<PAGE>   1
                                                                     EXHIBIT 4.7


                    PREFERRED SECURITIES GUARANTEE AGREEMENT

                                 BY AND BETWEEN

                           SOUTHSIDE BANCSHARES, INC.

                                      AND

                       U.S. TRUST COMPANY OF TEXAS, N.A.

                                  MAY __, 1998
<PAGE>   2
                               TABLE OF CONTENTS

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                                                                                                                 PAGE NO.
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ARTICLE I - DEFINITIONS AND INTERPRETATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
         Section 1.1  Definitions and Interpretation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II - TRUST INDENTURE ACT  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
         Section 2.1      Trust Indenture Act; Application  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
         Section 2.2      Lists of Holders of Securities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
         Section 2.3      Reports by the Preferred Guarantee Trustee  . . . . . . . . . . . . . . . . . . . . . . . . . 6
         Section 2.4      Periodic Reports to Preferred Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . 6
         Section 2.5      Evidence of Compliance with Conditions Precedent  . . . . . . . . . . . . . . . . . . . . . . 6
         Section 2.6      Events of Default; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
         Section 2.7      Event of Default; Notice  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
         Section 2.8      Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE III - POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE  . . . . . . . . . . . . . . . . . . . . . . . . 7
         Section 3.1      Powers and Duties of the Preferred Guarantee Trustee  . . . . . . . . . . . . . . . . . . . . 7
         Section 3.2      Certain Rights of Preferred Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . 9
         Section 3.3      Not Responsible for Recitals or Issuance of Guarantee . . . . . . . . . . . . . . . . . . .  11

ARTICLE IV - PREFERRED GUARANTEE TRUSTEE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
         Section 4.1      Preferred Guarantee Trustee; Eligibility  . . . . . . . . . . . . . . . . . . . . . . . . .  11
         Section 4.2      Appointment, Removal and Resignation of Preferred Guarantee
                          Trustees  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

ARTICLE V - GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
         Section 5.1      Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
         Section 5.2      Waiver of Notice and Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
         Section 5.3      Obligations Not Affected  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
         Section 5.4      Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
         Section 5.5      Guarantee of Payment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
         Section 5.6      Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
         Section 5.7      Independent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15

ARTICLE VI - LIMITATION OF TRANSACTIONS; SUBORDINATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
         Section 6.1      Limitation of Transactions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
         Section 6.2      Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
</TABLE>





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<TABLE>
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ARTICLE VII - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
         Section 7.1      Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

ARTICLE VIII - MISCELLANEOUS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
         Section 8.1      Successors and Assigns  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
         Section 8.2      Amendments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
         Section 8.3      Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
         Section 8.4      Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
         Section 8.5      Governing Law.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
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<PAGE>   4
                    PREFERRED SECURITIES GUARANTEE AGREEMENT

         THIS PREFERRED SECURITIES GUARANTEE AGREEMENT (this "Preferred
Securities Guarantee"), dated as of May __, 1998, is executed and delivered by
SOUTHSIDE BANCSHARES, INC., a Texas corporation (the "Guarantor"), and U.S.
TRUST COMPANY OF TEXAS, N.A., a trust company organized under the laws of the
United States, as trustee (the "Preferred Guarantee Trustee"), for the benefit
of the Holders (as defined herein) from time to time of the Preferred
Securities (as defined herein) of Southside Capital Trust I, a Delaware
statutory business trust (the "Trust").

                                    RECITALS

         WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement") dated as of May __, 1998, among the trustees of the Trust
named therein, the Guarantor, as depositor, and the holders from time to time
of undivided beneficial interests in the assets of the Trust, the Trust is
issuing on the date hereof preferred securities, having an aggregate
liquidation amount of $10, designated the ____% Cumulative Trust Preferred
Securities (the "Preferred Securities") representing undivided beneficial
ownership interests in the assets of the Trust and having the terms set forth
in the Trust Agreement;

         WHEREAS, the Preferred Securities will be issued by the Trust and the
proceeds thereof, together with the proceeds from the issuance of the Trust's
Common Securities, will be used to purchase the Junior Subordinated Deferrable
Interest Debentures due June 30, 2028 (the "Junior Subordinated Debentures") of
the Guarantor which will be deposited with U.S. Trust Company of Texas, N.A.,
as Property Trustee under the Trust Agreement, as trust assets; and

         WHEREAS, as an incentive for the Holders to purchase the Preferred
Securities, the Guarantor irrevocably and unconditionally agrees, to the extent
set forth in this Preferred Securities Guarantee, to pay to the Holders of the
Preferred Securities the Guarantee Payments (as defined herein) and to make
certain other payments on the terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.

