exv10w5






Exhibit 10.5




June 7, 2008




Mr. Keith Meister

Managing Director

Icahn Partners LP

767 Fifth Avenue, 47th Floor

New York, New York 10153




Ladies and Gentlemen:




     Contemporaneously with the execution and delivery of this letter agreement (this “Agreement”),
Guaranty Financial Group Inc. (the “Company” or “we”) and Icahn Partners LP (the “Investor”) have
entered into that certain Investment Agreement of even date herewith (the “Investment Agreement”).
Capitalized terms used in this Agreement that are not otherwise defined herein shall have the
meaning given to them in the Investment Agreement. The Company and the Investor are entering into
this Agreement to agree to additional terms and conditions related to the transactions contemplated
by the Investment Agreement, as set forth below:



     1. Governance Matters.




     (a) Promptly following the Closing, the Investor and the Governance Committee of the
Board of Directors (the “Governance Committee”) will cooperate and work jointly to identify a
qualified individual who is “independent” for the purposes of the New York Stock Exchange
Rules and Rule 10A-3 promulgated under the Exchange Act that is acceptable to both the
Investor and the Governance Committee, and who satisfies all legal and governance
requirements regarding service as a director of the Company (the “Board Representative”), to
serve as a director of the Company. Following the identification of such Board
Representative as described above (the “Identification Process”), the Company will promptly,
and in no event later than thirty days following such identification, cause such Board
Representative to be appointed or elected to the Board of Directors. After such appointment
or election, so long as the Investor and its affiliates beneficially own (as determined in
accordance with Rule 13d-3 under the Exchange Act) an aggregate of at least 10% of the
outstanding shares of Common Stock (including for this purpose shares of Common Stock
issuable upon conversion of the Convertible Preferred Stock), the Company will be required to
recommend to its stockholders the election to the Board of Directors of the Board
Representative at the Company’s annual meeting, subject to satisfaction of all legal and
governance requirements regarding service as a director of the Company. If the Investor and
its affiliates no longer beneficially own (as determined in accordance with Rule 13d-3 under
the Exchange Act) in the aggregate the minimum number of Securities specified in the prior
sentence, the Investor will have no further rights and the Company will have no further
obligations under this Section 1.



 









 






     (b) The Board Representative (including any successor nominee) duly selected in
accordance with Section 1(a) shall, subject to applicable law, be one of the
Company’s and the Company’s Governance Committee’s nominees to serve on the Board of
Directors. The Company shall use all reasonable best efforts to have the Board
Representative elected as a director of the Company and the Company shall solicit proxies for
each such person to the same extent as it does for any of its other nominees to the Board of
Directors.




     (c) Upon the death, resignation, retirement, disqualification or removal from office of
the Board Representative, the Investor and the Governance Committee shall again engage in the
Identification Process to identify a replacement Board Representative. Following the
successful conclusion of the Identification Process, the Board of Directors will use its
reasonable best efforts to take all action required to fill the vacancy resulting from such
death, resignation, retirement, disqualification or removal, with such newly identified Board
Representative (including such person, subject to applicable law, being one of the Company’s
and the Company’s Governance Committee’s nominees to serve on the Board of Directors, using
all reasonable best efforts to have such person elected as director of the Company and the
Company soliciting proxies for such person to the same extent as it does for any of its other
nominees to the Board of Directors).




     (d) The Board Representative shall be entitled to the same compensation and same
indemnification in connection with his or her role as a director as the other members of the
Board of Directors, and each Board Representative shall be entitled to reimbursement for
documented, reasonable out-of-pocket expenses incurred in attending meetings of the Board of
Directors or any committees thereof, to the same extent as the other members of the Board of
Directors. The Company shall notify the Board Representative of all regular and special
meetings of the Board of Directors and shall notify the Board Representative of all regular
and special meetings of any committee of the Board of Directors of which the Board
Representative is a member.  The Company shall provide the Board Representative with copies
of all notices, minutes, consents and other materials provided to all other members of the
Board of Directors concurrently as such materials are provided to the other members.




     (e) For so long as the Board Representative is entitled to serve on the Board of
Directors, upon the Investor’s request, the Company will promptly take such actions as may be
necessary to appoint the Board Representative to the board of directors of Guaranty Bank and
the governing board of any bank or savings institution subsequently acquired by the Company.



     2. Expenses. Except as set forth in the Investment Agreement and that certain
Purchase Agreement between Guaranty Bank and the Investor dated as of even date herewith (the “Note
Purchase Agreement”), each of the Company and the Investor shall pay its respective fees and
expenses related to the transactions contemplated by this Agreement, the Investment Agreement and
the Note Purchase Agreement; provided, however, that the Company shall pay the Investor a one-time
fee of $350,000, which the



 









 




parties agree is a reasonable amount to reimburse the Investor for its expenses incurred in
connection with the transactions contemplated by this Agreement.




