and diluted earnings per share for the three months ended March 31, 2005 of $0.33 will remain unchanged on a pro forma basis.

Decrease in Capital. As a result of the merger, our capital will be reduced. More specifically, our tier 1 capital to risk-weighted assets ratio will decrease from 12.60% as of March 31, 2005 to approximately 12.23% on a pro forma basis, our leverage capital ratio will decrease from 8.62% as of March 31, 2005 to approximately 8.35% on a pro forma basis, and our total risk-based capital ratio will decrease from 13.78% as of March 31, 2005 to approximately 13.42% on a pro forma basis. All regulatory capital ratios have been calculated assuming that 61,749 shares are cashed out in the merger.

Termination of Exchange Act Reporting Obligations. Our common stock is currently registered under the Exchange Act. After the merger, our common stock will not be registered under the Exchange Act and we will no longer be subject to the reporting requirements under the Exchange Act. More specifically, we will no longer be required to file (1) annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K presenting and analyzing our business, financial condition and results of operations, (2) ongoing reports regarding insiders’ stock transactions and (3) proxy statements disclosing information about our directors and officers, their compensation and our corporate governance process. Accordingly, we expect to eliminate direct and indirect costs and expenses associated with continuance of the Exchange Act registration, estimated at approximately $350,000 per year. We intend to apply for such termination as soon as practicable following completion of the merger.

Effect on Market for Shares. Our common stock is currently quoted on the Nasdaq Stock Market, but it will not be quoted on Nasdaq or listed on any exchange after the merger. Because we will no longer be quoted on the Nasdaq Stock Market or be required to maintain current public information by filing reports under the Exchange Act, the market for shares of our common stock will be adversely affected. Although there is currently only minimal liquidity in our shares of common stock, there will be a significant reduction in the liquidity of our common stock after the merger.

Further, the proposed amendment to our Articles of Incorporation provides Guaranty a right of first refusal with respect to certain future transfers of our common stock. If shareholders approve the amendment at the special meeting and the merger is completed, this right of first refusal may further reduce the liquidity of our common stock.

Effect on Dividends. The principal source of our cash revenues comes from dividends received from the Bank. The amount of dividends that may be paid by the Bank to us depends on the Bank’s earnings and capital position and is limited by federal and state law, regulations, and policies. In addition to the availability of funds from the Bank, our future dividend policy is subject to the discretion of our Board of Directors and will depend upon a number of factors, including future earnings, financial condition, cash needs, and general business conditions. If dividends should be declared in the future, the amount of such dividends presently cannot be estimated and it cannot be known whether such dividends would continue for future periods.

We anticipate that the merger will not have a material effect on our dividend policy, and we intend to continue paying a semi-annual cash dividend; however, any future declaration and payment of dividends will depend upon, among other factors, our results of operations and financial condition, future prospects, regulatory limitations and capital requirements, and other factors deemed relevant by our Board of Directors.

Financial Effects of the Merger; Financing of the Merger. We expect that the purchase of the cashed-out shares in the merger will cost not more than approximately $1.5 million which does not include approximately $120,000 in professional fees and other expenses we anticipate incurring in the course of the transaction. In addition, we do not expect that the completion of the merger will have any material adverse effect on our capital adequacy, liquidity, results of operations or cash flow. Because we do not currently know the actual number of shares that will be cashed out in the merger, we do not know the exact amount of cash we will ultimately pay to shareholders in the merger. However, our obligation to consummate the merger under the merger agreement is conditioned on the aggregate number of shares of our common stock owned by shareholders who are to be cashed out or who have properly perfected their rights as dissenting shareholders not exceeding 100,000 shares.

Increased Ownership Percentage of Executive Officers and Directors. As a result of the merger, we expect that the percentage of ownership of our common stock beneficially owned by our current executive officers and directors as a group (12 persons) will increase from 33.39% to approximately 34.12%. For a description of the assumptions used in determining the numbers of shares and related percentages that we expect to be beneficially owned by executive officers and directors immediately following the merger, please see footnotes (1) and (2) under “Information about Guaranty and its Affiliates—Security Ownership of Certain Beneficial Owners and Management.”

Our board of directors was aware of these interests and considered them in approving the merger agreement. See “Special Factors—Background of the Merger.”

Effects of the Merger on Shareholders Generally

The merger will have various effects on our affiliated and unaffiliated shareholders as described below:

Before the Merger


Net Effect After the Merger


Shareholders holding fewer than 600 shares of our common stock

•      You will receive $24.00 in cash, for each share you own at the effective time of the merger.

•      You will not have to pay any brokerage commissions or other service charges in connection with the merger.

•      All amounts owed to you will be subject to applicable federal, state and local income taxes.

•      You will have no further interest in Guaranty with respect to your cashed-out shares. Your only right will be to receive cash for those shares.

•      You will receive a letter of transmittal from us as soon as practicable after the merger with instructions on how to surrender your existing certificate(s) in exchange for your cash payment.

NOTE: If you want to continue to remain a shareholder after the merger, you may do so by purchasing a sufficient number of shares of our common stock prior to the effective time of the merger so that you hold at least 600 shares at the effective time of the merger.

As described in the section “Proposal I: Approval of the Merger Agreement—Conversion of Shares in the Merger,” there are specific provisions regarding the treatment of shares held in nominee form, or “street name.” In determining the number of shares held beneficially in street name by any shareholder, we may, in our discretion, rely on “no objection” lists provided by any nominee holder. Further, after the merger, we will deliver to each shareholder who would appear to be entitled to receive cash in the merger in consideration for his or her shares a letter of transmittal requesting certain information from such shareholder and requiring the shareholder

to certify as to the number of shares actually held, whether in registered form, or in street name. Letters of transmittal will be delivered to any shareholder who (1) holds of record, or combined with any shares listed in clause (2), fewer than 600 shares, (2) according to records made available to us from the nominee holder for any shares held in street name, holds in street name, or combined with any shares held of record, fewer than 600 shares or (3) holds shares in street name and with respect to which we are not provided by the nominee holder the number of shares so held.

The effects of the merger to a shareholder will vary depending on whether all of the shareholder’s shares will be cashed out in the merger. The determination of whether or not any particular shares of our common stock will be cashed out in the merger will be based on whether the holder of those shares holds either fewer than 600 shares or 600 or more shares. Since a shareholder may own shares for the benefit of another holder, a shareholder may beneficially own both shares that will be cashed out in the merger and shares that will remain outstanding in the merger. We expect that our executive officers and directors (12 persons) will continue to own beneficially a total of approximately 963,214 shares (including shares that may be acquired pursuant to the exercise of stock options), or approximately 34.12% of the outstanding shares immediately after the merger. We do not anticipate any affiliated shareholder’s shares being cashed out in the merger. All of the effects to shareholders described below assume that the maximum of 61,749 shares are cashed out in the merger, unless otherwise noted.

Effects on Cashed-Out Shareholders. The effects of the merger on shareholders owning fewer than 600 shares immediately prior to the effective time of the merger will, upon consummation of the merger, include:

Receipt of Cash. Shareholders who own fewer than 600 shares of our common stock, in the aggregate, whether of record or in street name, will receive $24.00 in cash per share.

Loss of Ownership Interest. Shareholders will no longer have any equity or voting interest in Guaranty and therefore will not receive any cash dividends or participate in our future potential earnings or growth, if any, as a shareholder.

Taxes. Shareholders will likely be required to pay federal and, if applicable, state and local income taxes on the cash amount received in the merger. See “—Material U.S. Federal Income Tax Consequences.”

Effects on Remaining Shareholders. The effects of the merger on shareholders owning 600 or more shares immediately prior to the effective time of the merger will, upon consummation of the merger, include:

Continued Ownership of Shares. Shareholders who own 600 or more shares immediately prior to the effective time of the merger will continue to be shareholders of Guaranty and will own the same number of shares immediately after the merger as they owned immediately prior to the merger.

Increased Ownership Percentage. Remaining shareholders will have a slightly increased ownership percentage in Guaranty as a result of the merger.

Decreased Access to Information. If the merger is completed, we intend to terminate our registration under the Exchange Act. As a result, we will no longer be subject to the periodic reporting requirements and the proxy rules of the Exchange Act.

Decreased Liquidity and Transfer Restrictions. The liquidity of the shares of our common stock held by remaining shareholders will be reduced because our common stock will no longer be quoted on the Nasdaq Stock Market and we will have fewer shareholders. Additionally, if the proposed amendment is approved by our shareholders, we will have a right of first refusal to purchase any shares of our common stock proposed to be transferred in a transaction that would increase the number of our record shareholders. The absence of an established trading market, a smaller shareholder base and the amendment to our Articles of Incorporation, if approved by shareholders, may restrict your ability to transfer your shares of common stock after the merger.

Reduced Capital. Our regulatory capital ratios will be reduced, including a decrease in our tier 1 capital to risk-weighted assets ratio from 12.60% as of March 31, 2005 to approximately 12.23% on a pro forma basis. Our other regulatory capital ratios will be similarly reduced: our leverage ratio will

decrease from 8.62% as of March 31, 2005 to approximately 8.35% on a pro forma basis; and our total risk-based capital ratio will decrease from 13.78% as of March 31, 2005 to approximately 13.42% on a pro forma basis.

Reduced Book Value Per Share. The book value per share of our common stock as of March 31, 2005 would be reduced from $13.20 per share on a historical basis to approximately $12.94 per share on a pro forma basis.

Effect on Earnings Per Share. Diluted earnings per share for the year ended December 31, 2004 would increase from $1.24 on a historical basis to approximately $1.31 on a pro forma basis, an increase of 5.65%. Diluted earnings per share for the three months ended March 31, 2005 of $0.33 will remain unchanged on a pro forma basis.

Increased Ownership Percentage of Executive Officers and Directors. As a result of the merger, we expect that the percentage of ownership of common stock beneficially owned by our executive officers and directors (12 persons) as a group will increase from 33.39%, as of the record date, to approximately 34.12% on a pro forma basis (based on the number of shares we anticipate such executive officers and directors to own beneficially immediately after the merger).

Effects of the Merger on Affiliated Shareholders

In addition to the effects of the merger on shareholders generally, which are described in the previous section, the merger will have some additional effects on our executive officers and directors, each of whom is, a result of his or her position, deemed to be an affiliate of Guaranty. As used in this proxy statement, the term “affiliated shareholder” means any shareholder who is a director or executive officer of Guaranty or the beneficial owner of 10% or more of our outstanding common stock, and the term “unaffiliated shareholder” means any shareholder other than an affiliated shareholder.

No Further Reporting Obligations Under the Exchange Act. After the merger, our common stock will not be registered under the Exchange Act. As a result, our executive officers, directors and other affiliates will no longer be subject to many of the reporting requirements and restrictions of the Exchange Act, including the reporting and short-swing profit provisions of Section 16, and information about their compensation and stock ownership will not be publicly available.

Rule 144 Not Available. Because our common stock will not be registered under the Exchange Act after the merger and we will no longer be required to furnish publicly available periodic reports, our executive officers and directors will lose the ability to dispose of their shares of our common stock under Rule 144 of the Securities Act of 1933, which provides a “safe harbor” for resales of stock by affiliates of an issuer.

Examples of Merger Results

In general, the merger can be illustrated by the following examples:

Hypothetical Scenario


Result


Ms. Smith owns 500 shares of Guaranty common stock registered in her own name at the effective time of the merger. Ms. Smith holds no other shares.Ms. Smith’s 500 shares will be canceled and converted into the right to receive cash in the amount of $24.00 per share.
If Ms. Smith wants to continue her investment in Guaranty, she would need to buy at least 100 shares of our common stock (preferably of record in her own name so as to make it more readily apparent that she holds 600 or more shares). Ms. Smith should act far enough in advance of the effective time of the merger so that the purchase is complete and registered on our books before the effective time of the merger.

Hypothetical Scenario


Result


Mr. Brown owns 100 shares of Guaranty that are held in a brokerage account at the effective time of the merger. Mr. Brown owns no other shares.Mr. Brown’s 100 shares will be converted into the right to receive cash in an amount equal to $24.00 per share, Mr. Brown will no longer be a shareholder of Guaranty.
Mr. Davis owns 500 shares of Guaranty registered in his own name and 500 shares that are held in a brokerage account at the effective time of the merger. Mr. Davis owns no other shares.If either we or Mr. Davis can establish to our satisfaction that he, in fact, holds 600 or more shares, Mr. Davis’ 1,000 shares will remain outstanding after the merger. Otherwise, we will presume that all of the shares are held by a holder of fewer than 600 shares and were therefore canceled in the merger and converted into the right to receive cash in an amount equal to $24.00 per share. Mr. Davis will be able to rebut the presumption that his shares were cashed out in the merger by certifying in the letter of transmittal sent to him after the merger that he holds 600 or more shares and providing us such other information as it may request to verify that fact.

Interests of Executive Officers and Directors in the Merger

Our Board of Directors believes that it has acted in the best interests of Guaranty and its shareholders. However, as you consider the recommendation of the Board of Directors, you should be aware that the directors and executive officers have interests which are in addition to their interests as our shareholders. As a result of the merger, we expect that the beneficial ownership of our common stock held by current executive officers and directors (12 persons) as a group will increase from 33.39% to approximately 34.12%. See “Information about Guaranty and its Affiliates—Security Ownership of Certain Beneficial Owners and Management.”

Our Board of Directors was aware of these interests and considered them in approving the merger agreement. See “Special Factors—Background of the Merger.”

Conduct of Guaranty’s Business After the Merger

Following the merger, Guaranty and its subsidiaries, including the Bank, will continue to conduct their existing operations in substantially the same manner as now conducted. Our executive officers and directors immediately prior to the merger will be the executive officers and directors of Guaranty after the merger. Except for the change that would result from the amendment (if approved by the shareholders at the special meeting), the Articles of Incorporation and Bylaws of Guaranty will remain in effect and unchanged by the merger. The deposits of the Bank will continue to be insured by the Federal Deposit Insurance Corporation, and Guaranty and the Bank will continue to be regulated by the same regulatory agencies as before the merger.

Fees and Expenses

We estimate that merger related fees and expenses, consisting primarily of financial advisory fees, SEC filing fees, fees and expenses of attorneys and accountants and other related charges, will total approximately $120,000, assuming the merger is completed. This amount consists of the following estimated fees:

Description


  Amount

Advisory fees and expenses

  $15,000

Legal fees and expenses

   75,000

Accounting fees and expenses

   10,000

Printing, solicitation and mailing costs

   20,000
   

Total

  $120,000
   

Anticipated Accounting Treatment

We anticipate that we will account for the shares of our outstanding common stock repurchased in the merger as treasury shares.

Material U.S. Federal Income Tax Consequences

The following discussion summarizes the material U.S. federal income tax consequences to our shareholders with respect to the merger. The discussion is based upon the Internal Revenue Code of 1986, as amended, its legislative history, applicable U.S. Treasury regulations, existing administrative interpretations and court decisions currently in effect. Any of these authorities could be repealed, overruled or modified at any time after the date of this proxy statement, and any such change could be applied retroactively. This discussion does not address any alternative minimum tax consequences or the tax consequences under state, local or foreign laws.

The discussion that follows neither binds nor precludes the Internal Revenue Service from adopting a position contrary to that expressed in this document, and we cannot assure you that such a contrary position could not be asserted successfully by the Internal Revenue Service or adopted by a court if the positions were litigated. We have not obtained a ruling from the Internal Revenue Service or a written opinion from tax counsel with respect to the United States federal income tax consequences discussed below.

This discussion assumes that you hold your shares of our common stock as a capital asset within the meaning of Section 1221 of the Internal Revenue Code. This discussion is only for general information and does not address all aspects of federal income taxation that may be important to you in light of your particular circumstances or if you are subject to certain rules, such as those rules relating to shareholders who are not citizens or residents of the United States, financial institutions, tax-exempt organizations and entities (including IRAs), insurance companies, dealers in securities, shareholders who hold options to acquire shares of our common stock, and shareholders who acquired their shares of common stock through the exercise of employee stock options or similar derivative securities or otherwise as compensation.

Federal income tax consequences to shareholders who do not receive cash in the merger. If you (1) continue to hold shares of our common stock immediately after the merger, and (2) you receive no cash as a result of the merger, then you will not recognize any gain or loss in the merger and you will have the same adjusted tax basis and holding period in your shares of our common stock as you had in such stock immediately prior to the merger.

Federal income tax consequences to shareholders who receive cash in the merger. An exchange of your shares of our common stock for cash pursuant to the merger will be a taxable transaction. If you receive cash in exchange for your shares of common stock as a result of the merger, the cash you received will be treated as redemption of your shares of our common stock exchanged therefor under Section 302 of the Internal Revenue Code. Under Section 302 of the Internal Revenue Code, a shareholder who exchanges his or her shares of our common stock for cash will be treated as having sold his or her shares of our common stock if the exchange meets one of the following three tests:

the exchange results in a “complete termination” of his or her equity interest in Guaranty;

the exchange is “substantially disproportionate” with respect to the shareholder; or

the cash received is “not essentially equivalent to a dividend” with respect to the shareholder.

For purposes of these tests, in addition to the shares of common stock you actually own, you will be deemed to own constructively certain shares of our common stock under the constructive ownership rules of Section 318 of the Internal Revenue Code. Generally, the constructive ownership rules under Section 318 of the Internal Revenue Code treat a shareholder as owning:

shares of stock owned by certain relatives, related corporations, partnerships, estates or trusts, and

shares of stock the shareholder has an option to acquire.

Because the constructive ownership rules are complex, each shareholder should consult his or her own tax advisor as to the applicability of these rules.

Cashed-out shareholders who do not actually or constructively own any shares of Guaranty common stock after the merger. In general, if you receive cash in exchange for your shares of our common stock as a result of the merger but do not actually or constructively own any shares of our common stock immediately after the merger, you will be treated as having sold your shares of our common stock for the cash received. You will recognize gain or loss on the exchange in an amount equal to the difference between the cash you receive for your cashed-out shares of our common stock and your aggregate adjusted tax basis in such stock. Your gain will be a capital gain provided you held your shares of our common stock as a capital asset within the meaning of Section 1221 of the Internal Revenue Code as of the effective time of the merger.

Shareholders receiving cash who actually or constructively continue to own any shares of Guaranty common stock after the merger. If you receive cash in exchange for your shares of our common stock as a result of the merger and are treated as directly or constructively owning shares of our common stock immediately after the merger, then you will be treated as having sold your shares of our common stock for the cash received only if you meet one of the three tests mentioned above and described below.

You will satisfy the “complete termination” test if you receive cash in exchange for your shares of our common stock pursuant to the merger and you completely terminate your direct and constructive ownership interest in Guaranty. If you would otherwise satisfy the complete termination requirement but for your constructive ownership of shares of our common stock held by family members, you may, in certain circumstances, be entitled to disregard such constructive ownership. You should check with your own tax advisor as to whether you would be entitled to disregard such constructive ownership and the required filings with the Internal Revenue Service pursuant to such a decision.

You will satisfy the “substantially disproportionate” test if immediately after the merger you actually and constructively own less than 50% of the total combined voting power of all classes of our stock entitled to vote and your percentage interest in Guaranty (i.e., the number of voting shares actually and constructively owned by you divided by the number of voting shares outstanding) is less than 80% of your percentage interest in Guaranty immediately prior to the merger.

You will satisfy the “not essentially equivalent to a dividend” test if the reduction in your percentage interest in Guaranty, as described above, constitutes a “meaningful reduction of your proportionate interest” given your particular facts and circumstances. The Internal Revenue Service has indicated in published rulings that a minority shareholder whose relative stock interest is minimal (i.e., less than 1%) and who exercises no control with respect to corporate affairs is considered to have a “meaningful reduction” generally if the shareholder has some reduction in the shareholder’s stock ownership percentage.

If you satisfy one of these three tests, you will be treated as having sold your shares of Guaranty common stock for the cash exchanged therefore and will recognize gain or loss on the exchange in an amount equal to the difference between the cash you receive for your cashed-out shares of our common stock and your aggregate adjusted tax basis in such stock. Your gain will be a capital gain provided you held your shares of our common stock as a capital asset within the meaning of Section 1221 of the Internal Revenue Code as of the effective time of the merger.

If you do not satisfy one of these three tests, you will be treated as having received a dividend to the extent of our current and accumulated earnings and profits, which we anticipate will be sufficient to cover the amount of any such dividend and will be includible in your gross income as ordinary income in its entirety, without reduction for the adjusted tax basis of your shares of our common stock exchanged for cash. No loss will be recognized. If the exchange is treated as a dividend, your adjusted tax basis in your shares of our common stock exchanged for cash generally will be added to your tax basis in your remaining shares of our common stock. To the extent that cash received in exchange for your shares of our common stock is treated as a dividend to a

corporate shareholder, the corporate shareholder will be: (1) eligible for a dividends-received deduction (subject to applicable limitations); and (2) subject to the “extraordinary dividend” provisions of the Internal Revenue Code. To the extent, if any, the cash received by you exceeds our current and accumulated earnings and profits, it will be treated first as a tax-free return of your adjusted tax basis in the shares surrendered and thereafter as a capital gain.

Capital gain and loss. For individuals, net capital gain (defined generally as your total capital gains in excess of capital losses for the year) recognized upon the sale of capital assets that have been held for more than 12 months generally will be subject to tax at a rate not to exceed 15%. Net capital gain recognized from the sale of capital assets that have been held for 12 months or less will continue to be subject to tax at ordinary income tax rates. In addition, capital gain recognized by a corporate taxpayer will continue to be subject to tax at the ordinary income tax rates applicable to corporations. There are limitations on the deductibility of capital losses.

Backup withholding. If you receive cash in the merger, you will be required to provide your social security or other taxpayer identification numbers (or, in some instances, additional information) in connection with the merger to avoid backup withholding requirements that might otherwise apply. The letter of transmittal will require you to deliver such information when your shares of our common stock certificates are surrendered following the effective time of the merger. Failure to provide such information may result in backup withholding.

As explained above, the amounts paid to you as a result of the merger may result in dividend income, capital gain income, or some combination of dividend and capital gain income to you depending on your individual circumstances. The U.S. federal income tax discussion set forth above is based upon present law, which is subject to change possibly with retroactive effect. You should consult your tax advisor as to the particular federal, state, local, foreign, and other tax consequences of the transaction that are applicable to you in light of your specific circumstances.

Regulatory Requirements

In connection with the merger, we will be required to make certain filings with and obtain certain approvals from various federal and state governmental agencies, including:

filing of Articles of Merger with the Secretary of State of Texas in accordance with the TBCA after the approval of the merger agreement by our shareholders; and

complying with federal and state securities laws, including our and the merger subsidiary’s filing, in conjunction with this proxy statement, of a Rule 13e-3 Transaction Statement on Schedule 13E-3 with the SEC.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following table summarizes financial results actually achieved by Guaranty for the periods and at the dates indicated and should be read in conjunction with our consolidated financial statements and the notes to the consolidated financial statements contained in reports that we have previously filed with the SEC. Historical financial information can be found in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 and our Annual Report on Form 10-K for the year ended December 31, 2004, which are incorporated by reference in this proxy statement. See “Where You Can Find Additional Information” on page 54 for instructions on how to obtain the information that has been incorporated by reference. Financial amounts as of and for the three months ended March 31, 2005 and March 31, 2004 are unaudited, but management of Guaranty believes that such amounts reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of its results of operations and financial position as of the dates and for the periods indicated. You should not assume the results of operations for past periods and for the three months ended March 31, 2005 and 2004 indicate results for any future period.