                                   ARTICLE I
                         DEFINITIONS AND INTERPRETATION

SECTION 1.1  DEFINITIONS AND INTERPRETATION.

         In this Preferred Securities Guarantee, unless the context otherwise
requires:
<PAGE>   5
         (a)     capitalized terms used in this Preferred Securities Guarantee
but not defined in the preamble or recitals above have the respective meanings
assigned to them in this Section;

         (b)     terms defined in the Trust Agreement in effect on the date of
execution of this Preferred Securities Guarantee have the same meaning when
used in this Preferred Securities Guarantee unless otherwise defined herein;

         (c)     all references to "the Preferred Securities Guarantee" or
"this Preferred Securities Guarantee" are to this Preferred Securities
Guarantee as modified, supplemented or amended from time to time;

         (d)     all references in this Preferred Securities Guarantee to
Articles and Sections are to Articles and Sections of this Preferred Securities
Guarantee, unless otherwise specified;

         (e)     a term defined in the Trust Indenture Act has the same meaning
when used in this Preferred Securities Guarantee, unless otherwise defined in
this Preferred Securities Guarantee or unless the context otherwise requires;
and

         (f)     a reference to the singular includes the plural and vice
versa.

         "Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.

         "Business Day" means any day other than a Saturday or a Sunday or a
day on which federal or state banking institutions in the Borough of Manhattan,
the City of New York, or the State of Delaware are authorized or required by
law, executive order or regulation to close, or a day on which the Corporate
Trust Office of the Preferred Guarantee Trustee is closed for business.

         "Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee
Trustee shall, at any particular time, be principally administered, which
office at the date of execution of this Agreement is located at U.S. Trust
Company of Texas, N.A., 2001 Ross Avenue, Suite 2700, Dallas, Texas 75201,
Attention: Corporate Trust Administration.

         "Covered Person" means any Holder or beneficial owner of Preferred 
Securities.

         "Debentures" means the ____% Junior Subordinated Debentures due June
30, 2028, of the Debenture Issuer held by the Property Trustee of the Trust.

         "Debenture Issuer" means the Guarantor.

         "Debt" means, with respect to any person, whether recourse is to all
or a portion of the assets of such Person and whether or not contingent: (i)
every obligation of such Person for money





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<PAGE>   6
borrowed; (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or businesses; (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person; (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business); (v) every
capital lease obligation of such Person; (vi) all indebtedness of such person
whether incurred on or prior to the date of the Indenture or thereafter
incurred, for claims in respect of derivative products, including interest
rate, foreign exchange rate and commodity forward contracts, options and swaps
and similar arrangements; and (vii) every obligation of the type referred to in
clauses (i) through (vi) of another Person and all dividends of another Person
the payments of which, in either case, such Person has guaranteed or is
responsible or liable, directly or indirectly, as obligor or otherwise.

         "Distributions" has the meaning provided therefor in the Trust
Agreement.

         "Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Preferred Securities Guarantee.

         "Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent
not paid or made by the Trust: (i) any accumulated and unpaid Distributions
that are required to be paid on such Preferred Securities, to the extent the
Trust shall have funds available therefor, (ii) the redemption price, including
all accumulated and unpaid Distributions to the date of redemption (the
"Redemption Price"), to the extent the Trust has funds available therefor, with
respect to any Preferred Securities called for redemption by the Trust, and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination of
the Trust (other than in connection with the distribution of Junior
Subordinated Debentures to the Holders in exchange for Preferred Securities as
provided in the Trust Agreement or a redemption of all of the Preferred
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accumulated and unpaid Distributions on the Preferred Securities to the date of
payment, to the extent the Trust shall have funds available therefor (the
"Liquidation Distribution"), and (b) the amount of assets of the Trust
remaining available for distribution to Holders in liquidation of the Trust.

