-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, DMHB+N5VrBcW28zVuorTlQDI4Q+AAlOyGtMYRWUktxLRUhogWJiU+6UJBb8ZKdgr 0dG90x5FBkRrX7Srrp0A8Q== 0000912057-95-000993.txt : 19950301 0000912057-95-000993.hdr.sgml : 19950301 ACCESSION NUMBER: 0000912057-95-000993 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19950227 SROS: NASD GROUP MEMBERS: CHARLES J. WYLY, JR. GROUP MEMBERS: MAVERICK ENTREPRENEURS FUND, LTD. GROUP MEMBERS: SAM WYLY GROUP MEMBERS: WYLY SAMUEL EVANS SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MICHAELS STORES INC CENTRAL INDEX KEY: 0000740670 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-HOBBY, TOY & GAME SHOPS [5945] IRS NUMBER: 751943604 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-35305 FILM NUMBER: 95515319 BUSINESS ADDRESS: STREET 1: 5931 CAMPUS CIRCLE DR CITY: IRVING STATE: TX ZIP: 75063 BUSINESS PHONE: 2147147000 MAIL ADDRESS: STREET 1: PO BOX 619566 CITY: DFW STATE: TX ZIP: 75261 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WYLY SAMUEL EVANS CENTRAL INDEX KEY: 0000909761 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 8080 N CENTRAL EXPRESSWAY STREET 2: LB 31 CITY: DALLAS STATE: TX ZIP: 75206 FORMER COMPANY: FORMER CONFORMED NAME: WYLY SAM DATE OF NAME CHANGE: 19930726 SC 13D/A 1 SCHEDULE 13D/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D/A Under the Securities Exchange Act of 1934 (Amendment No. 23)* Michaels Stores, Inc. -------------------------------------------------------- (NAME OF ISSUER) Common Stock, par value $0.10 per share -------------------------------------------------------- (TITLE OF CLASS OF SECURITIES) 594087-10-8 -------------------------------------------------------- (CUSIP NUMBER) Charles D. Maguire, Jr. 901 Main Street, Suite 6000 Dallas, Texas 75202 (214) 953-6000 -------------------------------------------------------- (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS) February 23, 1995 -------------------------------------------------------- (DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box / /. Check the following box if a fee is being paid with this statement / /. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class. (See Rule 13d-7.) NOTE: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Page 1 of 10 Pages CUSIP No. 594087-10-8 13D Page 2 of 10 Pages - ------------------------------------------------------------------------------- (1) Names of Reporting Person S.S. or I.R.S. Identification No. of Above Person Sam Wyly ###-##-#### - ------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member (a) /X/ of a Group* (b) / / - ------------------------------------------------------------------------------- (3) SEC Use Only - ------------------------------------------------------------------------------- (4) Source of Funds* N/A - ------------------------------------------------------------------------------- (5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(a) / / / - ------------------------------------------------------------------------------- (6) Citizenship or Place of Organization United States - ------------------------------------------------------------------------------- Number of Shares (7) Sole Voting Beneficially Owned Power 1,434,905 by Each Reporting -------------------------------------------------- Person With (8) Shared Voting Power 200,000 -------------------------------------------------- (9) Sole Dispositive Power 1,884,905 -------------------------------------------------- (10) Shared Dispositive Power 200,000 - ------------------------------------------------------------------------------- (11) Aggregate Amount Beneficially Owned by Each Reporting Person 2,084,905 - ------------------------------------------------------------------------------- (12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares* / / - ------------------------------------------------------------------------------- (13) Percent of Class Represented by Amount in Row (11) 9.7% - ------------------------------------------------------------------------------- (14) Type of Reporting Person* IN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! CUSIP No. 594087-10-8 13D Page 3 of 10 Pages - ------------------------------------------------------------------------------- (1) Names of Reporting Person S.S. or I.R.S. Identification No. of Above Person Charles J. Wyly, Jr ###-##-#### - ------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member (a) /X/ of a Group* (b) / / - ------------------------------------------------------------------------------- (3) SEC Use Only - ------------------------------------------------------------------------------- (4) Source of Funds* N/A - ------------------------------------------------------------------------------- (5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(a) / / - ------------------------------------------------------------------------------- (6) Citizenship or Place of Organization United States - ------------------------------------------------------------------------------- Number of Shares (7) Sole Voting Beneficially Owned Power 1,497,607 by Each Reporting -------------------------------------------------- Person With (8) Shared Voting Power 200,000 -------------------------------------------------- (9) Sole Dispositive Power 1,722,607 -------------------------------------------------- (10) Shared Dispositive Power 200,000 - ------------------------------------------------------------------------------- (11) Aggregate Amount Beneficially Owned by Each Reporting Person 1,922,607 - ------------------------------------------------------------------------------- (12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares* / / - ------------------------------------------------------------------------------- (13) Percent of Class Represented by Amount in Row (11) 9.0% - ------------------------------------------------------------------------------- (14) Type of Reporting Person* IN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! CUSIP No. 594087-10-8 13D Page 4 of 10 Pages - ------------------------------------------------------------------------------- (1) Names of Reporting Person S.S. or I.R.S. Identification No. of Above Person Maverick Entrepreneurs Fund, Ltd. (f/k/a First Dallas Limited) 75-231-9145 - ------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member (a) /X/ of a Group* (b) / / - ------------------------------------------------------------------------------- (3) SEC Use Only - ------------------------------------------------------------------------------- (4) Source of Funds* N/A - ------------------------------------------------------------------------------- (5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(a) / / - ------------------------------------------------------------------------------- (6) Citizenship or Place of Organization Texas - ------------------------------------------------------------------------------- Number of Shares (7) Sole Voting Beneficially Owned Power 200,000 by Each Reporting -------------------------------------------------- Person With (8) Shared Voting Power 0 -------------------------------------------------- (9) Sole Dispositive Power 200,000 -------------------------------------------------- (10) Shared Dispositive Power 0 - ------------------------------------------------------------------------------- (11) Aggregate Amount Beneficially Owned by Each Reporting Person 200,000 - ------------------------------------------------------------------------------- (12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares* / / - ------------------------------------------------------------------------------- (13) Percent of Class Represented by Amount in Row (11) 0.9% - ------------------------------------------------------------------------------- (14) Type of Reporting Person* PN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! CUSIP No. 594087-10-8 13D Page 5 of 10 Pages - ------------------------------------------------------------------------------- (1) Names of Reporting Person S.S. or I.R.S. Identification No. of Above Person The Wyly Group - ------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member (a) /X/ of a Group* (b) / / - ------------------------------------------------------------------------------- (3) SEC Use Only - ------------------------------------------------------------------------------- (4) Source of Funds* N/A - ------------------------------------------------------------------------------- (5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(a) / / - ------------------------------------------------------------------------------- (6) Citizenship or Place of Organization Texas - ------------------------------------------------------------------------------- Number of Shares (7) Sole Voting Beneficially Owned Power 3,132,512 by Each Reporting -------------------------------------------------- Person With (8) Shared Voting Power 0 -------------------------------------------------- (9) Sole Dispositive Power 3,807,512 -------------------------------------------------- (10) Shared Dispositive Power 0 - ------------------------------------------------------------------------------- (11) Aggregate Amount Beneficially Owned by Each Reporting Person 3,807,512 - ------------------------------------------------------------------------------- (12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares* / / - ------------------------------------------------------------------------------- (13) Percent of Class Represented by Amount in Row (11) 17.8% - ------------------------------------------------------------------------------- (14) Type of Reporting Person* IN,PN - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! CUSIP No. 594087-10-8 13D Page 6 of 10 Pages ITEM 1. SECURITY AND ISSUER. Not Amended. ITEM 2. IDENTITY AND BACKGROUND. Not Amended. ITEM 3. SOURCE AND AMOUNT OF FUNDS. Not Applicable. ITEM 4. PURPOSE OF TRANSACTION. Not Amended. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. Item 5 is hereby amended and restated in its entirety to read as follows: On November 9, 1994, Mr. Sam Wyly resigned as Trustee of, and as a member of the Investment Committee and the Management Committee for, the Michaels Stores, Inc. Employees 401(k) Plan and Trust (the "Plan" and "Trust," respectively). Such resignation was accepted by Michaels Stores, Inc. on November 9, 1994. At such time, the Trust held approximately 455,925 shares of Common Stock. Effective February 23, 1995, each of the Reporting Persons entered into an arrangement with Lehman Brothers Finance, S.A. (the "Lender") in respect of, in the aggregate, 1,771,163 shares of Common Stock; the details of such transaction are more fully described in Item 6. Mr. Sam Wyly beneficially owns 2,084,905 shares, or 9.7%, of the outstanding Common Stock. Sam Wyly beneficially owns 150,000 of such shares by virtue of his ownership of options; beneficially owns 1,174,536 of such shares as general partner of Tallulah, Ltd., a Texas limited partnership for which Sam Wyly is general partner ("Tallulah") (through direct ownership by Tallulah of 874,536 shares and beneficial ownership by Tallulah of an additional 300,000 shares as a result of Tallulah's ownership of options); beneficially owns 200,000 of such shares as general partner of Maverick Entrepreneurs Fund, Ltd.; beneficially owns 7,918 of such shares as the guardian of a minor child; beneficially owns 15,836 of such shares by virtue of his holding a power of attorney to vote the shares of two adult children; and beneficially owns an aggregate of 536,615 of such shares as trustee of the trusts listed below: Shares Beneficially Name of Trust Owned - -------------------------------------------- ---------------- 1. The Christiana Parker Wyly Trust 82,393 2. The Andrew David Sparrow Wyly Trust 82,393 3. The Laurie L. Wyly Revocable Trust 123,943 4. The Lisa Wyly Revocable Trust 123,943 CUSIP No. 594087-10-8 13D Page 7 of 10 Pages 5. The Kelly Wyly Elliot Trust 123,943 - ---------------------------------------- ----------------- - ---------------------------------------- ----------------- Sam Wyly possesses sole voting power with respect to 1,434,905 shares of Common Stock, sole dispositive power with respect to 1,884,905 shares of Common Stock and shared voting and dispositive power with respect to 200,000 shares of Common Stock. Charles J. Wyly, Jr. beneficially owns 1,922,607 shares, or 9.0%, of the outstanding Common Stock. Charles J. Wyly, Jr. owns 225,000 of such shares by virtue of his ownership of options; beneficially owns 755,000 of such shares as general partner of Brush Creek; beneficially owns 374 of such shares by virtue of his holding a power of attorney to vote the shares of four adult children; beneficially owns 200,000 of such shares as general partner of Maverick Entrepreneurs Fund, Ltd. and beneficially owns an aggregate of 742,233 of such shares as trustee of the trusts listed below: Number of Shares Beneficially Name of Trust Owned - ---------------------------------------- ----------------- 1. The Charles Joseph Wyly III Trust 190,913 2. The Martha Caroline Wyly Trust 170,000 3. The Emily Ann Wyly Trust 190,813 4. The Jennifer Lynn Wyly Trust 190,507 - ---------------------------------------- ----------------- - ---------------------------------------- ----------------- Charles J. Wyly, Jr. possesses sole voting power with respect to 1,497,607 shares of Common Stock, sole dispositive power with respect to 1,722,607 shares of Common Stock and shared voting and dispositive power with respect to 200,000 shares of Common Stock. Maverick Entrepreneurs Fund, Ltd. beneficially owns 200,000 shares, or 0.9%, of the outstanding Common Stock. Maverick Entrepreneurs Fund, Ltd. owns all of such shares directly. The Reporting Persons as a group beneficially own 3,807,512 shares, or 17.8%, of the outstanding Common Stock. The Reporting Persons as a group possess sole voting power with respect to 3,132,512 shares of Common Stock, sole dispositive power with respect to 3,807,512 shares of Common Stock and shared voting and dispositive power with respect to 0 shares of Common Stock. CUSIP No. 594087-10-8 13D Page 8 of 10 Pages Except as set forth in this Item 5, no transactions in the Common Stock were effected by the Reporting Persons during the past 60 days or since the most recent filing on Schedule 13D, whichever is less. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Item 6 is hereby amended by adding the following disclosure: On February 23, 1995, the Reporting Persons each entered into a Loan Agreement with the Lender providing for loans to the Reporting Persons from time to time (the "Loan Agreements"). In connection with the Loan Agreements, the Reporting Persons entered into various security documents provided for in the Loan Agreements (the "Security Documents"). Included in the Security Documents are documents that provide, in general, that: (i) with respect to an aggregate of 1,771,163 shares of Common Stock (770,000 shares of which are beneficially owned by Mr. Sam Wyly, 801,163 shares of which are beneficially owned by Mr. Charles J. Wyly, Jr., and 200,000 shares of which are beneficially owned by each of the Reporting Persons), if the market price of such shares on or before February 23, 1998, is less than $28.5574, then the Lender, upon the request of the Reporting Persons, will pay to the Reporting Persons the difference between such market price and such specified amount at the time of such request, and if the market price on February 23, 1998, is greater than $48.2302, the Reporting Persons will, on that date, pay to the Lender the difference between such market price and such specified amount; and (ii) the Reporting Persons are required to pledge such rights and an aggregate of 1,771,163 shares to secure their obligations under the Security Documents. Reference is made to the complete terms of the Loan Agreements and Security Documents in the forms attached hereto as exhibits. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1 - Agreement pursuant to Rule 13d-1(f)(1)(iii). Exhibit 2.1 - Form of Loan Agreement, dated as of February 23, 1995, between Lehman Brothers Finance, S.A., and Those Persons Specified in Schedule A thereto. Exhibit 2.2 - Form of Loan Agreement, dated as of February 23, 1995, between Lehman Brothers Finance, S.A., and Those Persons Specified in Schedule A thereto. Exhibit 3.1 - Form of Option Transaction Confirmation, dated as of February 23, 1995, by Lehman Brothers Finance, S.A. to the Counterparties set forth on Exhibit A thereto. Exhibit 3.2 - Form of Option Transaction Confirmation, dated as of February 23, 1995, by Lehman Brothers Finance, S.A. to the Counterparties set forth on Exhibit A thereto. Exhibit 3.3 - Form of Option Transaction Confirmation, dated as of February 23, 1995, by Lehman Brothers Finance, S.A. to the Counterparties set forth on Exhibit A thereto. Exhibit 3.4 - Form of Option Transaction Confirmation, dated as of February 23, 1995, by Lehman Brothers Finance, S.A. to the Counterparties set forth on Exhibit A thereto. Exhibit 4.1 - Form of Pledge Agreement, dated as of February 23, 1995, between Lehman Brothers Finance, S.A. and the Counterparties set forth on Exhibit A thereto. Exhibit 4.2 - Form of Pledge Agreement, dated as of February 23, 1995, between Lehman Brothers Finance, S.A. and the Counterparties set forth on Exhibit A thereto. Exhibit 5.1 - Form of Guarantee Agreement. CUSIP No. 594087-10-8 13D Page 9 of 10 Pages SIGNATURES After reasonable inquiry and to the best of our knowledge and belief, we certify that the information set forth in this statement is true, complete and correct. Date: February 27, 1995 /s/ Sam Wyly ----------------------------------------- Sam Wyly /s/ Charles J. Wyly, Jr. ----------------------------------------- Charles J. Wyly, Jr. MAVERICK ENTREPRENEURS FUND, LTD. (formerly First Dallas Limited) By: /s/ Sam Wyly ----------------------------------------- Sam Wyly, General Partner By: /s/ Charles J. Wyly, Jr. ----------------------------------------- Charles J. Wyly, Jr., General Partner CUSIP No. 594087-10-8 13D Page 10 of 10 Pages EXHIBIT 1 Pursuant to Rule 13d-1(f)(1)(iii) of Regulation 13D-G of the General Rules and Regulations of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, the undersigned agree that the statement to which this Exhibit is attached is filed on behalf of each of them. Date: February 27, 1995 /s/ Sam Wyly ----------------------------------------- Sam Wyly /s/ Charles J. Wyly, Jr. ----------------------------------------- Charles J. Wyly, Jr. MAVERICK ENTREPRENEURS FUND, LTD. (formerly First Dallas Limited) By: /s/ Sam Wyly ----------------------------------------- Sam Wyly, General Partner By: /s/ Charles J. Wyly, Jr. ----------------------------------------- Charles J. Wyly, Jr., General Partner EX-2.1 2 EXHIBIT 2.1 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- LOAN AGREEMENT Dated as of February 23, 1995 Between Those Persons Specified in Schedule A as Borrowers and LEHMAN BROTHERS FINANCE, S.A. as Lender - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS Article Section Page - ------- ------- ---- I. DEFINITIONS 1.01. Defined Terms . . . . . . . . . . . . . . . . . 1.02. Terms Generally . . . . . . . . . . . . . . . . II. LOANS 2.01. Availability . . . . . . . . . . . . . . . . . 2.02. Drawdown . . . . . . . . . . . . . . . . . . . 2.03. Notes . . . . . . . . . . . . . . . . . . . . . 2.04. Interest . . . . . . . . . . . . . . . . . . . 2.05. Prepayment . . . . . . . . . . . . . . . . . . 2.06. Default Interest . . . . . . . . . . . . . . . 2.07. Alternate Rate of Interest . . . . . . . . . . 2.08. Prepayment of Loans . . . . . . . . . . . . . . 2.09. Reserve Requirements; Change in Circumstances . 2.10. Change in Legality . . . . . . . . . . . . . . 2.11. Indemnity . . . . . . . . . . . . . . . . . . . 2.12. Taxes . . . . . . . . . . . . . . . . . . . . . 2.13. Payments . . . . . . . . . . . . . . . . . . . 2.14. Obligations Several . . . . . . . . . . . . . . III. REPRESENTATIONS AND WARRANTIES 3.01. Organization; Powers . . . . . . . . . . . . . 3.02. Authorization . . . . . . . . . . . . . . . . . 3.03. Governmental Approval . . . . . . . . . . . . . 3.04. Enforceability . . . . . . . . . . . . . . . . 3.05. Litigation; Compliance with Laws . . . . . . . 3.06. No Material Misstatements . . . . . . . . . . . IV. CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . V. AFFIRMATIVE COVENANTS 5.01. Legal Existence . . . . . . . . . . . . . . . . 5.02. Obligations and Taxes . . . . . . . . . . . . . Article Section Page - ------- ------- ---- 5.03. Litigation and Other Notices . . . . . . . . . 5.04. Further Assurance . . . . . . . . . . . . . . . 5.05. Use of Proceeds . . . . . . . . . . . . . . . . 5.06 Securities Laws . . . . . . . . . . . . . . . . VI. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . VII. MISCELLANEOUS 7.01. Notices . . . . . . . . . . . . . . . . . . . . 7.02. Survival of Agreement . . . . . . . . . . . . . 7.03. Successors and Assigns . . . . . . . . . . . . 7.04. Expenses of the Lender; Indemnity . . . . . . . 7.05. Right of Setoff . . . . . . . . . . . . . . . . 7.06. Applicable Law . . . . . . . . . . . . . . . . 7.07. Payments on Business Days . . . . . . . . . . . 7.08. Waivers; Amendments . . . . . . . . . . . . . . 7.09. Consent to Jurisdiction . . . . . . . . . . . . 7.10. Waiver of Jury Trial . . . . . . . . . . . . . 7.11. Severability . . . . . . . . . . . . . . . . . 7.12. Counterparts . . . . . . . . . . . . . . . . . 7.13. Headings . . . . . . . . . . . . . . . . . . . Schedule A The Borrowers Exhibit A Form of Promissory Note Exhibit B Form of Pledge Agreement Exhibit C Form of Collar Documentation LOAN AGREEMENT dated as of February 23, 1995, between those persons specified in Schedule A (each, a "Borrower" and together, the "Borrowers") and LEHMAN BROTHERS FINANCE, S.A., a Swiss corporation (the "Lender"). The Borrowers have applied to the Lender for loans in the aggregate principal amount specified in Schedule A. The Lender is willing to make such loans to the Borrowers, subject to the terms and conditions hereinafter set forth. Accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings specified below: "AFFILIATE" shall mean, with respect to any person, any person or group of persons acting in concert in respect of the person in question that, directly or indirectly, controls or is controlled by or is under common control with such person. "BUSINESS DAY" shall mean any day, other than a Saturday or Sunday, on which (a) banks are open for (i) banking business in New York City and (ii) dealings in dollar deposits in the London interbank market and (b) the NASDAQ NMS is open for trading. "COLLAR DOCUMENTATION" shall mean the ISDA master agreement, master agreement schedule and confirmations to be entered into by the Lender and the Borrower substantially in the form of Exhibit C. "DEFAULT" shall mean any event, condition or circumstance which, with the giving of notice or the passage of time or both, would become an Event of Default. "DEFAULT RATE" shall mean the relevant Interest Rate plus 5% per annum. 2 "DOLLARS" and the symbol "$" shall mean the lawful currency of the United States. "DRAWING DATE" shall mean February , 1995. EVENT OF DEFAULT" shall have the meaning assigned to such term in Article VI hereof. "INTEREST PAYMENT DATE" shall mean the last day of each Interest Period. "INTEREST PERIOD" shall mean the period commencing on the Drawing Date (or, in the case of subsequent Interest Periods, on the last day of the preceding Interest Period) and ending on the numerically corresponding day (or if there is no corresponding day, the last day) in the following calendar month; PROVIDED, HOWEVER, that (y) if any Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (z) no Interest Period shall extend beyond the Maturity Date. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "INTEREST RATE" shall mean LIBOR plus the Margin. "LBI" shall mean Lehman Brothers Inc. "LIBOR" shall mean, with respect to any Interest Period (a) the rate for deposits in dollars for a period comparable to the applicable Interest Period which appears on the Telerate Page 3750 as of 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period; (b) if such rate does not appear on the Telerate page 3750, the arithmetic mean of the rates for deposits in dollars for a period comparable to the applicable Interest Period which appear on the Reuters Screen LIBO Page as of 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period; and (c) if only one or no such rate appears on the Reuters Screen LIBO Page, the rate (rounded upwards, if necessary, to the next higher 1/16 of 1%) at which dollar deposits approximately equal in principal amount to the Loans and with a maturity comparable to the applicable Interest Period are offered to the Lender in immediately available funds in the London interbank 3 market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "LOAN" shall mean, in relation to each Borrower, the principal amount specified opposite its name in Schedule A, to be advanced by the Lender to such Borrower hereunder or, as the context requires, the principal amount thereof outstanding from time to time, and "LOANS" shall mean the aggregate of all such principal amounts. "MARGIN" shall mean 1.0% per annum. "MATURITY DATE" shall mean the third anniversary of the Drawing Date, or such later date as the Lender and Borrowers agree in writing. "NOTE" shall mean, in relation to a Borrower, a promissory note of such Borrower executed and delivered as provided in Section 2.03, substantially in the form of Exhibit A. "PERSON" shall mean any natural person, corporation, business trust, association, company, joint venture, partnership or government or any agency or political subdivision thereof. "PLEDGE AGREEMENT" shall mean the Pledge Agreement, substantially in the form of Exhibit B, between the Borrowers and the Lender. "SECURITY DOCUMENTS" shall mean the Pledge Agreement and the Collar Documentation. "SHARES" shall mean, in relation to each Borrower, that number of shares of common stock of Michaels Stores Inc. specified opposite its name in Schedule A. "TRANSACTION DOCUMENTS" shall mean, in relation to a Borrower, this Agreement, the Note of such Borrower and the Security Documents. "TRANSACTIONS" shall have the meaning assigned to such term in Section 3.02. SECTION 1.02. TERMS GENERALLY. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may 4 require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. ARTICLE II LOANS SECTION 2.01. AVAILABILITY. Subject to the terms and conditions herein set forth, the Lender agrees to make each Loan to the related Borrower, and each Borrower agrees to drawdown its Loan, on the Drawing Date. SECTION 2.02. DRAWDOWN. The Lender shall by 3:00 p.m., New York City time, on the Drawing Date, credit the amount of each Loan, in immediately available funds, to the account of the related Borrower specified in a notice delivered to the Lender by such Borrower no later than two Business Days prior to the Drawing Date. SECTION 2.03. NOTES. Each Loan shall be evidenced by a Note duly executed on behalf of the related Borrower, dated the Drawing Date, with the blanks appropriately filled, payable to the order of the Lender in a principal amount equal to the principal amount of the related Loan. Each Note shall bear interest from the Drawing Date on the principal amount thereof as set forth in Section 2.04. SECTION 2.04. INTEREST. Subject to the provisions of Section 2.06, each Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) from the Drawing Date to the Maturity Date at a rate per annum equal to the Interest Rate. Interest on each Loan shall be payable by the related Borrower on each applicable Interest Payment Date. LIBOR shall be determined by the Lender, and such determination shall be conclusive absent manifest error. The Lender shall promptly advise each Borrower of such determination. 5 SECTION 2.05. REPAYMENT. Each Borrower shall repay its Loan on the Maturity Date. SECTION 2.06. DEFAULT INTEREST. If a Borrower defaults in the payment of the principal of or interest on its Loan or any other amount becoming due hereunder, by acceleration or otherwise, such Borrower shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment at the Default Rate. SECTION 2.07. ALTERNATE RATE OF INTEREST. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for the Loans, the Lender shall have determined (i) that dollar deposits in the amount of the Loans are not generally available in the London interbank market or (ii) that the rate at which such dollar deposits are being offered will not adequately and fairly reflect the cost to the Lender of making or maintaining the Loans during such Interest Period, the Lender shall, as soon as practicable thereafter, give written or telex notice of such determination to each Borrower. In the event of any such determination, the Interest Rate payable with respect to such Interest Period shall be the rate certified by the Lender to be its cost of funding the Loans for such period, plus the Margin. Each determination by the Lender hereunder shall be conclusive absent manifest error. SECTION 2.08. PREPAYMENT OF LOANS. Each Borrower may, on giving the Lender no less than five Business Days' notice, prepay its Loan or any part thereof in an amount of no less than $1,000,000 on an Interest Payment Date. Such notice shall be irrevocable and shall require such Borrower to make such prepayment on the date specified therein. SECTION 2.09. RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES. (a) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any governmental authority charged with the inter- pretation or administration thereof (whether or not having the force of law) shall change the basis of taxation of payments to the Lender or of the principal of or interest on a Loan or any other fees or amounts payable hereunder (other than taxes imposed on the overall net income of the Lender by the jurisdiction in which the Lender has its principal office, or by any political subdivision or 6 taxing authority therein), or shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, the Lender or shall impose on the Lender or the London interbank market any other condition affecting this Agreement, and the result of any of the foregoing shall be to increase the cost to the Lender of making or maintaining a Loan or to reduce the amount of any sum received or receivable by the Lender hereunder (whether of principal, interest or otherwise) in respect thereof by an amount deemed by the Lender to be material, then the related Borrower will pay to the Lender upon demand such additional amount or amounts as will compensate the Lender for