   

As of and for the

Three Months Ended
March 31,


  

As of and for the

Year Ended

December 31,


 
   2005

  2004

  2004

  2003

  2002

 
   (Dollars in thousands, except per share data) 

Income Statement Data:

                     

Interest income

  $7,142  $6,700  $27,029  $27,564  $28,955 

Interest expense

   2,643   2,150   9,137   10,242   12,272 
   

  

  


 


 


Net interest income

   4,499   4,550   17,892   17,322   16,683 

Provision for loan losses

   200   250   930   1,075   1,260 
   

  

  


 


 


Net interest income after provision for loan losses

   4,299   4,300   16,962   16,247   15,423 

Noninterest income

   1,391   1,228   4,756   4,937   5,056 

Noninterest expense

   4,247   4,114   16,483   15,837   14,692 
   

  

  


 


 


Earnings before provision for income taxes

   1,443   1,414   5,235   5,347   5,787 

Provision for income taxes

   460   382   1,575   1,503   1,410 
   

  

  


 


 


Net earnings

  $983  $1,032  $3,660  $3,844  $4,377 
   

  

  


 


 


Common Share Data:

                     

Basic earnings per share (1)

  $0.34  $0.35  $1.25  $1.32  $1.46 

Diluted earnings per share (1)

   0.33   0.35   1.24   1.30   1.45 

Book value

   13.20   12.88   13.26   12.47   11.81 

Tangible book value

   12.40   12.08   12.46   11.67   11.01 

Cash dividends declared

   —     —     0.40   0.37   0.32 

Dividend payout ratio

   —     —     31.88%  28.12%  21.73%

Weighted average shares outstanding (basic) (in thousands)

   2,912   2,922   2,918   2,923   2,991 

Weighted average shares outstanding (diluted) (in thousands)

   2,955   2,966   2,963   2,953   3,013 

Shares outstanding at end of period (in thousands)

   2,920   2,922   2,913   2,922   2,932 

Balance Sheet Data (at period end):

                     

Total assets

  $552,512  $518,997  $541,966  $517,078  $517,968 

Securities

   111,842   92,811   103,751   99,614   106,992 

Loans held for sale

   2,666   1,263   1,749   1,244   5,727 

Loans

   379,806   366,639   375,585   364,270   359,888 

Allowance for loan losses

   4,418   4,029   4,154   3,906   3,692 

Total deposits

   444,031   415,855   433,743   407,847   424,950 

Total shareholders’ equity

   38,543   37,629   38,624   36,448   34,644 

   

As of and for the

Three Months Ended
March 31,


  

As of and for the

Year Ended

December 31,


 
   2005

  2004

  2004

  2003

  2002

 
   (Dollars in thousands, except per share data) 

Average Balance Sheet Data:

                     

Total assets

  $548,633  $517,320  $527,025  $524,675  $490,620 

Securities

   111,305   95,897   97,549   109,325   91,710 

Loans (2)

   378,350   363,841   371,586   359,829   342,823 

Allowance for loan losses

   4,249   3,932   4,091   3,767   3,485 

Total deposits

   437,989   413,166   420,592   423,283   403,125 

Total shareholders’ equity

   38,767   37,230   37,687   35,496   33,934 

Performance Ratios:

                     

Return on average assets

   0.73%  0.80%  0.69%  0.73%  0.89%

Return on average common equity

   10.28   11.15   9.71   10.83   12.90 

Net interest margin

   3.61   3.90   3.71   3.63   3.73 

Efficiency ratio (3)

   72.11   71.72   73.17   71.75   68.79 

Asset Quality Ratios (4):

                     

Nonperforming assets to total loans and other real estate

   0.99%  1.12%  1.13%  0.90%  1.18%

Net charge-offs to average loans

   (0.02)  3.00   0.18   0.24   0.27 

Allowance for loan losses to total loans

   1.16   1.10   1.10   1.07   1.01 

Allowance for loan losses to nonperforming loans (5)

   139.15   124.24   116.16   152.52   114.87 

Capital Ratios (4):

                     

Leverage ratio

   8.62%  8.76%  8.73%  8.32%  8.62%

Average shareholders’ equity to average total assets

   7.07   7.20   7.15   6.77   6.92 

Tier 1 risk-based capital ratio

   12.60   12.49   12.52   12.10   12.06 

Total risk-based capital ratio

   13.78   13.60   13.65   13.18   13.12 


(1)Net earnings per share are based upon the weighted average number of common shares outstanding during the period.
(2)Includes loans held for sale.
(3)Calculated by dividing total noninterest expense by net interest income plus noninterest income, excluding securities losses or gains. Taxes are not part of this calculation.
(4)At period end, except for net charge-offs to average loans and average shareholders’ equity to average total assets, which is for periods ended at such dates.
(5)Nonperforming loans consist of nonaccrual loans, loans contractually past due 90 days or more and restructured loans.

CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES

The following sets forth our consolidated ratios of earnings to fixed charges for each of the two years in the two-year period ended December 31, 2004 and for the three months ended March 31, 2005 and the pro forma consolidated earnings to fixed charges ratio for the three months ended March 31, 2005 and the year ended December 31, 2004, which gives effect to the merger as if it had occurred on January 1 of the applicable year. The information presented below is derived from (1) our consolidated historical financial statements, including the related notes, incorporated by reference into this proxy statement and (2) our unaudited pro forma consolidated financial statements as of and for the three months ended March 31, 2005 and for the year ended December 31, 2004 included in this proxy statement.

   Pro Forma Three
Months Ended
March 31, 2005


  Pro Forma
Year Ended
December 31, 2004


  

Three Months
Ended March 31,

2005


  

Year Ended
December 31,

2004


  Year Ended
December 31,
2003


 

Earnings to Fixed Charges

                

Including interest on deposits

  1.53x 1.60x 1.55x 1.57x 1.52x

Excluding interest on deposits

  2.84x 2.78x 2.88x 2.71x 2.78x

For purposes of computing these ratios, earnings represent net income, plus applicable income taxes and fixed charges. Fixed charges include gross interest expense, other than interest on deposits in one case and inclusive of such interest in the other, and the proportion deemed representative of the interest factor or rent expense, net of income from subleases.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma consolidated financial information as of March 31, 2005 and for the three months ended March 31, 2005 and the year ended December 31, 2004, give effect to the following assumptions:

We have assumed that the merger occurred as of March 31, 2005 for purposes of the consolidated balance sheet, and as of January 1 of the earliest indicated period for purposes of the consolidated statements of earnings.

We have assumed that a total of 61,749 shares are cashed out in the merger at a price of $24.00 per share for a total of approximately $1.5 million. Additionally, we have assumed that we will incur approximately $120,000 in costs and expenses relating to the merger.

We have assumed that the maximum amount of cash necessary to consummate the merger to be approximately $1.6 million.

We have assumed that we will realize cost savings, estimated to be approximately $350,000 per year as a result of the merger.

We have assumed that the expenses and anticipated cost savings in connection with the merger will be tax effected at a rate of 34%.

The following information should be read in conjunction with and is qualified in its entirety by our consolidated financial statements and accompanying notes, which are incorporated by reference into this proxy statement.

The unaudited pro forma consolidated financial information is intended for informational purposes and is not necessarily indicative of our financial position or operating results that would have occurred had the merger actually been in effect as of the date or for the period presented.

Unaudited Pro Forma Consolidated Balance Sheet

As of March 31, 2005

   

Historical

March 31, 2005


  Adjustments

  Pro Forma
March 31, 2005


 
   (Dollars in thousands) 

Assets:

             

Cash and due from banks

  $16,055  $   $16,055 

Federal funds sold

   5,395   (1,561)(1)  3,834 

Interest-bearing deposits

   206       206 

Interest-bearing time deposits

   12,823       12,823 

Securities available-for-sale

   111,842       111,842 

Loans held for sale

   2,666       2,666 

Loans, net of allowance for loan losses

   375,388       375,388 

Premises and equipment, net

   13,501       13,501 

Accrued interest receivable

   2,849       2,849 

Other real estate

   617       617 

Goodwill

   2,338       2,338 

Cash surrender value of life insurance

   5,304       5,304 

Other assets

   3,528       3,528 
   


 


 


Total assets

  $552,512  $(1,561) $550,951 
   


 


 


Liabilities and Shareholders’ Equity:

             

Deposits

             

Noninterest-bearing

  $86,600      $86,600 

Interest-bearing

   357,431       357,431 
   


     


Total deposits

   444,031       444,031 

Accrued interest and other liabilities

   4,169       4,169 

Federal Home Loan Bank advances

   55,459       55,459 

Junior subordinated debentures

   10,310       10,310 
   


     


Total liabilities

  $513,969      $513,969 
   


     


Shareholders’ equity

             

Common stock, 50,000,000 shares authorized, 3,252,016 shares issued and 2,919,725 outstanding as of March 31, 2005, and 3,252,016 shares issued and 2,857,976 shares outstanding on a pro forma basis

  $3,252  $   $3,252 

Additional paid-in-capital

   12,864       12,864 

Retained earnings

   27,388   (79)(2)  27,309 

Treasury stock, at cost, 332,291 shares as of March 31, 2005 and 394,040 shares on a pro forma basis

   (4,101)  (1,482)  (5,583)

Accumulated other comprehensive income

   (860)  —     (860)
   


 


 


Total shareholders’ equity

   38,543   (1,561)  36,982 
   


 


 


Total liabilities and shareholders’ equity

  $552,512  $(1,561) $550,951 
   


 


 



(1)This adjustment represents the payment of cash consideration payable in the merger.
(2)This adjustment represents the estimated expenses in connection with the merger of $120,000, less the tax benefit of $41,000.

Unaudited Pro Forma Consolidated Statement of Earnings

for the Three Months Ended March 31, 2005

   

Historical

Three Months Ended
March 31, 2005


  Adjustments

  

Pro Forma

Three Months Ended
March 31, 2005


   (Dollars in thousands, except per share data)

Interest income

            

Loans, including fees

  $5,909      $5,909

Securities

            

Taxable

   970       970

Nontaxable

   150       150

Federal funds sold and interest-bearing deposits

   113       113
   

      

Total interest income

   7,142       7,142

Interest expense

            

Deposits

   1,877       1,877

FHLB advances and federal funds purchased

   516       516

Junior subordinated debentures

   250       250
   

      

Total interest expense

   2,643       2,643
   

      

Net interest income

   4,499       4,499

Provision for loan losses

   200       200
   

      

Net interest income after provision for loan losses

   4,299       4,299

Noninterest income

            

Service charges

   700       700

Other operating income

   691       691
   

      

Total noninterest income

   1,391       1,391

Noninterest expense

            

Salaries and benefits

   2,556       2,556

Occupancy expenses

   537       537

Other operating expenses

   1,154  $32(1)  1,186
   

  


 

Total noninterest expenses

   4,247   32   4,279
   

  


 

Earnings before provision for income taxes

   1,443   (32)  1,411

Provision for income taxes

   460   (11)(2)  449
   

  


 

Net earnings

  $983  $(21) $962
   

  


 

Earnings per common share—basic

  $0.34      $0.34

Earnings per common share—diluted

   0.33       0.33

(1)This adjustment represents the estimated expenses in connection with the transaction of $120,000, less the cost savings of approximately $88,000 on a quarterly basis that we expect to realize as a result of the merger.
(2)This adjustment represents the estimated tax effect at 34%.

Unaudited Pro Forma Consolidated Statement of Earnings

for the Year Ended December 31, 2004

   

Historical

Year Ended
December 31, 2004


  Adjustments

  

Pro Forma

Year Ended
December 31, 2004


   (Dollars in thousands, except per share data)

Interest income

            

Loans, including fees

  $22,990      $22,990

Securities

            

Taxable

   3,559       3,559

Nontaxable

   210       210

Federal funds sold and interest-bearing deposits

   270       270
   

      

Total interest income

   27,029       27,029

Interest expense

            

Deposits

   6,072       6,072

FHLB advances and federal funds purchased

   2,061       2,061

Junior subordinated debentures

   1,004       1,004
   

      

Total interest expense

   9,137       9,137
   

      

Net interest income

   17,892       17,892

Provision for loan losses

   930       930
   

      

Net interest income after provision for loan losses

   16,962       16,962

Noninterest income

            

Service charges

   3,036       3,036

Net realized gain on securities transactions

   120       120

Other operating income

   1,600       1,600
   

      

Total noninterest income

   4,756       4,756

Noninterest expense

            

Salaries and benefits

   9,326       9,326

Occupancy expenses

   2,260       2,260

Other operating expenses

   4,897  $(230)(1)  4,667
   

  


 

Total noninterest expenses

   16,483   (230)  16,253
   

  


 

Earnings before provision for income taxes

   5,235   230   5,465

Provision for income taxes

   1,575   78(2)  1,653
   

  


 

Net earnings

  $3,660  $152  $3,812
   

  


 

Earnings per common share—basic

  $1.25      $1.33

Earnings per common share—diluted

   1.24       1.31

(1)This adjustment represents the estimated expenses in connection with the transaction of $120,000, less the cost savings of approximately $350,000 on an annual basis that we expect to realize as a result of the merger.
(2)This adjustment represents the estimated tax effect at 34%.

THE SPECIAL MEETING

Purpose

This proxy statement is furnished to our shareholders in connection with the solicitation of proxies by our Board of Directors for use at the special meeting. The special meeting is a meeting of the shareholders of Guaranty at which the shareholders will vote upon a proposal to approve the merger agreement and a proposal to approve an amendment to our Articles of Incorporation. A copy of the merger agreement is attached asAppendix A and the full text of the proposed amendment is attached asAppendix B.

Date, Place and Time of Special Meeting

The special meeting of our shareholders will be held at              a.m., local time, on             , 2005, at the main office of the Bank at 100 W. Arkansas, Mt. Pleasant, Texas 75455.

Shares Entitled to Vote; Quorum and Vote Required

Shares Entitled to Vote. The holders of record of the outstanding shares of our common stock at the close of business on             , 2005, the record date, will be entitled to notice of and to vote at the special meeting and any adjournment or postponement of the special meeting. At the close of business on that date, there were              shares of our common stock issued and outstanding and entitled to vote at the special meeting.

Quorum. At the specialannual meeting, our shareholders will be entitledasked to one vote for each share of our common stock owned of record on the record date. The holders of a majority of our common stock outstanding must be present, either in person or by proxy, to constitute a quorum at the special meeting. Shares of our common stock present in person or represented by proxy, including shares whose holders abstain or do not vote and shares held of record by a broker or nominee that are voted on any matter, will be counted for purposes of determining whether a quorum exists at the special meeting.

Votes Required. The affirmative vote of a majority of the issued and outstanding Guaranty common stock is required to approve both the merger agreement and the amendment to the Articles of Incorporation. The affirmative vote of at least a majority of our common stock present at the meeting, either in person or by proxy, is required to approve any other matters that may be properly presented at the special meeting.

Abstentions. A shareholder who is present in person or by proxy at the special meeting and who abstains from voting on any or all proposals will be included in the number of shareholders present at the special meeting for the purpose of determining the presence of a quorum. However, because approval of the merger agreement and the amendment each require a majority of the issued and outstanding shares of our common stock, an abstention would effectively function as a vote against the merger agreement and the amendment, even though it would not be counted in the voting tally as such. Abstentions will not affect the outcome of any other proposal that may be properly brought before the special meeting because only a majority of the votes actually cast must be voted in favor of such a proposal.

Broker Non-Votes. Generally, brokers who hold shares for the accounts of beneficial owners must vote these shares as directed by the beneficial owner. Both the proposal to approve the merger agreement and the proposal to approve the amendment are “non-discretionary” items, meaning that brokers and banks may not give a proxy to vote shares on those matters without specific instructions from their customers. Proxies that contain a broker vote on one or more proposals but no vote on others are referred to as “broker non-votes” with respect to the proposal(s) not voted upon. A broker non-vote with respect to a proposal for which the broker has no discretionary voting authority against the merger agreement and a vote against the amendment but will not affect the outcome of any other proposal properly brought before the special meeting.

On the record date, our directors and executive officers (12 persons) were entitled to vote, in the aggregate, 904,314 shares of our common stock (not including any shares that may be acquired pursuant to the exercise of

stock options), or approximately             % of the outstanding shares of our common stock. These shares are expected to be voted FOR approval of the merger agreement and FOR approval of the amendment to the Articles of Incorporation. If these shares are voted in favor of the merger agreement and the amendment, then shareholders owning an additional              shares would be required to vote in favor of the merger in order for the proposals to receive approval by a majority of the outstanding shares of our common stock.

A list of shareholders will be available for examination by holders of the our common stock for any purpose related to the special meeting at the special meeting and during the 10 days prior to the special meeting at the office of our corporate secretary at our offices at 100 W. Arkansas, Mt. Pleasant, Texas 75455.

Our Board of Directors unanimously recommends that you vote FOR approval of the merger agreement and FOR approval of the amendment to the Articles of Incorporation.

Voting Procedures and Revocation of Proxies

Proxies, in the form enclosed, which are properly executed by the shareholders and returned to us and not subsequently revoked, will be voted in accordance with the instructions indicated on the proxies. Any properly executed proxy on which voting instructions are not specified will be voted FOR the proposal to approve the merger agreement and FOR the proposal to approve the amendment to the Articles of Incorporation. The proxy also grants authority to theelect five persons designated in the proxy to vote in accordance with their own judgment if an unscheduled matter is properly brought before the special meeting.

If you are the record holder of your shares, you may revoke any proxy given pursuant to this solicitation by the Board of Directors at any time before it is voted at the special meeting by:

giving written notice to the Secretary of Guaranty;

executing a proxy bearing a later date filed with the Secretary of Guaranty at or before the meeting; or

attending and voting in person at the meeting. Attendance without voting at the special meeting will not in and of itself constitute revocation of a proxy.

All written notices of revocation and other communications with respect to revocation or proxies should be sent to: Guaranty Bancshares, Inc., 100 W. Arkansas, Mt. Pleasant, Texas 75455, Attention: Kim Shumate. If you hold your shares in street name with a bank or broker, you must contact the bank or broker if you wish to revoke your proxy.

Attending the Special Meeting

All of our shareholders are invited to attend the special meeting. If you want to vote your shares of our common stock held in street name by a broker, bank or other nominee in person at the special meeting, you will have to get a written proxy in your name from the broker, bank or other nominee who holds your shares.

Solicitation of Proxies and Expenses

This proxy solicitation is made by our Board of Directors. We are responsible for our expenses incurred in preparing, assembling, printing and mailing this proxy statement. Proxies will be solicited through the mail. Additionally, directors, officers and other employees of Guaranty or its subsidiaries may solicit proxies personally, by telephone or other means of communications. None of these people will receive any special compensation for solicitation activities. We will reimburse banks, brokers and other custodians, nominees and fiduciaries for their reasonable expenses in forwarding the proxy materials to beneficial owners.

PROPOSAL I:  APPROVAL OF THE MERGER AGREEMENT

Parties to the Merger

Guaranty Bancshares, Inc. Guaranty was incorporated as a business corporation under the laws of the State of Texas in 1980 to serve as a holding company for Guaranty Bond Bank, formally known as Guaranty Bank, (the “Bank”), which was chartered in 1913, and for Talco State Bank, which was chartered in 1912 and merged intoClass III directors until the Bank in 1997. We offer a broad range of financial products and services to small and medium-sized businesses and consumers through twelve banking locations in the Texas communities Mt. Pleasant (two offices), Bogata, Commerce, Ft. Stockton, Mount Vernon, Paris, Pittsburg, Sulphur Springs, Talco and Texarkana (two offices). Guaranty’s headquarters are located at 100 W. Arkansas, Mt. Pleasant, Texas 75455, and its telephone number is (903) 572-9881.

GB Facilitation, Inc. The merger subsidiary is a newly formed Texas corporation, organized solely for the purpose of facilitating the merger agreement, and is our wholly-owned subsidiary. The merger subsidiary will merge with and into Guaranty and will cease to exist after the merger. The merger subsidiary has no significant assets, liabilities or shareholders’ equity, and has conducted no business activities other than those incidental to its formation, the execution of the merger agreement and assistance in preparing various SEC filings related to the merger. The principal executive offices of merger subsidiary are located at 100 W. Arkansas, Mt. Pleasant, Texas 75455.

Structure of the Merger

The merger agreement provides for the merger of the merger subsidiary with and into Guaranty, with Guaranty surviving the merger. In the merger, shareholders owning fewer than 600 shares of Guaranty common stock will receive $24.00 in cash for each share that they own as of the effective time of the merger. All other shares will remain outstanding and be unaffected by the merger. Our directors and executive officers after the merger will be the same as our directors and executive officers immediately prior to the merger.

Conversion of Shares in the Merger

The merger agreement provides that, at the effective time of the merger:

all outstanding shares of our common stock, whether record shares (as defined below) or street shares (as defined below), held of record by a holder holding fewer than 600 shares of Guaranty common stock immediately prior to the effective time of the merger will, without any action on the part of the holder thereof, be converted into the right to receive cash equal to $24.00 per share (the “merger consideration”). We may presume that all street shares are held by holders holding fewer than 600 shares immediately prior to the effective time unless a beneficial owner of street shares is able to demonstrate to our satisfaction that such shares are held beneficially by a holder holding 600 or more shares immediately prior to the effective time of the merger. In that case, such shares will remain outstanding with all rights, privileges, and powers existing immediately before the merger;

all outstanding shares of our common stock other than those described above as being converted into the right to receive the merger consideration or shares for which dissenters’ rights have been exercised will remain outstanding with all rights, privileges, and powers existing immediately before the merger; and

the outstanding shares of the merger subsidiary will, without any action on the part of the holder thereof, be canceled.

The merger agreement further provides that:

immediately prior to the merger, no holder holding, of record or beneficially, 600 or more shares (including any combination of record shares or street shares) in the aggregate will be entitled to receive any merger consideration with respect to the shares so held other than by exercising his or her dissenters’ rights; and

it is a condition precedent to the right of any holder to receive the merger consideration, if any, payable with respect to the shares held by such holder that such holder certify to Guaranty in the letter of transmittal delivered by us as described below that such holder held, of record and beneficially, immediately prior to the merger fewer than 600 shares (including any combination of record shares and street shares) in the aggregate.

For purposes of the merger agreement:

the term “record shares” means shares of Guaranty common stock other than street shares, and any record shares will be deemed to be held by the registered holder thereof as reflected on our books;

the term “street shares” means shares of Guaranty common stock held of record in street name, and any street shares will be deemed to be held by the beneficial owner thereof as reflected on the books of the nominee holder thereof; and

the term “holder” means:

(a)any record holder or holders of record shares who would be deemed, under Rule 12g5-1 under the Exchange Act as described below, to be a single “person” for purposes of determining the number of our record shareholders, and

(b)any other person or persons who would be deemed to be a “holder” under the above clause if the shares it holds beneficially in street name were held of record by such person or persons.

The merger agreement provides that Guaranty (along with any other person or entity to which Guaranty may delegate or assign any responsibility or task with respect thereto) will have full discretion and exclusive authority (subject to its right and power to so delegate or assign such authority) to:

make such inquiries, whether of any shareholder(s) or otherwise, as it may deem appropriate for purposes of confirming the above provisions, and

resolve and determine, in our sole discretion, all ambiguities, questions of fact and interpretive and other matters relating to such provisions, including, without limitation, any questions as to the number of shares held by any holder immediately prior to the merger. All such determinations by us will be final and binding on all parties, and no person or entity will have any recourse against us or any other person or entity with respect thereto.

For purposes of the above provisions, we may, our sole discretion, but will not have any obligation to do so,

presume that any shares of Guaranty common stock held in a discrete account (whether record or beneficial) are held by a person distinct from any other person, notwithstanding that the registered or beneficial holder of a separate discrete account has the same or a similar name as the holder of a separate discrete account; and

aggregate the shares held (whether of record or beneficially) by any person or persons that we determine to constitute a single holder for purposes of determining the number of shares held by such holder.

Rule 12g5-1 under the Exchange Act provides that, for the purpose of determining whether an issuer is subject to the registration provisions of the Exchange Act, securities will be deemed to be “held of record” by each person who is identified as the owner of such securities on records of security holders maintained by or on behalf of the issue, subject to the following:

In any case where the records of security holders have not been maintained in accordance with accepted practice, any additional person who would be identified as such an owner on such records if they had been maintained in accordance with accepted practice will be included as a holder of record.

Securities identified as held of record by a corporation, a partnership, a trust whether or not the trustees are named, or other organization will be included as so held by one person.

Securities identified as held of record by one or more persons as trustees, executors, guardians, custodians or in other fiduciary capacities with respect to a single trust, estate or account will be included as held of record by one person.

Securities held by two or more persons as co-owners will be included as held by one person.

Securities registered in substantially similar names where the issuer has reason to believe because of the address or other indications that such names represent the same person, may be included as held of record by one person.

Effect on Outstanding Options

The holders of outstanding stock options issued by Guaranty will continue to hold those securities. The terms of the options will not be affected by the merger.

Effective Time of the Merger

The merger will be effective at the date and time specified in the Certificate of Merger to be issued by the Secretary of State of Texas. As soon as practicable after shareholder approval of the merger agreement, we will file Articles of Merger with the Secretary of State of Texas and will send a Letter of Transmittal to all record holders of Guaranty common stock who are entitled to receive cash in the merger. We anticipate that this will occur in September of 2005.

At the effective time of the merger, each shareholder who owns fewer than 600 shares of record immediately prior to the merger will not have any rights as a Guaranty shareholder and will have only the right to receive cash as provided under the merger agreement.

Exchange of Shares

The Letter of Transmittal will provide the means by which shareholders will surrender their certificates representing Guaranty common stock and obtain the cash to which they are entitled. If certificates evidencing our common stock have been lost or destroyed, we and our transfer agent may, in our sole discretion, accept a duly executed affidavit and indemnity agreement of loss or destruction in a form satisfactory to us in lieu of the lost or destroyed certificate. If a certificate is lost or destroyed, the shareholder will be required to submit, in addition to other documents, a bond or other security, satisfactory to us and our transfer agent, indemnifying us and all other persons against any losses incurred as a consequence of the issuance of a new stock certificate. Shareholders whose certificates have been lost or destroyed should contact us. Additional instructions regarding lost or destroyed stock certificates will be included in the Letter of Transmittal that will be sent to shareholders after the merger becomes effective.

Except as described above with respect to lost stock certificates, there will be no service charges or costs payable by shareholders in connection with the exchange of their certificates for cash in the merger. We will bear these costs.