         "Holder" shall mean any holder, as registered on the books and records
of the Trust, of any Preferred Securities; provided, however, that in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.

         "Indenture" means the Indenture dated as of May __, 1998, among the
Debenture Issuer and U.S. Trust Company of Texas, N.A., as trustee, and any
indenture supplemental thereto pursuant to which the Junior Subordinated
Debentures are to be issued to the Trust.





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<PAGE>   7
         "Liquidation Distribution" has the meaning provided therefor in the
definition of Guarantee Payments.  "Majority in liquidation amount of the
Preferred Securities" means the holders of more than 50% of the liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accumulated and unpaid Distributions to the date
upon which the voting percentages are determined) of all of the Preferred
Securities.

         "Officers' Certificate" means, with respect to any Person, a
certificate signed by two authorized officers of such Person.  Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Preferred Securities Guarantee shall include:

         (a)     a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions relating
thereto;

         (b)     a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the Officers'
Certificate;

         (c)     a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and

         (d)     a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.

         "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, government or any agency
or political subdivision thereof or any other entity of whatever nature.

          "Preferred Guarantee Trustee" means U.S. Trust Company of Texas,
N.A., until a Successor Preferred Guarantee Trustee has been appointed and has
accepted such appointment pursuant to the terms of this Preferred Securities
Guarantee and thereafter means each such Successor Preferred Guarantee Trustee.

         "Redemption Price" has the meaning provided therefor in the definition
of Guarantee Payments.

         "Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer of the Preferred Guarantee Trustee, including any
vice-president, any assistant vice-president, any assistant secretary, any
assistant treasurer or other officer customarily performing functions similar
to those performed by any of the above designated officers, and also means,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of that officer's knowledge of and familiarity
with the particular subject.





                                       4
<PAGE>   8
         "Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing or any
petition in bankruptcy or for reorganization relating to the Guarantor whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of the Indenture or thereafter
incurred unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Junior Subordinated Debentures or to other
Debt which is pari passu with, or subordinated to, the Junior Subordinated
Debentures; provided, however, that Senior Debt shall not be deemed to include
(i) any Debt of the Guarantor which, when incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code of 1978, as
amended, was without recourse to the Guarantor, (ii) any Debt of the Guarantor
to any of its subsidiaries and (iii) Debt to any employee of the Guarantor.

         "Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under SECTION 4.1.

         "Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.

                                   ARTICLE II
                              TRUST INDENTURE ACT

SECTION 2.1      TRUST INDENTURE ACT; APPLICATION.

         (a)     This Preferred Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Preferred Securities Guarantee and shall, to the extent applicable, be governed
by such provisions.

         (b)     If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.

SECTION 2.2      LISTS OF HOLDERS OF SECURITIES.

         (a)     The Guarantor shall provide the Preferred Guarantee Trustee
with a list, in such form as the Preferred Guarantee Trustee may reasonably
require, of the names and addresses of the Holders of the Preferred Securities
("List of Holders") as of such date, (i) within one Business Day after June 30
and December 31 of each year, and (ii) at any other time within 30 days of
receipt by the Guarantor of a written request for a List of Holders as of a
date no more than 15 days before such List of Holders is given to the Preferred
Guarantee Trustee; provided, however, that the Guarantor shall not be obligated
to provide such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Preferred Guarantee Trustee
by the Guarantor.  The Preferred Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.





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<PAGE>   9
         (b)     The Preferred Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.

SECTION 2.3      REPORTS BY THE PREFERRED GUARANTEE TRUSTEE.

         The Preferred Guarantee Trustee shall provide to the Holders of the
Preferred Securities such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by Section 313 of
the Trust Indenture Act.  The Preferred Guarantee Trustee shall also comply
with the requirements of Section 313(d) of the Trust Indenture Act.

SECTION 2.4      PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE.