     3. Equivalent Treatment




     (a) The Company has advised the Investor that the Company has entered into that certain
Investment Agreement dated May 26, 2008 (as the same has been amended by that certain First
Amendment to Investment Agreement dated May 29, 2008, the “TRT Investment Agreement”) with
TRT Holdings, LLC (“TRT”), pursuant to which TRT has purchased Common Stock and will
purchase shares of the Company’s preferred stock. The Company hereby represents and warrants
to the Investor that (i) except as previously disclosed in the Company’s public filings with
the Securities and Exchange Commission, there are no agreements, side letters or
understandings in existence or contemplated between the Company and TRT or its affiliates
regarding an investment in the Company, the purchase or sale of debt or equity securities
issued by the Company or otherwise regarding the matters that are the subject of the TRT
Investment Agreement, or amending or supplementing the TRT Investment Agreement, and (ii)
the preferred stock to be issued to TRT or its affiliates pursuant to the TRT Investment
Agreement will be of the same series to be purchased by the Investor under the Investment
Agreement.




     (b) The Company has advised the Investor that the Company intends to agree to issue
additional subordinated notes and preferred stock on or about the date hereof to one or more
third parties (collectively, the “Other Investors”). The Company hereby represents and
warrants to the Investor that, other than the TRT Investment Agreement and any ancillary
documents, certificates and instruments delivered pursuant to the terms thereof (not
including any documents that substantively supplement, alter or amend the terms of the TRT
Investment Agreement), except as consented to by the Investor (i) in connection with such
purchases, each Other Investor will execute agreements in the same form as the Investment
Agreement and the Note Purchase Agreement to be executed by the Investor and (ii) there are
no agreements, side letters or understandings in existence or contemplated between the
Company and such Other Investor other than the form of Investment Agreement or Note Purchase
Agreement to be executed by each Other Investor.




     (c) From the date hereof through the date that is 180 days from the date hereof, the
Company shall not enter into any agreement, arrangement or understanding with any Person
relating to or contemplating the issuance of debt or equity securities of the Company or any
of its subsidiaries containing any material term or condition that is any more favorable to
any potential purchaser of such securities than the terms and conditions of the Investment
Agreement, this Agreement and the Note Purchase Agreement.



     4. No Representation or Warranty Regarding Certain Tax Matters. Notwithstanding any
provision to the contrary contained in the Investment Agreement, the Note Purchase Agreement or any
other agreement, the Company makes no



 









 




representation or warranty with respect to Section 4.03(d) of the Tax Matters Agreement
between it and Temple Inland dated December 11, 2007, including, without limitation, under
Section 3(d) and 3(h) of the Investment Agreement.




     5. Pre-Emptive Right. From the Closing Date until the earlier to occur of (a) the
first anniversary of the Closing Date and (b) the first date on which the Investor and its
affiliates cease to beneficially own in the aggregate 5% of the issued and outstanding Common
Stock, the Company and its subsidiaries shall not issue or sell any Subject Securities without
first complying with this Section 5. The Company hereby grants to the Investor the
preemptive right to purchase, pro rata, all or any part of the Subject Securities that the Company
or any of its subsidiaries may, from time to time, propose to sell or issue. In the event that
Subject Securities are offered or sold as part of a unit with other securities, the Investor must,
if the Investor elects to exercise its preemptive right to purchase the Subject Securities,
exercise its preemptive right with respect to all of the securities comprising part of the units on
the same terms that the Company proposes to offer such units to other parties (provided, however,
that Investor will not be obligated to pay part of any brokerage fees payable by such other party
pursuant to an agreement between such party and a broker). The Investor’s pro rata share for
purposes of this Section 5 is the ratio that the number of shares of Common Stock
beneficially owned by the Investor and its affiliates immediately before giving effect to the
proposed issuance of the Subject Securities bears to the total number of shares of Common Stock
then issued and outstanding. In the event the Company proposes to issue or sell Subject
Securities, it shall give the Investor written notice of its intention, describing the type of
Subject Securities and the price and terms upon which the Company proposes to issue or sell the
Subject Securities. The Investor shall have five Business Days from the date of such notice to
irrevocably agree to purchase up to its pro rata share of the Subject Securities for the price and
upon the terms (including brokerage, transaction, acquisition, advisory, due diligence, origination
or similar fees, but excluding expense reimbursements and underwriting discounts, fees or
commissions) specified in the notice by giving written notice to the Company stating the quantity
of Subject Securities agreed to be purchased. The Investor acknowledges that the acquisition of
the Subject Securities may be subject to stockholder approval under the rules of the New York Stock
Exchange and subject to any required approval from any Governmental Entity. In the event the
Investor fails to exercise such preemptive right within such five Business Day period, the Company
shall have 90 days to sell the Subject Securities not agreed to be purchased by the Investor at the
same price and upon the same terms specified in the Company’s notice described above. In the event
the Company has not sold the Subject Securities within such ninety-day period, the Company shall
not thereafter issue or sell any Subject Securities without first offering such securities in the
manner provided above. In the event that the Investor is entitled to the rights provided in this
Section 5 as the result of a registered offering of Subject Securities, the Investor shall be
entitled to exercise such rights through participation in such registered offering and the Company
shall ensure that enough units of Subject Securities shall be registered to permit such exercise.
For the purposes of this Section 5, the term “Subject Securities” means any debt or equity
securities of the Company (including common stock or preferred stock of the Company), or any debt
or equity security of the Company convertible or exchangeable for or into any debt or equity
security of the Company, but excludes (i) shares of Common Stock that are issued or are