The Letter of Transmittal will be sent to shareholders as soon as practicable after the effective time of the merger. Do not send in your stock certificate(s) until you have received the Letter of Transmittal.

Termination of Exchange Act Registration

Our common stock is currently registered under the Exchange Act. We will be permitted to terminate our registration once we can certify that we have fewer than 300 shareholders of record. Upon the completion of the merger, we expect to have approximately 184 shareholders of record. We intend to apply for termination of the registration of our common stock under the Exchange Act as promptly as possible after the effective time of the merger.

Termination of registration under the Exchange Act will substantially reduce the information required to furnish to our shareholders and to the SEC and would make some of the provisions of the Exchange Act, such as the short-swing profit provisions of Section 16, the requirement of furnishing a proxy or information statement in connection with shareholder meetings under Section 14(a) and required compliance with the Sarbanes-Oxley Act, no longer applicable to us. Furthermore, our affiliates will lose the ability to dispose of their common stock under Rule 144 promulgated under the Securities Act of 1933.

We estimate that termination of the registration of our common stock under the Exchange Act will save us approximately $350,000 per year in legal, accounting, printing, management time and other expenses. See “Special Factors-Effects of the Merger on Guaranty.”

Source of Funds and Expenses

We estimate that approximately $1.5 million will be required to pay for the shares of our common stock exchanged for cash in the merger. Additionally, we will pay all of the expenses related to the merger. We estimate that these expenses will be as follows:

Legal fees

  $75,000

Financial advisory fees

   15,000

Printing and mailing costs

   20,000

Accounting fees

   10,000
   

Total

  $120,000
   

We intend to use existing cash generated from our operations to pay for the shares to be cashed out and the expenses related to the merger. Although it is not anticipated that we will need funds in excess of cash on hand to finance the merger, if additional funds are required it is likely such funds will be borrowed from one of Guaranty’s correspondent banks.

Conditions to the Completion of the Merger

The obligations of Guaranty and the merger subsidiary to complete the merger are subject to the satisfaction or waiver of all of the following conditions:

approval of the merger agreement by the holders of a majority of the outstanding shares of our common stock;

all of the representations and warranties made in the merger agreement must be true and correct in all material respects as of the effective time of the merger;

absence of pending or threatened litigation regarding the merger; and

the aggregate number of the shares to be cashed out in the merger, plus the number of shares held by shareholders who delivered their notice to exercise their rights to dissent from the merger pursuant to the provisions of the TBCA, does not exceed 100,000 shares.

The merger is not contingent on shareholder approval of the amendment. Therefore, if shareholders approve the merger agreement, Guaranty and the merger subsidiary will proceed with the completion of the merger, regardless of whether the shareholders approve the amendment.

Termination of Merger Agreement

The merger agreement may be terminated by either Guaranty or the merger subsidiary at any time prior to the effective time of the merger.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER AGREEMENT.

Dissenters’ Rights of Appraisal

The following section of this proxy statement describes material aspects of the law pertaining to dissenters’ rights under Texas law. If you are a shareholder of Guaranty and you wish to dissent from the merger and receive the fair value in cash of your shares of Guaranty common stock instead of receiving the merger consideration, you should carefully read the following discussion, review the full text of the applicable law relating to dissenters’ rights which is attached to this proxy statement asAppendix D, and consult with your legal counsel before electing or attempting to exercise these rights.

If you hold one or more shares of Guaranty common stock, you are entitled to dissenters’ rights under Texas law. This means that if you properly dissent from the merger of merger subsidiary with and into Guaranty pursuant to the merger agreement, you will receive an amount in cash representing the fair value of the shares of Guaranty common stock that you hold. This value may be more or less than the value of the merger consideration that you would otherwise receive pursuant to the merger agreement. The availability of your right to dissent from the merger and obtain the fair value of your shares of Guaranty common stock is conditioned upon compliance with a complicated procedure that is set forth in Articles 5.11, 5.12 and 5.13 of the TBCA, which are referred to in the following discussion as the dissent provisions. The following discussion is only a summary of the dissent provisions. A copy of the full text of Articles 5.11, 5.12 and 5.13 is attached atAppendix Dto this proxy statement. You will lose your dissenters’ rights in the merger if you do not properly comply with the procedures set forth in the dissent provisions.

How to Exercise and Perfect Your Right to Dissent

To be eligible to exercise your right to dissent from the merger:

you must, prior to the special meeting, provide Guaranty with a written objection to the merger that states that you intend to exercise your right to dissent if the merger agreement is approved and the merger is completed and that provides an address to which Guaranty may send a notice if the merger is completed; and

you must not vote your shares of Guaranty common stock in favor of the merger agreement.

If you intend to dissent from the merger, you should send the notice to:

Guaranty Bancshares, Inc.

100 W. Arkansas

Mt. Pleasant, Texas 75455

Attention: Clifton A. Payne

If you vote your shares of Guaranty common stock at the special meeting to approve the merger agreement, you will lose your right to dissent from the merger. Instead, you will receive the cash-out price of $24.00 per share if you own fewer than 600 shares of Guaranty common stock or you will retain your shares if you own 600 or more shares of Guaranty common stock. If you comply with the two items above and the merger is completed, Guaranty will send you a written notice advising you that the merger has been completed. Guaranty must deliver this notice to you within ten days after the merger is completed.

If you wish to receive the fair value of your shares of Guaranty common stock in cash, you must, within ten days of the date the notice was delivered or mailed to you by Guaranty, send a written demand to Guaranty for payment of the fair value of your shares of Guaranty common stock. The fair value of your shares of Guaranty common stock will be the value of the shares on the day immediately preceding the Guaranty special meeting, excluding any appreciation or depreciation in anticipation of the merger. Your written demand and any notice should be sent to Guaranty at the address set forth above.

Your Demand for Payment

Your written demand must state how many shares of Guaranty common stock you own and your estimate of the fair value of your shares of Guaranty common stock. If you fail to send this written demand to Guaranty within ten days of Guaranty’s delivery of your notice, you will be bound by the merger and you will not be entitled to receive a cash payment representing the fair value of your shares of Guaranty common stock. Instead, you will receive the merger consideration as described in the merger agreement if you own fewer than 600 shares of Guaranty common stock or you will retain your shares if you own 600 or more shares of Guaranty common stock. You must also, within 20 days of making a demand for payment, submit the stock certificates representing your shares of Guaranty common stock to Guaranty. Guaranty will make a notation on your stock certificates indicating that a demand for payment has been made and may return the share certificates to you. If you fail to submit your stock certificates to Guaranty for notation, Guaranty may, at its option, terminate your right to receive a cash payment for your shares, unless a court otherwise directs Guaranty.

Guaranty’s Actions Upon Receipt of Your Demand for Payment

Within 20 days after Guaranty receives your demand for payment and your estimate of the fair value of your shares of Guaranty common stock, Guaranty must send you written notice stating whether or not it accepts your estimate of the fair value of your shares.

If Guaranty accepts your estimate, Guaranty will notify you that it will pay the amount of your estimated fair value within 90 days of the merger being completed. Guaranty will make this payment to you only if you have surrendered the share certificates representing your shares of Guaranty common stock, duly endorsed for transfer, to Guaranty.

If Guaranty does not accept your estimate, Guaranty will notify you of this fact and will make an offer of an alternative estimate of the fair value of your shares that it is willing to pay you within 90 days of the merger being completed, which you may accept within 60 days or decline.

Payment of the Fair Value of Your Shares of Guaranty Common Stock Upon Agreement of an Estimate

If you and Guaranty have reached an agreement on the fair value of your shares of Guaranty common stock within 60 days after the merger is completed, Guaranty must pay you the agreed amount. The payment must be made by Guaranty within 90 days after the merger is completed, provided that you have surrendered the share certificates representing your shares of Guaranty common stock, duly endorsed for transfer, to Guaranty.

Commencement of Legal Proceedings if a Demand for Payment Remains Unsettled

If you and Guaranty have not reached an agreement as to the fair market value of your shares of Guaranty common stock within 60 days after the merger is completed, you or Guaranty may, with 60 days after the expiration of the 60-day period, commence proceedings in Titus County, Texas, asking the court to determine the fair value of your shares of Guaranty common stock. The court will determine if you have complied with the dissent provisions and if you have become entitled to a valuation of and payment for your shares of Guaranty common stock. The court will appoint one or more qualified persons to act as appraisers to determine the fair value of your shares. The appraisers will determine the fair value of your shares and will report this value to the court. The court will consider the report, and both you and Guaranty may address the court about the report. The court will determine the fair value of your shares and direct Guaranty to pay that amount, plus interest, which will begin to accrue 91 days after the merger is completed.

Rights as a Shareholder

If you have made a written demand on Guaranty for payment of the fair value of your shares of Guaranty common stock, you will not thereafter be entitled to vote or exercise any other rights as a shareholder except the right to receive payment for your shares as described herein and the right to maintain an appropriate action to

obtain relief on the ground that the merger would be or was fraudulent. In the absence of fraud in the transaction, your right under the dissent provisions described herein is the exclusive remedy for the recovery of the value of your shares or money damages with respect to the merger.

Withdrawal of Demand

If you have made a written demand on Guaranty for payment of the fair value of your Guaranty common stock, you may withdraw such demand at any time before payment for your shares has been made or before a petition has been filed with a court for determination of the fair value of your shares. If you withdraw your demand or are otherwise unsuccessful in asserting your dissenters’ rights, you will be bound by the merger and your status as a shareholder will be restored without prejudice to any corporate proceedings, dividends or distributions which may have occurred during the interim.

Income Tax Consequences

See “Special Factors—Material U.S. Federal Income Tax Consequences” on page 29 for a discussion on the federal income tax consequences if you elect to dissent from the merger.

PROPOSAL II: APPROVAL OF THE AMENDMENT TO

ARTICLES OF INCORPORATION

Our Board of Directors has unanimously approved, and recommends that shareholders vote for the proposal to approve the amendment to our Articles of Incorporation. The following discussion summarizes the change to our existing Articles of Incorporation that would be affected by the approval of the amendment. This summary is qualified in its entirety by reference to the text of proposed new Article XVI, which is included asAppendix B to this proxy statement.

Under the provisions of the Exchange Act, if, after the merger, the number of our shareholders of record did increase to 300 or greater and remained at that level as of December 31 of any calendar year, then we would be required to resume our reporting obligations under the Exchange Act. Accordingly, the Board approved the amendment to help us control any potential future increases in the number of our record shareholders by granting us a right of first refusal with respect to certain future transfers of our common stock and enable us to delay or avoid Guaranty again becoming subject to the reporting requirements under the Exchange Act. If the amendment is approved, Guaranty will have right, but not the obligation, to purchase the shares of common stock a shareholder would like to transfer, whether by sale, gift or otherwise as described below, if that transfer would result in an increase in the number of our record shareholders.

As a result of the amendment, a Guaranty shareholder that wants to transfer any common stock must give us a period of thirty (30) days in which to purchase the shares. The purchase price we will pay for the shares shall be no less than the per share price established by periodic independent third party appraisals of our common stock that we intend to obtain following the merger for purposes of our Employee Stock Ownership Plan. If we do not exercise our purchase right, the shareholder may proceed with the transfer of the shares.

For purposes of the amendment, a “transfer” is defined as any type of disposition of shares that would result in an increase in the number of record holders of our shares of common stock, including a sale, gift, transfer incident to divorce, transfer to legatees, heirs or trustees of a trust as the result of the death of the record holder, transfer incident to a guardian or probate proceeding or transfer resulting from the liquidation or sale of a partnership, corporation or other business entity. Consequently, the proposed amendment would not limit transfers to or among “street name” accounts, as shares held for beneficial owners by banks or brokers are typically held of record by a depository nominee which is the record holder. These types of transfers generally do not result in an increase in the number of record holders of the shares. In accordance with Texas law, the restriction imposed by the amendment would not be binding with respect to shares issued before shareholder approval of the amendment unless the shareholder voted for approval of the amendment.

The amendment, if approved by shareholders, combined with the absence of an established trading market and a smaller shareholder base following completion of the merger, may restrict your ability to transfer your shares of common stock after the merger.

The proposal to approve the amendment is contingent on shareholder approval of the merger agreement and the completion of the merger. As a result, the amendment will not become effective unless the merger agreement is approved and the merger is consummated, even if shareholders approve the amendment. However, the merger is not contingent on shareholder approval of the amendment.

If the amendment is approved and becomes effective, if you are the holder of 600 or more shares of our common stock and you voted in favor of the amendment, we will ask that you surrender your stock certificate(s) representing your shares to receive a new stock certificate(s) which will include information regarding the transfer restriction. After completion of the merger, we will send you a Letter of Transmittal with instructions for exchanging your stock certificate(s).

Our Board of Directors believes that the amendment is in the best interest of Guaranty and our shareholders because it would slow the growth in the number of shareholders in the future, and thus enable Guaranty to avoid or delay the need to again become subject to the reporting requirements of the Exchange Act.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION.

INFORMATION ABOUT GUARANTY AND ITS AFFILIATES

Directors and Executive Officers of Guaranty

The following table sets forth certain information with respect to our directors and executive officers as of                     , 2005. The Board of Directors is divided into three classes with each class to be nearly equal in number as possible. Each class of directors serves for a period of three years and the classes have staggered terms so that the terms of approximately one-third of the directors end at each2021 annual meeting of shareholders or until their successors are elected and qualified.

The Corporate Governance and Nominating Committee has recommended to the board of directors, and the board of directors has approved the nomination of, the following five individuals to serve as Class III directors of the Company until the Company’s 2021 annual meeting of shareholders and each until his or her respective successor is duly elected and qualified or until his or her earlier resignation or removal:
NameAgePosition with CompanyDirector Since
James S. Bunch57Class III Director2014
Molly Curl63Class III Director2017
Christopher B. Elliott49Class III Director2010
Weldon C. Miller82Class III Director1979
William D. Priefert69Class III Director2002
Each of the nominees was approved by our board of directors upon the recommendation of the Corporate Governance and Nominating Committee. In addition, each of the nominees has previously served as a director of the Company and has agreed to serve as a director, if elected, for an additional term. If any of the nominees should become unable to serve as a director, our board of directors may designate a substitute nominee. In that case, the persons named on the proxy card as proxies may vote for the substitute nominee or nominees recommended by our board of directors. We have no reason to believe that any of the five nominees for election named above will be unable to serve.
Unless authority is expressly withheld, the proxy holders will vote the proxies received by them for the five director nominees listed above. Although each nominee has consented to being named in this proxy statement and to serve if elected, if any nominee should prior to the annual meeting decline or become unable to serve as a director, the proxies will be voted by the proxy holders for such other person as may be designated by the present board of directors.
Pursuant to the Company's Certificate of Formation, directors are elected by a majority of the votes cast in the election of directors, meaning that each candidate must receive more votes "for" than votes "against." However, if there are more nominees for director than there are available directorships, then the directors are elected by plurality, meaning those nominees receiving the most votes "for" will be elected director.
If a director does not receive a majority of the votes cast for his or her election, our Corporate Governance Guidelines require that the director promptly tender her or her resignation to the board of directors. The Corporate Governance and Nominating Committee will consider whether or not to accept such resignation and provide its recommendation to the full board no later than 60 days after the relevant shareholder meeting based on the factors set forth in our Corporate Governance Guidelines, and the full board of directors will make a final determination, considering such recommendation, of whether to accept


or reject the tendered resignation no later than 90 days after the relevant shareholder meeting. The Company will disclose the board's decision, including a full explanation of the process by which the decision was reached, in public filing with the SEC. If the resignation is accepted by the board, the Corporate Goverance and Nominating Committee will recommend to the board of directors whether to reduce the number of directors or to fill the vacant directorship.

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE CLASS III DIRECTOR NOMINEES LISTED ABOVE FOR ELECTION TO THE BOARD OF DIRECTORS.


Information Regarding Director Nominees
A brief description of the background of each of the nominees for Class III director is set forth below. No nominee has a family relationship with any other executive officer or director.
James S. Bunch. Mr. Bunch was elected to serve on the Company board of directors in 2014 and has served as a director of the Bank since 2011. Mr. Bunch serves as Chairman of the Compensation Committee, and as a member of the Corporate Governance and Nominating Committee, the Audit Committee, and the Bank’s Directors’ Loan and Executive officersCommittees. Since 2006, Mr. Bunch has served as the President and Chief Executive Officer of BWI Companies, Inc., a privately held company that has eight full service distribution locations and eight satellite locations servicing 15 states in the south and mid-south. BWI Companies, Inc. has 600 employees with annual revenue of approximately $410 million. Prior to his appointment as the President and Chief Executive Officer, Mr. Bunch served as Vice President of Sales and the Texarkana location manager for BWI Companies, Inc. Mr. Bunch has over 30 years of experience managing a complex distribution company and has authored many articles regarding the growth and management of a successful business enterprise. Mr. Bunch has served as President of the National Lawn and Garden Distributors Association and as Chairman of the board of directors for Prokoz (distributor chemical buying group), Chairman of the board of directors for Gro Group (distributor lawn and garden marketing group), and currently serves on the board of Voluntary Purchasing Group (member owned co-op that manufactures fertilizer and chemicals). Mr. Bunch is a very active member and either chairs or serves on several committees at Williams Memorial Methodist Church in Texarkana, Texas. Mr. Bunch currently serves or has served on many charitable boards such as Wadley Hospital Foundation, Methodist Retirement Communities Foundation and Water Springs Ranch (a neglected children’s home). Mr. Bunch is a graduate of Stephen F. Austin State University, B.S. in Agriculture and a minor in Business Management, 1983. Mr. Bunch’s extensive management, strategic planning and mergers and acquisitions experience, as well as his community involvement, qualify him to serve at the pleasureon our board of directors.
Molly Curl. Ms. Curl was appointed to our board of directors in 2017 and serves as a member of our BoardAudit Committee. Ms. Curl has more than 40 years of Directors. Noneexperience in the areas of organization, compliance, loan review, loan servicing, policy development, budgeting and capital strategic planning in the directorsfinancial services industry. She currently serves as a consultant in the financial services industry following her retirement in July 2017 from Grant Thornton LLP, an independent audit, tax and advisory firm, where she had served as a partner in the Bank Advisory and Regulatory Consulting group since 2010. Ms. Curl began her career as a bank examiner with the Office of the Comptroller of the Currency in 1975, where she served for approximately nine years, before then joining Grant Thornton LLP in the financial services group in 1985. She left Grant Thornton LLP in 1994 to take a senior management position at a Dallas-based financial institution, where she oversaw loan review, regulatory compliance and internal audit for 16 years, before rejoining Grant Thornton LLP in 2010. Ms. Curl currently serves on the Finance Commission of Texas, a position to which she was appointed in 2016 for a six year term. The Finance Commission oversees the Texas Department of Banking, the Department of Savings and Mortgage Lending, and the Office of the Consumer Credit Commissioner, and is the primary point of accountability for ensuring that state depository and lending institutions function as a system. Ms. Curl is a graduate of John Carroll University, B.S.B.A.


Finance, 1975. She is also licensed by the State of Texas as a certified public accountant and is a member of the American Institute of Certified Public Accountants. Ms. Curl’s extensive business experience and knowledge of audit and compliance procedures qualify her to serve on our board of directors.
Christopher B. Elliott.  Mr. Elliott has served on our board of directors since 2010 and has served as a director of any other companythe Bank since 2004. He is Chairman of our Corporate Governance and Nominating Committee and our Audit Committee and serves on our KSOP Committee, Compensation Committee and the Bank’s Directors’ Loan and Executive Committees. Mr. Elliott has served as the managing partner of Kartos Holdings, L.P. since 2006. Kartos Holdings, L.P. owns several automobile dealerships with locations in Mount Pleasant, Kilgore and Jacksonville, Texas, as well as the real estate holdings associated with their operations. Mr. Elliott is a classgraduate of securities registered pursuant to Section 12Texas Christian University, B.B.A. in Management, 1990. He is currently a member of the Exchange Act. City of Mount Pleasant Airport Advisory Board. Mr. Elliott’s extensive business experience and contacts in our East Texas markets qualify him to serve on our board of directors.
Weldon C. Miller.  Mr. Miller has served as a director of the Company since 1979 and has served as a director of the Bank since 1969, until his retirement from the Bank board in December 2015. Mr. Miller has been the President of Everybody’s Furniture Company since1957. Mr. Miller is a member of our Audit Committee, our Compensation Committee and our Corporate Governance and Nominating Committee. Mr. Miller served on the board of directors of the Bart Scharlach Memorial Foundation from 2004 to 2016, and previously served on the board of the Nevill’s Chapel Cemetery Association from 1995 to 2009. Mr. Miller served in the Texas Army National Guard for fourteen years. Mr. Miller is also a member and serves as an elder of the North Jefferson Church of Christ in Mount Pleasant. Mr. Miller is a graduate of Abilene Christian College, B.S. in Marketing, 1957. Mr. Miller’s extensive business experience, as well as his years of experience as a director of the Company and the Bank, qualify him to serve on our board of directors.
William D. Priefert. Mr. Priefert has served as a director of the Company since 2002 and has served as a director of the Bank since 1983. Mr. Priefert serves as a member of our KSOP Committee and the Bank’s Executive Committee. Mr. Priefert has been Chairman of the Board and CEO of Priefert Manufacturing, Inc., a farm, ranch and rodeo equipment manufacturer, since 1988. Mr. Priefert also serves on the board of BWI Companies, Inc., and is a Transportation Committee member of the Titus County Chamber of Commerce. He previously served on the Northeast Texas Community College Board from 2002 to 2014. Mr. Priefert is a graduate of Stephen F. Austin University, B.B.A. in Business Management, 1970. Mr. Priefert’s extensive experience in business and manufacturing, as well as his community involvement, leadership skills and his business relationships throughout the state of Texas, qualify him to serve on our board of directors.

CURRENT EXECUTIVE OFFICERS AND DIRECTORS
General
Our board of directors is composed of 13 members and is divided into three classes of directors, serving staggered three-year terms. Approximately one-third of our board of directors is elected by our shareholders at each annual shareholders’ meeting for a term of three years, and the elected directors hold office until their successors are elected and qualified or until such director’s earlier death, resignation or removal. Our executive officers are appointed by our board of directors and hold office until their successors are duly appointed and qualified or until their earlier death, resignation or removal.
The business addressboard of directors of Guaranty Bank & Trust consists of 16 members. All of the Company’s directors serve on the board of directors of Guaranty Bank & Trust, except for Arthur B. Scharlach, Jr. and phone numberWeldon C. Miller, who retired from the Bank’s board of directors in December 2014 and 2015, respectively, Clifton A. Payne, who concluded his term in December 2016, and Molly Curl. As the sole shareholder of Guaranty Bank & Trust, we elect the directors of the Bank annually for a term of one year and the directors of the Bank hold office until their successors are elected and qualified or until such director’s earlier death,


resignation or removal. The executive officers of Guaranty Bank & Trust are appointed by the Bank’s board of directors and hold office until their successors are duly appointed and qualified or until their earlier death, resignation or removal.
Continuing Directors
A brief description of the background of each of our continuing Class I and Class II directors together with the experience, qualifications, attributes or skills that caused our board of directors andto determine that the individual should serve as a director is set forth below. Similar information for each of the current Class III directors, who have each been nominated to continue to serve in such role, has been provided above. No director has any family relationship, as defined in Item 401 of Regulation S-K, with any other director or executive officers listed below is c/o Guaranty Bancshares, Inc., 100 W. Arkansas, Mt. Pleasant, Texas 75455.

officer.

Name


Age

PositionsPosition with Guaranty and theCompany

Position with Bank


Age

Tyson T. Abston

52

Class III Director and President of Guaranty; Director and President of the Bank

39

Martin Bell

Executive Vice President and Director of the Bank

43

Johnny O. Conroy

Class II Director of Guaranty; Director of the Bank

59

Jonice Crane

Class I Director of Guaranty; Director of the Bank;

79

C. A. Hinton, Sr.

Class II Director of Guaranty; Director of the Bank

82

Carl Johnson, Jr.

Class I Director of Guaranty; Director of the Bank

49

Kirk Lee

Class I Director and Sr. Vice President of Guaranty; Director and Executive Vice President of the Bank

43

Weldon Miller

Class III Director of Guaranty; Director of the Bank

70

Clifton A. Payne

Class I Director, Sr. Vice President and Chief Financial Officer of Guaranty; Director, Executive Vice President and Chief Financial Officer of the Bank

47

Bill Priefert

Class III Director of Guaranty; Director of the Bank

57

Arthur B. Scharlach, Jr.