         The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as are required by Section 314 (if any) and
the compliance certificate required by Section 314 of the Trust Indenture Act
in the form, in the manner and at the times required by Section 314 of the
Trust Indenture Act.  Delivery of such reports, information and documents to
the Preferred Guarantee Trustee is for informational purposes only and the
Preferred Guarantee Trustee's receipt of such shall not constitute constructive
notice of any information contained therein or determinable from information
contained herein, including the Guarantor's compliance with any of its
covenants hereunder (as to which the Preferred Guarantee Trustee is entitled to
rely exclusively on Officer's Certificates).

SECTION 2.5      EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.

         The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act.  Any certificate or opinion
required to be given by an officer pursuant to Section 314(c) may be given in
the form of an Officers' Certificate.

SECTION 2.6      EVENTS OF DEFAULT; WAIVER.

         The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default and its consequences.  Upon such
waiver, any such Event of Default shall cease to exist and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Preferred Securities Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.





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<PAGE>   10
SECTION 2.7      EVENT OF DEFAULT; NOTICE.

         (a)     The Preferred Guarantee Trustee shall, within 90 days after
the occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events of
Default actually known to a Responsible Officer of the Preferred Guarantee
Trustee, unless such defaults have been cured before the giving of such notice;
provided, however, that the Preferred Guarantee Trustee shall be protected in
withholding such notice if and so long as a Responsible Officer of the
Preferred Guarantee Trustee in good faith determines that the withholding of
such notice is in the interest of the Holders of the Preferred Securities.

         (b)     The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Preferred Guarantee Trustee shall
have received written notice, or a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Trust Agreement shall
have obtained actual knowledge, of such Event of Default.

SECTION 2.8      CONFLICTING INTERESTS.

         The Trust Agreement shall be deemed to be specifically described in
this Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.

                                  ARTICLE III
            POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE

SECTION 3.1      POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE.

         (a)     This Preferred Securities Guarantee shall be held by the
Preferred Guarantee Trustee for the benefit of the Holders of the Preferred
Securities, and the Preferred Guarantee Trustee shall not transfer this
Preferred Securities Guarantee to any Person except a Successor Preferred
Guarantee Trustee on acceptance by such Successor Preferred Guarantee Trustee
of its appointment to act as Successor Preferred Guarantee Trustee.  The right,
title and interest of the Preferred Guarantee Trustee shall automatically vest
in any Successor Preferred Guarantee Trustee, and such vesting and cessation of
title shall be effective whether or not conveyancing documents have been
executed and delivered pursuant to the appointment of such Successor Preferred
Guarantee Trustee.

         (b)     If an Event of Default actually known to a Responsible Officer
of the Preferred Guarantee Trustee has occurred and is continuing, the
Preferred Guarantee Trustee shall enforce this Preferred Securities Guarantee
for the benefit of the Holders of the Preferred Securities.

         (c)     The Preferred Guarantee Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform





                                       7
<PAGE>   11
only such duties as are specifically set forth in this Preferred Securities
Guarantee, and no implied covenants shall be read into this Preferred
Securities Guarantee against the Preferred Guarantee Trustee.  In case an Event
of Default has occurred (that has not been cured or waived pursuant to SECTION
2.6) and is actually known to a Responsible Officer of the Preferred Guarantee
Trustee, the Preferred Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Preferred Securities Guarantee, and use the same
degree of care and skill in its exercise thereof, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.

         (d)     No provision of this Preferred Securities Guarantee shall be
construed to relieve the Preferred Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:

                 (i)      prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may have
occurred:  (A) the duties and obligations of the Preferred Guarantee Trustee
shall be determined solely by the express provisions of this Preferred
Securities Guarantee, and the Preferred Guarantee Trustee shall not be liable
except for the performance of such duties and obligations as are specifically
set forth in this Preferred Securities Guarantee, and no implied covenants or
obligations shall be read into this Preferred Securities Guarantee against the
Preferred Guarantee Trustee; and (B) in the absence of bad faith on the part of
the Preferred Guarantee Trustee, the Preferred Guarantee Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed herein, upon any certificates or opinions furnished to the
Preferred Guarantee Trustee and conforming to the requirements of this
Preferred Securities Guarantee; but in the case of any such certificates or
opinions that by any provision hereof are specifically required to be furnished
to the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall be
under a duty to examine the same to determine whether or not they conform to
the requirements of this Preferred Securities Guarantee;