such additional costs incurred or reduction suffered. (b) A certificate of the Lender setting forth such amount or amounts as shall be necessary to compensate it as specified in paragraph (a) above shall be delivered to the related Borrower and shall be conclusive absent manifest error. Such Borrower shall pay the Lender the amount shown as due on any such certificate within 5 days after its receipt of the same. SECTION 2.10. CHANGE IN LEGALITY. Notwithstanding anything to the contrary herein contained, if any change in any law or regulation or in interpretation thereof by any governmental authority charged with the administration or interpretation thereof shall make it unlawful for the Lender to maintain a Loan or to give effect to its obligations as contemplated hereby, then, by written notice to the related Borrower, the Lender may require that such Loan be repaid immediately or on such later date as the Lender specifies. SECTION 2.11. INDEMNITY. Each Borrower shall indemnify the Lender against any loss or reasonable expense which the Lender may sustain or incur as a consequence of (a) any failure by such Borrower to fulfill on the Drawing Date the applicable conditions set forth in Article IV, (b) any failure by such Borrower to drawdown hereunder on the Drawing Date, (c) any payment or prepayment of its Loan required by any other provision of this Agreement or otherwise made on a date other than the last day of an Interest Period, (d) any default in the payment or prepayment of the principal amount of its Loan or any part thereof or interest accrued thereon, as and when due and payable, or (e) the occurrence of any Event of Default with 7 respect to it, including any loss or reasonable expense sustained or incurred or to be sustained or incurred in liquidating or employing deposits from third parties acquired to effect or maintain its Loan or any part thereof. A certificate of the Lender setting forth any amount or amounts which the Lender is entitled to receive pursuant to this Section shall be delivered to such Borrower and shall be conclusive absent manifest error. Such Borrower shall pay the Lender the amount shown as due on any such statement within 5 days after receipt of the same. SECTION 2.12. TAXES. (a) Any and all payments by each Borrower hereunder shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING taxes imposed on the Lender's income, and franchise taxes imposed on the Lender, by the jurisdiction of its principal office or lending office or any political subdivision thereof, and withholding taxes payable with respect to payments to the Lender at its principal office or lending office under laws (including, without limitation, any treaty, ruling, determination or regulation) in effect on the date hereof, but not any increase in withholding tax resulting from any subsequent change in such laws (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If a Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to the Lender, (i) the sum payable shall be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, each Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement (hereinafter referred to as "Other Taxes"). (c) Each Borrower will indemnify the Lender for the full amount of Taxes or Other Taxes (including any Taxes 8 or Other Taxes imposed by any jurisdiction (except as specified in clause (a)) on amounts payable under this Section with respect to such Borrower's Loan and paid by the Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted; PROVIDED, HOWEVER, that at the request of a Borrower and solely at such Borrower's expense the Lender shall use reasonable efforts to contest the payment of such Taxes or Other Taxes which such Borrower and the Lender believe were not correctly or legally asserted. This indemnification shall be made within 10 days from the date the Lender makes written demand therefor. If the Lender receives a refund in respect of any Taxes or Other Taxes for which it has received payment from such a Borrower hereunder, it shall, within seven days of receipt, repay such refund to such Borrower, provided that such Borrower, upon the request of the Lender, agrees to return such refund (plus any penalties, interest or other charges) to the Lender in the event the Lender is required to repay such refund. (d) Each Borrower will, within 30 days after the date of any payment of Taxes or Other Taxes withheld by it in respect of any payment to the Lender, furnish to the Lender the original or a certified copy of a receipt evidencing payment thereof. (e) Without prejudice to the survival of any other agreement hereunder, the agreements and obligations contained in this Section shall survive the payment in full of principal and interest hereunder. SECTION 2.13. PAYMENTS. Each Borrower shall make each payment to the Lender hereunder not later than 12:00 noon, New York City time, on the day when due in dollars in immediately available funds to the Lender's account at Chemical Bank, New York; ABA Number 021000128; Favour: Lehman Brothers Finance S.A.; Account Number 066-196566. SECTION 2.14. OBLIGATIONS SEVERAL. Notwithstanding any other provision of this Agreement, the obligations of the Borrowers hereunder shall be several. 9 ARTICLE III REPRESENTATIONS AND WARRANTIES Each Borrower represents and warrants to Lender that: SECTION 3.01. ORGANIZATION; POWERS. It is duly established and validly existing as an express trust or, as the case may be, as a limited partnership under the laws of the jurisdiction of its establishment, has the requisite power and authority to own or lease its property and assets and to carry on its business as now conducted and is qualified to do business in every jurisdiction where such qualification is required, except where the failure so to qualify would not have a material adverse effect on the condition, financial or otherwise, of such Borrower. Such Borrower has the power and authority to execute, deliver and perform its obligations under the related Transaction Documents. SECTION 3.02. AUTHORIZATION. The execution, delivery and performance by such Borrower of its obligations under the related Transaction Documents (collectively, the "Transactions") (a) have been duly authorized by all requisite action and (b) will not (i) violate (A) any provision of any law, statute, rule or regulation or the constitutive documents of such Borrower, (B) any order of any court, or any rule, regulation or order of any other agency of government binding upon such Borrower or (C) any provisions of any indenture, agreement or other instrument to which such Borrower is a party, or by which such Borrower or any of its properties or assets are or may be bound, other than any indentures, agreements and other instruments which, individually or in aggregate, are not material to such Borrower, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in (b)(i)(C) above, other than indentures, agreements and other instruments which, individually or in aggregate, are not material to such Borrower or to the Transactions, or (iii) result in the creation or imposition of any lien upon any property or assets of such Borrower, except pursuant to the Security Documents. SECTION 3.03. GOVERNMENTAL APPROVAL. No registration with or consent or approval of, or other action by, any Federal, state, foreign or other governmental agency, 10 authority or regulatory body is or will be required in connection with any of the Transactions. SECTION 3.04. ENFORCEABILITY. Each of the related Transaction Documents constitutes the legal, valid and binding obligations of such Borrower, enforceable in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting creditors' rights generally). SECTION 3.05. LITIGATION; COMPLIANCE WITH LAWS, ETC. (a) There are not any actions, suits or proceedings at law or in equity or by or before any governmental instrumentality or other agency or regulatory authority now pending or, to the knowledge of such Borrower, threatened against or affecting such Borrower or the businesses, assets or rights of such Borrower (i) which involve any of the related Transaction Documents or any of the Transactions or (ii) which may reasonably be expected to, individually or in the aggregate, materially impair the ability of such Borrower to conduct its businesses, or materially and adversely affect the businesses, assets, properties, operations or condition, financial or otherwise, or prospects of such Borrower, or impair the validity or enforceability of or the ability of such Borrower to perform its obligations under this Agreement or its Note or any other related Transaction Document. (b) Such Borrower is not in violation of any law, or in default with respect to any judgment, writ, injunction, decree, rule or regulation of any court or governmental agency or instrumentality, where such violation or default would have a materially adverse effect on the businesses, assets, properties, operations or condition, financial or otherwise, or prospects of such Borrower. SECTION 3.06. NO MATERIAL MISSTATEMENTS. No information, report, financial statement, exhibit or schedule prepared or furnished by or on behalf of such Borrower to the Lender in connection with any of the related Transaction Documents or included therein contained or contains any material misstatement of fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 11 Each representation and warranty contained in this Section 3 shall be made by each Borrower on the Drawing Date and deemed to be repeated on each day on which such Borrower makes a payment to the Lender hereunder. ARTICLE IV CONDITIONS OF LENDING The obligations of the Lender to make the Loans hereunder are subject to the satisfaction of the following conditions on the Drawing Date: (a) The representations and warranties set forth in Article III shall be true and correct in all material respects on and as of the Drawing Date, except to the extent that such representations and warranties expressly relate to an earlier date or a change therein permitted by this Agreement. (b) Each Borrower shall be in compliance in all material respects with all the terms and provisions contained in the Transaction Documents, and immediately after the drawdown of the Loans no Event of Default or Default shall have occurred and be continuing with respect to any Borrower. (c) Each Borrower has executed and delivered to the Lender each of the related Transaction Documents and each other document contemplated by the related Transaction Documents (including the documents specified in Section 3 of the Pledge Agreement) and each such document remains in full force and effect. ARTICLE V AFFIRMATIVE COVENANTS Each Borrower covenants and agrees with the Lender that it will: SECTION 5.01. LEGAL EXISTENCE. Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence. 12 SECTION 5.02. OBLIGATIONS AND TAXES. Comply in all material respects with all applicable laws, rules, regulations and orders, pay or cause to be paid all of its indebtedness and other obligations promptly when due in accordance with their terms, and pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it. SECTION 5.03. LITIGATION AND OTHER NOTICES. Give the Lender prompt written notice of the following: (a) the issuance by any court or governmental agency or authority of any injunction, order or other restraint prohibiting, or having the effect of prohibiting, the performance of this Agreement, any other related Transaction Document, the maintaining of its Loan or any other related Transaction or the initiation of any litigation, or any claim or contro- versy which might result in the initiation of any litigation, seeking any such injunction, order or other restraint; (b) the filing or commencement of any action, suit or proceeding, whether at law or in equity or by or before any court or any Federal, state, municipal or other governmental agency or authority, which may reasonably be expected to materially impair the right or the ability of such Borrower to perform its obligations under this Agreement or any other related Transaction Document, or materially and adversely affect the business, assets, properties, operations, prospects or condition, financial or otherwise, of such Borrower; (c) any Event of Default or Default, specifying the nature and extent thereof and the action (if any) which is proposed to be taken with respect thereto; and (d) any development in the business or affairs of such Borrower which has resulted in or which could, in the reasonable judgment of such Borrower, result in a material adverse change in the business, assets, properties, operations or condition, financial or otherwise, or prospects of such Borrower. SECTION 5.04. FURTHER ASSURANCE. Execute any and all further documents, financing statements, agreements and instruments, and take all further actions (including filing Uniform Commercial Code financing statements, mortgages and 13 other instruments), which may be required under applicable law, or which the Lender may reasonably request, in order to effectuate the Transactions and in order to grant, preserve, protect and perfect the validity and priority of the security interests created by the Security Documents. SECTION 5.05. USE OF PROCEEDS. Use the proceeds of its Loan solely for the purpose of repayment of its indebtedness. SECTION 5.06. SECURITIES LAWS. Make or cause to be made all filings or reportings required by applicable Federal or state securities law in connection with the Transactions as soon as possible (but in any event before the expiration of the period, or no later than the date, prescribed by such law). ARTICLE VI EVENTS OF DEFAULT In case of the occurrence of any of the following events (herein called Events of Default) with respect to a Borrower: (a) default shall be made in the payment of any principal of or interest on its Loan, when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; (b) any representation or warranty made or deemed made by it in or in connection with any of the related Transaction Documents shall prove to have been false or misleading in any material respect when made; (c) default shall be made in the due observance or performance of any other covenant, condition or agreement to be observed or performed on the part of such Borrower pursuant to the terms of this Agreement, or any other related Transaction Document, and such default shall continue for a period of 10 days after written notice thereof from the Lender; (d) such Borrower shall (i) voluntarily commence any proceeding or file any petition seeking relief under any Federal, state or foreign bank- ruptcy, 14 insolvency, liquidation or similar law, (ii) consent to the institution of, or fail to contravene in a timely and appropriate manner, any such pro- ceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for such Borrower or for a substantial part of its property or assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due, or (vii) take action for the purpose of effecting any of the foregoing; (e) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of such Borrower or of a substantial part of the property or assets of such Borrower under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for such Borrower or for a substantial part of the property of such Borrower or (iii) the liquidation of such Borrower; and such proceeding or petition shall continue undismissed for 30 days or an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for 30 days; then, and in any such event, the Lender may declare the related Note due and payable; whereupon the principal of such Note, together with accrued interest thereon and any other fees and other liabilities of such Borrower accrued hereunder, shall become forthwith due and payable both as to principal and interest, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in such Note or any other related Transaction Document to the contrary notwithstanding. ARTICLE VII MISCELLANEOUS SECTION 7.01. NOTICES. Notices and other communications provided for herein shall be in writing and 15 shall be delivered or mailed (or in the case of telegraphic communication, delivered by telex, graphic scanning or other telegraphic communications equipment) addressed, (a) if to a Borrower, at 8800 North Central Expressway Suite 1300 Dallas, Texas 75206 Attention: Shari Robertson Facsimile No.: 214-891-8311 Telephone No.: 214-891-8341; and (b) if to the Lender, at 13 Route de Florissant P.O. Box 280 1211 Geneva 12 Switzerland Attention: Financial Controller Telex No.: 428345; Answerback: LBF CH Facsimile No.: 4122-789-1929 Telephone No.: 4122-789-0789. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if hand delivered or three days after being sent by registered or certified mail, postage prepaid, return receipt requested, if by mail, or upon confirmed receipt, if by any telegraphic or telex communications equipment, in each case addressed to such party as provided in this Section or in accordance with the latest unrevoked direction from such party. SECTION 7.02. SURVIVAL OF AGREEMENT. All covenants, agreements, representations and warranties made by each Borrower herein shall be considered to have been relied upon by the Lender and shall survive the making by the Lender of the related Loan and the execution and delivery to the Lender of the related Note and shall continue in full force and effect as long as the principal of or any accrued interest on the related Note is outstanding and unpaid. SECTION 7.03. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the Borrowers and the Lender and inure to the benefit of the Borrowers, the Lender and LBI and their respective successors and assigns. No 16 Borrower may assign or transfer any of its rights or obligations hereunder without the written consent of the Lender. The Lender may assign to one or more banks or other entities all or a portion of its interests, rights and obligations under this Agreement, the Notes and the other Transaction Documents, PROVIDED, in the case of an assignment to a person other than an Affiliate of the Lender, it obtains the prior written consent of each related Borrower (not to be unreasonably withheld). SECTION 7.04. EXPENSES OF THE LENDER; INDEMNITY. (a) Each Borrower agrees to indemnify the Lender, its directors, officers, employees, agents and affiliates against, and to hold the Lender and each such person harmless from, any and all losses, claims, damages, liabilities and related expenses, including counsel fees and expenses, incurred by or asserted against the Lender or any such persons arising out of, in any way in connection with, or as a result of any of its related Transaction Documents; PROVIDED, HOWEVER, any such indemnity shall not apply to any such losses, claims, damages, liabilities or related expenses arising from the Lender's gross negligence or wilful misconduct. (b) The provisions of this Section shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, any of the other related Transaction Documents or the invalidity or unenforceability of any term or provision of this Agreement or any related Transaction Document. All amounts due under this Section shall be payable on written demand therefor. SECTION 7.05. RIGHT OF SETOFF. Each of the Lender and LBI is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by it to or for the credit or the account of a Borrower against any of and all the obligations of a such Borrower now or hereafter existing under this Agreement and the other related Transaction Documents, irrespective of whether or not the Lender shall have made any demand under this Agreement or such other related Transaction Document. The Lender agrees promptly to notify such Borrower after any such setoff and application made by it or LBI, but the failure to give such notice shall not affect the validity of such setoff and application. The 17 rights of the Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) which the Lender may have. SECTION 7.06. APPLICABLE LAW. This Agreement and the Notes shall be construed in accordance with and governed by the laws of the State of New York. SECTION 7.07. PAYMENTS ON BUSINESS DAYS. Should the principal of or interest on a Note, or any other amount payable hereunder, become due and payable on other than a Business Day, payment in respect thereof may be made on the next succeeding Business Day, and such extension of time shall in such case be included in computing interest, if any, in connection with such payment. SECTION 7.08. WAIVERS; AMENDMENTS. No failure or delay of the Lender in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Lender hereunder are cumulative and not exclusive of any rights or remedies which it would otherwise have. No waiver of any provision of this Agreement or the Notes or consent to any departure by a Borrower therefrom shall in any event be effective unless the same shall be in writing signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on a Borrower in any case shall entitle such Borrower to any other or further notice or demand in similar or other circumstances. No amendment to this Agreement shall be effective unless it is in writing signed by the Lender and each Borrower. SECTION 7.09. CONSENT TO JURISDICTION. Each of the parties hereto irrevocably submits to the jurisdiction of the United States District Court for the Southern District of New York, any court in the State of New York located in the City and County of New York, and any appellate court from any thereof, in any action, suit or proceeding brought against it and related to or in connection with this Agreement, the other Transaction Documents or the Transactions or for recognition or enforcement of any judgment, and each of the parties hereto irrevoacably and unconditionally agrees that all claims in 18 respect of any such suit or action or proceeding may be heard or determined in such New York State court or, to the extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law. To the extent permitted by applicable law, each of the parties hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or any of the other Transaction Documents or the subject matter hereof or thereof may not be litigated in or by such courts. SECTION 7.10. WAIVER OF JURY TRIAL. Except as prohibited by law, each party hereto hereby waives any right it may have to a trial by jury in respect of any litigation directly or indirectly arising out of, under or in connection with this Agreement, the other Transaction Documents or the Transactions. SECTION 7.11. SEVERABILITY. If any one or more of the provisions contained in this Agreement or in the Notes should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable and the validity, legality and enforceability of the remaining provisions contained herein or therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7.12. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. SECTION 7.13. HEADINGS. Article and Section headings and the Table of Contents used herein are for convenience of reference only and are not to affect the 19 construction of, or to be taken into consideration in interpreting, this Agreement. IN WITNESS WHEREOF, the Borrowers and the Lender have caused this Agreement to be duly executed as of the day and year first above written. LEHMAN BROTHERS FINANCE, S.A., by _____________________________ Title: BRUSH CREEK LTD., by ______________________________ Title: CHARLES J. WYLY JR. as trustee for Charles J. Wyly III ______________________________ CHARLES J. WYLY JR. as trustee for Jennifer Lynn Wyly ______________________________ CHARLES J. WYLY JR. as trustee for Emily Ann Wyly ______________________________ 20 CHARLES J. WYLY JR. as trustee for Martha C. Wyly ______________________________ SCHEDULE A THE BORROWERS
Principal Amount Name and Address of Loan Number of Shares ---------------- ---------------- ---------------- Brush Creek Ltd. 420,000 Charles J. Wyly Jr. 95,031 as trustee for the benefit of Charles J. Wyly III Charles J. Wyly Jr. 96,070 as trustee for the benefit of Jennifer Lynn Wyly Charles J. Wyly Jr. 95,031 as trustee for the benefit of Emily Ann Wyly Charles J. Wyly Jr. 95,030 as trustee for the benefit of Martha C. Wyly
EXHIBIT A FORM OF PROMISSORY NOTE Date: Principal Amount: [ ] FOR VALUE RECEIVED, the undersigned, [ ], a [ ] (the "Maker"), hereby promises to pay to the order of LEHMAN BROTHERS FINANCE, S.A. (the "Holder"), at [office or bank of the relevant Borrower], on the Matu- rity Date, the lesser of the principal amount hereof and the aggregate unpaid principal amount of its Loan, in lawful money of the United States of America in immediately available funds, and to pay interest from the date hereof on the principal amount hereof from time to time outstanding, in like funds, at said office, at a rate or rates per annum and payable on such dates as determined pursuant to the terms of the Loan Agreement (as defined below). This Note is the Note of the Maker referred to in the Loan Agreement dated as of February 23, 1995 between the Maker, the Holder and the other Borrowers specified therein, as the same may be amended or modified from time to time (the "Loan Agreement"). The Loan Agreement contains additional rights of the holder hereof. Capitalized terms used but not defined herein have the meaning assigned thereto to the Loan Agreement. This Note is subject to mandatory repayment, prior to the Maturity Date, in whole or in part, as provided in the Loan Agreement. If an Event of Default occurs with respect to the Maker and is continuing, the principal and accrued interest hereon may be declared to be due and payable in the manner and with the effect provided in the Loan Agreement. If the Maker shall default in the payment of the principal of or interest on its Loan or any other amount becoming due under the Loan Agreement, by acceleration or otherwise, the Maker promises to pay interest on demand from time to time, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment. The Maker hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever, other than as expressly required by the Loan Agreement. The nonexercise by the Holder of any of its rights hereunder in 2 any particular instance shall not constitute a waiver thereof in that or any subsequent instance. This Note shall be construed in accordance with and governed by the laws of the State of New York and any applicable laws of the United States of America. This Note is secured by and entitled to the benefits of the Security Documents. [ ], by ----------------------------- Title: EX-2.2 3 EXHIBIT 2.2 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- LOAN AGREEMENT Dated as of February 23, 1995 Between Those Persons Specified in Schedule A as Borrowers and LEHMAN BROTHERS FINANCE, S.A. as Lender - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS Article Section Page - ------- ------- ---- I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1.01. Defined Terms . . . . . . . . . . . . . . . . . 1.02. Terms Generally . . . . . . . . . . . . . . . . II. LOANS 2.01. Availability . . . . . . . . . . . . . . . . . 2.02. Drawdown . . . . . . . . . . . . . . . . . . . 2.03. Notes . . . . . . . . . . . . . . . . . . . . . 2.04. Interest . . . . . . . . . . . . . . . . . . . 2.05. Prepayment . . . . . . . . . . . . . . . . . . 2.06. Default Interest . . . . . . . . . . . . . . . 2.07. Alternate Rate of Interest . . . . . . . . . . 2.08. Prepayment of Loans . . . . . . . . . . . . . . 2.09. Reserve Requirements; Change in Circumstances . 2.10. Change in Legality . . . . . . . . . . . . . . 2.11. Indemnity . . . . . . . . . . . . . . . . . . . 2.12. Taxes . . . . . . . . . . . . . . . . . . . . . 2.13. Payments . . . . . . . . . . . . . . . . . . . 2.14. Obligations Several . . . . . . . . . . . . . . III. REPRESENTATIONS AND WARRANTIES 3.01. Organization; Powers . . . . . . . . . . . . . 3.02. Authorization . . . . . . . . . . . . . . . . . 3.03. Governmental Approval . . . . . . . . . . . . . 3.04. Enforceability . . . . . . . . . . . . . . . . 3.05. Litigation; Compliance with Laws . . . . . . . 3.06. No Material Misstatements . . . . . . . . . . . IV. CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . V. AFFIRMATIVE COVENANTS 5.01. Legal Existence . . . . . . . . . . . . . . . . 5.02. Obligations and Taxes . . . . . . . . . . . . . Article Section Page - ------- ------- ---- 5.03. Litigation and Other Notices . . . . . . . . . 5.04. Further Assurance . . . . . . . . . . . . . . . 5.05. Use of Proceeds . . . . . . . . . . . . . . . . 5.06 Securities Laws . . . . . . . . . . . . . . . . VI. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . VII. MISCELLANEOUS 7.01. Notices . . . . . . . . . . . . . . . . . . . . 7.02. Survival of Agreement . . . . . . . . . . . . . 7.03. Successors and Assigns . . . . . . . . . . . . 7.04. Expenses of the Lender; Indemnity . . . . . . . 7.05. Right of Setoff . . . . . . . . . . . . . . . . 7.06. Applicable Law . . . . . . . . . . . . . . . . 7.07. Payments on Business Days . . . . . . . . . . . 7.08. Waivers; Amendments . . . . . . . . . . . . . . 7.09. Consent to Jurisdiction . . . . . . . . . . . . 7.10. Waiver of Jury Trial . . . . . . . . . . . . . 7.11. Severability . . . . . . . . . . . . . . . . . 7.12. Counterparts . . . . . . . . . . . . . . . . . 7.13. Headings . . . . . . . . . . . . . . . . . . . Schedule A The Borrowers Exhibit A Form of Promissory Note Exhibit B Form of Pledge Agreement Exhibit C Form of Collar Documentation LOAN AGREEMENT dated as of February 23, 1995, between those persons specified in Schedule A (each, a "Borrower" and together, the "Borrowers") and LEHMAN BROTHERS FINANCE, S.A., a Swiss corporation (the "Lender"). The Borrowers have applied to the Lender for loans in the aggregate principal amount specified in Schedule A. The Lender is willing to make such loans to the Borrowers, subject to the terms and conditions hereinafter set forth. Accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings specified below: "AFFILIATE" shall mean, with respect to any person, any person or group of persons acting in concert in respect of the person in question that, directly or indirectly, controls or is controlled by or is under common control with such person. "BUSINESS DAY" shall mean any day, other than a Saturday or Sunday, on which (a) banks are open for (i) banking business in New York City and (ii) dealings in dollar deposits in the London interbank market and (b) the NASDAQ NMS is open for trading. "COLLAR DOCUMENTATION" shall mean the ISDA master agreement, master agreement schedule and confirmations to be entered into by the Lender and the Borrower substantially in the form of Exhibit C. "DEFAULT" shall mean any event, condition or circumstance which, with the giving of notice or the passage of time or both, would become an Event of Default. "DEFAULT RATE" shall mean the relevant Interest Rate plus 5% per annum. 