Class II Director, Chairman of the Board and Chief Executive Officer

Chairman of Guaranty; Director, Chairman Of the Board and Chief Executive Officer of the Bank

66
Richard W. Baker58

Gene Watson

Class II Director of Guaranty;

Director
Johnny O. Conroy72Class II DirectorDirector
Bradley K. Drake47Class I DirectorDirector
Carl Johnson, Jr.62Class I DirectorDirector
Kirk L. Lee56Class I Director of the Bank

and President
Vice Chairman and Chief Credit Officer
Clifton A. Payne6960Class I Director, Senior Executive Vice President and Chief Financial OfficerSenior Executive Vice President and Chief Financial Officer
Arthur B. Scharlach, Jr.78Class II Director-----

Tyson T. Abston. Mr. Abston serves as Chairman of the Board and Chief Executive Officer of both the Company and the Bank. Mr. Abston joined the Bank as Senior Vice President in 1997, after serving fivehaving previously served four years as an officer of an East Texas bank. He has previously served as President of the Bank’s Texarkana, Texas location and as Executive Vice President of a Northeast Texas bank. He became President of the Texarkana location in 1997 and then in 1999 transferred to Mt. Pleasant and was elected as Executive Vice President of the Bank. Mr. Abston has served as a director of the Bank since 1999 and a director of Guarantythe Company since 2002. In 2002,2005, Mr. Abston was elected President and Chief Executive Officer of the Bank and Senior Vice President of Guaranty. In 2004, Mr. Abstonin 2006, he was elected President of the Company.

Martin Bell. In 2013, Mr. Bell joinedAbston was elected Chairman and Chief Executive Officer of both the Company and the Bank. He is also Chairman of the Executive Committee, a member of the Bank’s Directors’ Loan Committee, and either chairs or is a member of all the key operational committees of the Bank. He has served on the boards of the Federal Home Loan Bank of Dallas, Independent Bankers Association of Texas and Texas Security Bank in 2000Dallas. Mr. Abston has also served on various charitable organization boards, including Mount Pleasant Habitat for Humanity, Mount Pleasant Industrial Foundation and served as the PresidentTitus County Child Welfare Board. Mr. Abston is a graduate of the Sulphur Springs location. In January 2005, he was elected Executive Vice PresidentUniversity of North Texas, B.B.A. in Finance, 1988, and Texas A&M University-Texarkana, MBA, 1990. Mr. Abston’s extensive experience in banking, as well as his long-standing business and banking relationships in our markets, qualify him to serve on our board of directors.

Richard W. Baker. Mr. Baker has served on the BankCompany board of directors since 2015 and is administratively in charge of the mortgage division and location presidents. Mr. Bell was also appointed to the Bank’s Board of Directors in January 2005.

Johnny O. Conroy. Mr. Conroy was appointedhas served as a director of the CompanyBank since 2013. Mr. Baker serves on our Corporate Governance and Nominating Committee, as well as the Bank’s Directors’ Loan Committee, Executive Committee and Trust Committee. Mr. Baker began his career in May1982 when he founded Big Tex Trailer Manufacturing. He served as President and Chief Executive Officer until he sold the company in 2015. He was presented the 2001 Ernst & Young Entrepreneur of the Year Award, the 2015 National Association of Trailer Manufacturers Outstanding Member of the Year Award, and the 2016 Lifetime Achievement Award by the Titus County Chamber of Commerce. Mr. Baker is a strong supporter of the Titus County Fair, the Titus County Hospice, and a local non-profit organization known as Titus County Cares. Mr. Baker’s extensive experience in business and



manufacturing, as well as his long-standing business relationships throughout the state of Texas, qualify him to serve on our board of directors.
Johnny O. Conroy. Mr. Conroy has served on our board of directors since 2004 and has served as a director of the Bank since 2003. Mr. Conroy has been the Viceserves on our Compensation Committee and KSOP Committee. Mr. Conroy retired in 2009 as President of Conroy Tractor, Inc. for more than the past five years., a family owned agricultural implements business in Mount Pleasant, where he worked since 1962. Mr. Conroy servesis actively involved in several charitable organization boards. Mr. Conroy is a graduate of East Texas State University, B.B.A., 1968. Mr. Conroy’s extensive business and real estate experience, as well as his community involvement, qualify him to serve on the Compensation and Nominating Committees.

Jonice Crane. Ms. Crane joined the Bank in 1943 and had 53 yearsour board of continuous service until her retirement as an officerdirectors.

Bradley K. Drake.Mr. Drake has served on our board of the Bank in 1996. She served as an Executive Vice President of the Bank from 1971 to 1996directors since 2013 and has served as a director of the Bank since 1971 and2007. He currently serves as a directormember of Guaranty since its inception in 1980. Ms. Crane serves on the Compensation Committee and Nominating Committees.

C.A. Hinton, Sr.the Bank’s Trust Committee. Mr. HintonDrake joined Lamar Companies, LLC in 2006 and currently serves as its President and Chief Executive Officer. Lamar Companies,LLC is a construction services company headquartered in Paris, Texas. Mr. Drake graduated with a bachelor of business administration in finance from Texas Tech University in 1993. The Governor of Texas appointed Mr. Drake as a board member of the Sulphur River Basin Authority where he is currently serving. Mr. Drake’s extensive commercial real estate experience, as well as his knowledge and business relationships throughout the state of Texas, qualify him to serve on our board of directors.

Carl Johnson, Jr.  Mr. Johnson has served as a directoron our board of the Bankdirectors since 1960 and as a director of Guaranty since its inception in 1980. Mr. Hinton has been the Chairman of Hinton Production Company in Mt. Pleasant, Texas for more than the past five years. Mr. Hinton serves on the Compensation and Nominating Committees.

Carl Johnson, Jr.Mr. Johnson was appointed a director of Guaranty in 2003 and has served as a director of the Bank since 1991.1992. He is Chairman of our KSOP Committee and serves on our Audit Committee, Corporate Governance and Nominating Committee and the Bank’s Directors’ Loan Committee. Mr. Johnson is a Certified Public Accountant and has been a partneran owner of Baker & Johnson, PC for more than the past five years.since 1989. Mr. Johnson has also served as the County Auditor for Titus County since 1992. He is a graduate of the University of Texas – Arlington, B.B.A. in Accounting, 1979. Mr. Johnson’s extensive financial and accounting experience qualifies him to serve on our board of directors.

Kirk L. Lee. Mr. Lee serves onas President of the Audit Committee.

Kirk Lee.Company and as Vice Chairman and Chief Credit Officer of the Bank. Mr. Lee serves is Chairman of the Bank’s Directors’ Loan Committee, is a member of the Bank’s Executive Committee and either chairs or is a member of all the key operational committees of the Bank. Mr. Lee joined the Bank in 1992, andserving as President of the Bank’s Paris, Texas office. Mr. Lee served as the President of the Paris location until 2002. In January 2002, he was elected Executive Vice Presidentand Chief Credit Officer of the Bank from 2011 until his promotion to Vice Chairman and is nowChief Credit Officer in charge of credit administration.2014. Mr. Lee was also appointed to the Bank’s Board of Directors in 2002. In January 2005, Mr. Lee was appointed by the board of directors, upon the recommendation of the Nominating Committee, to serve as a Class I director of Guaranty.

Weldon Miller.Mr. Miller has served as a director of Guaranty in 1980 and has served as a director of the Bank since 1969.2002 and a director of the Company since 2005. Mr. MillerLee has beenover 30 years of banking experience, and previously worked at the PresidentArkansas State Banking Department as a Bank Examiner Supervisor and worked a number of Everybody’s Furniture Companyyears in Mount Pleasant, Texas for more thancommercial lending and management at another community bank prior to joining us. He is a graduate of Ouachita Baptist University, B.B.A., 1983. In addition, he received a graduate degree in commercial banking from the past five years. Mr. Miller servesSouthwestern Graduate School of Banking in 1989. His extensive experience in bank regulation and community bank management, coupled with his long-standing business and banking relationships in our markets, qualify him to serve on the Audit, Compensation and Nominating Committees.our board of directors.

Clifton A. Payne.  Mr. Payne. serves as the Senior Executive Vice President and Chief Financial Officer of both the Company and the Bank. Mr. Payne either chairs or is a member of all the key operational committees of the Bank. Mr. Payne joined the Bank in 1984 after four years in private practice withas a certified public accounting firm.Credit Analyst, before advancing to Senior Loan Officer, Controller, and Investment Officer. He became a Vice President of the Bank in 1986 and was elected an Executive Vice President in 1996 and Chief Financial Officer in 1998. In 1995, Mr. Payne was elected to the Board of Directors of Guaranty and the Bank. Mr. Payne is also Senior Vice President and Chief Financial Officer.

Bill Priefert.Mr. Priefert has served as a director of the BankCompany since 1983 and1995 as served as a director of Guarantythe Bank from 1995 until 2016. He currently serves as an advisory member of the Bank’s board of directors. Prior to joining the Bank, Mr. Payne spent four years in private practice with Oakerson & Arnold PC, a regional certified public accounting firm. With over 30 years of executive financial experience, Mr. Payne oversees the accounting and investor relations divisions of the Company. During his tenure as CFO, the Company went public in 1998, was listed on the NASDAQ National Market System, and then returned in 2005 to a private entity. Mr. Payne is a graduate of Baylor University, B.B.A. in Accounting,



1980 and is a licensed Certified Public Accountant. Mr. Payne’s deep institutional knowledge and extensive banking experience qualify him to serve on our board of directors.
Arthur B. Scharlach, Jr.  Mr. Scharlach has served as a director of the Company since 2002.1979 and served as a director of the Bank from 1971 until December 2014. Mr. PriefertScharlach joined the Bank in 1970 and served the Bank in varying capacities as Senior Vice President, President, Chief Operating Officer, Chairman and Chief Executive Officer until his retirement in 2005. In 2013, Mr. Scharlach resigned as Chairman of the Board of the Company. Mr. Scharlach is a graduate of Texas Christian University, B.B.A., 1965. Mr. Scharlach also received a BAI degree from the University of Wisconsin in Operations & Audit. Mr. Scharlach has served as a director and as Chairman of TIB-The Independent BankersBank, as well as serving on various board and charitable organizations in the community, including the Mount Pleasant Industrial Foundation, the Titus County Child Welfare Board, and the Board of Trustees of the Texas Methodist Foundation. Mr. Scharlach’s experience with the Company and the Bank and extensive community and banking relationships qualify him to serve on our board of directors.
Executive Officers
Certain information regarding each of our executive officers, including a brief description of the background of each of the executive officers of the Company who are not also directors, is set forth below. No executive officer has any family relationship, as defined in Item 401 of Regulation S-K, with any other executive officer or director.
NameAgePosition with CompanyPosition with Bank
Tyson T. Abston52Class II Director, Chairman of the Board and Chief Executive OfficerChairman of the Board and Chief Executive Officer
Martin C. Bell56-----Executive Vice President
Charles A. Cowell63-----Vice Chairman of the Board and Executive Vice President
Randall R. Kucera61Vice President and General CounselExecutive Vice President and General Counsel
Harold E. Lower, II53-----Executive Vice President
Kirk L. Lee56Class I Director and PresidentVice Chairman of the Board and Chief Credit Officer
J. Daniel Muskrat38-----Executive Vice President and Chief Information Officer
Clifton A. Payne60Class I Director, Senior Executive Vice President and Chief Financial OfficerSenior Executive Vice President and Chief Financial Officer
Robert P. Sharp52-----Executive Vice President
Martin C. Bell. Mr. Bell has been an Executive Vice President of Priefert Manufacturing, Inc.the Bank since 2005 and currently serves as an advisory member of the Bank’s board of directors. Mr. Bell has commercial, real estate, and consumer lending responsibilities, as well as administrative oversight of several East Texas Bank locations, and serves as Chief Operations Officer. He leads the Bank’s strategic planning process and integrations of mergers and acquisitions. Mr. Bell either chairs or is a member of all key operational committees of the Bank. Mr. Bell has over 30 years of banking experience. He is a graduate of Texas Christian University, B.B.A. in Mt. Pleasant,Finance, 1984, and is also a graduate of the Texas Tech University Intermediate and Advanced Schools of Banking. In 1991, Mr. Bell graduated with Honors from the Southwestern Graduate School of Banking in Dallas.
Chuck Cowell. Mr. Cowell has been an Executive Vice President of the Bank since 2015 and has served on the Bank’s board of directors since October 2016, currently serving as Vice Chairman. He has extensive lending and administrative oversight of all Dallas/Fort Worth metrolplex locations as well as the Bank’s trust, mortgage lending, mortgage warehouse lending, SBA lending, credit administration, loan review


and marketing divisions. He also either chairs or serves as a member on all the key operational committees of the Bank. Mr. Cowell served as President and Chief Executive Officer of Preston State Bank and its parent company DCB Financial in Dallas from 2009 until its acquisition by the Company in 2015. He has over 46 years of industry experience, having served in executive positions for both privately held and publicly-traded institutions in the Midland, Graham, Abilene, and Houston, Texas markets. Cowell received his undergraduate degree in finance from Texas Tech University and is a graduate of the National Installment Lending School in Norman, Oklahoma and the Southwestern Graduate School of Banking in Dallas.
Randall R. Kucera. Mr. Kucera serves as Executive Vice President and General Counsel for both the Company and the Bank, and as advisory director to the Bank’s board of directors. Prior to joining the Bank in 2012, Mr. Kucera was a partner in the litigation division of Akin, Gump, Strauss, Hauer & Feld LLP, or Akin Gump, for more than five years. Prior to joining Akin Gump, he was an assistant district attorney in the Dallas County District Attorney’s Office. In his 30-year legal career, Mr. Kucera focused on complex commercial litigation, including a wide variety of contract, antitrust, lender liability, business tort, intellectual property, and insurance matters. He previously served as the litigation partner in charge of Akin Gump’s commercial mortgage-backed securities (CMBS) litigation practice, which handled complex commercial real estate litigation involving institutional lenders, financial service companies, conduit lenders, and master and special servicers. Mr. Kucera has been a speaker at various continuing education seminars in Texas on the subjects of litigation and civil procedure. He has published articles on the subject of litigating claims in mortgage and asset-backed securities matters, including publications in the American Bar Association Real Estate Litigation newsletter and the Mortgage and Asset-Backed Securities Litigation Handbook. Mr. Kucera is a graduate of Vanderbilt University, B.A. in political science, summa cum laude, 1979. Mr. Kucera is also a graduate of Yale Law School, J.D., 1983. He is a member of the State Bar of Texas and is admitted to practice before the U.S. district courts for the Northern, Southern, Eastern, and Western Districts of Texas, the U.S. Court of Appeals for the 5th and 7th Circuits and the Supreme Court of the United States.
Harold E. Lower, II. Mr. Lower has been an Executive Vice President of the Bank since 2010 and currently serves as an advisory member of the Bank’s board of directors and Directors’ Loan Committee. He served as a member of the Company board of directors from 2013 through 2015 and a member of the Bank’s board of directors from 2012 through 2015. He also either chairs or serves as a member on all the key operational committees of the Bank. In his capacity as Executive Vice President of the Bank, Mr. Lower is responsible for overseeing the operations of the Bank’s twelve locations in Bowie, Cass, Lamar, Hopkins, Franklin, Rockwall and Hunt counties. Mr. Lower joined the Bank in 2009 as a Senior Vice President, having previously served eight years as an officer of a Northeast Texas bank. Mr. Lower has over 28 years’ experience in the financial services industry. He is a graduate of Texas A&M University, B.B.A. in Accounting, 1987, and is a licensed Certified Public Accountant.
J. Daniel Muskrat. Mr. Muskrat currently serves as Executive Vice President and Chief Information Officer of the Bank and is an advisory member of the Bank’s board of directors. He is chairman of the Bank’s Technology Committee, Core Processing Committee and Business Intelligence Committee, in addition to serving as a member on most other key operational committees of the Bank. In his capacity as Executive Vice President, Mr. Muskrat has administrative oversight of the deposit services, data processing, internet banking and information technology divisions of the Bank. Mr. Muskrat has 19 years of banking experience in the areas of online and mobile banking, mergers and acquisitions, operations, network infrastructure, system conversions, data processing and information security. Mr. Muskrat serves in many advisory capacities such as a member of Fiserv’s Precision Core Advisory Council and First Data’s Online Banking Advisory Council. He also serves the Mount Pleasant community in several roles including Founder and Executive Board Member of MPISD Education Foundation and he has served on various advisory committees for the Northeast Texas Community College. Mr. Muskrat also serves the community as a Founder, Director, Life Group Leader, and Senior Leadership Team Member at Center Church. Mr. Muskrat is actively involved with the Mount Pleasant Rotary Club as a Board Member, Past President and Treasurer. Finally, he has served the Mount Pleasant Chamber of Commerce as a Team Captain for the 2014 Total Resource Campaign, he has served the past four years on Everything Texas Ranch Run Committee and he is a graduate of the


2011 Leadership Mount Pleasant Class. Mr. Muskrat is a graduate of Baylor University, B.A. in Information Systems Management, 2001, and received an MBA from Baylor University in 2004.
Robert P. Sharp. Mr. Sharp currently serves as Executive Vice President for the Bank, and was elected as an advisory director of the Bank in 2013. In addition to commercial lending responsibilities, Mr. Sharp has administrative oversight of the Bank’s Mount Pleasant and Pittsburg locations, regulatory compliance and loan operations divisions. Mr. Sharp chairs or serves as a member on all key operational committees of the Bank. Mr. Sharp joined the Bank in 2006 as Senior Vice President, having previously served 23 years with various North Texas banks. Mr. Sharp has over 30 years of banking experience. He is a graduate of Texas Tech University, B.A., 1990, and attended the American British College in Barcelona, Spain. Mr. Sharp also graduated with honors from the Southwestern Graduate School of Banking in 2007. He serves as a trustee at Northeast Texas Community College, is a member of the Mount Pleasant Rotary Club, and was formerly a director of Cypress Basin Hospice from 2003 to 2014.
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
We are committed to having sound corporate governance principles, which are essential to running our business efficiently and maintaining our integrity in the marketplace. Our board of directors has adopted Corporate Governance Guidelines, which set forth the framework within which our board, assisted by our board committees, directs the affairs of our organization. The Guidelines address, among other things, the composition and functions of the board, director independence, compensation of directors, management succession and review, board committees and selection of new directors. In addition, our board of directors adopted a Code of Conduct that applies to all of our directors, officers and employees, as well as a separate Code of Ethics for the Chief Executive Officer and Senior Financial Officers. Our Corporate Governance Guidelines, as well the Code of Conduct and Code of Ethics, are available on our website at www.gnty.com. Any amendments to the Code of Ethics, or any waivers of its requirements, will be disclosed on our website, as well as any other means required by the Nasdaq Stock Market rules.
Board Independence
Under the rules of the NASDAQ Global Select Market, independent directors must comprise a majority of our board of directors within a specified period of time of our initial public offering. The rules of the NASDAQ Global Select Market, as well as those of the SEC, also impose several other requirements with respect to the independence of our directors.
Our board of directors has evaluated the independence of its members based upon the rules of the NASDAQ Global Select Market and the SEC. Applying these standards, our board of directors has affirmatively determined that directors Baker, Bunch, Conroy, Curl, Drake, Elliot, Johnson, Miller, and Priefert are “independent directors” under the applicable rules. This group of independent directors include all five years.

Arthur B.of the nominees for Class III director. We have determined that directors Abston, Lee, Payne and Scharlach Jr.are not “independent directors” under the applicable rules. Directors Abston, Lee and Payne are employees of Guaranty Bank & Trust, and Mr. Scharlach was engaged as a consultant to Guaranty Bank & Trust pursuant to a consulting agreement that expired February 1, 2016.

Leadership Structure
Our board of directors and the board of Guaranty Bank & Trust each meet monthly. Our board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board of Directors, as the board believes that it is in the best interests of our organization to make that determination from time to time based on the position and direction of our organization and the membership of the board. The board has determined that having our Chief Executive Officer serve as Chairman of the Board of Directors is in the best interests of our shareholders at this time. Our board of directors believes that this structure makes best use of the Chief Executive Officer’s extensive knowledge of our organization and the banking


industry. The board views this arrangement as also providing an efficient nexus between our organization and the board, enabling the board to obtain information pertaining to operational matters expeditiously and enabling our Chairman to bring areas of concern before the board in a timely manner.
Because the positions of Chairman and Chief Executive Officer are held by the same person, our board of directors has designated Weldon C. Miller to serve as Lead Independent Director. Among other things, the Lead Independent Director (1) presides at all meetings of the board at which the Chairman is not present, including executive sessions of the independent directors; (2) serves as liaison between the Chairman and the independent directors; (3) approves information sent to the board of directors; (4) approves meeting agendas for the board of directors; (5) approves meeting schedules to assure that there is sufficient time for discussion of all agenda items; (6) has the authority to call meetings of the independent directors; and (7) if requested by major shareholders, makes himself or herself available for consultation and direct communication.
Board Meetings
Our board of directors held 13 scheduled meetings in 2017. Information regarding meetings of the various committees is described below. All directors attended at least 75% of the board and committee meetings on which they served during 2017. Directors are encouraged to attend annual meetings of our shareholders, although we have no formal policy on director attendance at annual meetings.

Board Committees
Our board of directors has established standing committees in connection with the discharge of its responsibilities. These committees include the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee and the KSOP Committee. Our board of directors also may establish such other committees as it deems appropriate, in accordance with applicable law and regulations and our corporate governance documents.
Audit Committee
The members of our Audit Committee are directors Elliott (Chairman), Bunch, Curl, Johnson and Miller. Our board of directors has evaluated the independence of each of the members of our Audit Committee and has affirmatively determined that (1) each of the members of our Audit Committee is an “independent director” under NASDAQ Global Select Market rules, (2) each of the members satisfies the additional independence standards under applicable SEC rules for audit committee service, and (3) each of the members has the ability to read and understand fundamental financial statements. In addition, our board of directors has determined that Mr. Johnson is a financial expert and has the financial sophistication required of at least one member of the Audit Committee by the rules of the NASDAQ Global Select Market due to his experience and background. Our board of directors has also determined that directors Curl and Johnson each qualify as an “audit committee financial expert” under the rules and regulations of the SEC. Our Audit Committee held 11 scheduled meetings in 2017.
The Audit Committee assists the board of directors in its oversight of the integrity of our financial statements, the selection, engagement, management and performance of our independent auditor that audits and reports on our consolidated financial statements, the performance of our internal audit function, the review of reports of bank regulatory agencies and monitoring management’s compliance with the recommendations contained in those reports and our compliance with legal and regulatory requirements related to our financial statements and reporting. Among other things, our Audit Committee has responsibility for:
selecting and reviewing the performance of our independent auditor and approving, in advance, all engagements and fee arrangements;


reviewing reports from the independent auditor regarding its internal quality control procedures and any material issues raised by the most recent internal quality-control or peer review or by governmental or professional authorities, and any steps taken to deal with such issues;
reviewing the independence of our independent auditor and setting policies for hiring employees or former employees of our independent auditor and for audit partner rotation and independent auditor rotation in accordance with applicable laws, rules and regulations;
resolving any disagreements regarding financial reporting between management and the independent auditor;
overseeing our internal audit function;
reviewing operating and control issues identified in internal audit reports, management letters, examination reports of regulatory agencies and monitoring management’s compliance with recommendations contained in those reports;
meeting with management and the independent auditor to review the effectiveness of our system of internal control and internal audit procedures, and to address any deficiencies in such procedures;
monitoring management’s compliance all applicable laws, rules and regulations;
reviewing our earnings releases and reports filed with the SEC;
preparing the Audit Committee report required by SEC rules to be included in our annual report;
reviewing the adequacy and effectiveness of our accounting and financial controls, including guidelines and policies for assessing and managing our risk exposure;
establishing and overseeing procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and for the confidential anonymous submission by Company employees of concerns, regarding questionable accounting or auditing matters;
reviewing actions by management on recommendations of the independent auditors and internal auditors; and
handling such other matters that are specifically delegated to the Audit Committee by our board of directors from time to time.
Our Audit Committee has adopted a written charter, which sets forth the committee’s duties and responsibilities. The charter of the Audit Committee is available on our website at www.gnty.com.
Whitley Penn Fees
The following table presents fees for professional services rendered by Whitley Penn for 2017 and 2016:
  2017 2016
Audit fees $160,000
 $125,000
Audit-related fees 45,000
 39,000
Tax fees 16,000
 16,000
All other fees 2,500
 2,500