                 (ii)     the Preferred Guarantee Trustee shall not be liable
for any error of judgment made in good faith by a Responsible Officer of the
Preferred Guarantee Trustee, unless it shall be proved that the Preferred
Guarantee Trustee was negligent in ascertaining the pertinent facts upon which
such judgment was made;

                 (iii)    the Preferred Guarantee Trustee shall not be liable
with respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a Majority in
liquidation amount of the Preferred Securities relating to the time, method and
place of conducting any proceeding for any remedy available to the Preferred
Guarantee Trustee, or exercising any trust or power conferred upon the
Preferred Guarantee Trustee under this Preferred Securities Guarantee; and

                 (iv)     no provision of this Preferred Securities Guarantee
shall require the Preferred Guarantee Trustee to expend or risk its own funds
or otherwise incur personal financial liability in the performance of any of
its duties or in the exercise of any of its rights or powers,





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<PAGE>   12
if the Preferred Guarantee Trustee shall have reasonable grounds for believing
that the repayment of such funds or liability is not reasonably assured to it
under the terms of this Preferred Securities Guarantee or indemnity, reasonably
satisfactory to the Preferred Guarantee Trustee, against such risk or liability
is not reasonably assured to it.

SECTION 3.2      CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE.

         (a)     Subject to the provisions of SECTION 3.1:

                 (i)      The Preferred Guarantee Trustee may conclusively
rely, and shall be fully protected in acting or refraining from acting, upon
any resolution, certificate, statement, instrument, opinion, report notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to
have been signed, sent or presented by the proper party or parties.

                 (ii)     Any direction or act of the Guarantor contemplated by
this Preferred Securities Guarantee shall be sufficiently evidenced by an
Officers' Certificate.

                 (iii)    Whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall deem it desirable
that a matter be proved or established before taking, suffering or omitting any
action hereunder, the Preferred Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on its part,
request and conclusively rely upon an Officers' Certificate which, upon receipt
of such request, shall be promptly delivered by the Guarantor.

                 (iv)     The Preferred Guarantee Trustee shall have no duty to
see to any recording, filing or registration of any instrument (or any
rerecording, refiling or reregistration thereof).

                 (v)      The Preferred Guarantee Trustee may consult with
counsel of its discretion, and the advice or opinion of such counsel with
respect to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or opinion.  Such counsel may
be counsel to the Guarantor or any of its Affiliates.  The Preferred Guarantee
Trustee shall have the right at any time to seek instructions concerning the
administration of this Preferred Securities Guarantee from any court of
competent jurisdiction.

                 (vi)     The Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Preferred Securities Guarantee at the request or direction of any Holder,
unless such Holder shall have provided to the Preferred Guarantee Trustee such
security and indemnity, reasonably satisfactory to the Preferred Guarantee
Trustee, against the costs, expenses (including attorneys' fees and expenses
and the expenses of the Preferred Guarantee Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as





                                       9
<PAGE>   13
may be requested by the Preferred Guarantee Trustee; provided, however, that,
nothing contained in this Section shall be taken to relieve the Preferred
Guarantee Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this Preferred
Securities Guarantee.

                 (vii)    The Preferred Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Preferred Guarantee Trustee,
in its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit.

                 (viii)   The Preferred Guarantee Trustee may execute any of
the trusts or powers hereunder or perform any duties hereunder either directly
or by or through agents, nominees, custodians or attorneys, and the Preferred
Guarantee Trustee shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it hereunder.

                 (ix)     Any action taken by the Preferred Guarantee Trustee
or its agents hereunder shall bind the Holders of the Preferred Securities and
the signature of the Preferred Guarantee Trustee or its agents alone shall be
sufficient and effective to perform any such action.  No third party shall be
required to inquire as to the authority of the Preferred Guarantee Trustee to
so act or as to its compliance with any of the terms and provisions of this
Preferred Securities Guarantee, both of which shall be conclusively evidenced
by the Preferred Guarantee Trustee's or its agent's taking such action.