2 "DOLLARS" and the symbol "$" shall mean the lawful currency of the United States. "DRAWING DATE" shall mean February , 1995. "EVENT OF DEFAULT" shall have the meaning assigned to such term in Article VI hereof. "INTEREST PAYMENT DATE" shall mean the last day of each Interest Period. "INTEREST PERIOD" shall mean the period commencing on the Drawing Date (or, in the case of subsequent Interest Periods, on the last day of the preceding Interest Period) and ending on the numerically corresponding day (or if there is no corresponding day, the last day) in the following calendar month; PROVIDED, HOWEVER, that (y) if any Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (z) no Interest Period shall extend beyond the Maturity Date. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "INTEREST RATE" shall mean LIBOR plus the Margin. "LBI" shall mean Lehman Brothers Inc. "LIBOR" shall mean, with respect to any Interest Period (a) the rate for deposits in dollars for a period comparable to the applicable Interest Period which appears on the Telerate Page 3750 as of 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period; (b) if such rate does not appear on the Telerate page 3750, the arithmetic mean of the rates for deposits in dollars for a period comparable to the applicable Interest Period which appear on the Reuters Screen LIBO Page as of 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period; and (c) if only one or no such rate appears on the Reuters Screen LIBO Page, the rate (rounded upwards, if necessary, to the next higher 1/16 of 1%) at which dollar deposits approximately equal in principal amount to the Loans and with a maturity comparable to the applicable Interest Period are offered to the Lender in immediately available funds in the London interbank 3 market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "LOAN" shall mean, in relation to each Borrower, the principal amount specified opposite its name in Schedule A, to be advanced by the Lender to such Borrower hereunder or, as the context requires, the principal amount thereof outstanding from time to time, and "LOANS" shall mean the aggregate of all such principal amounts. "MARGIN" shall mean 1.0% per annum. "MATURITY DATE" shall mean the third anniversary of the Drawing Date, or such later date as the Lender and Borrowers agree in writing. "NOTE" shall mean, in relation to a Borrower, a promissory note of such Borrower executed and delivered as provided in Section 2.03, substantially in the form of Exhibit A. "PERSON" shall mean any natural person, corporation, business trust, association, company, joint venture, partnership or government or any agency or political subdivision thereof. "PLEDGE AGREEMENT" shall mean the Pledge Agreement, substantially in the form of Exhibit B, between the Borrowers and the Lender. "SECURITY DOCUMENTS" shall mean the Pledge Agreement and the Collar Documentation. "SHARES" shall mean, in relation to each Borrower, that number of shares of common stock of Michaels Stores Inc. specified opposite its name in Schedule A. "TRANSACTION DOCUMENTS" shall mean, in relation to a Borrower, this Agreement, the Note of such Borrower and the Security Documents. "TRANSACTIONS" shall have the meaning assigned to such term in Section 3.02. SECTION 1.02. TERMS GENERALLY. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may 4 require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. ARTICLE II LOANS SECTION 2.01. AVAILABILITY. Subject to the terms and conditions herein set forth, the Lender agrees to make each Loan to the related Borrower, and each Borrower agrees to drawdown its Loan, on the Drawing Date. SECTION 2.02. DRAWDOWN. The Lender shall by 3:00 p.m., New York City time, on the Drawing Date, credit the amount of each Loan, in immediately available funds, to the account of the related Borrower specified in a notice delivered to the Lender by such Borrower no later than two Business Days prior to the Drawing Date. SECTION 2.03. NOTES. Each Loan shall be evidenced by a Note duly executed on behalf of the related Borrower, dated the Drawing Date, with the blanks appropriately filled, payable to the order of the Lender in a principal amount equal to the principal amount of the related Loan. Each Note shall bear interest from the Drawing Date on the principal amount thereof as set forth in Section 2.04. SECTION 2.04. INTEREST. Subject to the provisions of Section 2.06, each Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) from the Drawing Date to the Maturity Date at a rate per annum equal to the Interest Rate. Interest on each Loan shall be payable by the related Borrower on each applicable Interest Payment Date. LIBOR shall be determined by the Lender, and such determination shall be conclusive absent manifest error. The Lender shall promptly advise each Borrower of such determination. 5 SECTION 2.05. REPAYMENT. Each Borrower shall repay its Loan on the Maturity Date. SECTION 2.06. DEFAULT INTEREST. If a Borrower defaults in the payment of the principal of or interest on its Loan or any other amount becoming due hereunder, by acceleration or otherwise, such Borrower shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment at the Default Rate. SECTION 2.07. ALTERNATE RATE OF INTEREST. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for the Loans, the Lender shall have determined (i) that dollar deposits in the amount of the Loans are not generally available in the London interbank market or (ii) that the rate at which such dollar deposits are being offered will not adequately and fairly reflect the cost to the Lender of making or maintaining the Loans during such Interest Period, the Lender shall, as soon as practicable thereafter, give written or telex notice of such determination to each Borrower. In the event of any such determination, the Interest Rate payable with respect to such Interest Period shall be the rate certified by the Lender to be its cost of funding the Loans for such period, plus the Margin. Each determination by the Lender hereunder shall be conclusive absent manifest error. SECTION 2.08. PREPAYMENT OF LOANS. Each Borrower may, on giving the Lender no less than five Business Days' notice, prepay its Loan or any part thereof in an amount of no less than $1,000,000 on an Interest Payment Date. Such notice shall be irrevocable and shall require such Borrower to make such prepayment on the date specified therein. SECTION 2.09. RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES. (a) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any governmental authority charged with the inter- pretation or administration thereof (whether or not having the force of law) shall change the basis of taxation of payments to the Lender or of the principal of or interest on a Loan or any other fees or amounts payable hereunder (other than taxes imposed on the overall net income of the Lender by the jurisdiction in which the Lender has its principal office, or by any political subdivision or 6 taxing authority therein), or shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, the Lender or shall impose on the Lender or the London interbank market any other condition affecting this Agreement, and the result of any of the foregoing shall be to increase the cost to the Lender of making or maintaining a Loan or to reduce the amount of any sum received or receivable by the Lender hereunder (whether of principal, interest or otherwise) in respect thereof by an amount deemed by the Lender to be material, then the related Borrower will pay to the Lender upon demand such additional amount or amounts as will compensate the Lender for such additional costs incurred or reduction suffered. (b) A certificate of the Lender setting forth such amount or amounts as shall be necessary to compensate it as specified in paragraph (a) above shall be delivered to the related Borrower and shall be conclusive absent manifest error. Such Borrower shall pay the Lender the amount shown as due on any such certificate within 5 days after its receipt of the same. SECTION 2.10. CHANGE IN LEGALITY. Notwithstanding anything to the contrary herein contained, if any change in any law or regulation or in interpretation thereof by any governmental authority charged with the administration or interpretation thereof shall make it unlawful for the Lender to maintain a Loan or to give effect to its obligations as contemplated hereby, then, by written notice to the related Borrower, the Lender may require that such Loan be repaid immediately or on such later date as the Lender specifies. SECTION 2.11. INDEMNITY. Each Borrower shall indemnify the Lender against any loss or reasonable expense which the Lender may sustain or incur as a consequence of (a) any failure by such Borrower to fulfill on the Drawing Date the applicable conditions set forth in Article IV, (b) any failure by such Borrower to drawdown hereunder on the Drawing Date, (c) any payment or prepayment of its Loan required by any other provision of this Agreement or otherwise made on a date other than the last day of an Interest Period, (d) any default in the payment or prepayment of the principal amount of its Loan or any part thereof or interest accrued thereon, as and when due and payable, or (e) the occurrence of any Event of Default with 7 respect to it, including any loss or reasonable expense sustained or incurred or to be sustained or incurred in liquidating or employing deposits from third parties acquired to effect or maintain its Loan or any part thereof. A certificate of the Lender setting forth any amount or amounts which the Lender is entitled to receive pursuant to this Section shall be delivered to such Borrower and shall be conclusive absent manifest error. Such Borrower shall pay the Lender the amount shown as due on any such statement within 5 days after receipt of the same. SECTION 2.12. TAXES. (a) Any and all payments by each Borrower hereunder shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING taxes imposed on the Lender's income, and franchise taxes imposed on the Lender, by the jurisdiction of its principal office or lending office or any political subdivision thereof, and withholding taxes payable with respect to payments to the Lender at its principal office or lending office under laws (including, without limitation, any treaty, ruling, determination or regulation) in effect on the date hereof, but not any increase in withholding tax resulting from any subsequent change in such laws (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If a Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to the Lender, (i) the sum payable shall be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, each Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement (hereinafter referred to as "Other Taxes"). (c) Each Borrower will indemnify the Lender for the full amount of Taxes or Other Taxes (including any Taxes 8 or Other Taxes imposed by any jurisdiction (except as specified in clause (a)) on amounts payable under this Section with respect to such Borrower's Loan and paid by the Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted; PROVIDED, HOWEVER, that at the request of a Borrower and solely at such Borrower's expense the Lender shall use reasonable efforts to contest the payment of such Taxes or Other Taxes which such Borrower and the Lender believe were not correctly or legally asserted. This indemnification shall be made within 10 days from the date the Lender makes written demand therefor. If the Lender receives a refund in respect of any Taxes or Other Taxes for which it has received payment from such a Borrower hereunder, it shall, within seven days of receipt, repay such refund to such Borrower, provided that such Borrower, upon the request of the Lender, agrees to return such refund (plus any penalties, interest or other charges) to the Lender in the event the Lender is required to repay such refund. (d) Each Borrower will, within 30 days after the date of any payment of Taxes or Other Taxes withheld by it in respect of any payment to the Lender, furnish to the Lender the original or a certified copy of a receipt evidencing payment thereof. (e) Without prejudice to the survival of any other agreement hereunder, the agreements and obligations contained in this Section shall survive the payment in full of principal and interest hereunder. SECTION 2.13. PAYMENTS. Each Borrower shall make each payment to the Lender hereunder not later than 12:00 noon, New York City time, on the day when due in dollars in immediately available funds to the Lender's account at Chemical Bank, New York; ABA Number 021000128; Favour: Lehman Brothers Finance S.A.; Account Number 066-196566. SECTION 2.14. OBLIGATIONS SEVERAL. Notwithstanding any other provision of this Agreement, the obligations of the Borrowers hereunder shall be several. 9 ARTICLE III REPRESENTATIONS AND WARRANTIES Each Borrower represents and warrants to Lender that: SECTION 3.01. ORGANIZATION; POWERS. It is duly established and validly existing as an express trust or, as the case may be, as a limited partnership under the laws of the jurisdiction of its establishment, has the requisite power and authority to own or lease its property and assets and to carry on its business as now conducted and is qualified to do business in every jurisdiction where such qualification is required, except where the failure so to qualify would not have a material adverse effect on the condition, financial or otherwise, of such Borrower. Such Borrower has the power and authority to execute, deliver and perform its obligations under the related Transaction Documents. SECTION 3.02. AUTHORIZATION. The execution, delivery and performance by such Borrower of its obligations under the related Transaction Documents (collectively, the "Transactions") (a) have been duly authorized by all requisite action and (b) will not (i) violate (A) any provision of any law, statute, rule or regulation or the constitutive documents of such Borrower, (B) any order of any court, or any rule, regulation or order of any other agency of government binding upon such Borrower or (C) any provisions of any indenture, agreement or other instrument to which such Borrower is a party, or by which such Borrower or any of its properties or assets are or may be bound, other than any indentures, agreements and other instruments which, individually or in aggregate, are not material to such Borrower, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in (b)(i)(C) above, other than indentures, agreements and other instruments which, individually or in aggregate, are not material to such Borrower or to the Transactions, or (iii) result in the creation or imposition of any lien upon any property or assets of such Borrower, except pursuant to the Security Documents. SECTION 3.03. GOVERNMENTAL APPROVAL. No registration with or consent or approval of, or other action by, any Federal, state, foreign or other governmental agency, 10 authority or regulatory body is or will be required in connection with any of the Transactions. SECTION 3.04. ENFORCEABILITY. Each of the related Transaction Documents constitutes the legal, valid and binding obligations of such Borrower, enforceable in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting creditors' rights generally). SECTION 3.05. LITIGATION; COMPLIANCE WITH LAWS, ETC. (a) There are