As defined by the Securities and Exchange Commission, (i) “audit fees” are fees for professional services rendered by the independent registered public accounting firm for the audit of our annual financial statements and review of financial statements included in our Form 10-Q, or for services that are normally


provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years; (ii) “audit-related fees” are fees for assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “audit fees;” (iii) “tax fees” are fees for professional services rendered by our principal accountant for tax compliance, tax advice, and tax planning; and (iv) “all other fees” are fees for products and services provided by our principal accountant, other than the services reported under “audit fees,” “audit-related fees,” and “tax fees.”
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee selects and oversees our independent auditor. In addition, it is required to pre-approve the audit and non-audit services performed by our independent auditor to ensure that they do not impair the auditor’s independence. Federal securities regulations specify the types of non-audit services that an independent auditor may not provide to us and establish the Audit Committee’s responsibility for administration of the engagement of our independent auditors. During 2017, the Audit Committee pre-approved all services provided to us by our independent auditor.
Report of the Audit Committee of the Board of Directors
The Audit Committee’s general role is to assist the board of directors in overseeing the financial reporting process and related matters of the Company and its consolidated subsidiaries, including Guaranty Bank & Trust. Each member of the committee is “independent” as that term is defined by the Nasdaq Stock Market rules.
The Audit Committee has reviewed and discussed with management and Whitley Penn the audited financial statements of the Company to be included in its Annual Report on Form 10-K for the year ended December 31, 2017.
The Audit Committee reviewed with the independent auditor, which is responsible for expressing an opinion on the conformity of those audited consolidated financial statements and related schedules with generally accepted accounting principles, its judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Audit Committee by the standards of the Public Company Accounting Oversight Board, including Auditing Standard No. 16, Communications With Audit Committees, the rules of the Securities and Exchange Commission, and other applicable regulations. In addition, the Audit Committee discussed with the independent auditor the firm’s independence from our management and the Company, including the matters in the letter from the firm required by Public Company Accounting Oversight Board Rule 3526, Communication with Audit Committees Concerning Independence, and considered the compatibility of non-audit services with the independent auditor’s independence.
It is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and in accordance with generally accepted accounting principles; that is the responsibility of management and Whitley Penn LLP. In giving its recommendation to the board of directors, the Audit Committee has relied on (1) management’s representation that the financial statements have been prepared with integrity and objectivity and in conformity with generally accepted accounting principles and (2) the reports of Whitley Penn LLP with respect to those financial statements.
Based on the review and discussion referenced above, the Audit Committee recommends to the board of directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the Securities and Exchange Commission.
Submitted by the Audit Committee of the Board of Directors
Christopher B. Elliott (Chairman)
James S. Bunch


Molly Curl
Carl Johnson, Jr.
Weldon C. Miller

Compensation Committee
The members of our Compensation Committee are directors Bunch (Chairman), Conroy, Drake, Elliott and Miller. Our board of directors has evaluated the independence of each of the members of our Compensation Committee and has affirmatively determined that each of the members of our Compensation Committee meets the definition of an “independent director” under NASDAQ Global Select Market rules. Our board has also determined that each of the members of the Compensation Committee qualifies as a “nonemployee director” within the meaning of Rule 16b-3 under the Exchange Act and an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code. Our Compensation Committee held four scheduled meetings in 2017.
The Compensation Committee assists the board of directors in its oversight of our overall compensation structure, policies and programs and assessing whether such structure meets our corporate objectives, the compensation of our named executive officers and the administration of our compensation and benefit plans.
Among other things, our Compensation Committee has responsibility for:
reviewing and determining, and recommending to the board of directors for its confirmation, the annual compensation, annual incentive compensation and any other matter relating to the compensation of our named executive officers; all employment agreements, severance or termination agreements, change in control agreements to be entered into between any executive officer and us; and modifications to our philosophy and compensation practices relating to compensation of our directors and management;
reviewing and determining, and recommending to the board of directors for its confirmation, the establishment of performance measures and the applicable performance targets for each performance-based cash and equity incentive award to be made under any benefit plan;
taking all actions required or permitted under the terms of our benefit plans, with separate but concurrent authority;
reviewing, approving and administering each of our benefit plans, and performing such other duties and responsibilities and may be assigned to the Compensation Committee under the terms of such plans;
reviewing with our Chief Executive Officer the compensation payable to employees other than the named executive officers, including equity and non-equity incentive compensation and other benefits and our total incentive compensation program envisioned for each fiscal year;
consulting with our Chief Executive Officer regarding a succession plan for our executive officers, including our Chief Executive Officer, and the review of our leadership development process for senior management positions;
reviewing the performance of our named executive officers;
reviewing and discussing with management any compensation discussion and analysis included in our annual meeting proxy statements and any other reports filed with the SEC and determining whether or not to recommend to our board of directors that such compensation discussion and analysis be so included;
preparing the Compensation Committee report required by SEC rules to be included in our annual report;


overseeing the administration of our equity plans and other incentive compensation plans and programs and preparing recommendations and periodic reports to our board of directors relating to these matters;
overseeing and making recommendations to the board of directors regarding the Company’s compliance with SEC rules and regulations regarding shareholder approval of certain executive compensation matters, including advisory votes on executive compensation and golden parachute compensation and approval of equity compensation plans;
conducting an annual evaluation of the performance of the Compensation Committee and the adequacy of its charter and recommending to the board of directors any changes that it deems necessary; and
handling such other matters that are specifically delegated to the Compensation Committee by our board of directors from time to time.
Our Compensation Committee has adopted a written charter, which sets forth the committee’s duties and responsibilities. The charter of the Compensation Committee is available on our website at www.gnty.com.
Compensation Committee Interlocks and Insider Participation
During 2017, none of the members of our Compensation Committee were an officer or employee of Guaranty Bancshares or Guaranty Bank & Trust. In addition, none of our executive officers serves or has served as a member of the board of directors, compensation committee or other board committee performing equivalent functions of any other entity that has one or more executive officers serving as one of our directors or on our Compensation Committee.
Corporate Governance and Nominating Committee
The members of our Corporate Governance and Nominating Committee are directors Elliott (Chairman), Baker, Bunch, Johnson and Miller. Our board of directors has evaluated the independence of each of the members of our Corporate Governance and Nominating Committee and has affirmatively determined that each of the members of our Corporate Governance and Nominating Committee meets the definition of an “independent director” under NASDAQ Global Select Market rules. Our Corporate Governance and Nominating Committee held one scheduled meeting in 2017.
The Corporate Governance and Nominating Committee assists the board of directors in its oversight of identifying and recommending persons to be nominated for election as directors and to fill any vacancies on the board of directors of the Company and each of our subsidiaries, monitoring the composition and functioning of the standing committees of the board of directors of the Company and each of our subsidiaries, developing, reviewing and monitoring the corporate governance policies and practices of the Company and each of our subsidiaries.
Among other things, our Corporate Governance and Nominating Committee is responsible for:
reviewing the performance of our board of directors of the Company and each of our subsidiaries;
identifying, assessing and determining the qualification, attributes and skills of, and recommend, persons to be nominated by our board of directors for election as directors and to fill any vacancies on the board of directors of the Company and each of our subsidiaries;
reviewing the background, qualifications and independence of individuals being considered as director candidates, including persons proposed by our shareholders;


reviewing and recommending to our board of directors each director’s suitability for continued service as a director upon the expiration of his or her term and upon any material change in his or her status;
reviewing the size and composition of the board of directors of the Company and each of our subsidiaries as a whole, and recommend any appropriate changes to reflect the appropriate balance of required independence, knowledge, experience, skills, expertise and diversity;
monitoring the function of our standing committees and recommending any changes, including the director assignments, creation or elimination of any committee;
developing, reviewing and monitoring compliance with our corporate governance guidelines and the corporate governance provisions of the federal securities laws and the listing rules applicable to us;
investigating any alleged violations of such guidelines and the applicable corporate governance provisions of federal securities laws and listing rules, and reporting such violations to our board of directors with recommended corrective actions;
reviewing our corporate governance practices in light of best corporate governance practices among our peers and determining whether any changes in our corporate governance practices are necessary;
considering any resignation tendered to our board of directors by a director and recommend the acceptance of such resignation if appropriate;
considering questions of possible conflicts of interest involving directors, including operations that could be considered competitive with our operations or otherwise present a conflict of interest;
reviewing and approving all related person transactions in accordance with our policy and procedures;
overseeing our director orientation and continuing education programs for the board of directors;
reviewing its charter and recommending to our board of directors any modifications or changes; and
handling such other matters that are specifically delegated to the Corporate Governance and Nominating Committee by our board of directors from time to time.
Our Corporate Governance and Nominating Committee has adopted a written charter, which sets forth the committee’s duties and responsibilities. The charter of the Corporate Governance and Nominating Committee is available on our website at www.gnty.com.
Director Qualifications
In carrying out its functions, the Corporate Governance and Nominating Committee will develop qualification criteria for all potential nominees for election, including incumbent directors, board nominees and shareholder nominees to be included in the Company’s future proxy statements. These criteria may include the following attributes:
adherence to high ethical standards and high standards of integrity;
sufficient educational background, professional experience, business experience, service on other boards of directors and other experience, qualifications, diversity of viewpoints, attributes and sills that will allow the candidate to serve effectively on the board of directors and the specific committee for which he or she is being considered;
evidence of leadership, sound professional judgment and professional acumen;


evidence the nominee is well recognized in the community and has a demonstrated record of service to the community;
a willingness to abide by any published code of conduct or ethics for the Company and to objectively appraise management performance;
the ability and willingness and ability to devote sufficient time to carrying out the duties and responsibilities required of a director;
any related person transaction in which the candidate has or may have a material direct or indirect interest and in which we participate; and
the fit of the individual’s skills and personality with those of other directors and potential directors in building a board of directors that is effective, collegial and responsive to the needs of the Company and the interests of our shareholders.
The Corporate Governance and Nominating Committee will also evaluate potential nominees for the Company’s board of directors to determine if they have any conflicts of interest that may interfere with their ability to serve as effective board members and to determine whether they are “independent” in accordance with applicable SEC and NASDAQ Global Select Market rules (to ensure that, at all times, at least a majority of our directors are independent). Although we do not have a separate diversity policy, the committee considers the diversity of the Company’s directors and nominees in terms of knowledge, experience, skills, expertise and other demographics that may contribute to the Company’s board of directors.
Prior to nominating or, if applicable, recommending an existing director for re-election to the Company’s board of directors, the Corporate Governance and Nominating Committee will consider and review the following attributes with respect to each existing director:
attendance and performance at meetings of the Company’s board of directors and the committees on which such director serves;
length of service on the Company’s board of directors;
experience, skills and contributions that the existing director brings to the Company’s board of directors;
independence and any conflicts of interest; and
any significant change in the director’s status, including the attributes considered for initial membership on the Company’s board of directors.
KSOP Committee
The KSOP Committee is responsible for managing the operation and administration of our KSOP. The KSOP Committee serves as the trustee of our KSOP and its members are appointed by our board of directors. The voting members of our KSOP Committee are directors Johnson (Chairman), Conroy, Elliott and Priefert. Our KSOP Committee held 10 scheduled meetings in 2017.
Code of Conduct; Code of Ethics for Chief Executive Officer and Senior Financial Officers
Our board of directors has adopted a Code of Conduct that applies to all of our directors, officers and employees. The Code of Conduct sets forth the standard of conduct that we expect all of our directors, officers and employees to follow, including our Chief Executive Officer and Chief Financial Officer. In addition, our board of directors has adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers that applies to our Chief Executive Officer, our Chief Financial Officer and any other officer serving in a finance function and sets forth specific standards of conduct and ethics that we expect from such individuals in addition to those set forth in the Code of Conduct. Our Code of Conduct and our Code of Ethics for the Chief Executive Officer and Senior Financial Officers are available on our website at www.gnty.com.


We expect that any amendments to the Code of Conduct or the Code of Ethics for the Chief Executive Officer and Senior Financial Officers, or any waivers of their respective requirements, will be disclosed on our website, as well as any other means required by NASDAQ Global Select Market rules or the SEC.
Corporate Governance Guidelines
We have adopted Corporate Governance Guidelines to assist our board of directors in the exercise of its fiduciary duties and responsibilities and to promote the effective functioning of our board of directors and its committees. Our Corporate Governance Guidelines are available on our website at www.gnty.com.
Shareholder Communications with the Board
The board of directors has established the following procedure to enable anyone who has a concern regarding Guaranty to communicate that concern directly to an individual director, the board as a group, or a specified committee or group, including the independent directors as a group. Any such communication should be made using the following contact information:
Guaranty Bancshares, Inc.
c/o Corporate Secretary
201 South Jefferson Street
Mount Pleasant, Texas 75455
Each communication should specify the applicable addressee or addresses to be contacted as well as the general topic of the communication. Communications may be confidential or anonymous. Guaranty will initially receive and process communications before forwarding them to the addressee. Communications may also be referred to other departments within Guaranty. Guaranty generally will not forward to the directors a communication that it determines to be primarily commercial in nature or related to an improper or irrelevant topic, or that requests general information about Guaranty.
Concerns about questionable accounting or auditing matters or possible violations of the Code of Business Conduct should be reported under the procedures outlined in the Code, which is available on Guaranty’s website (www.gnty.com).
EXECUTIVE COMPENSATION AND OTHER MATTERS
We are providing compensation disclosure that satisfies the requirements applicable to emerging growth companies, as defined by the JOBS Act. Our named executive officers for 2017, which consist of our principal executive officer and the two other most highly compensated executive officers, are:
Tyson T. Abston, Chairman of the Board and Chief Executive Officer of GuarantyOfficer;
Kirk L. Lee, President; and Chairman of the Board and Chief
Clifton A. Payne, Senior Executive Officer of the Bank. He joined the Bank in 1970 as a Vice President and Loan OfficerChief Financial Officer.
Agreements with Executive Officers
We have not entered into employment agreements with any of our named executive officers, each of whom serves at the pleasure of our board of directors and was electedis an “at will” employee.
Summary Compensation Table
The following table presents summary information regarding the total compensation awarded to, earned by, and paid to our named executive officers who were serving as executive officers at the end of our fiscal year ended December 31, 2017. Except as set forth in the notes to the table, all cash compensation


for each of our named executive officers was paid by the Company or by Guaranty Bank & Trust, where Messrs. Abston and Payne serve in the same capacity, and Mr. Lee serves as Vice Chairman and Chief Credit Officer.
Name and Principal Company Position Year Salary Nonequity Incentive Plan Compensation (1)(2) Nonqualified Deferred Compensation Earnings(3) All Other Compensation (4)(5)(6) Total
Tyson T. Abston 2017 $344,678
 $315,152
 $29,958
 $76,904
 $766,692
Chairman of the Board and Chief Executive Officer            
             
Kirk L. Lee 2017 $246,211
 $141,332
 $23,833
 $66,210
 $477,586
President            
             
Clifton A. Payne 2017 $234,300
 $131,268
 $27,929
 $63,107
 $456,604
Senior Executive Vice President and Chief Financial Officer            
(1)    The amounts in this column include performance based cash bonuses of $302,152, $131,931 and $122,707 paid to Messrs. Abston, Lee and Payne, respectively, pursuant to the Company’s Employee Bonus Plan.
(2)    The amounts in this column also include the amount of vested contributions of $13,000, $9,401 and $8,561 earned by Messrs. Abston, Lee and Payne, respectively, pursuant to the Company’s Executive Incentive Retirement Plan.
(3)    The amounts in this column represent the amount of interest earned on vested contributions under the Company’s Executive Incentive Retirement Plan that exceeds 120.0% of the applicable federal long-term rate.
(4)    As other compensation, Mr. Abston received director fees of approximately $48,175, employer KSOP contributions of approximately $13,500, life insurance premiums of approximately $1,242, wellness benefits of $9,452 and $4,535 attributable to the use of a company car.
(5)    As other compensation, Mr. Lee received director fees of approximately $48,175, employer KSOP contributions of approximately $13,500, life insurance premiums of approximately $2,322 and $2,213 attributable to the use of a company car.
(6)    As other compensation, Mr. Payne received director fees of approximately $32,025, employer KSOP contributions of approximately $13,500, life insurance premiums of approximately $3,564, wellness benefits of $10,205 and $3,813 attributable to the use of a company car.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information relating to the unexercised options held by our named executive officers as of December 31, 2017. All of the stock options shown in the table below were granted with a per share exercise price equal to the fair market value of our common stock on the grant date. Each of the stock options set forth below vests ratably in annual installments over a period of 10 years from the grant date, beginning on the first anniversary of the grant date. No stock options were exercised by the named executive officers and our Chief Financial Officer during fiscal 2017.
 Options Awards
Name
Number of Securities Underlying Unexercised Options
Exercisable
(#)
Number of Securities Underlying Unexercised Options
Unexercisable
(#)
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)
Option Exercise Price
($)
Option Expiration Date
Tyson T. Abston15,00035,000-24.0010/15/2024
Kirk L. Lee9,00021,000-24.0010/15/2024
Clifton A. Payne7,50017,500-24.0010/15/2024




2015 Equity Incentive Plan
Our board of directors and shareholders adopted and approved the Guaranty Bancshares, Inc. 2014 Stock Option Plan, or Option Plan, which became effective on February 19, 2014. On February 18, 2015, our board of directors amended and restated the Option Plan as the 2015 Equity Incentive Plan, or 2015 Plan. Our shareholders adopted and approved 2015 Plan on April 15, 2015. The following is a brief summary of the material terms of our 2015 Plan.
Purpose.  The purpose of our 2015 Plan is to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentives to selected employees, directors and consultants and to promote the success of the Company’s and the Bank’s Boardbusiness by offering these individuals an opportunity to acquire a proprietary interest in the success of Directorsthe Company.
Administration.  Our board of directors or one or more committees appointed by our board of directors will administer the 2015 Plan. For this purpose our board of directors has delegated general administrative authority for the 2015 Plan to the Compensation Committee.
Eligibility.  Persons eligible to receive awards under the 2015 Plan include officers, directors, employees and consultants. The Compensation Committee determines from time to time the participants to whom awards will be granted.
Authorized Shares; Limits on Awards.  The maximum number of shares of common stock that may be issued or transferred pursuant to awards under the 2015 Plan equals 1,000,000 shares, all of which may be subject to incentive stock option treatment. Under the terms of the 2015 Plan, the maximum aggregate number of shares of common stock that may be issued pursuant to all awards under the 2015 Plan, other than those subject to incentive stock option treatment, shall increase annually on the first day of each fiscal year following the adoption of the 2015 Plan by 20,000 shares, unless our board of directors determines a lesser amount.  For each fiscal year after adopting the 2015 Plan, we determined not to increase the number of shares that may be issued under the plan.  As a result, the maximum number of shares of common stock that may be issued or transferred pursuant to awards under the 2015 Plan continues to equal 1,000,000 shares, all of which may be subject to incentive stock option treatment. Additionally, the maximum number of shares that may be issued for awards to any single officer, employee or consultant participant during a calendar year for stock options and stock appreciation rights, or SARs, is 300,000 shares (200,000 shares for non-employee members of the board of directors), for other stock-based awards (excluding stock options and SARs but including restricted stock and restricted stock units) is 150,000 shares (100,000 shares for non-employee members of the board of directors) and for cash awards is $2.0 million.
If any shares of stock covered by an award granted under the 2015 Plan are not purchased or are forfeited or expire, or if an award otherwise terminates without delivery of any shares of stock subject thereto, or is settled in 1971. Hecash in lieu of shares of stock, then the number of shares of stock counted against the aggregate number of shares of stock available under the 2015 Plan with respect to the award will again be available for making awards under the 2015 Plan.
Currently Outstanding Awards.  As of February 28, 2018, 484,442 stock options and 2,398 restricted stock units were issued and outstanding under the 2015 Plan and an aggregate of 515,558 shares of our common stock remain available for issuance under the 2015 Plan. Other than as set forth above, no other types of incentive awards have been issued under the 2015 Plan as of February 28, 2018.
Adjustments for Changes in Capitalization.  In connection with recapitalizations, stock dividends, stock splits, combination of shares or other changes in the stock, our Compensation Committee will make adjustments that it deems appropriate to the aggregate number of shares of common stock that may be issued under the 2015 Plan and the terms of outstanding awards.


Incentive Awards.    The 2015 Plan authorizes the grant of stock options, SARs, restricted stock, restricted stock units, performance-based awards, as well as other awards described in the 2015 Plan. The 2015 Plan retains the flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances. Any award may be paid or settled in cash. An option or SAR will expire, or other award will vest, in accordance with the schedule set forth in the applicable award agreement.
Stock Options.  A stock option is the right to purchase shares of common stock at a future date at a specified price per share generally equal to, but no less than, the fair market value of a share on the date of grant. An option may either be an incentive stock option, or ISO, or a nonstatutory stock option, or NSO. ISO benefits are taxed differently from NSOs, as described below under “—Federal Income Tax Treatment of Awards under the 2015 Plan.” ISOs also are subject to more restrictive terms and are limited in amount by the Internal Revenue Code and the 2015 Plan. Full payment for shares purchased on the exercise of any option must be made at the time of such exercise in a manner approved by the Compensation Committee.
SARs.  A SAR is the right to receive payment of an amount equal to the excess of the fair market value of a share of common stock on the date of exercise of the SAR over the fair market value of a share of common stock the date on the date of grant.
Restricted Stock.  A restricted stock award is typically for a fixed number of shares of common stock that remain forfeitable unless and until specified conditions are met. Upon satisfaction of the applicable conditions, the holder of a restricted stock award may sell or transfer the shares.
Restricted Stock Units.  A restricted stock unit is an award that entitles the recipient to receive a share of our common stock or an amount of cash equal to the fair market value of a share of our common stock upon the satisfaction of applicable restrictions. Restricted stock units are similar to restricted stock; however restricted stock units are a promise to deliver shares or cash, while an award of restricted stock is a grant of actual shares of our common stock subject to transfer restrictions.
Performance-Based Awards.  Our Compensation Committee may designate any award, the exercisability or settlement of which is subject to the achievement of performance conditions, as a performance-based award that is intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code. In order to qualify as performance-based compensation, the performance objectives used for the performance-based award must be from the list of performance objectives set forth in the 2015 Plan.
Until recently, Section 162(m) of the Internal Revenue Code imposed a limit, with certain exceptions, on the amount that a publicly held corporation may deduct in any tax year for the compensation paid or accrued to its principal executive officer and three highest compensated officers (other than the principal executive officer or the principal financial officer). However, on December 22, 2017, the President signed the Tax Cuts and Jobs Act, or the TCJA, into law. The TCJA repeals certain exceptions to the deductible limit for performance-based compensation for tax years beginning after 2017. In addition, the TCJA requires compensation paid to the principal financial officer also be subject to the limit, in addition to the principal executive officer and three other highest compensated officers, or covered employees. Once an employee is treated as a covered employee in a tax year after December 31, 2016, the individual remains a covered employee for all future years, including once they are no longer employed by the Company and with respect to payments made after the death of the covered employee. The TCJA does provide for a transition exception to these changes to Section 162(m) whereby the expansion of the rules mentioned above does not apply to remuneration paid under a written, binding contract in effect on November 2, 2017, so long as that agreement is not materially modified on or after that date.