                 (x)      Whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Preferred Guarantee Trustee (i) may request
written instructions from the Holders of a Majority in liquidation amount of
the Preferred Securities, (ii) may refrain from enforcing such remedy or right
or taking such other action until such written instructions are received, and
(iii) shall be protected in conclusively relying on or acting in accordance
with such instructions.

         (b)     No provision of this Preferred Securities Guarantee shall be
deemed to impose any duty or obligation on the Preferred Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be illegal, or
in which the Preferred Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to exercise
any such right, power, duty or obligation.  No permissive power or authority
available to the Preferred Guarantee Trustee shall be construed to be a duty.





                                       10
<PAGE>   14
SECTION 3.3      NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.

         The Recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Preferred Guarantee Trustee does not
assume any responsibility for their correctness.  The Preferred Guarantee
Trustee makes no representation as to the validity or sufficiency of this
Preferred Securities Guarantee.

                                   ARTICLE IV
                          PREFERRED GUARANTEE TRUSTEE

SECTION 4.1      PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY.

         (a)     There shall at all times be a Preferred Guarantee Trustee
which shall:  (i) not be an Affiliate of the Guarantor; and (ii) be a Person
permitted by the Securities and Exchange Commission to act as an institutional
trustee under the Trust Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$50,000,000, and subject to supervision or examination by federal, state or
District of Columbia authority.  If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then for the purposes of
this Section the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition as published.

         (b)     If at any time the Preferred Guarantee Trustee shall cease to
be eligible so to act under SECTION 4.1(A), the Preferred Guarantee Trustee
shall immediately resign in the manner and with the effect set out in SECTION
4.2(D).

         (c)     If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.

SECTION 4.2      APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED GUARANTEE
                 TRUSTEES.

         (a)     Subject to SECTION 4.2(C), the Preferred Guarantee Trustee may
be appointed or removed without cause at any time by the Guarantor.

         (b)     The Preferred Guarantee Trustee may be removed for cause at
any time by Act (within the meaning of Section 608 of the Trust Agreement) of
the Holders of at least a Majority in liquidation amount of the Preferred
Securities, delivered to the Preferred Guarantee Trustee.

         (c)     The Preferred Guarantee Trustee shall not be removed in
accordance with SECTIONS 4.2(A) and 4.2(B) until a Successor Preferred
Guarantee Trustee has been appointed and has





                                       11
<PAGE>   15
accepted such appointment by written instrument executed by such Successor
Preferred Guarantee Trustee and delivered to the Guarantor.

         (d)     The Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have been appointed
or until its removal or resignation.  The Preferred Guarantee Trustee may
resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Preferred Guarantee Trustee and delivered
to the Guarantor, which resignation shall not take effect until a Successor
Preferred Guarantee Trustee has been appointed and has accepted such
appointment by instrument in writing executed by such Successor Preferred
Guarantee Trustee and delivered to the Guarantor and the resigning Preferred
Guarantee Trustee.

         (e)     If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section within 60 days
after delivery of an instrument of resignation, the resigning Preferred
Guarantee Trustee may petition any court of competent jurisdiction for
appointment of a Successor Preferred Guarantee Trustee.  Such court may
thereupon, after prescribing such notice, if any, as it may deem proper,
appoint a Successor Preferred Guarantee Trustee.

         (f)     No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.

         (g)     Upon termination of this Preferred Securities Guarantee or
removal or resignation of the Preferred Guarantee Trustee pursuant to this
Section, the Guarantor shall pay to the Preferred Guarantee Trustee all amounts
accumulated to the date of such termination, removal or resignation.

                                   ARTICLE V
                                   GUARANTEE

SECTION 5.1      GUARANTEE.

         The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Trust), as and when due, regardless of any defense, right of
set-off or counterclaim that the Trust may have or assert.  The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by the Guarantor to the Holders or by causing the Trust to
pay such amounts to the Holders.





                                       12
<PAGE>   16
SECTION 5.2      WAIVER OF NOTICE AND DEMAND.

         The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first
against the Trust or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.

SECTION 5.3      OBLIGATIONS NOT AFFECTED.