not any actions, suits or proceedings at law or in equity or by or before any governmental instrumentality or other agency or regulatory authority now pending or, to the knowledge of such Borrower, threatened against or affecting such Borrower or the businesses, assets or rights of such Borrower (i) which involve any of the related Transaction Documents or any of the Transactions or (ii) which may reasonably be expected to, individually or in the aggregate, materially impair the ability of such Borrower to conduct its businesses, or materially and adversely affect the businesses, assets, properties, operations or condition, financial or otherwise, or prospects of such Borrower, or impair the validity or enforceability of or the ability of such Borrower to perform its obligations under this Agreement or its Note or any other related Transaction Document. (b) Such Borrower is not in violation of any law, or in default with respect to any judgment, writ, injunction, decree, rule or regulation of any court or governmental agency or instrumentality, where such violation or default would have a materially adverse effect on the businesses, assets, properties, operations or condition, financial or otherwise, or prospects of such Borrower. SECTION 3.06. NO MATERIAL MISSTATEMENTS. No information, report, financial statement, exhibit or schedule prepared or furnished by or on behalf of such Borrower to the Lender in connection with any of the related Transaction Documents or included therein contained or contains any material misstatement of fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 11 Each representation and warranty contained in this Section 3 shall be made by each Borrower on the Drawing Date and deemed to be repeated on each day on which such Borrower makes a payment to the Lender hereunder. ARTICLE IV CONDITIONS OF LENDING The obligations of the Lender to make the Loans hereunder are subject to the satisfaction of the following conditions on the Drawing Date: (a) The representations and warranties set forth in Article III shall be true and correct in all material respects on and as of the Drawing Date, except to the extent that such representations and warranties expressly relate to an earlier date or a change therein permitted by this Agreement. (b) Each Borrower shall be in compliance in all material respects with all the terms and provisions contained in the Transaction Documents, and immediately after the drawdown of the Loans no Event of Default or Default shall have occurred and be continuing with respect to any Borrower. (c) Each Borrower has executed and delivered to the Lender each of the related Transaction Documents and each other document contemplated by the related Transaction Documents (including the documents specified in Section 3 of the Pledge Agreement) and each such document remains in full force and effect. ARTICLE V AFFIRMATIVE COVENANTS Each Borrower covenants and agrees with the Lender that it will: SECTION 5.01. LEGAL EXISTENCE. Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence. 12 SECTION 5.02. OBLIGATIONS AND TAXES. Comply in all material respects with all applicable laws, rules, regulations and orders, pay or cause to be paid all of its indebtedness and other obligations promptly when due in accordance with their terms, and pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it. SECTION 5.03. LITIGATION AND OTHER NOTICES. Give the Lender prompt written notice of the following: (a) the issuance by any court or governmental agency or authority of any injunction, order or other restraint prohibiting, or having the effect of prohibiting, the performance of this Agreement, any other related Transaction Document, the maintaining of its Loan or any other related Transaction or the initiation of any litigation, or any claim or contro- versy which might result in the initiation of any litigation, seeking any such injunction, order or other restraint; (b) the filing or commencement of any action, suit or proceeding, whether at law or in equity or by or before any court or any Federal, state, municipal or other governmental agency or authority, which may reasonably be expected to materially impair the right or the ability of such Borrower to perform its obligations under this Agreement or any other related Transaction Document, or materially and adversely affect the business, assets, properties, operations, prospects or condition, financial or otherwise, of such Borrower; (c) any Event of Default or Default, specifying the nature and extent thereof and the action (if any) which is proposed to be taken with respect thereto; and (d) any development in the business or affairs of such Borrower which has resulted in or which could, in the reasonable judgment of such Borrower, result in a material adverse change in the business, assets, properties, operations or condition, financial or otherwise, or prospects of such Borrower. SECTION 5.04. FURTHER ASSURANCE. Execute any and all further documents, financing statements, agreements and instruments, and take all further actions (including filing Uniform Commercial Code financing statements, mortgages and 13 other instruments), which may be required under applicable law, or which the Lender may reasonably request, in order to effectuate the Transactions and in order to grant, preserve, protect and perfect the validity and priority of the security interests created by the Security Documents. SECTION 5.05. USE OF PROCEEDS. Use the proceeds of its Loan solely for the purpose of repayment of its indebtedness. SECTION 5.06. SECURITIES LAWS. Make or cause to be made all filings or reportings required by applicable Federal or state securities law in connection with the Transactions as soon as possible (but in any event before the expiration of the period, or no later than the date, prescribed by such law). ARTICLE VI EVENTS OF DEFAULT In case of the occurrence of any of the following events (herein called Events of Default) with respect to a Borrower: (a) default shall be made in the payment of any principal of or interest on its Loan, when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; (b) any representation or warranty made or deemed made by it in or in connection with any of the related Transaction Documents shall prove to have been false or misleading in any material respect when made; (c) default shall be made in the due observance or performance of any other covenant, condition or agreement to be observed or performed on the part of such Borrower pursuant to the terms of this Agreement, or any other related Transaction Document, and such default shall continue for a period of 10 days after written notice thereof from the Lender; (d) such Borrower shall (i) voluntarily commence any proceeding or file any petition seeking relief under any Federal, state or foreign bank- ruptcy, 14 insolvency, liquidation or similar law, (ii) consent to the institution of, or fail to contravene in a timely and appropriate manner, any such pro- ceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for such Borrower or for a substantial part of its property or assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due, or (vii) take action for the purpose of effecting any of the foregoing; (e) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of such Borrower or of a substantial part of the property or assets of such Borrower under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for such Borrower or for a substantial part of the property of such Borrower or (iii) the liquidation of such Borrower; and such proceeding or petition shall continue undismissed for 30 days or an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for 30 days; then, and in any such event, the Lender may declare the related Note due and payable; whereupon the principal of such Note, together with accrued interest thereon and any other fees and other liabilities of such Borrower accrued hereunder, shall become forthwith due and payable both as to principal and interest, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in such Note or any other related Transaction Document to the contrary notwithstanding. ARTICLE VII MISCELLANEOUS SECTION 7.01. NOTICES. Notices and other communications provided for herein shall be in writing and 15 shall be delivered or mailed (or in the case of telegraphic communication, delivered by telex, graphic scanning or other telegraphic communications equipment) addressed, (a) if to a Borrower, at 8800 North Central Expressway Suite 1300 Dallas, Texas 75206 Attention: Shari Robertson Facsimile No.: 214-891-8311 Telephone No.: 214-891-8341; and (b) if to the Lender, at 13 Route de Florissant P.O. Box 280 1211 Geneva 12 Switzerland Attention: Financial Controller Telex No.: 428345; Answerback: LBF CH Facsimile No.: 4122-789-1929 Telephone No.: 4122-789-0789. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if hand delivered or three days after being sent by registered or certified mail, postage prepaid, return receipt requested, if by mail, or upon confirmed receipt, if by any telegraphic or telex communications equipment, in each case addressed to such party as provided in this Section or in accordance with the latest unrevoked direction from such party. SECTION 7.02. SURVIVAL OF AGREEMENT. All covenants, agreements, representations and warranties made by each Borrower herein shall be considered to have been relied upon by the Lender and shall survive the making by the Lender of the related Loan and the execution and delivery to the Lender of the related Note and shall continue in full force and effect as long as the principal of or any accrued interest on the related Note is outstanding and unpaid. SECTION 7.03. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the Borrowers and the Lender and inure to the benefit of the Borrowers, the Lender and LBI and their respective successors and assigns. No 16 Borrower may assign or transfer any of its rights or obligations hereunder without the written consent of the Lender. The Lender may assign to one or more banks or other entities all or a portion of its interests, rights and obligations under this Agreement, the Notes and the other Transaction Documents, PROVIDED, in the case of an assignment to a person other than an Affiliate of the Lender, it obtains the prior written consent of each related Borrower (not to be unreasonably withheld). SECTION 7.04. EXPENSES OF THE LENDER; INDEMNITY. (a) Each Borrower agrees to indemnify the Lender, its directors, officers, employees, agents and affiliates against, and to hold the Lender and each such person harmless from, any and all losses, claims, damages, liabilities and related expenses, including counsel fees and expenses, incurred by or asserted against the Lender or any such persons arising out of, in any way in connection with, or as a result of any of its related Transaction Documents; PROVIDED, HOWEVER, any such indemnity shall not apply to any such losses, claims, damages, liabilities or related expenses arising from the Lender's gross negligence or wilful misconduct. (b) The provisions of this Section shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, any of the other related Transaction Documents or the invalidity or unenforceability of any term or provision of this Agreement or any related Transaction Document. All amounts due under this Section shall be payable on written demand therefor. SECTION 7.05. RIGHT OF SETOFF. Each of the Lender and LBI is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by it to or for the credit or the account of a Borrower against any of and all the obligations of a such Borrower now or hereafter existing under this Agreement and the other related Transaction Documents, irrespective of whether or not the Lender shall have made any demand under this Agreement or such other related Transaction Document. The Lender agrees promptly to notify such Borrower after any such setoff and application made by it or LBI, but the failure to give such notice shall not affect the validity of such setoff and application. The 17 rights of the Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) which the Lender may have. SECTION 7.06. APPLICABLE LAW. This Agreement and the Notes shall be construed in accordance with and governed by the laws of the State of New York. SECTION 7.07. PAYMENTS ON BUSINESS DAYS. Should the principal of or interest on a Note, or any other amount payable hereunder, become due and payable on other than a Business Day, payment in respect thereof may be made on the next succeeding Business Day, and such extension of time shall in such case be included in computing interest, if any, in connection with such payment. SECTION 7.08. WAIVERS; AMENDMENTS. No failure or delay of the Lender in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Lender hereunder are cumulative and not exclusive of any rights or remedies which it would otherwise have. No waiver of any provision of this Agreement or the Notes or consent to any departure by a Borrower therefrom shall in any event be effective unless the same shall be in writing signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on a Borrower in any case shall entitle such Borrower to any other or further notice or demand in similar or other circumstances. No amendment to this Agreement shall be effective unless it is in writing signed by the Lender and each Borrower. SECTION 7.09. CONSENT TO JURISDICTION. Each of the parties hereto irrevocably submits to the jurisdiction of the United States District Court for the Southern District of New York, any court in the State of New York located in the City and County of New York, and any appellate court from any thereof, in any action, suit or proceeding brought against it and related to or in connection with this Agreement, the other Transaction Documents or the Transactions or for recognition or enforcement of any judgment, and each of the parties hereto irrevocably and unconditionally agrees that all claims in 18 respect of any such suit or action or proceeding may be heard or determined in such New York State court or, to the extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law. To the extent permitted by applicable law, each of the parties hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or any of the other Transaction Documents or the subject matter hereof or thereof may not be litigated in or by such courts. SECTION 7.10. WAIVER OF JURY TRIAL. Except as prohibited by law, each party hereto hereby waives any right it may have to a trial by jury in respect of any litigation directly or indirectly arising out of, under or in connection with this Agreement, the other Transaction Documents or the Transactions. SECTION 7.11. SEVERABILITY. If any one or more of the provisions contained in this Agreement or in the Notes should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable and the validity, legality and enforceability of the remaining provisions contained herein or therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7.12. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. SECTION 7.13. HEADINGS. Article and Section headings and the Table of Contents used herein are for convenience of reference only and are not to affect the 19 construction of, or to be taken into consideration in interpreting, this Agreement. IN WITNESS WHEREOF, the Borrowers and the Lender have caused this Agreement to be duly executed as of the day and year first above written. LEHMAN BROTHERS FINANCE, S.A., by _____________________________ Title: TALLULAH LTD., by ______________________________ Title: SAM WYLY as trustee for Andrew David Sparrow Wyly ______________________________ SAM WYLY as trustee for Christiana Parker Wyly ______________________________ SAM WYLY as trustee for Laurie L. Wyly ______________________________ 20 SAM WYLY as trustee for Lisa Wyly ______________________________ SAM WYLY as trustee for Kelly Wyly Elliott ______________________________ MAVERICK ENTERPRENEURS FUND, LTD., by ______________________________ Title: SCHEDULE A THE BORROWERS Principal Amount Number Name of Loan of Shares ---- ---------------- --------- Tallulah Ltd. 485,000 Sam Wyly as trustee 45,000 for the benefit of Andrew David Sparrow Wyly Sam Wyly as trustee 45,000 for the benefit of Christiana Parker Wyly Sam Wyly as trustee 65,000 for the benefit of Laurie L. Wyly Sam Wyly as trustee 65,000 for the benefit of Lisa Wyly Sam Wyly as trustee 65,000 for the benefit of Kelly Wyly Elliott Maverick 200,000 Entrepreneurs Fund, Ltd. EXHIBIT A FORM OF PROMISSORY NOTE Date: Principal Amount: [ ] FOR VALUE RECEIVED, the undersigned, [ ], a [ ] (the "Maker"), hereby promises to pay to the order of LEHMAN BROTHERS FINANCE, S.A. (the "Holder"), at [office or bank of the relevant Borrower], on the Matu- rity Date, the lesser of the principal amount hereof and the aggregate unpaid principal amount of its Loan, in lawful money of the United States of America in immediately available funds, and to pay interest from the date hereof on the principal amount hereof from time to time outstanding, in like funds, at said office, at a rate or rates per annum and payable on such dates as determined pursuant to the terms of the Loan Agreement (as defined below). This Note is the Note of the Maker referred to in the Loan Agreement dated as of February 23, 1995 between the Maker, the Holder and the other Borrowers specified therein, as the same may be amended or modified from time to time (the "Loan Agreement"). The Loan Agreement contains additional rights of the holder hereof. Capitalized terms used but not defined herein have the meaning assigned thereto to the Loan Agreement. This Note is subject to mandatory repayment, prior to the Maturity Date, in whole or in part, as provided in the Loan Agreement. If an Event of Default occurs with respect to the Maker and is continuing, the principal and accrued interest hereon may be declared to be due and payable in the manner and with the effect provided in the Loan Agreement. If the Maker shall default in the payment of the principal of or interest on its Loan or any other amount becoming due under the Loan Agreement, by acceleration or otherwise, the Maker promises to pay interest on demand from time to time, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment. The Maker hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever, other than as expressly required by the Loan Agreement. The nonexercise by the Holder of any of its rights hereunder in 2 any particular instance shall not constitute a waiver thereof in that or any subsequent instance. This Note shall be construed in accordance with and governed by the laws of the State of New York and any applicable laws of the United States of America. This Note is secured by and entitled to the benefits of the Security Documents. [ ], by ---------------------- Title: EX-3.1 4 EXHIBIT 3.1 - ------------------------------------------------------------------------------- February 23, 1995 OPTION TRANSACTION The Name of each counterparty (each, a "Counterparty", and collectively, the "Counterparties") hereto shall be as set forth in Exhibit A which is incorporated herein by reference. 8800 North Central Expressway Suite 1300 Dallas, Texas 75206 - ------------------------------------------------------------------------------- Master Number: LBF Reference Number: Gentlemen: The purpose of this letter agreement (this "Confirmation") is to confirm the terms and conditions of the Transaction entered into between us on the Trade Date specified below (the "Option Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the ISDA Master Agreement specified below. The definitions and provisions contained in the 1991 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc. (formerly known as the International Swap Dealers Association, Inc. ("ISDA")) are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. Exhibit A is incorporated herein by reference. 1. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement, including the Pledge Agreement (the "Agreement"), to be negotiated between Lehman Brothers Finance S.A. ("LBF") and the Counterparties. All provisions contained in the Agreement govern this Confirmation except as expressly modified below. In addition, this Confirmation shall itself evidence a complete and binding agreement between you and us as to the terms and conditions of the Option Transaction to which this Confirmation relates. 2. The terms of the Option Transaction to which this Confirmation relates are as follows: GENERAL TERMS: Agent: Lehman Brothers Inc. is confirming as agent for both Buyer and Seller Trade Date: February 23, 1995 Option Style: American Option Option Type: Put Option Seller: LBF Buyer: Counterparty Underlying Shares: Common Shares of Michaels Stores Inc. Underlying Currency: USD Quotation Exchange: Nasdaq NMS Number of Options: As set forth in Exhibit A which is incorporated herein by reference. Share Entitlement per Option: 1 Underlying Share Strike Price: USD 28.5574 Premium: USD 0. Buyer and Seller agree that the Premium for this Option Transaction has been paid in full by virtue of Buyer's and Seller's execution of the Related Option Transaction. Related Option Transaction: The European Call Option Transaction entered into between Buyer and Seller on the Trade Date (LBF Reference No.: ) Exchange Business Day: A day that is (or, but for the occurrence of a Market Disruption Event, would have been) a trading day on the relevant Market Disruption Exchange(s) other than a day on which trading on any Market Disruption Exchange(s) is scheduled to close prior to its regular weekday closing time. Calculation Agent: Lehman Brothers Inc., whose determinations and calculations shall be binding in the absence of manifest error. EXERCISE: Exercise Period: Any Exchange Business Day from, and including, the Trade Date to, and including, the tenth Exchange Business Day immediately prior to the Expiration Date Expiration Date: February 23, 1998 Exercise Date: The Exchange Business Day during the Exercise Period on which that Option is or is deemed to be exercised. Notice of Exercise and Written Confirmation: Applicable. If the notice of exercise is delivered after 1:00 p.m. (local time in New York) on an Exchange Business Day, then that notice will be deemed delivered on the next following Exchange Business Day, if any, in the Exercise Period. Automatic Exercise: If, on the Expiration Date, the Option is in-the-money, then the Option shall be deemed automatically exercised unless the Buyer notifies the Seller to the contrary. Multiple Exercise: Inapplicable Seller's telephone or Vuk Bulajic facsimile number and Tel #: 212-526-0905 contact details for Fax #: 212-528-7337 purposes of giving cc: Jim Staricco notice: Tel #: 4122-789-0789 Fax #: 4122-789-1929 VALUATION: Valuation Date: Each Exchange Business Day during the Valuation Period on which a Market Disruption Event has not occurred. 2 Valuation Period: The Exchange Business Days from, and including, the Exercise Date to, and including the ninth Exchange Business Day immediately following the Exercise Date; provided, however, that if the Option Transaction is exercised pursuant to the Automatic Exercise provision set forth above, then the Valuation Period will be the ten (10) Exchange Business Days immediately prior to, and including, the Expiration Date. Final Price: The arithmetic average of the closing prices of the Underlying Shares on each Valuation Date. If a Market Disruption Event occurs on one or more of the Exchange Business Days during the Valuation Period, then the Final Price will equal the average of the closing prices of the Underlying Shares on the Exchange Business Days during the Valuation Period on which a Market Disruption Event has not occurred or, if there is only one such Exchange Business Day, the closing price of the Underlying Shares on such day. If a Market Disruption Event occurs on all Exchange Business Days during the Valuation Period, then the Calculation Agent will determine the Final Price of the Underlying Shares on the last Exchange Business Day of the Valuation Period, regardless of whether a Market Disruption Event has occurred on such day. Market Disruption Event: The occurrence or existence during the Market Disruption Period that ends at the close of the Market Disruption Exchange(s) on the Valuation Date of any of the following events, in the determination of the Calculation Agent: The suspension of or material limitation imposed on trading in (1) the Underlying Shares or (2) any options contracts on the Underlying Shares. Market Disruption Period: One-half hour Market Disruption Exchange(s): The Quotation Exchange SETTLEMENT: Method of Settlement: Cash Settlement Settlement Currency: The Underlying Currency Cash Settlement Amount: An amount, as calculated by the Calculation Agent, equal to the Number of Options MULTIPLIED by the Strike Price Differential MULTIPLIED by the Share Entitlement per Option Strike Price Differential: An amount equal to the greater of (i) the excess of the Strike Price over the Final Price, and (ii) zero. Cash Settlement Payment Date: Five (5) Exchange Business Days after the final Valuation Date. DIVIDENDS: If, at any time during the period from and including the Trade Date to but excluding the Cash Settlement Payment Date, an ex-dividend occurs with respect to the Underlying Shares, then the Strike Price shall be reduced by the corresponding amount. 3 OTHER PROVISIONS: Counterparty Representation: Counterparty represents that (i) it is not entering into the Option Transaction on behalf of or for the accounts of any other person or entity, and will not transfer or assign its obligations under the Option Transaction or any portion of such obligations to any other person or entity except in compliance with applicable laws and the terms of the Option Transaction; (ii) it is authorized to enter into the Option Transaction and such action does not violate any laws of its jurisdiction of organization or residence or the terms of any agreement to which it is a party; and (iii) it has reached its own conclusions about the Option Transaction, and any legal, regulatory, tax, accounting or economic consequences arising from the Option Transaction, and has concluded that the Option Transaction is suitable in light of its own investment objectives, financial capabilities and expertise. Counterparty represents that (i) it has held the Underlying Shares since at least February 1, 1992 (except for the 200,000 Underlying Shares pledged by Maverick Entrepreneurs Fund, Ltd. that have been held since at least May 30, 1994); (ii) it acquired the Underlying Shares in private transactions from Michaels Stores Inc.; (except for the 200,000 Underlying Shares pledged by Maverick Entrepreneurs Fund, Ltd. that were acquired in open-market purchases); (iii) the amount of Underlying Shares sold by it and by all persons whose sales are required to be taken into consideration pursuant to paragraph (e) of Rule 144 under the Securities Act of 1933 during the preceding three months is zero; and (iv) it, and any person whose sales are required to be taken into consideration pursuant to paragraph (e) of Rule 144 under the Securities Act of 1933, will not sell additional securities of the same class through any other means during (a) the three month period commencing on the Trade Date, or (b) the three month period immediately prior to the Expiration Date, in each case, without the prior written consent of LBF. Notwithstanding the above, Counterparty or any person whose securities are required to be taken into consideration by it pursuant to paragraph (e) of Rule 144 under the Securities Act of 1933 may, at any other time during the term of this Option Transaction, sell additional securities of the same class upon providing LBF with written notice two (2) Exchange Business Days immediately prior to the date of such sale. NEITHER LBF NOR ANY OF ITS AFFILIATES HAS ADVISED COUNTERPARTY WITH RESPECT TO ANY LEGAL, REGULATORY, TAX, ACCOUNTING OR ECONOMIC CONSEQUENCES ARISING FROM THIS OPTION TRANSACTION, AND NEITHER LBF NOR ANY OF ITS AFFILIATES IS ACTING AS AGENT OR ADVISOR FOR COUNTERPARTY IN CONNECTION WITH THIS OPTION TRANSACTION. 4 Settlement Provision: a) Seller's obligations to Buyer under this Option Transaction, if any, shall not accrue until Buyer's obligations under the Pledge Agreement are fully satisfied. b) All payments under this Option Transaction will be made without any deduction or withholding for or on account of any withholding tax, stamp tax, or any other tax, duties, fees or commissions required by any applicable law. c) Buyer shall have no right to unwind or exercise this Option Transaction, in whole or in part, prior to the repayment by Buyer of all amounts due Seller under the Loan Agreement between Buyer and Seller, dated the date hereof. Adjustments: The Calculation Agent will make adjustments to this Option Transaction in case of the occurrence of certain events as follows: (i) If a stock dividend or other stock distribution is declared with respect to the Underlying Shares, then (a) the Number of Options shall be increased by the same number of shares issued MULTIPLIED by the Share Entitlement per Option, and (b) the Strike Price shall be proportionately reduced as soon as such event becomes effective. (ii) If a spin-off has occurred with respect to the Underlying Shares, then (a) any property distributed or apportioned with respect to the Underlying Shares, to the extent of such distribution or apportionment, shall be included in any valuation of the Underlying Shares, and (b) the Strike Price shall not be adjusted. Governing Law: New York Transfer: Neither party may transfer any Option, in whole or in part, without the prior written consent of the non-transferring party, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, LBF may assign this Option Transaction to any affiliated entity whose obligations in respect of such assignment are guaranteed by the guarantor of LBF's obligations; PROVIDED, HOWEVER, that (i) the transferring party will notify the other party of any such assignment and (ii) such assignment shall not be permitted hereunder if, as a result of the assignment, a payment hereunder becomes subject to any deduction or withholding for or on account of any tax which would not have arisen had such assignment not been effected. Guarantee: Lehman Brothers Holdings Inc. shall unconditionally guarantee to Counterparty the due and punctual payment of all amounts payable by LBF under this Option Transaction as such payments become due and payable. ACCOUNT DETAILS: LBF's payment instructions: Chemical Bank, New York ABA Number: 021000128 Favour: Lehman Brothers Finance S.A. Account Number: 066-196566 5 LBF's delivery instructions: Citibank, N.A. New York, USA Account Bear Stearns Securities Corporation ABA Number 021000089 For the account of Lehman Brothers Counterparty's payment instructions: As set forth in Exhibit A which is incorporated herein by reference. 