Acceleration of Awards; Possible Early Termination of Awards.  Upon a change in control of our Company, outstanding awards under the 2015 Plan will be assumed or substituted on substantially the same terms. However, if the successor corporation does not assume or substitute the outstanding awards, then


vesting of these awards will fully accelerate, and in the case of options or SARs, will become immediately exercisable. For this purpose a change in control is defined to include certain changes in the majority of our board of directors, the sale of all or substantially all of our assets and the consummation of certain mergers or consolidations.
Transfer Restrictions.  Subject to certain exceptions, awards under the 2015 Plan are not transferable by the recipient other than by will or the laws of descent and distribution and are generally exercisable, during the recipient’s lifetime, only by him or her.
Termination of or Changes to the 2015 Plan.  Our board of directors may, in its discretion, amend, alter or terminate the 2015 Plan or any award outstanding under the 2014 plan at any time and in any manner. Unless required by applicable law or listing agency rule, shareholder approval for any amendment will not be required. Unless previously terminated by our board of directors, the 2015 Plan will terminate on the tenth anniversary of its effective date. Outstanding awards may be amended, subject, however, to the consent of the holder if the amendment materially and adversely affects the holder.
Federal Income Tax Treatment of Awards under the 2015 Plan.  Federal income tax consequences (subject to change) relating to awards under the 2015 Plan are summarized in the following discussion. This summary is not intended to be exhaustive and, among other considerations, does not describe the deferred compensation provisions of Section 409A of the Internal Revenue Code to the extent an award is subject to and does not satisfy those rules, nor does it describe state, local, or international tax consequences.
For NSOs, we are generally entitled to deduct (and the optionee recognizes taxable income in) an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise. For ISOs, we are generally not entitled to a deduction nor does the participant recognize income at the time of exercise. The current federal income tax consequences of other awards authorized under the 2015 Plan generally follow certain basic patterns: SARs are taxed and deductible in substantially the same manner as NSOs; nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid (if any) only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); bonuses and performance share awards are generally subject to tax at the time of payment; cash-based awards are generally subject to tax at the time of payment; and compensation otherwise effectively deferred is taxed when paid. We will generally have a corresponding deduction at the time the participant recognizes income. However, as for those awards subject to ISO treatment, we would generally have no corresponding compensation deduction.
If an award is accelerated under the 2015 Plan in connection with a change in control (as this term is used under the Internal Revenue Code), we may not be permitted to deduct the portion of the compensation attributable to the acceleration, commonly called parachute payments, if it exceeds certain threshold limits under the Code (and certain related excise taxes may be triggered). Furthermore, the aggregate compensation in excess of $1,000,000 attributable to awards which are not “performance-based” within the meaning of Section 162(m) of the Internal Revenue Code, or do not fall within any other applicable exceptions, we may not be permitted a deduction in certain circumstances.
Employee Bonus Plan
We sponsor an Employee Bonus Plan, or Bonus Plan. The Bonus Plan rewards officers and employees based on performance of individual business units of the Company. Earnings and growth performance goals for each business unit and for the Company as a whole are established at the beginning of the calendar year and approved annually by the board of directors. The Bonus Plan provides for a predetermined bonus amount to be contributed to the employee bonus pool based on (i) earnings target and growth for individual business units and (ii) achieving certain pre-tax return on average equity and pre-tax return on average asset levels for the Company as a whole. These bonus amounts are established


annually by our board of directors. In 2017, the Bonus Plan expense was elected$2.3 million based on a Senior Vice Presidentpre-tax return on average equity and a pre-tax return on average assets of 13.51% and 1.29%, respectively.
Employee Stock Ownership Plan
As of January 1, 1992, the Bank amended and restated its 401(k) profit sharing plan in its entirety as an Employee Stock Ownership Plan, or ESOP, as defined in the Internal Revenue Code, and upon our acquisition of the Bank in 1997, the ESOP became the Guaranty Bancshares, Inc. Employee Stock Ownership Plan with 401(k) Provisions, or KSOP.
Our KSOP is designed to: (1) qualify as an employee stock ownership plan which is intended to be a stock bonus plan under the Internal Revenue Code, and Employee Retirement Income Security Act of 1974, Presidentas amended, or ERISA; (2) allow participants to make elective contributions in 1979, Chief Operating Officeraccordance with the Internal Revenue Code; and (3) allow the Bank and/or the Company to make matching contributions in 1983accordance with the Internal Revenue Code and Chief Executive Officerother contributions in 1989. In 2002 he was elected to Chairmanaccordance with the Internal Revenue Code and Chief Executive OfficerERISA. Generally, an employee is an eligible participant in the KSOP upon the first day of the Bank. Hemonth coincident with or next following the date of hire in a full time position. In general, each such employee shall become eligible to receive allocations of non-elective contributions and forfeitures on the January 1 or July 1 coincident with completion of six consecutive months of service in which the employee is credited with 500 hours of service. Each such employee of the Company, Bank, and any affiliate shall become eligible to receive allocations of matching contributions on the January 1 or July 1 next following or coincident with the employee’s date of hire.
Employees may make elective “traditional” or “Roth” contributions to the plan, up to the maximum dollars amounts allowed annually by Internal Revenue Code and regulations. The Company has serveddiscretion to make matching contributions, on a dollar-for-dollar basis, with respect to salary deferrals up to a certain percentage of a participant’s compensation. In 2017, the KSOP contributed matching funds up to 5% of participant compensation. Company matching contributions are intended to be invested primarily in our common stock. Any cash dividends received by the trustee of the KSOP from shares of our stock held in the KSOP are applied, in the discretion of the trustee, to the purchase of additional shares of our common stock. The trustee of the KSOP is authorized to purchase our common stock from us directly or from any shareholder, and such stock may be outstanding, newly issued or treasury stock. All such purchases must be at a price not in excess of fair market value, in accordance with the Internal Revenue Code.
The KSOP was restated for IRS “Cycle A-2” on December 20, 2011, and received a favorable IRS Determination Letter for it on August 22, 2014. It was subsequently amended to (1) reflect the termination of the Company’s status as a Subchapter S corporation, (2) liberalize the entry date for the matching contribution, (3) include an automatic enrollment provision for new plan qualified employees, (4) allow forfeiture funds from the KSOP’s cash account to pay plan administration expenses, (5) allow forfeitures from the KSOP’s Company stock account to be allocated to plan participants (6) eliminate the plan’s participant class exclusion for hourly employees, and (7) adopt a distribution policy giving terminated employee participants the option to either receive distribution of their Company Stock accounts in kind or have such accounts converted to other investments.
The KSOP was restated for IRS “Cycle A-3” on December 14, 2016, which restatement includes the previous amendments, and the IRS issued a Favorable Determination Letter on October 18, 2017.
As of December 31, 2017, the KSOP held 1,314,277 shares of our common stock. Total compensation accrued or paid to the KSOP for the year ended December 31, 2017 was $965,000.
Executive Incentive Retirement Plan
We sponsor a non-qualified, non-contributory Executive Incentive Retirement Plan for the benefit of certain officers of the Bank with a title of senior vice president or above, including all of our named executive


officers. This plan provides benefits to such personnel for the attainment of certain performance criteria in various predetermined amounts equal to targeted awards levels as adjusted for annual earnings performance of the Company. Contributions under this plan are granted annually on a deferred basis. Currently, depending on the officer, the Bank contributes between 3.0% and 9.0% of the officer’s salary each year into a deferral account, and each officer’s account balance is further credited each year by an amount equal to our annualized return on equity, subject to a minimum crediting rate of 5.0% and a maximum crediting rate of 13.0%. The Executive Incentive Retirement Plan’s normal retirement benefit is payable following separation from service after reaching age 65, and is payable over 120 months with a 7.5% post retirement interest rate. This plan also provides a death benefit to the participants. This plan is unfunded.
In connection with the Executive Incentive Retirement Plan, we have purchased life insurance policies for the individuals participating in such plan. The cash surrender value of the life insurance policies held by us totaled $19.1 million for the year ended December 31, 2017. Our expenses related to the Executive Incentive Retirement Plan totaled $447,000 for the year ended December 31, 2017, and our recorded liability under the Executive Incentive Retirement Plan totaled approximately $2.4 million for the year ended December 31, 2017.
Compensation of Directors
We pay our directors based on the directors’ participation in board of directors and committee meetings held throughout the year, and Guaranty Bank & Trust pays its directors in the same manner. During 2017, outside directors received an annual retainer of $20,000 and inside directors received an annual retainer of $14,000. In addition, outside directors received $600 per board meeting attended and inside directors received $300 per board meeting attended. Directors also received a fee per committee meeting attended, which varied based on the particular committee. The Chairman of the Audit Committee received a fee of $550 per meeting attended, and the other members received a fee of $325 per meeting attended. The Chairman of the Corporate Governance and Nominating Committee and the Chairman of the Compensation Committee each received a fee of $275 per meeting attended, and the other members of these committees received a fee of $175 per meeting attended. Directors serving on the KSOP Committee received a fee of $200 per meeting attended.
The following table sets forth compensation paid, earned or awarded during 2017 to each of our directors other than directors Abston, Lee and Payne, whose compensation is described above in “Summary Compensation Table.” The table also includes compensation earned by each director that is attributable to his service as a director of Guaranty since its inceptionBank & Trust.
Name 
Fees Earned or 
Paid in Cash
 Total Compensation
Richard W. Baker $83,900
 $83,900
James S. Bunch 91,560
 91,560
Johnny O. Conroy 71,825
 71,825
Molly Curl 14,831
 14,831
Bradley K. Drake 69,635
 69,635
Christopher B. Elliott 90,400
 90,400
Carl Johnson, Jr. 91,525
 91,525
Weldon C. Miller 42,050
 42,050
William D. Priefert 68,850
 68,850
Arthur B. Scharlach, Jr. 38,625
 38,625
Directors have been and will continue to be reimbursed for travel, food, lodging and other expenses directly related to their activities as President since 1992directors. Directors are also entitled to the protection provided by the


indemnification provisions in our certificate of formation and in 2002 was elected Chief Executive Officer. In 2004, he was elected Chairman ofbylaws, and, to the Board of Guaranty.

GeneWatson. Mr. Watson has served as a directorextent they are directors of the Bank, the articles of association and bylaws of Guaranty Bank & Trust.

CERTAIN RELATIONSHIPS AND RELATED PERSONS TRANSACTIONS
In addition to the compensation arrangements with directors and executive officers described in “Executive Compensation” above, the following is a description of each transaction since 1999January 1, 2017, and each proposed transaction in which:
we have been or are to be a participant;
the amount involved exceeds or will exceed $120,000; and
any of our directors, executive officers or beneficial holders of more than five percent of our capital stock, or any immediate family member of or person sharing the household with any of these individuals (other than tenants or employees), had or will have a direct or indirect material interest.
Policies and Procedures Regarding Related Person Transactions
Transactions by Guaranty Bank & Trust or us with related persons are subject to a formal written policy, as well as regulatory requirements and restrictions. These requirements and restrictions include Sections 23A and 23B of the Federal Reserve Act and the Federal Reserve’s Regulation W (which govern certain transactions by Guaranty Bank & Trust with its affiliates) and the Federal Reserve’s Regulation O (which governs certain loans by Guaranty Bank & Trust to its executive officers, directors, and principal shareholders). We have adopted policies to comply with these regulatory requirements and restrictions.
In addition, our board of directors has adopted a written policy governing the approval of related person transactions that complies with all applicable requirements of the SEC and the NASDAQ Global Select Market concerning related person transactions. Related person transactions are transactions in which we are a participant, the amount involved exceeds $120,000 and a directorrelated person has or will have a direct or indirect material interest. Related persons of Guaranty since 2002. He had beenBancshares, Inc. include directors (including nominees for election as directors), executive officers, beneficial holders of more than five percent of our capital stock and the Chairman and a directorimmediate family members of First American Financial Corporation since 1981, which was acquired by Guarantythese persons. Our executive management team, in September 1999. Mr. Watson retired from Watson Company Realtors in Sulphur Springs, Texas in 1999. Mr. Watson serves onconsultation with outside counsel, as appropriate, will review potential related person transactions to determine if they are subject to the Audit, Compensationpolicy. If so, the transaction will be referred to the Corporate Governance and Nominating Committees.

MarketCommittee for Common Stock and Dividends

The Guaranty common stock began trading on May 21, 1998 and is listed onapproval. In determining whether to approve a related person transaction, the National Market SystemCommittee will consider, among other factors, the fairness of the Nasdaq Stock Market underproposed transaction, the symbol “GNTY”. Priordirect or indirect nature of the related person’s interest in the transaction, the appearance of an improper conflict of interests for any director or executive officer taking into account the size of the transaction and the financial position of the related person, whether the transaction would impair an outside director’s independence, the acceptability of the transaction to that date, Guaranty common stock was privately heldour regulators and not listedthe potential violations of other corporate policies. Upon completion of the offering, our Related Person Transactions Policy will be available on anyour website at www.gnty.com.

Directed Share Program
Concurrently with our initial public exchange or actively traded. Guaranty had a total of 2,826,012offering, we offered up to 140,000 shares outstanding at May 25, 2005. As of May 25, 2005, there were 430 registered shareholders of record.

The following table presents the high and low sales prices of our common stock reported by Nasdaq by quarter duringat the periods indicated:

Quarter


  High

  Low

2005

        

Third quarter (through                     , 2005)

  $   $ 

Second quarter

   23.38   17.50

First quarter

   22.78   20.59

2004

        

Fourth quarter

   22.83   20.44

Third quarter

   24.00   17.05

Second quarter

   20.65   19.00

First quarter

   22.10   20.00

2003

        

Fourth quarter

   22.00   17.78

Third quarter

   18.15   16.40

Second quarter

   16.59   14.90

First quarter

   16.40   15.64

Holdersinitial public offering price to our directors, officers, employees and certain other persons through a directed share program. Sales of Guaranty common stock are entitled to receive dividends when, asour directors, executive officers, and if declared by our Boardbeneficial owners of Directors outmore than five percent of funds legally available therefore. While we have declared dividends on our common stock since 1980,for a total purchase price in excess of $120,000 through the directed share program are detailed below:



Shareholder Issue DateShares Per Share Total Purchase
Richard W. Baker May 12, 201750,000
 $27.00
 $1,350,000
James S. Bunch May 12, 20175,000
 27.00
 135,000
Bradley K. Drake May 12, 201720,000
 27.00
 540,000
William D. Priefert May 12, 20175,000
 27.00
 135,000
Robert P. Sharp May 12, 201710,000
 27.00
 270,000

Ordinary Banking Relationships
Certain of our officers, directors and paid semi-annual dividends aggregating $0.40 per share per annumprincipal shareholders, as well as their immediate family members and affiliates, are customers of, or have or have had transactions with, Guaranty Bank & Trust or us in 2004, there isthe ordinary course of business. These transactions include deposits, loans, wealth management products and other financial services related transactions. Related person transactions are made in the ordinary course of business, on substantially the same terms, including interest rates and collateral (where applicable), as those prevailing at the time for comparable transactions with persons not related to us, and do not involve more than normal risk of collectability or present other features unfavorable to us. As of December 31, 2017, no assurance that we willrelated person loans were categorized as nonaccrual, past due, restructured or potential problem loans. We expect to continue to pay dividendsenter into transactions in the future.

Theordinary course of business on similar terms with our officers, directors and principal source of cash revenues to Guaranty is dividends paid by the Bank with respect to the Bank’s capital stock. There are certain restrictions on the payment of such dividends imposed by federalshareholders, as well as their immediate family members and state banking laws, regulations and authorities.

The cash dividends we paid per share by quarter for the periods indicated were as follows:

   2005

  2004

  2003

Fourth quarter

  $N/A  $0.20  $0.20

Third quarter

   N/A   —     —  

Second quarter

   0.21   0.20   0.17

First quarter

   —     —     —  

affiliates.

Security Ownership of Certain Beneficial Owners and Management

BENEFICIAL OWNERSHIP OF THE COMPANY’S COMMON STOCK BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table sets forth certainprovides information regarding the beneficial ownership of Guarantyour common stock as of May 25, 2005, by all (1) directors, (2) named executive officers, (3) February 28, 2018, and as adjusted to reflect the completion of the offering, for:
each person who is known by Guaranty to own beneficially 5% orus to be the beneficial owner of more than five percent of our common stockstock;
each of our directors and (4) named executive officers; and
all directors and executive officers, as a group. Unless otherwise indicated, based on information furnished by such shareholders, management of Guaranty believes that each person has sole voting and dispositive power over
Beneficial ownership is determined in accordance with the shares indicated as owned by such person.

Information relating to beneficial ownership of the common stock set forth below is based upon “beneficial ownership” concepts set forth in rules of the SEC under Section 13(d)and generally includes shares over which a person exercises sole or share voting and/or investment power. Shares of common stock subject to options currently exercisable or exercisable within 60 days are deemed outstanding for purposes of computing the percentage ownership of the Exchange Act. Under these rules a person isholding the options but are not deemed to be a “beneficial owner”outstanding for purposes of a security if that person has or shares “voting power,” which includescomputing the power to vote or direct the voting of such security, or “investment power,” which includes the power to dispose or to direct the disposition of such security. A person is also deemed to be a beneficial ownerownership of any securityother person. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the tables below have sole voting and investment power with respect to all shares of whichcommon stock that person hasthey beneficially own, subject to applicable community property laws. Unless otherwise noted, the right to acquireaddress for each shareholder listed on the table below is: c/o Guaranty Bancshares, Inc., 201 South Jefferson Street, Mount Pleasant, Texas 75455.

The table below calculates the percentage of beneficial ownership within 60 days. Under the rules, morebased on 11,058,956 shares of common stock outstanding as of February 28, 2018. Beneficial ownership representing less than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he has no beneficial interest. For instance, beneficial ownership includes spouses, minor children and other relatives residing in the same household, and trusts, partnerships or corporations which are affiliated1% is denoted with the shareholder.

      Percentage
Beneficially Owned


 

Name


  Number of Shares

  Before (1)

  After (2)

 

Principal Shareholders:

          

Guaranty Bancshares, Inc. Employee Stock Ownership Plan (with 401(k) provisions)

  512,690(3) 18.14% 18.55%

Estate of Bill G. Jones

  251,447(4) 8.90  9.10 

Directors and Executive Officers:

          

Tyson T. Abston

  28,704(5) 1.01  1.03 

Martin Bell

  10,581(6) *  * 

Johnny O. Conroy

  63,675  2.25  2.30 

Jonice Crane

  97,692(7) 3.46  3.53 

C. A. Hinton, Sr

  179,676(8) 6.36  6.50 

Carl Johnson, Jr.

  11,666  *  * 

Kirk Lee.

  38,035(9) 1.34  1.37 

Weldon Miller

  225,172(10) 7.97  8.15 

Clifton A. Payne

  47,915(11) 1.69  1.73 

Bill Priefert

  54,388(12) 1.92  1.97 

Arthur B. Scharlach, Jr.

  156,430(13) 5.50  5.62 

Gene Watson.

  49,280  1.74  1.78 

Directors and executive officers as a group (12 persons)

  963,214  33.39% 34.12%

an asterisk (*).


 
Number of
Shares
 
 Percent
of Class
Name of Beneficial Owner   
Greater than 5% shareholders   
Guaranty Bancshares, Inc. Employee Stock Ownership Plan
(with 401(k) provisions)
(1)   
1,352,400
 12.23%
Directors and named executive officers   
Tyson T. Abston(2)   
158,836
 1.43%
Richard W. Baker(3)   
360,000
 3.26%
James S. Bunch(4)   
65,000
 *
Johnny O. Conroy(5)   
143,158
 1.29%
Molly Curl(6)   
1,000
 *
Bradley K. Drake(7)   
200,000
 1.80%
Christopher B. Elliott(8)   
103,758
 *
Carl Johnson, Jr.(9)   
48,000
 *
Kirk L. Lee10)   
193,999
 1.75%
Weldon C. Miller(11)   
440,686
 3.98%
Clifton A. Payne(12)   
222,620
 2.01%
William D. Priefert(13)   
194,556
 1.76%
Arthur B. Scharlach, Jr.(14)   
119,438
 1.08%
Other executive officers   
Martin C. Bell(15)
66,524
 *
Charles A. Cowell(16)
39,762
 *
Randall R. Kucera(17)
29,212
 *
Harold E. Lower, II(18)
24,461
 *
J. Daniel Muskrat(19)
12,618
 *
Robert P. Sharp(20)
88,426
 *
All directors and executive officers as a group (19 persons)   
2,512,053
 22.57%
*Indicates ownership which
(1)Each KSOP participant has the right to direct the KSOP trustee to vote the shares allocated to his or her account on all matters requiring the vote of our shareholders. In the event that a participant does not exceed 1.0%.direct the KSOP trustee on how to vote his or her allocated shares, the KSOP trustee will determine how such shares are voted. The KSOP trustee also has the right to vote all shares held by the KSOP that are not allocated to the participants' accounts and may be deemed the beneficial owner thereof. The business address for our KSOP is 201 South Jefferson, Mount Pleasant, Texas 75455.
(1)The percentage beneficially owned was calculated based on 2,826,012
(2)Includes 80,000 shares held by Mr. Abston individually, 50,000 of common stock issued andwhich have been pledged as collateral to secure outstanding as of May 25, 2005. The percentage assumes the exercisedebt obligations, 63,836 shares held by the shareholder or group named in each row of all options for the purchase of common stock held by such shareholder or groupCompany’s KSOP and allocated to Mr. Abston’s account and 15,000 exercisable within 60 days.options.
(2)The percentage beneficially owned was calculated based on 2,764,263 shares of common stock issued and outstanding and assumes that 61,749 shares will be cashed out in the merger. The percentage assumes the exercise by the shareholder or group named in each row of all options for the purchase of common stock held by such shareholder or group and exercisable within 60 days.

(3)A total of 157,927Includes 350,000 shares held by Guaranty’s 401(k) Plan for the benefit of the directorsMr. Baker individually and executive officers are also included in the number of10,000 shares reported in this table to be ownedheld by each director or executive officer in his individual capacity.Mr. Baker's spouse.
(4)Includes 22,827 sharesShares are held of record by the Bill G. Jones IRA Rollover, 161 shares held of recordjointly by Mr. Jones’ wife’s IRABunch and 16,253 shares held of record by Guaranty’s 401(k) Plan, over which the Estate of Mr. Jones has investment control.his spouse.
(5)Includes 6,000141,158 shares held of record by the Tyson Abston IRA, 10,704Mr. Conroy individually and 2,000 shares held by Mr. Conroy's spouse.
(6)Shares are held by The Curl Family Trust, of recordwhich Ms. Curl is a trustee.
(7)Shares are held by Mr. Drake individually, 30,000 of which have been pledged as collateral to secure outstanding debt obligations.
(8)Includes 10,000 shares held individually by Mr. Elliott, 77,820 shares held jointly by Mr. Elliott and his spouse, and 15,938 shares held by Mr. Elliott’s individual retirement account.
(9)Shares are held jointly by Mr. Johnson and his spouse.
(10)Includes 64,000 shares held jointly by Mr. Lee and his spouse, 120,999 shares held by the Company’s 401(k) Plan, over whichKSOP and allocated to Mr. Abston has investment controlLee’s account and 12,000 shares which may be acquired pursuant to the exercise of fully vested stock9,000 exercisable options.
(6)
(11)Includes 3,881168,744 shares held by Mr. Miller individually, 120,000 shares of record by Guaranty’s 401(k) Plan, over which Mr. Bell has investment control, and 6,600 shares which may be acquired pursuanthave been pledged as collateral to the exercise of fully vested stock options.
(7)Includes 3,500secure outstanding debt obligations, 118,094 shares held of record by the Jonice Crane IRA and 1,715 shares held of record by Ms. Crane’s husband.
(8)Includes 2,884 shares held of record by the Charles A. Hinton IRA.
(9)Includes 1,880 shares held of record by the Kirk Lee IRA, 24,263 shares held of record by Guaranty’s 401(k) Plan, over which Mr. Lee has investment control, and 9,100 shares which may be acquired pursuant to the exercise of fully vested stock options.
(10)Includes 8,463 shares held of record by Everybody’s Furniture Company, of which Mr. Miller is the President, 38,957 shares held of record by the Everybody’s Furniture Company Profit Sharing Plan & Trust of which Mr. Miller is the trustee, 86515,000 shares of which have been pledged as collateral to secure outstanding debt obligations, and 153,848 shares held of record by the WeldonJoAnn Miller IRA and 865 sharesTrust, of held of record bywhich Mr. Miller’s wife’s IRA.spouse is trustee.
(11)Includes 30,928 shares held of record by Guaranty’s 401(k) Plan, over which Mr. Payne has investment control, and 11,200 shares which may be acquired pursuant to the exercise of fully vested stock options.
(12)Includes 44,44180,000 shares held of recordby Mr. Payne individually, 135,120 shares held by the Company’s KSOP and allocated to Mr. Payne’s account and 7,500 exercisable options.



(13)Includes 97,560 shares held by the Bill and Shayne Priefert Family Trust and 96,966 shares held by the Priefert Retirement Trust, both of which Mr. Priefert is the trustee.
(13)
(14)Includes 10,33865,394 shares held of record by the Arthur B.Mr. Scharlach Jr. IRA, 34,041individually and 54,044 shares held of record by Mr. Scharlach’s wife, 71,898 shares heldspouse, all of record by Guaranty’s 401(k) Plan, over which Mr. Scharlach has investment control, and 20,000 shares which may be acquired pursuanthave been pledged as collateral to the exercise of fully vested stock options.secure outstanding debt obligations.

(15) Includes 15,603 shares held by Mr. Bell individually, 40,121 shares held by the Company’s KSOP and allocated to Mr. Bell’s account and 10,800 exercisable options.
(16) Includes 18,948 shares held by Mr. Cowell individually, all of which have been pledged as collateral to secure outstanding debt obligations, 10,110 shares held by Mr. Cowell's individual retirement account, 2,704 shares held by the Company’s KSOP and allocated to Mr. Cowell’s account and 8,000 exercisable options.
(17) Includes 1,000 shares held by Mr. Kucera individually, 23,412 shares held by the Company’s KSOP and allocated to Mr. Kucera’s account and 4,800 exercisable options.
(18) Includes 5,000 shares held by Mr. Lower individually, 14,661 shares held by the Company’s KSOP and allocated to Mr. Lower’s account and 4,800 exercisable options.
(19) Includes 6,618 shares held by the Company’s KSOP and allocated to Mr. Muskrat’s account and 6,000 exercisable options.
(20) Includes 17,500 shares held by Mr. Sharp individually, 43,876 shares held by Robert Patrick Sharp Lifetime Trust, of which Mr. Sharp is a trustee, 21,050 shares held by the Company’s KSOP and allocated to Mr. Sharp’s account and 6,000 exercisable options.


Guaranty Common Stock Purchase
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 and Sale Information

Purchases by Guaranty of Guaranty Common Stock During the Past Two Years. During the last two years, we purchased sharesrelated regulations require our officers and directors, and anyone owning more than ten percent of our common stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission, and to furnish us with copies of the forms. We assist our directors and executive officers in complying with these requirements.

Based on our review of the forms we received, or written representations from reporting persons, we believe that all applicable reporting persons satisfied these filing requirements during 2017 except for the Initial Statement of Beneficial Ownership of Securities on Form 3 filed by the following individuals: Martin C. Bell, Charles A. Cowell, Harold E. Lower II, J. Daniel Muskrat and Robert P. Sharp. Each of these filings were required to be filed on the date of the effectiveness of our registration statement on Form S-1, May 8, 2017, but were filed on the following day, May 9, 2017, due to unexpected delays in obtaining filing codes for these individuals.