         The obligations, covenants, agreements and duties of the Guarantor
under this Preferred Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:

         (a)     the release or waiver, by operation of law or otherwise, of
the performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be
performed or observed by the Trust;

         (b)     the extension of time for the payment by the Trust of all or
any portion of the Distributions, Redemption Price, Liquidation Distribution or
any other sums payable under the terms of the Preferred Securities or the
extension of time for the performance of any other obligation under, arising
out of, or in connection with, the Preferred Securities (other than an
extension of time for payment of Distributions, Redemption Price, Liquidation
Distribution or other sum payable that results from the extension of any
interest payment period on the Junior Subordinated Debentures);

         (c)     any failure, omission, delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Trust granting indulgence or
extension of any kind;

         (d)     the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Trust or any of the
assets of the Trust;

         (e)     any invalidity of, or defect or deficiency in, the Preferred
Securities;

         (f)     any failure or omission to receive any regulatory approval or
consent required in connection with the Preferred Securities (or the common
equity securities issued by the Trust), including the failure to receive any
regulatory approval required in connection with the redemption of the Preferred
Securities;





                                       13
<PAGE>   17
         (g)     the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or

         (h)     any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.

         There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.

SECTION 5.4      RIGHTS OF HOLDERS.

         (a)     The Guarantor expressly acknowledges that: (i) this Guarantee
will be deposited with the Preferred Guarantee Trustee to be held for the
benefit of the Holders; (ii) the Preferred Guarantee Trustee has the right to
enforce this Preferred Securities Guarantee; and (iii) Holders of a Majority in
liquidation amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Preferred Guarantee Trustee in respect of this Preferred Securities
Guarantee or exercising any trust or power conferred upon the Preferred
Guarantee Trustee under this Preferred Securities Guarantee.

         (b)     Any Holder of Preferred Securities may institute a legal
proceeding directly against the Guarantor to enforce its rights under this
Preferred Securities Guarantee, without first instituting a legal proceeding
against the Trust, the Preferred Guarantee Trustee or any other Person.

SECTION 5.5      GUARANTEE OF PAYMENT.

         This Preferred Securities Guarantee creates a guarantee of payment and
not of collection.  This Preferred Securities Guarantee will not be discharged
except by payment of the Guarantee Payments in full (without duplication of
amounts theretofore paid by the Trust).

SECTION 5.6      SUBROGATION.

         The Guarantor shall be subrogated to all (if any) rights of the
Holders of Preferred Securities against the Trust in respect of any amounts
paid to such Holders by the Guarantor under this Preferred Securities
Guarantee; provided, however, that the Guarantor shall not (except to the
extent required by mandatory provisions of law) be entitled to enforce or
exercise any right that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under
this Preferred Securities Guarantee, if at the time of any such payment any
amounts are due and unpaid under this Preferred Securities Guarantee.  If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.





                                       14
<PAGE>   18
SECTION 5.7      INDEPENDENT OBLIGATIONS.

         The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
SECTION 5.3.

                                   ARTICLE VI
                   LIMITATION ON TRANSACTIONS; SUBORDINATION

SECTION 6.1      LIMITATION ON TRANSACTIONS.

         So long as any Preferred Securities remain outstanding, if there shall
have occurred and be continuing an Event of Default under this Preferred
Securities Guarantee or an event of default under the Trust Agreement or during
an Extended Interest Payment Period (as defined in the Indenture), then (a) the
Guarantor shall not, and shall not permit any Subsidiary (as defined in the
Indenture) to, declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock (other than (i) the reclassification of
any class of the Company's capital stock into another class of capital stock,
(ii) dividends or distributions payable in any class of the Company's common
stock, (iii) any declaration of a dividend in connection with the
implementation of a shareholder rights plan, or the issuance of stock under any
such plan in the future, or the redemption or repurchase of any rights pursuant
thereto and (iv) purchases of the Company's common stock related to the rights
under any of the Company's benefit plans for its or its subsidiaries'
directors, officers or employees), and (b) the Guarantor shall not, and shall
not permit any Subsidiary to, make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities issued
by the Guarantor which rank pari passu with or junior to the Junior
Subordinated Debentures; (c) the Guarantor shall not, and shall not permit any
Subsidiary to make any guarantee payments with respect to any guarantee (other
than this Preferred Securities Guarantee) by the Company of the debt securities
of any Subsidiary of the Company if such guarantee ranks pari passu with or
junior to the Junior Subordinated Debentures; and (d) the Guarantor shall not
redeem, purchase or acquire less than all of the outstanding Debentures or any
of the Preferred Securities.