 









 




issuable pursuant to a stock option plan, restricted stock plan, agreements or other incentive
stock arrangements approved by the stockholders and a majority of the Board of Directors or an
authorized committee thereof; (ii) shares of Common Stock issued in a split or subdivision of the
outstanding shares of Common Stock, a dividend or other distribution payable in additional shares
of Common Stock or other securities or rights convertible into, exchangeable for, or entitling the
holder thereof to receive directly or indirectly, additional shares of Common Stock (the “Common
Stock Equivalents”) without payment of any consideration by such holder for the additional shares
of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), so long as the Investor is entitled to participate
in the same to the extent of any securities affected thereby that it holds on the applicable record
date for the same, (iii) shares of Common Stock issued pursuant to the Rights Offering or any
similar offerings in the future, so long as the Investor is permitted to participate in the same to
the extent of any common stock it holds as of the record date for the same, and (iv) securities
issued to TRT pursuant to the TRT Investment Agreement.




     6. Disclosure of Material Non-Public Information. The next Business Day following the
execution and delivery of this Agreement, the Company agrees to file a Current Report on Form 8-K
regarding the transactions contemplated by the Investment Agreement and the Note Purchase
Agreement. The Company hereby represents and warrants to the Investor that, upon the filing of
such Form 8-K, the Company will have disclosed in the Company SEC Documents all theretofor material
nonpublic information that the Company had previously provided to the Investor.



     7. Other Terms.




     (a) Severability. If any term, provision, covenant, or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants, and restrictions of this
Agreement will remain in full force and effect and will in no way be affected, impaired, or
invalidated.




     (b) Entire Agreement. This Agreement, together with the Investment Agreement
and the Note Purchase Agreement, contain the entire agreement between the parties concerning
the subject matter hereof and thereof and supersede all prior written, and prior or
contemporaneous oral, agreements, representations, arrangements, understandings, and
negotiations between the parties with respect to such matters.




     (c) Waivers and Amendment. This Agreement may be modified or the terms of this
Agreement waived only by a separate writing signed by the parties expressly so modifying or
waiving this Agreement or such terms. It is further understood and agreed that no failure or
delay by either party in exercising any right, power, or privilege under this Agreement will
operate as a waiver thereof, nor will any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any right, power, or privilege under
this



 









 





     Agreement.




     (d) Assignment. No party to this Agreement may assign this Agreement, nor may
any party delegate any duties under this Agreement, without the prior written consent of the
other party, which consent may be withheld in such other party’s sole option and election.
Any assignment or delegation or attempted assignment or delegation of this Agreement without
the prior written consent of the other party will be void.




     (e) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CONFLICT OF
LAWS PRINCIPLES OF THAT STATE OR ANY OTHER PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF
THE LAWS OF ANY OTHER JURISDICTION.




     (f) Construction. As used in this Agreement, “or” will not be deemed exclusive;
inclusion of items in a list will not be deemed to exclude similar items; terms that imply
gender will include all genders; defined terms will have their meanings in both the singular
and the plural case; and “include” and its correlatives mean to include without limitation.




     (g) Investor. For the avoidance of doubt, (i) “Investor” shall mean each of
High River Limited Partnership, Icahn Partners LP, Icahn Partners Master Fund LP, Icahn
Partners Master Fund II LP and Icahn Partners Master Fund III LP, (ii) for purposes of
paragraph 1, the foregoing entities shall designate a single individual to interact with the
Governance Committee (which individual may be changed in their discretion); (iii) for
purposes of paragraph 2, only a single $350,000 fee shall be payable hereunder (which fee
shall be allocated among the foregoing entities in their discretion); and (iv) each of High
River Limited Partnership, Icahn Partners Master Fund LP, Icahn Partners Master Fund II LP
and Icahn Partners Master Fund III LP are intended third party beneficiaries of this
Agreement.



[signature page follows]




 









 





     Each party to confirm its agreement with the foregoing by signing and returning one copy of
this Agreement to the undersigned other party, whereupon this Agreement will become a binding
agreement between the parties.



	 	 	 	 	 
	 	Confirmed and Agreed to:


Icahn Partners LP

 	 
	 	By:  	/s/
Keith Meister  	 
	 	Name:  	Keith Meister 	 
	 	Title:  	Managing Director
	 
	 
	 	June 7, 2008 	 
	 



	 	 	 	 	 
	 	Confirmed and Agreed to:


Guaranty Financial Group Inc.

 	 
	 	By:  	/s/
Ronald D. Murff  	 
	 	Name:  	Ronald D. Murff 	 
	 	Title:  	Sr. EVP and Chief Financial Officer
	 
	 
	 	June 7, 2008