PROPOSAL 2 -
RATIFICATION OF APPOINTMENT OF WHITLEY PENN LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2018
Pursuant to the recommendation of the Audit Committee, the Board has appointed Whitley Penn LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2018. Whitley Penn LLP has served as the Company’s independent registered public accounting firm since 2015.
At the annual meeting, the shareholders will be asked to consider and act upon a proposal to ratify the appointment of Whitley Penn LLP. The ratification of such appointment will require the affirmative vote of the holders of a majority of the outstanding shares of common stock entitled to vote and present in person or represented by proxy at the annual meeting. Representatives of Whitley Penn LLP are expected to be present at the annual meeting, will be given an opportunity to make a statement (if they desire to do so) and are expected to be available to respond to appropriate questions.
Shareholder ratification of the selection of Whitley Penn LLP as the Company’s independent registered public accounting firm for the 2018 fiscal year is not required by the Company’s bylaws, state law or otherwise. However, the board of directors is submitting the selection of Whitley Penn LLP to the Company’s shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain Whitley Penn LLP. Even if the selection of Whitley Penn LLP is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the 2018 fiscal year if it determines that such a change would be in the best interests of the Company and its shareholders.

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF WHITLEY PENN LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2018.





SHAREHOLDER PROPOSALS AND NOMINATIONS
FOR 2019 ANNUAL MEETING
Shareholders interested in submitting a proposal for inclusion in the proxy statement for our 2019 annual meeting may do so by following the procedures set forth in Rule 14a-8 promulgated under the table belowExchange Act. To be eligible for inclusion, shareholder proposals must be received by us at our principal executive offices, 201 South Jefferson Street, Mount Pleasant, Texas 75455, addressed to Sondra Cunningham, Corporate Secretary, 201 South Jefferson Avenue, Mount Pleasant, Texas 75455, no later than December 6, 2018. The proposal and its proponent must satisfy all applicable requirements of Rule 14a-8. However, as the rules of the Securities and Exchange Commission make clear, simply submitting a proposal does not guarantee its inclusion.
In addition, under our bylaws, a shareholder who wishes to nominate an individual for election to our board of directors directly or to propose any business to be considered at an annual meeting (other than matters brought under Rule 14a-8) must deliver advance written notice of that nomination or business to us following certain procedures contained in our bylaws. To be timely, the open market or in privately negotiated transactions. We didnotice must be received by our Corporate Secretary at our principal executive offices not purchase any shares inless than 90 nor more than 120 days before the first or second quarters of 2004 or the third or fourth quarters of 2003.

Period


  Number of Shares

  Price Range Paid
Per Share


  Average Price Paid
Per Share


Second quarter 2005

  102,177(1) $20.00 – 22.40  $21.50

First quarter 2005

  952  $21.70   21.70

Fourth quarter 2004

  —     —     —  

Third quarter 2004

  11,451   19.50 – 19.75   19.61

(1)Includes the purchase of 100,000 shares of our common stock at $21.50 per share (the closing price of our common stock on the Nasdaq Stock Market on the day immediately prior to the repurchase) from the Estate of Bill G. Jones, a former director and Chairman of the Board of Guaranty. The shares were repurchased, in part, with proceeds from key man life insurance established for this purpose.

Purchasesand Sales of Guaranty Common Stock by the Executive Officers, Directors and Control Persons.The following table shows all transactions in Guaranty common stock for which consideration was paid involving Guaranty and its executive officers, directors and affiliates during the past two years or since becoming an affiliate, whichever is later. Unless otherwise indicated, each transaction listed was made on the open market.

Name


  Date

  Number of
Shares


  

Price

Per Share


  Purchase/Sale

Tyson T. Abston

  1/11/05  1,035  $21.80  Sale

Arthur B. Scharlach, Jr.

  8/18/04  3,500   19.75  Sale

Arthur B. Scharlach, Jr.

  7/08/04  5,000   19.75  Sale

Arthur B. Scharlach, Jr.

  6/21/04  1,500   20.10  Sale

Arthur B. Scharlach, Jr.

  6/08/04  10,000   20.65  Sale

D. R. Zachry

  12/26/03  8,000   20.50  Sale

Tyson T. Abston

  10/28/03  150   19.70  Purchase

OTHER MATTERS

Asanniversary of the date of thisthe 2018 annual meeting, unless our 2019 annual meeting is held on a date that is not within 30 days before or after the first anniversary of the date of the 2018 annual meeting. In that case, to be timely, notice must be delivered not later than the close of business on the fifteenth day following the date on which notice of the date of the 2019 annual meeting is mailed or public disclosure of the date of the 2019 annual meeting is made, whichever occurs first.

To be in proper form, a shareholder’s notice must include all of the information about the proposal or nominee required by our bylaws. You may obtain a copy of our bylaws upon written request to our Corporate Secretary at our principal executive offices. The chairman of the annual meeting may refuse to acknowledge any director nomination or the proposal of any business not made in compliance with the procedures contained in our bylaws.

COST OF ANNUAL MEETING AND PROXY SOLICITATION
We will bear all costs associated with the 2018 annual meeting, including the cost of soliciting proxies. In addition to soliciting proxies by mail, we may solicit proxies by personal interview, telephone, email or other electronic means. No director, officer or employee will be paid any additional compensation for any solicitation activities, although we will reimburse to them any out-of-pocket expenses. We may request banks, brokers and other custodians, nominees and fiduciaries to forward copies of these proxy statement,materials to the Boardbeneficial holders and to request instructions for the execution of Directorsproxies, and managementmay reimburse these persons for their related expenses. Proxies are solicited to provide all record holders of Guaranty know of no other businessour common stock with an opportunity to vote on the matters to be presented for consideration at the special meeting. However,annual meeting, even if other matters do properly come beforethey cannot attend the special meeting or any adjournment or postponement thereof, unless otherwise instructed, it is intended that the persons named in the proxy cardperson.
ANNUAL REPORT ON FORM 10-K
The Company will act in accordance with their best judgment.

WHERE YOU CAN FIND MORE INFORMATION

We file reports, proxy statements and other information with the SEC under the Exchange Act. You may read andfurnish, without charge, a copy at the prescribed rates, this information at the SEC’s Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. The SEC also maintains a web site that contains reports, proxy statements and other information about issuers, including Guaranty, who file electronically with the SEC. The address of that site iswww.sec.gov.

Guaranty, the merger subsidiary and the Filing Persons have filed with the SEC a Rule 13e-3 Transaction Statement on Schedule 13E-3 in respect of the merger. As permitted by the SEC, this proxy statement omits certain information contained in the Schedule 13E-3. The Schedule 13E-3, including any amendments and exhibits filed or incorporated by reference as a part thereof, is available for inspection or copying as set forth above or is available electronically at the SEC’s website.

The SEC allows Guaranty to “incorporate by reference” information into this document. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information that we incorporate by reference is considered to be a part of this document.

This document incorporates by reference the documents listed below that have previously been filed with the SEC, which contain important information about Guaranty:

Company’s Annual Report on Form 10-K for the year ended December 31, 2004; and2017, as filed with the SEC, to any shareholder upon written request to Sondra Cunningham, Corporate Secretary, 201 South Jefferson Avenue, Mount Pleasant, Texas 75455.

QuarterlyThe Company’s Annual Report on Form 10-Q10-K, including consolidated financial statements and related notes, for the three monthsyear ended MarchDecember 31, 2005;

We also incorporate by reference any future filings we make2017, as filed with the SEC, under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement and before the special meeting. Any statement contained in this proxy statement or in a document incorporated or deemed to be incorporated by reference in this proxy statement shall be deemed to be modified or superseded to the extent that a statement contained herein or

in any subsequently filed document that also is, or is deemed to be, incorporated by reference herein modified or superseded such statement. Any statement so modified or superseded willaccompanies but does not be deemed, except as so modified or superseded, to constitute a part of this proxy statement.

We will provide, without charge,




OTHER MATTERS
The board of directors does not intend to each person to whom this proxy statement is delivered, upon written or oral request of such personbring any other matter before the annual meeting and by first class mail or other equally prompt means within one business day of receipt of such request, a copydoes not know of any and all informationother matters that has been incorporated by reference, without exhibits unless such exhibits are also incorporated by reference in this proxy statement. You may obtain a copy of these documents and any amendments thereto by writing to Kim Shumatebe presented for action at the following address: Guaranty Bancshares, Inc., 100 W. Arkansas, Mt. Pleasant, Texas 75455, telephone number (903) 572-9881.

Appendix A

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), made and effective as of June 13, 2005, is entered into by and betweenGUARANTY BANCSHARES, INC. (the “Company”), a Texas corporation andGB FACILITATION, INC.(“Newco”), a Texas corporation.

W I T N E S S E T H:

WHEREAS, the Company is a business corporation duly incorporated and validly existing under the laws of the State of Texas, with authorized capital stock consisting of (i) 50,000,000 shares of common stock, $1.00 par value per share (“Common Stock”), of which 3,252,016 shares are issued and 2,826,012 shares are outstanding as of the date hereof and (ii) 15,000,000 shares of preferred stock, $5.00 par value per share, none of which are issued and outstanding as of the date hereof; and

WHEREAS, Newco is a corporation duly organized and validly existing under the laws of the State of Texas, with authorized capital stock consisting of 1,000 shares of common stock, $1.00 par value per share (“Newco Stock”), of which 1,000 shares are issued and outstanding; and

WHEREAS, the Company and Newco believe that the merger of Newco with and into the Company in the manner provided by, and subject to the terms and conditions set forth in, this Agreement is desirable and in the best interests of their respective shareholders; and

WHEREAS, the respective Boards of Directors of the Company and Newco have approved this Agreement and the transactions proposed herein substantially on the terms and conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements set forth herein, andannual meeting. However, if any other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as set forth below:

I. THE MERGER

Section 1.1Merger.    Upon the terms and subject to the conditions set forth in this Agreement, Newco shall be merged with and into the Company (the “Merger”), with the Company as the surviving corporation (sometimes hereinafter referred to as the “Surviving Corporation” when reference is made to it after the Effective Time (as defined inArticle VIII hereof) of the Merger), pursuant to the provisions of, and with the effect provided in Article 5 of the Texas Business Corporation Act (“TBCA”). The name of the surviving corporation shall be “Guaranty Bancshares, Inc.”, and the business of the Surviving Corporation shall be that of a bank holding company.

Section 1.2Effect of Merger.    At the Effective Time of the Merger, the corporate existence of the Company and Newco shall, as provided in the provisions of law heretofore mentioned, be merged and continued in Surviving Corporation, and Surviving Corporation shall be deemed to be a continuation in entity and identity of the Company and Newco. All rights, franchises and interests of the Company and Newco, respectively, in and to any type of property and choices in action shall be transferred to and vested in Surviving Corporation by virtue of such Merger without any deed or other transfer. Surviving Corporation, without any order or other action on the part of any court or otherwise, shall hold and enjoy all rights of property, franchises and interest, including appointments, designations and nominations, and all other rights and interests as trustee, executor, administrator, transfer agent or registrar of stocks and bonds, guardian of estates, assignee, receiver and committee of estates and lunatics, and in every other fiduciary capacity, in the same manner and to the same extent as such rights,

franchises, and interests were held or enjoyed by the Company and Newco, respectively, as of the Effective Time. The Merger shall have all other effects set forth in Article 5.06 of the TBCA.

Section 1.3Liabilities of Surviving Corporation.    At the Effective Time, Surviving Corporation shall be liable for all liabilities of the Company and Newco. All deposits, debts, liabilities, obligations and contracts of the Company and of Newco, respectively, matured or unmatured, whether accrued, absolute, contingent or otherwise, and whether or not reflected or reserved against on balance sheets, books of account, or records of the Company or Newco, as the case may be, shall be those of Surviving Corporation and shall not be released or impaired by the Merger. All rights of creditors and other obligees and all liens on property of either the Company or Newco shall be preserved unimpaired subsequent to the Merger.

Section 1.4Conveyance.    All assets of Newco and the Company as they exist at the Effective Time of the Merger shall pass to, and vest in, the Surviving Corporation without any conveyance or other transfer. The Surviving Corporation shall be responsible for all the liabilities of every kind and description of each of the Company and Newco existing as of the Effective Time of the Merger.

Section 1.5Board of Directors and Officers; Articles of Incorporation; Bylaws.    At the Effective Time and until thereafter changed in accordance with applicable law or the Articles of Incorporation or Bylaws of the Surviving Corporation, the members of the Board of Directors and officers of the Company shall become the Board of Directors and officers of the Surviving Corporation. At the Effective Time and until thereafter amended in accordance with applicable law, the Articles of Incorporation of the Surviving Corporation shall be the Articles of Incorporation of the Company as in effect as of the Effective Time. Until altered, amended or repealed as provided therein and in the Articles of Incorporation, the Bylaws of the Surviving Corporation shall be the Bylaws of the Company as in effect as of the Effective Time.

II. MERGER CONSIDERATION AND EXCHANGE PROCEDURES

Section 2.1Merger Consideration.    At the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof,

(a) all outstanding shares of Common Stock, whether Record Shares (as hereinafter defined) or Street Shares (as hereinafter defined), held by a Holder (as hereinafter defined) holding fewer than 600 shares of Common Stock immediately prior to the Effective Time (such shareholders are referred to herein as “Cash-Out Shareholders”) shall, without any action on the part of the holder thereof, be canceled and converted into the right to receive, upon the surrender of the certificate representing such shares, cash equal to $24.00 per share of Common Stock without interest thereon, (the “Merger Consideration”) other than Dissenting Shares (as defined inSection 2.2 hereof);provided,however, that the Company may presume that all Street Shares (as hereinafter defined) are held by Holders holding fewer than 600 shares of Common Stock immediately prior to the Effective Time unless the Company or a beneficial owner of Street Shares is able to demonstrate to the Company’s satisfaction that such shares are held beneficially by a Holder holding 600 or more shares of Common Stock immediately prior to the Effective Time, in which event such shares of Common Stock shall remain outstanding with all rights, privileges, and powers existing immediatelymatter does properly come before the Effective Time;

(b) all outstanding shares of Common Stock other than those described in paragraph (a) above as being converted into the right to receive the Merger Consideration shall remain outstanding with all rights, privileges, and powers existing immediately prior to the Effective Time; and

(c) the outstanding shares of Newco Stock shall, without any action on the part of the holder thereof, be canceled.

Except as provided inSection 2.2, in no event shall any Holder holding, of record or beneficially, immediately prior to the Effective Time 600 or more shares of Common Stock (including any combination of

Record Shares and Street Shares) in the aggregate be entitled to receive any Merger Consideration with respect to the shares of Common Stock so held. It shall be a condition precedent to the right of any Holder to receive the Merger Consideration, if any, payable with respect to the shares of Common Stock held by such Holder that such Holder certify to the Company in the letter of transmittal delivered by the Company as described inSection 2.2 that such Holder held, of record and beneficially, immediately prior to the Effective Time fewer than 600 shares of Common Stock (including any combination of Record Shares and Street Shares) in the aggregate.

For purposes hereof,

(1) the term “Record Shares” shall mean shares of Common Stock other than Street Shares and any Record Share shall be deemed to be held by the registered Holder thereof as reflected on the books of the Company;

(2) the term “Street Shares” shall mean shares of Common Stock held of record in street name, and any Street Share shall be deemed to be held by the beneficial owner thereof as reflected on the books of the nominee holder thereof;

(3) the term “Holder” shall mean (i) any record holder or holders of Record Shares who would be deemed, under Rule 12g5-1 promulgated under the Securities Exchange Act of 1934, as amended, to be a single “person” for purposes of determining the number of record shareholders of the Company, and (ii) any other person or persons who would be deemed to be a “Holder” under clause (i) above if the shares of Common Stock such person holds beneficially in street name were held of record by such person or persons; and

(4) the term “Cash-Out Shares” shall mean any shares of Common Stock that are converted into the right to receive the Merger Consideration pursuant to thisSection 2.1.

The Company (along with any other person or entity to which it may delegate or assign any responsibility or task with respect thereto) shall have full discretion and exclusive authority (subject to its right and power to so delegate or assign such authority) to (i) make such inquiries, whether of any shareholder(s) or otherwise, as it may deem appropriate for purposes of thisSection 2.1 and (ii) resolve and determine, in its sole discretion, all ambiguities, questions of fact and interpretive and other matters relating to thisSection 2.1, including, without limitation, any questions as to the number of shares of Common Stock held by any Holder immediately prior to the Effective Time. All determinations by the Company under thisSection 2.1 shall be final and binding on all parties, and no person or entity shall have any recourse against the Companyannual meeting or any other person or entity with respect thereto.

For purposes of thisSection 2.1,adjournment thereof, the Company may in its sole discretion, but shall not have any obligation to do so, (i) presume that any shares of Common Stock held in a discrete account (whether record or beneficial) are held by a person distinct from any other person, notwithstanding that the registered or beneficial holder of a separate discrete account has the same or a similar name as the holder of a separate discrete account; and (ii) aggregate the shares of Common Stock held (whether of record or beneficially) by any person or persons that the Company determines to constitute a single Holder for purposes of determining the number of shares of Common Stock held by such Holder.

Section 2.2Dissenting Shares.    Each share of Common Stock issued and outstanding immediately prior to the Effective Time, the Holder of which has not voted in favor of the Merger and who has delivered a written demand for payment of the fair value of such shares within the time and in the manner provided in Article 5.12 of the TBCA, is referred to herein as a “Dissenting Share.” Dissenting Shares owned by each holder thereof who has not Notwithstanding anything in this Agreement to the contrary, Dissenting Shares shall not be converted into or represent the right to receive the Merger Consideration pursuant toSection 2.1 hereof unless and until such holder shall have failed to perfect or shall have effectively withdrawn or lost his right to appraisal and

payment under the TBCA. If any such Holder shall have so failed to perfect or shall have effectively withdrawn or lost such right, such Holder’s Dissenting Shares shall thereupon be deemed to have been converted into and to have become exchangeable for, at the Effective Time, the right to receive the Merger Consideration without any interest thereon.

Section 2.3Exchange of Shares.

(a) The Company shall deposit or cause to be deposited in trust on behalf of Computershare Trust Company (the “Exchange Agent”) cash in an aggregate amount necessary to pay the Merger Consideration to Cash-Out Shareholders and to make appropriate cash payments to Holders of Dissenting Shares pursuant toSection 2.2 hereof, if any, (such amounts being hereinafter referred to as (the “Exchange Fund”). The Exchange Fund shall not be used for any other purpose, except as provided in this Agreement.

(b) As soon as practicable after the Effective Time, the Company shall use its best efforts to cause the Exchange Agent to mail to each record holder of an outstanding certificate which represents Cash-Out Shares (the “Certificates”), a form letter of transmittal which will specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent and contain instructions for use in effecting the surrender of the Certificates for payment therefor. At and after the Closing (as defined inSection 7.1) and upon surrender to the Exchange Agent of a Certificate, together with such letter of transmittal duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor the amount of cash provided inSection 2.1 hereof and such Certificate shall forthwith be canceled. Payment with respect to Cash-Out Sharesproxies will be made as soon as practicable after the Exchange Agent’s receipt of the Certificates and a properly completed letter of transmittal. No interest will be paid or accrued on the Merger Consideration payable upon surrender of the Certificates. Until surrenderedvoted in accordance with the provisionsdiscretion of thisSection 2.3, each Certificate (other than Certificates representing Dissenting Shares) shall represent for all purposes the right to receive the Merger Consideration without any interest thereon

(c) If payment of cash is to be made to a person other than the person in whose nameor persons voting the Certificate surrendered is registered, it shall be a conditionproxies.

You are cordially invited to attend the annual meeting. Regardless of payment thatwhether you plan to attend the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transferannual meeting, you are urged to complete, date, sign and thatreturn the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered or established to the satisfaction of the Company that such tax has been paid or is not applicable.

(d) Any portion of the Exchange Fund (including the proceeds of any investments thereof) that remains unclaimed by the shareholders of the Company for six months after the Exchange Agent mails the letter of transmittal pursuant toSection 2.2 hereof shall be returned to the Company upon demand, and the holders of shares of Common Stock who have not theretofore complied with the exchange procedures in thisSection 2.3 shall look to the Company only, and not the Exchange Agent, for the payment of any of the Merger Consideration in respect of such shares.

(e) None of the Company, Newco, the Exchange Agent or any other person shall be liable to any former holder of shares of Common Stock for any cash properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.

(f) In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Company or the Exchange Agent, the posting by such person of a bond in such amount as the Company or the Exchange Agent may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect thereof pursuant to this Agreement.

III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Newco as follows:

Section 3.1Organization.    The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas and is a registered bank holding company under the Bank Holding Company Act of 1956, as amended. The Company has full corporate power to own its properties, to carry on its business as now being, and presently contemplated to be, conducted.

Section 3.2Capitalization.    The authorized capital stock of the Company consists of (i) 50,000,000 shares of Common Stock, of which 3,252,016 shares are issued and 2,826,012 shares are outstanding as of the date of this Agreement and (ii) 15,000,000 shares of preferred stock, $5.00 par value, none of which are issued and outstanding as of the date of this Agreement.

Section 3.3Authority; Approvals.    The Company has full corporate power and authority to execute and deliver this Agreement and has full legal capacity, power and authority to perform its obligations hereunder. The Board of Directors of the Company has approved this Agreement and the transactions contemplated hereby, subject to the approval by the shareholders of the Company as required by law. This Agreement has been duly executed and delivered by the Company and when executed by Newco, will be a binding agreement of the Company enforceable against the Company in accordance with its terms.

Section 3.4No Conflict With Other Instruments.    Subject to the receipt of all required regulatory approvals and compliance with all applicable federal and state securities laws, the execution, delivery and performance of this Agreement and the transactions contemplated hereby and thereby will not violate any provision of, or constitute a default under any order, writ, injunction or decree of any court or other governmental agency, or any material contract, agreement or instrument to which the Company is a party or by which it is bound, or constitute an event which with the lapse of time or action by a third party could result in any default under any of the foregoing or resultenclosed proxy in the creation of any lien, charge or encumbrance upon any of the assets or properties of the Company or upon shares of Common Stock.

IV. REPRESENTATIONS AND WARRANTIES OF NEWCO

Newco hereby represents and warrants to the Company as follows:

Section 4.1Organization.    Newco is a Texas corporation duly organized, validly existing and in good standing under the laws of Texas, and has full corporate power and authority to own its properties, to engage in the business and activities now conducted by it.

Section 4.2Capitalization.    The authorized capital stock of Newco consists of 1,000 shares of common stock, $1.00 par value per share, all of which are issued and outstanding. All such shares are validly issued, fully paid, and nonassessable. There are no existing options, warrants, calls or commitments of any kind obligating Newco to issue any of its authorized and unissued capital stock.

Section 4.3Subsidiaries or Affiliates.    Newco does not own of record or beneficially, and is not obligated to acquire, any capital stock, other equity securities, debt securities or other interest of or in any corporation, government or other entity. Between the date hereof and the Effective Time, Newco will not create or acquire any subsidiaries without the prior written consent of the Company.

Section 4.4Authority; Approvals.    Newco has full corporate power and authority to execute and deliver this Agreement and has full legal capacity, power and authority to perform its obligations hereunder. The Board of Directors of Newco has approved this Agreement and the transactions contemplated hereby, subject to the

approval thereof by the shareholders of the Newco as required by law. This Agreement has been duly executed and delivered by Newco and when executed by the Company, will be a binding agreement of Newco enforceable against it in accordance with its terms.

V. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY

The obligation of the Company to effect the Merger shall be subject to the satisfaction on or before the Closing Date all of the following conditions, except as the Company may waive such conditions in writing:

Section 5.1Litigation.    On the Closing Date, there shall not be pending or threatened litigation in any court or any proceeding by any governmental commission, board or agency with a view to seeking, or in which it is sought, to restrain or prohibit consummation of the Merger, or in which it is sought to obtain divestiture, recession, or damages in connection with the Merger or the consummation of the Merger, and to the knowledge of any of the parties hereto, no investigation by any governmental agency shall be pending or threatened that might result in any such suit, action or other proceedings.

Section 5.2Representations and Warranties.    All representations and warranties of Newco contained in this Agreement, other than any representations and warranties as to future events, shall be true and correct in all material respects on and as of the Closing Date as if such representations and warranties were made on and as of the Closing Date, and Newco shall have performed all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date.

Section 5.3Shareholder Approval.    The shareholders of each of the Company and Newco shall have voted affirmatively to approve this Agreement by the requisite vote.

Section 5.4Dissenting and Cash-Out Shares.    The aggregate number shares held by Cash-Out Shareholders and shares of Common Stock held by shareholders of the Company who have delivered to the Company notice of their intent to exercise their dissenters’ rights with respect to the Merger shall not exceed 100,000.

VI. CONDITIONS TO THE OBLIGATIONS OF NEWCO

The obligation of Newco to effect the Merger shall be subject to the satisfaction prior to the Effective Time of the Merger of the following conditions:

Section 6.1Litigation.    On the Closing Date, there shall not be pending or threatened litigation in any court or any proceeding by any governmental commission, board or agency with a view to seeking, or in which it is sought, to restrain or prohibit consummation of the Merger, or in which it is sought to obtain divestiture, recission, or damages in connection with the Merger or the consummation of the Merger, and to the knowledge of any of the parties hereto, no investigation by any governmental agency shall be pending or threatened that might result in any such suit, action or other proceeding.