SECTION 6.2      RANKING.

         This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right
of payment to all other Senior Debt of the Guarantor, (ii) pari passu with the
most senior preferred securities or preference stock now or hereafter issued by
the Guarantor and with any guarantee now or hereafter entered into by the
Guarantor in respect to any preferred securities or preference stock of any
Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock.





                                       15
<PAGE>   19
                                  ARTICLE VII
                                  TERMINATION

SECTION 7.1      TERMINATION.

         This Preferred Securities Guarantee shall terminate (i) upon full
payment of the Redemption Price of all Preferred Securities, (ii) upon full
payment of the amounts payable in accordance with the Trust Agreement upon
liquidation of the Trust, or (iii) upon distribution of the Junior Subordinated
Debentures to the Holders of the Preferred Securities.  Notwithstanding the
foregoing, this Preferred Securities Guarantee shall continue to be effective
or shall be reinstated, as the case may be, if at any time any Holder of
Preferred Securities must restore payment of any sums paid under the Preferred
Securities or under this Preferred Securities Guarantee.

                                  ARTICLE VIII
                                 MISCELLANEOUS

SECTION 8.1      SUCCESSORS AND ASSIGNS.

         All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding.  Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
the Indenture and pursuant to which the successor agrees in writing to perform
the Guarantees obligations hereunder, any purported assignment that is not in
accordance with these provisions shall be void.

SECTION 8.2      AMENDMENTS.

         Except with respect to any changes that do not adversely affect the
rights of Holders (in which case no consent of Holders will be required), this
Preferred Securities Guarantee may only be amended with the prior approval of
the Holders of at least a Majority in liquidation amount of the Preferred
Securities.  The provisions of Article VI of the Trust Agreement with respect
to meetings of Holders of the Preferred Securities apply to the giving of such
approval.

SECTION 8.3      NOTICES.

         All notices provided for in this Preferred Securities Guarantee shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first-class or certified mail, as follows:

         (a)     If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address as
the Preferred Guarantee Trustee may give notice of to the Holders of the
Preferred Securities):





                                       16
<PAGE>   20
         U.S. Trust Company of Texas, N.A.
         2001 Ross Avenue
         Suite 2700
         Dallas, Texas 75201
         Facsimile No. (214) 754-1303
         Attention:       Corporate Trust Administration

         (b)     If given to the Guarantor, at the Guarantor's mailing address
set forth below (or such other address as the Guarantor may give notice of to
the Holders of the Preferred Securities):

         Southside Bancshares, Inc.
         1201 S. Beckham
         Tyler, Texas 75701
         Facsimile No.  (903) 592-3692
         Attention:       President

         (c)     If given to any Holder of Preferred Securities, at the address
set forth on the books and records of the Trust.

         All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.

SECTION 8.4      BENEFIT.

         This Preferred Securities Guarantee is solely for the benefit of the
Holders of the Preferred Securities and, subject to SECTION 3.1(A), is not
separately transferable from the Preferred Securities.

SECTION 8.5      GOVERNING LAW.

         THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.





                                       17
<PAGE>   21
         This Preferred Securities Guarantee is executed as of the day and year
first above written.

                                     SOUTHSIDE BANCSHARES, INC. AS
                                     GUARANTOR

                                     By:   
                                           -----------------------------------
                                     Name: 
                                           -----------------------------------
                                     Title:   
                                           -----------------------------------

                                     U.S. TRUST COMPANY OF TEXAS, N.A., AS
                                     PREFERRED GUARANTEE TRUSTEE


                                     By:   
                                           -----------------------------------
                                     Name: 
                                           -----------------------------------
                                     Title:   
                                           -----------------------------------






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