Section 6.2Representations and Warranties.    All representations and warranties of the Company contained in this Agreement, other than any representations and warranties as to future events, shall be true and correct in all material respects on and as of the Closing Date as if such representations and warranties were made on and as of the Closing Date, and the Company shall have performed all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date.

Section 6.3Shareholder Approval.    The shareholders of each of the Company and Newco shall have voted affirmatively to approve this Agreement by the requisite vote.

VII. EXPENSES

Costs and expenses relating to the negotiation and drafting of this Agreement and the consummation of the transactions contemplated hereby shall be borne and paid by the Company.

VIII. CLOSING DATE AND EFFECTIVE TIME

The closing of this Agreement and the transactions contemplated hereby shall be held on the Closing Date (as defined in thisArticle VIII)accompanying envelope at such time and place as the parties hereto may mutually agree upon. The “Closing Date” shall be such date as the Presidents of each of the Company and Newco, respectively, may agree upon. Subject to the terms and upon satisfaction on or before the Closing Date of all requirements of law and conditions specified in this Agreement, the Company and Newco shall, at the Closing Date, execute, acknowledge and deliver such other documents and instruments and take such further action as may be necessary or appropriate to consummate the Merger. The “Effective Time” is the date and time on which the Merger is effective, which shall be the date and time specified in the certificate of merger to be issued by the Secretary of State of Texas, and if no date is specified in such certificate, then the Effective Time shall be the time of the opening of business on the date the certificate of merger is recorded by the Secretary of State of Texas.

IX. TERMINATION AND AMENDMENT

Section 9.1Termination.    This Agreement may be terminated by either the Company or Newco at any time prior to the Effective Time. In the event of termination of this Agreement, this Agreement shall become void and shall have no effect and create no liability or obligation on the part of the parties hereto or their respective officers, directors or shareholders.

Section 9.2Amendment.    This Agreement may be amended only by an instrument in writing duly authorized by the Boards of Directors of the parties hereto and signed on behalf of each of the parties hereto.

X. NOTICES

All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, by facsimile (with confirmation) or mailed by registered or certified mail (return receipt requested) to the Company or Newco, respectively, at the following addresses:

If to the Company:

Guaranty Bancshares, Inc.

100 W. Arkansas

Mt. Pleasant, Texas 75455

If to Newco:

GB Facilitation, Inc.

100 W. Arkansas

Mt. Pleasant, Texas 75455

XI. MISCELLANEOUS

Section 11.1Further Assurances.    Each party hereto agrees to perform any further acts and to execute and deliver any further documents that may be reasonably necessary to carry out the provisions of this Agreement.

Section 11.2Interpretation.    When a reference is made in this Agreement to Sections or Articles, such reference shall be to a Section or Article of this Agreement unless otherwise indicated. The headings contained in

this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

Section 11.3Counterparts.    This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which shall be deemed to constitute one and the same instrument.

Section 11.4Governing Law.    This Agreement shall be governed by and construed in accordance with the laws of the State of Texas applicable to agreements made and entirely to be performed within such jurisdiction.

Section 11.5Entire Agreement.    This Agreement (including the documents and the instruments referred to herein) constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.

Section 11.6Assignment.    Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other party.

Section 11.7Severability.    In the event that any of the provisions, or portions thereof, of this Agreement are held to be illegal, unenforceable or invalid by any court of competent jurisdiction, the legality, enforceability and validity of the remaining provisions, or portions thereof, shall not be effected thereby, and in lieu of the illegal, unenforceable or invalid provision or portion thereof, there shall be added a new legal, enforceable and valid provision as similar in scope and effect as is necessary to effectuate the results intended by the deleted provision or portion.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.

GUARANTY BANCSHARES, INC.

By:

/s/    TYSON T. ABSTON        
Tyson T. Abston
President
your earliest convenience.

Attest:

By:

/s/    KIM SHUMATE        

GB FACILITATION, INC.

By:

/s/    ARTHUR B. SCHARLACH, JR.        
Arthur B. Scharlach, Jr.
President

Attest:

By:

/s/    SONDRA CUNNINGHAM        

Appendix B

Proposed New Article XVI of

Articles of Incorporation of Guaranty Bancshares, Inc.,

as amended

Article XVI. Restrictions on Transfer of Stock

(a) This Article XVI shall govern all transfers of shares of common stock of the corporation held by shareholders who voted in favor of the amendment of these articles to add this Article XVI at the special meeting of shareholders held on             , 2005 and all shares of common stock of the corporation acquired subsequent to the filing of this amendment with the Secretary of State of Texas. For purposes of this Article XVI, “transfer” means any type of disposition whatsoever, including but not limited to a sale; gift; transfer incident to divorce; transfer to legatees, heirs or trustees of a trust as the result of the death of the record holder of common stock; transfer incident to a guardian or probate proceeding; or transfer resulting from the liquidation or sale of a partnership, corporation or other business entity that, as a consequence of such transfer, would result in the corporation having more owners of record of the shares proposed to be transferred than existed at the time immediately prior to the proposed transfer. A holder of common stock shall be permitted to pledge any shares of common stock owned to secure bona fide indebtedness, but any transfer of such shares incident to the pledge shall constitute a “transfer” as defined above.

(b) If a holder of common stock subject to the provisions of this Article XVI shall at any time desire to transfer shares of common stock, such shareholder shall first give written notice (“Transfer Notice”) of the proposed transfer to the corporation. The Transfer Notice shall specify the number of shares of common stock proposed to be transferred, the name of the transferee, the price per share to be paid by the purchaser if the transfer is a sale and the other terms and conditions of the proposed transfer. Pursuant to the Transfer Notice, the corporation shall have the right to purchase the shares under the terms set forth in (c) below. The corporation shall have thirty (30) days following receipt of the Transfer Notice within which to exercise, by written notice to the shareholder, its option to acquire its the common stock proposed to be transferred.

(c) The price to be paid by the corporation for the shares shall be no less than the price per share of common stock established by independent third party appraisals of the common stock obtained for purposes of the corporation’s Employee Stock Ownership Plan. In the event that the corporation elects not to purchase the shares identified in the Transfer Notice, the shareholder shall be free to transfer the shares as set forth in the Transfer Notice.

(d) Any attempted transfer that is not in compliance with this Article XVI will be of no effect and will not be recorded on the stock transfer books of the corporation. This restriction will be binding to the fullest extent permitted by law and shall be noted conspicuously on stock certificates issued or transferred after the effective date of the amendment adding this Article XVI to the Articles of Incorporation.



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Appendix C

HOEFER & ARNETT

INCORPORATED

INVESTMENT BANKERS

207 JEFFERSON SQUARE

AUSTIN, TEXAS 78731

(512) 495-9890

FAX: (512) 495-9894

June 7, 2005

Members of the Board of Directors

Guaranty Bancshares, Inc.

P.O. Box 1158

Mount Pleasant, Texas 75455

Members of the Board:

You have requested our opinion as investment bankers that the fair value of $24.00 per share for the outstanding common stock of Guaranty Bancshares, Inc., Mount Pleasant, Texas (“Guaranty”) for the purpose of effecting a cash-out merger to go private is fair, from a financial point of view, to the shareholders of Guaranty that will be cashed out and to the shareholders of Guaranty that will remain following the merger. In accordance with the terms and conditions of the Agreement and Plan of Merger (the “Agreement”), all outstanding shares of Guaranty common stock shall, whether Record Shares or Street Shares (as defined in the Agreement), held by a Holder (as defined in the Agreement) holding fewer than 600 shares of Guaranty common stock immediately prior to the Effective Time (such shareholders referred to as “Cash-Out Shareholders”) shall, without any action on the part of the holder thereof, be canceled and converted into the right to receive cash equal to $24.00 per share of Guaranty common stock (the “Merger Consideration”). All outstanding shares of Guaranty common stock other than those described above as being converted into the right to receive the Merger Consideration shall remain outstanding.

The Merger Consideration of $24.00 per share represents a price to book value at March 31, 2005 of 1.82x, a price to tangible book value at March 31, 2005 of 1.94x and a price to 2004 earnings multiple of 19.35x.

In connection with this assignment, we have reviewed and analyzed, among other things, the following: (i) the Agreement; (ii) annual reports on Form 10-K of Guaranty for the years ended December 31, 2004, December 31, 2003 and December 31, 2002; (iii) quarterly reports on Form 10-Q of Guaranty for the quarters ended March 31, 2005, September 30, 2004, June 30, 2004 and March 31, 2004; (iv) certain other publicly available financial and other information concerning Guaranty; (v) publicly reported historical prices and trading activity for Guaranty common stock; (vi) the market price of selected publicly traded banking institutions we believe relevant to our inquiry; and (vii) the premiums paid in the acquisition of publicly traded banking institutions. We have conducted such other financial studies, analyses and investigations, as we deemed appropriate for purposes of this opinion.

In conducting our review and in arriving at our opinion, we have relied upon and assumed the accuracy and completeness of the financial and other information provided to us or publicly available, and we have not assumed any responsibility for independent verification of the same. We have relied upon the management of Guaranty as to the reasonableness of the financial and operating forecasts and projections (and the assumptions and bases therefor) provided to us, and we have assumed that such forecasts and projections reflect the best currently available estimates and judgments of Guaranty management.


Members of the Board of Directors

Guaranty Bancshares, Inc.

Page 2

HOEFER & ARNETT

INCORPORATED

We did not make or obtain any evaluations or appraisals of the assets or liabilities of Guaranty. We are not experts in the valuation of allowances for loan losses and we did not make an independent evaluation of the adequacy of the allowance for loan losses of Guaranty, nor did we review any individual loan credit files. We assumed that the allowance for loan losses set forth in the financial statements of Guaranty is adequate to cover such losses. For purposes of this opinion, we assumed that the merger would have the tax, accounting and legal effects described in the merger agreement. Hoefer & Arnett’s opinion as expressed herein is limited to the fairness of the proposed transaction, from a financial point of view, to the shareholders of Guaranty, and does not address the underlying business decision to proceed with the transaction.

We have considered such financial and other factors as we have deemed appropriate under the circumstances, including among others the following: (i) the historical and current financial position and results of operations of Guaranty, including interest income, interest expense, net interest income, net interest margin, provision for loan losses, non-interest income, non-interest expense, earnings, dividends, internal capital generation, book value, intangible assets, return on assets, return on shareholders’ equity, capitalization, the amount and type of non-performing assets, loan losses and the reserve for loan losses, all as set forth in the financial statements for Guaranty; (ii) the assets and liabilities of Guaranty, including the loan, investment and mortgage portfolios, deposits, other liabilities, historical and current liability sources and costs and liquidity; (iii) the market price of selected publicly traded banking institutions; (iv) the premiums paid in the acquisition of publicly traded banking institutions; and (v) the projected levels of accretion to earnings per share that a Holder of Guaranty common stock would achieve on a pro forma basis including assumed cost savings. We have also taken into account our assessment of general economic, market and financial conditions and our experience in other transactions, as well as our experience in securities valuation and our knowledge of the banking industry generally. Our opinion is necessarily based upon conditions as they exist and can be evaluated on the date hereof and the information made available to us through the date hereof.

Based upon and subject to the foregoing, we are of the opinion as investment bankers that, as of the date hereof, the terms of the proposed transaction are fair, from a financial point of view, to the shareholders of Guaranty.

As part of its investment banking business, Hoefer & Arnett, Incorporated is regularly engaged in the valuation of bank, bank holding company and thrift securities in connection with mergers, acquisitions, underwritings, sales and distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. Hoefer & Arnett, Incorporated provided investment banking and financial advisory services to Guaranty in 1998 in connection with its initial public offering for which it received customary fees. Hoefer & Arnett, Incorporated provides a full range of financial advisory and securities services and, in the course of its normal trading activities, may effect transactions and hold securities of Guaranty for its own account and for the accounts of customers.

Our opinion is directed to the Board of Directors of Guaranty for its information and assistance in connection with its consideration of the financial terms of the transaction contemplated by the Agreement and does not constitute a recommendation to any shareholder of Guaranty as to how such shareholder should vote on the proposed transaction. We hereby consent to the reference to our firm in the proxy statement related to the transaction and to the inclusion of our opinion as an exhibit to the proxy statement related to the transaction.

Respectfully Submitted,

/s/ Hoefer & Arnett, Incorporated

Hoefer & Arnett, Incorporated


Appendix D

PROVISIONS OF THE TEXAS BUSINESS CORPORATION ACT

RELATING TO RIGHTS OF

DISSENTING SHAREHOLDERS

(Articles 5.11 - 5.13)

Article 5.11. Rights of Dissenting Shareholders in the Event of Certain Corporate Actions

A.    Any shareholder of a domestic corporation shall have the right to dissent from any of the following corporate actions:

(1) Any plan of merger to which the corporation is a party if shareholder approval is required by Article 5.03 or 5.16 of this Act and the shareholder holds shares of a class or series that was entitled to vote thereon as a class or otherwise;

(2) Any sale, lease, exchange or other disposition (not including any pledge, mortgage, deed of trust or trust indenture unless otherwise provided in the articles of incorporation) of all, or substantially all, the property and assets, with or without goodwill, of a corporation if special authorization of the shareholders is required by this Act and the shareholders hold shares of a class or series that was entitled to vote thereon as a class or otherwise;

(3) Any plan of exchange pursuant to Article 5.02 of this Act in which the shares of the corporation of the class or series held by the shareholder are to be acquired.

B.    Notwithstanding the provisions of Section A of this Article, a shareholder shall not have the right to dissent from any plan of merger in which there is a single surviving or new domestic or foreign corporation, or from any plan of exchange, if:

(1) the shares, or depository receipts in respect of the shares held by the shareholder are part of a class or series, shares, or depository receipts in respect of the shares of which are on the record date fixed to determine the shareholders entitled to vote on the plan of merger or plan of exchange:

(a) listed on a national securities exchange;

(b) listed on the Nasdaq Stock Market (or successor quotation system) or designated as a national market security on an interdealer quotation system by the National Association of Securities Dealers, Inc., or successor; or

(c) held of record by not less than 2,000 holders;

(2) the shareholder is not required by the terms of the plan of merger or plan of exchange to accept for the shareholders’ shares any consideration that is different than the consideration (other than cash in lieu of fractional shares that the shareholder would otherwise be entitled to receive) to be provided to any other holder of shares of the same class or series of shares held by such shareholder; and

(3) the shareholder is not required by the terms of the plan of merger or the plan of exchange to accept for the shareholder’s shares any consideration other than:

(a) shares, or depository receipts in respect of the shares of a domestic or foreign corporation that, immediately after the effective time of the merger or exchange, will be part of a class or series, shares, or depository receipts in respect of the shares, of which are:

(i) listed, or authorized for listing upon official notice of issuance, on a national securities exchange;

(ii) approved for quotation as a national market security on an interdealer quotation system by the National Association of Securities Dealers, Inc., or successor entity; or

(iii) held of record by not less than 2,000 holders;

(b) cash in lieu of fractional shares otherwise entitled to be received; or

(c) any combination of the securities and cash described in Subdivisions (a) and (b) of this subsection.

Article 5.12. Procedure for Dissent by Shareholders as to Said Corporate Actions

A.    Any shareholder of any domestic corporation who has the right to dissent from any of the corporate actions referred to in Article 5.11 of this Act may exercise that right to dissent only by complying with the following procedures:

(1)(a) With respect to proposed corporate action that is submitted to a vote of shareholders at a meeting, the shareholder shall file with the corporation, prior to the meeting, a written objection to the action, setting out that the shareholder’s right to dissent will be exercised if the action is effective and giving the shareholder’s address, to which notice thereof shall be delivered or mailed in that event. If the action is effected and the shareholder shall not have voted in favor of the action, the corporation, in the case of action other than a merger, or the surviving or new corporation (foreign or domestic) or other entity that is liable to discharge the shareholder’s right of dissent, in the case of a merger, shall, within ten (10) days after the action is effected, deliver or mail to the shareholder written notice that the action has been effected, and the shareholder may, within ten (10) days from the delivery or mailing of the notice, make written demand on the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, for payment of the fair value of the shareholder’s shares. The fair value of the shares shall be the value thereof as of the day immediately preceding the meeting, excluding any appreciation or depreciation in anticipation of the proposed action. The demand shall state the number and class of the shares owned by the shareholder and the fair value of the shares as estimated by the shareholder. Any shareholder failing to make demand within the ten (10) day period shall be bound by the action.

(b) With respect to proposed corporate action that is approved pursuant to Section A of Article 9.10 of this Act, the corporation, in the case of action other than a merger, and the surviving or new corporation (foreign or domestic) or other entity that is liable to discharge the shareholder’s right of dissent, in the case of a merger, shall, within ten (10) days after the date the action is effected, mail to each shareholder of record as of the effective date of the action notice of the fact and date of the action and that the shareholder may exercise the shareholder’s right to dissent from the action. The notice shall be accompanied by a copy of this Article and any articles or documents filed by the corporation with the Secretary of State to effect the action. If the shareholder shall not have consented to the taking of the action, the shareholder may, within twenty (20) days after the mailing of the notice, make written demand on the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, for payment of the fair value of the shareholder’s shares. The fair value of the shares shall be the value thereof as of the date the written consent authorizing the action was delivered to the corporation pursuant to Section A of Article 9.10 of this Act, excluding any appreciation or depreciation in anticipation of the action. The demand shall state the number and class of shares owned by the dissenting shareholder and the fair value of the shares as estimated by the shareholder. Any shareholder failing to make demand within the twenty (20) day period shall be bound by the action.

(2) Within twenty (20) days after receipt by the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, of a demand for payment made by a dissenting shareholder in accordance with Subsection (1) of this Section, the corporation (foreign or domestic) or other entity shall deliver or mail to the shareholder a written notice that shall either set out that the corporation (foreign or domestic) or other entity accepts the amount claimed in the demand and agrees to pay that amount within ninety (90) days after the date on which the action was effected, and, in the case of shares represented by

certificates, upon the surrender of the certificates duly endorsed, or shall contain an estimate by the corporation (foreign or domestic) or other entity of the fair value of the shares, together with an offer to pay the amount of that estimate within ninety (90) days after the date on which the action was effected, upon receipt of notice within sixty (60) days after that date from the shareholder that the shareholder agrees to accept that amount and, in the case of shares represented by certificates, upon the surrender of the certificates duly endorsed.

(3) If, within sixty (60) days after the date on which the corporate action was effected, the value of the shares is agreed upon between the shareholder and the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, payment for the shares shall be made within ninety (90) days after the date on which the action was effected and, in the case of shares represented by certificates, upon surrender of the certificates duly endorsed. Upon payment of the agreed value, the shareholder shall cease to have any interest in the shares or in the corporation.

B.    If, within the period of sixty (60) days after the date on which the corporate action was effected, the shareholder and the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, do not so agree, then the shareholder or the corporation (foreign or domestic) or other entity may, within sixty (60) days after the expiration of the sixty (60) day period, file a petition in any court of competent jurisdiction in the county in which the principal office of the domestic corporation is located, asking for a finding and determination of the fair value of the shareholder’s shares. Upon the filing of any such petition by the shareholder, service of a copy thereof shall be made upon the corporation (foreign or domestic) or other entity, which shall, within ten (10) days after service, file in the office of the clerk of the court in which the petition was filed a list containing the names and addresses of all shareholders of the domestic corporation who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the corporation (foreign or domestic) or other entity. If the petition shall be filed by the corporation (foreign or domestic) or other entity, the petition shall be accompanied by such a list. The clerk of the court shall give notice of the time and place fixed for the hearing of the petition by registered mail to the corporation (foreign or domestic) or other entity and to the shareholders named on the list at the addresses therein stated. The forms of the notices by mail shall be approved by the court. All shareholders thus notified and the corporation (foreign or domestic) or other entity shall thereafter be bound by the final judgment of the court.

C.    After the hearing of the petition, the court shall determine the shareholders who have complied with the provisions of this Article and have become entitled to the valuation of and payment for their shares, and shall appoint one or more qualified appraisers to determine that value. The appraisers shall have power to examine any of the books and records of the corporation the shares of which they are charged with the duty of valuing, and they shall make a determination of the fair value of the shares upon such investigation as to them may seem proper. The appraisers shall also afford a reasonable opportunity to the parties interested to submit to them pertinent evidence as to the value of the shares. The appraisers shall also have such power and authority as may be conferred on Masters in Chancery by the Rules of Civil Procedure or by the order of their appointment.

D.    The appraisers shall determine the fair value of the shares of the shareholders adjudged by the court to be entitled to payment for their shares and shall file their report of that value in the office of the clerk of the court. Notice of the filing of the report shall be given by the clerk to the parties in interest. The report shall be subject to exceptions to be heard before the court both upon the law and the facts. The court shall by its judgment determine the fair value of the shares of the shareholders entitled to payment for their shares and shall direct the payment of that value by the existing, surviving, or new corporation (foreign or domestic) or other entity, together with interest thereon, beginning 91 days after the date on which the applicable corporate action from which the shareholder elected to dissent was effected to the date of such judgment, to the shareholders entitled to payment. The judgment shall be payable to the holders of uncertificated shares immediately but to the holders of shares represented by certificates only upon, and simultaneously with, the surrender to the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, of duly endorsed certificates for those shares. Upon payment of the judgment, the dissenting shareholders shall cease to have any interest in those

shares or in the corporation. The court shall allow the appraisers a reasonable fee as court costs, and all court costs shall be allotted between the parties in the manner that the court determines to be fair and equitable.

E.    Shares acquired by the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, pursuant to the payment of the agreed value of the shares or pursuant to payment of the judgment entered for the value of the shares, as in this Article provided, shall, in the case of a merger, be treated as provided in the plan of merger and, in all other cases, may be held and disposed of by the corporation as in the case of other treasury shares.

F.    The provisions of this Article shall not apply to a merger if, on the date of the filing of the articles of merger, the surviving corporation is the owner of all the outstanding shares of the other corporations, domestic or foreign, that are parties to the merger.

G.    In the absence of fraud in the transaction, the remedy provided by this Article to a shareholder objecting to any corporate action referred to in Article 5.11 of this Act is the exclusive remedy for the recovery of the value of his shares or money damages to the shareholder with respect to the action. If the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, complies with the requirements of this Article, any shareholder who fails to comply with the requirements of this Article shall not be entitled to bring suit for the recovery of the value of his shares or money damages to the shareholder with respect to the action.

Article 5.13. Provisions Affecting Remedies of Dissenting Shareholders

A.    Any shareholder who has demanded payment for his shares in accordance with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to vote or exercise any other rights of a shareholder except the right to receive payment for his shares pursuant to the provisions of those articles and the right to maintain an appropriate action to obtain relief on the ground that the corporate action would be or was fraudulent, and the respective shares for which payment has been demanded shall not thereafter be considered outstanding for the purposes of any subsequent vote of shareholders.

B.    Upon receiving a demand for payment from any dissenting shareholder, the corporation shall make an appropriate notation thereof in its shareholder records. Within twenty (20) days after demanding payment for his shares in accordance with either Article 5.12 or 5.16 of this Act, each holder of certificates representing shares so demanding payment shall submit such certificates to the corporation for notation thereon that such demand has been made. The failure of holders of certificated shares to do so shall, at the option of the corporation, terminate such shareholder’s rights under Articles 5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and sufficient cause shown shall otherwise direct. If uncertificated shares for which payment has been demanded or shares represented by a certificate on which notation has been so made shall be transferred, any new certificate issued therefor shall bear similar notation together with the name of the original dissenting holder of such shares and a transferee of such shares shall acquire by such transfer no rights in the corporation other than those which the original dissenting shareholder had after making demand for payment of the fair value thereof.

C.    Any shareholder who has demanded payment for his shares in accordance with either Article 5.12 or 5.16 of this Act may withdraw such demand at any time before payment for his shares or before any petition has been filed pursuant to Article 5.12 or 5.16 of this Act asking for a finding and determination of the fair value of such shares, but no such demand may be withdrawn after such payment has been made or, unless the corporation shall consent thereto, after any such petition has been filed. If, however, such demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B of this Article the corporation shall terminate the shareholder’s rights under Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking for a finding and

determination of fair value of such shares by a court shall have been filed within the time provided in Article

5.12 or 5.16 of this Act, as the case may be, or if after the hearing of a petition filed pursuant to Article 5.12 or 5.16, the court shall determine that such shareholder is not entitled to the relief provided by those articles, then, in any such case, such shareholder and all persons claiming under him shall be conclusively presumed to have approved and ratified the corporate action from which he dissented and shall be bound thereby, the right of such shareholder to be paid the fair value of his shares shall cease, and his status as a shareholder shall be restored without prejudice to any corporate proceedings which may have been taken during the interim, and such shareholder shall be entitled to receive any dividends or other distributions made to shareholders in the interim.

D-5



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