6 Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: TALLULAH, LTD. By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: SAM WYLY TTEE FOR THE BENEFIT OF ANDREW DAVID SPARROW WYLY TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: SAM WYLY TTEE FOR THE BENEFIT OF CHRISTIANA PARKER WYLY TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: SAM WYLY TTEE FOR THE BENEFIT OF LAURIE L. WYLY REVOCABLE TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: SAM WYLY TTEE FOR THE BENEFIT OF LISA WYLY REVOCABLE TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: SAM WYLY TTEE FOR THE BENEFIT OF KELLY WYLY ELLIOTT TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: MAVERICK ENTREPRENEURS FUND, LTD. By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. EXHIBIT A SAM WYLY GROUP COLLAR TRANSACTION - MICHAELS STORES INC. - ------------------------------------------------------------------------------- COUNTERPARTY NUMBER OF PAYMENT INSTRUCTIONS SHARES/OPTIONS - ------------------------------------------------------------------------------- TALLULAH, LTD. 485,000 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Tallulah, Ltd. Further Credit #: 837- 20011 - ------------------------------------------------------------------------------- Sam Wyly, trustee for the benefit of: - ------------------------------------------------------------------------------- ANDREW DAVID SPARROW WYLY TRUST 45,000 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Andrew David Sparrow Wyly Trust Further Credit #: 837- 20000 - ------------------------------------------------------------------------------- CHRISTIANA PARKER 45,000 Chemical Bank, NY WYLY TRUST ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Christiana Parker Wyly Trust Further Credit #: 837- 20002 - ------------------------------------------------------------------------------- EXHIBIT A (CONT'D) SAM WYLY GROUP COLLAR TRANSACTION - MICHAELS STORES INC. - ------------------------------------------------------------------------------- COUNTERPARTY NUMBER OF PAYMENT INSTRUCTIONS SHARES/OPTIONS - ------------------------------------------------------------------------------- LAURIE L. WYLY 65,000 Chemical Bank, NY REVOCABLE TRUST ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Laurie L. Wyly Revocable Trust Further Credit #: 837- 20006 - ------------------------------------------------------------------------------- LISA WYLY 65,000 Chemical Bank, NY REVOCABLE TRUST ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Lisa Wyly Revocable Trust Further Credit #: 837- 20007 - ------------------------------------------------------------------------------- KELLY WYLY 65,000 Chemical Bank, NY ELLIOTT TRUST ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Kelly Wyly Elliott Trust Further Credit #: 837- 20009 - ------------------------------------------------------------------------------- EXHIBIT A (CONT'D) SAM WYLY GROUP COLLAR TRANSACTION - MICHAELS STORES INC. - ------------------------------------------------------------------------------- COUNTERPARTY NUMBER OF PAYMENT INSTRUCTIONS SHARES/OPTIONS - ------------------------------------------------------------------------------- MAVERICK 200,000 Chemical Bank, NY ENTREPRENEURS ABA #: 021000128 FUND LTD. A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Maverick Entrepreneurs Fund, Ltd. Further Credit #: 837- 20012 - ------------------------------------------------------------------------------- EX-3.2 5 EXHIBIT 3.2 - ------------------------------------------------------------------------------- February 23, 1995 OPTION TRANSACTION The Name of each counterparty (each, a "Counterparty", and collectively, the "Counterparties") hereto shall be as set forth in Exhibit A which is incorporated herein by reference. 8800 North Central Expressway Suite 1300 Dallas, Texas 75206 - ------------------------------------------------------------------------------- Master Number: LBF Reference Number: Gentlemen: The purpose of this letter agreement (this "Confirmation") is to confirm the terms and conditions of the Transaction entered into between us on the Trade Date specified below (the "Option Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the ISDA Master Agreement specified below. The definitions and provisions contained in the 1991 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc. (formerly known as the International Swap Dealers Association, Inc. ("ISDA")) are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. Exhibit A is incorporated herein by reference. 1. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement, including the Pledge Agreement (the "Agreement"), to be negotiated between Lehman Brothers Finance S.A. ("LBF") and the Counterparties. All provisions contained in the Agreement govern this Confirmation except as expressly modified below. In addition, this Confirmation shall itself evidence a complete and binding agreement between you and us as to the terms and conditions of the Option Transaction to which this Confirmation relates. 2. The terms of the Option Transaction to which this Confirmation relates are as follows: GENERAL TERMS: GENERAL TERMS: Agent: Lehman Brothers Inc. is confirming as agent for both Buyer and Seller Trade Date: February 23, 1995 Option Style: European Option Option Type: Call Option Seller: Counterparty Buyer: LBF Underlying Shares: Common Shares of Michaels Stores Inc. Underlying Currency: USD Quotation Exchange: Nasdaq NMS Number of Options: As set forth in Exhibit A which is incorporated herein by reference. Share Entitlement per Option: 1 Underlying Share Strike Price: USD 48.2302 Premium: USD 0. Buyer and Seller agree that the Premium for this Option Transaction has been paid in full by virtue of Buyer's and Seller's execution of the Related Option Transaction. Related Option Transaction: The American Put Option Transaction entered into between Buyer and Seller on the Trade Date (LBF Reference No.: ) Exchange Business Day: A day that is (or, but for the occurrence of a Market Disruption Event, would have been) a trading day on the relevant Market Disruption Exchange(s) other than a day on which trading on any Market Disruption Exchange(s) is scheduled to close prior to its regular weekday closing time. Calculation Agent: Lehman Brothers Inc., whose determinations and calculations shall be binding in the absence of manifest error. EXERCISE: Exercise Period: The Expiration Date Expiration Date: February 23, 1998 Exercise Date: The Exchange Business Day during the Exercise Period on which that Option is or is deemed to be exercised. Automatic Exercise: If, on the Expiration Date, the Option is in- the-money, then the Option shall be deemed automatically exercised unless the Buyer notifies the Seller to the contrary. Multiple Exercise: Inapplicable Seller's telephone or Shari Robertson facsimile number and Tel #: 214-891-8341 contact details for Fax #: 214-891-8311 purposes of giving notice: VALUATION: Valuation Date: Each Exchange Business Day during the Valuation Period on which a Market Disruption Event has not occurred. Valuation Period: The ten (10) Exchange Business Days immediately prior to, and including, the Exercise Date. Final Price: The arithmetic average of the closing prices of the Underlying Shares on each Valuation Date. If a Market Disruption Event occurs on one or more of the Exchange Business Days during the Valuation Period, then the Final Price will equal the average of the closing prices of the Underlying Shares on the Exchange Business Days during the Valuation Period on which a Market Disruption Event has not occurred or, if there is only one such Exchange Business Day, the closing price of the Underlying Shares on such day. If a Market Disruption Event occurs on all Exchange Business Days during the Valuation Period, then the Calculation Agent will determine the Final Price of the Underlying Shares on the last Exchange Business Day of the Valuation Period, regardless of whether a Market Disruption Event has occurred on such day. 2 Market Disruption Event: The occurrence or existence during the Market Disruption Period that ends at the close of the Market Disruption Exchange(s) on the Valuation Date of any of the following events, in the determination of the Calculation Agent: The suspension of or material limitation imposed on trading in (1) the Underlying Shares or (2) any options contracts on the Underlying Shares. Market Disruption Period: One-half hour Market Disruption Exchange(s): The Quotation Exchange SETTLEMENT: Method of Settlement: Cash Settlement Settlement Currency: The Underlying Currency Cash Settlement Amount: An amount, as calculated by the Calculation Agent, equal to the Number of Options MULTIPLIED by the Strike Price Differential MULTIPLIED by the Share Entitlement per Option. Strike Price Differential: An amount equal to the greater of (i) the excess of the Final Price over the Strike Price and (ii) zero. Cash Settlement Payment Date: Five (5) Exchange Business Days after the final Valuation Date. Dividends: If, at any time during the period from and including the Trade Date to but excluding the Cash Settlement Payment Date, an ex-dividend date occurs with respect to the Underlying Shares, then the Strike Price shall be reduced by the corresponding amount. COLLATERAL: On the Trade Date, Counterparty shall pledge to LBF the Underlying Shares as Collateral for this Option Transaction (the "Upfront Collateral"). Such Upfront Collateral shall be pledged to LBF until the Cash Settlement Payment Date and Counterparty's performance of its obligations under this Option Transaction shall be secured by the Upfront Collateral. 3 Other Provisions: Counterparty Representation: Counterparty represents that (i) it is not entering into the Option Transaction on behalf of or for the accounts of any other person or entity, and will not transfer or assign its obligations under the Option Transaction or any portion of such obligations to any other person or entity except in compliance with applicable laws and the terms of the Option Transaction; (ii) it is authorized to enter into the Option Transaction and such action does not violate any laws of its jurisdiction of organization or residence or the terms of any agreement to which it is a party; and (iii) it has reached its own conclusions about the Option Transaction, and any legal, regulatory, tax, accounting or economic consequences arising from the Option Transaction, and has concluded that the Option Transaction is suitable in light of its own investment objectives, financial capabilities and expertise. Counterparty represents that (i) it has held the Underlying Shares since at least February 1, 1992 (except for the 200,000 Underlying Shares pledged by Maverick Entrepreneurs Fund, Ltd. that have been held since at least May 30, 1994); (ii) it acquired the Underlying Shares in private transactions from Michaels Stores Inc. (except for the 200,000 Underlying Shares pledged by Maverick Entrepreneures Fund, Ltd. that were acquired in open-market purchases); (iii) the amount of Underlying Shares sold by it and by all persons whose sales are required to be taken into consideration pursuant to paragraph (e) of Rule 144 under the Securities Act of 1933 during the preceding three months is zero; and (iv) it, and any person whose sales are required to be taken into consideration pursuant to paragraph (e) of Rule 144 under the Securities Act of 1933, will not sell additional securities of the same class through any other means during (a) the three month period commencing on the Trade Date, or (b) the three month period immediately prior to the Expiration Date, in each case, without the prior written consent of LBF. Notwithstanding the above, Counterparty or any person whose securities are required to be taken into consideration by it pursuant to paragraph (e) of Rule 144 under the Securities Act of 1933 may, at any other time during the term of this Option Transaction, sell additional securities of the same class upon providing LBF with written notice two (2) Exchange Business Days immediately prior to the date of such sale. NEITHER LBF NOR ANY OF ITS AFFILIATES HAS ADVISED COUNTERPARTY WITH RESPECT TO ANY LEGAL, REGULATORY, TAX, ACCOUNTING OR ECONOMIC CONSEQUENCES ARISING FROM THIS OPTION TRANSACTION, AND NEITHER LBF NOR ANY OF ITS AFFILIATES IS ACTING AS AGENT OR ADVISOR FOR COUNTERPARTY IN CONNECTION WITH THIS OPTION TRANSACTION. 4 Settlement Provision: a) All payments under this Option Transaction will be made without any deduction or withholding for or on account of any withholding tax, stamp tax, or any other tax, duties, fees or commissions required by any applicable law. b) Seller's obligations to Buyer hereunder are secured under the terms of the Pledge Agreement. Adjustments: The Calculation Agent will make adjustments to this Option Transaction in case of the occurrence of certain events as follows: (i) If a stock dividend or other stock distribution is declared with respect to the Underlying Shares, then (a) the Number of Options shall be increased by the same number of shares issued MULTIPLIED by the Share Entitlement per Option, and (b) the Strike Price shall be proportionately reduced as soon as such event becomes effective. (ii) If a spin-off has occurred with respect to the Underlying Shares, then (a) any property distributed or apportioned with respect to the Underlying Shares, to the extent of such distribution or apportionment, shall be included in any valuation of the Underlying Shares, and (b) the Strike Price shall not be adjusted. Governing Law: New York Transfer: Neither party may transfer any Option, in whole or in part, without the prior written consent of the non-transferring party, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, LBF may assign this Option Transaction to any affiliated entity whose obligations in respect of such assignment are guaranteed by the guarantor of LBF's obligations; PROVIDED, HOWEVER, that (i) the transferring party will notify the other party of any such assignment and (ii) such assignment shall not be permitted hereunder if, as a result of the assignment, a payment hereunder becomes subject to any deduction or withholding for or on account of any tax which would not have arisen had such assignment not been effected. Guarantee: Lehman Brothers Holdings Inc. shall unconditionally guarantee to Counterparty the due and punctual payment of all amounts payable by LBF under this Option Transaction as such payments become due and payable. ACCOUNT DETAILS: LBF's payment instructions: Chemical Bank, New York ABA Number: 021000128 Favour: Lehman Brothers Finance S.A. Account Number: 066-196566 5 LBF's delivery instructions: Citibank, N.A. New York, USA Account Bear Stearns Securities Corporation ABA Number 021000089 For the account of Lehman Brothers Counterparty's payment instructions: As set forth in Exhibit A which is incorporated herein by reference. 6 Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: TALLULAH, LTD. By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: SAM WYLY TTEE for the benefit of ANDREW DAVID SPARROW WYLY TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: SAM WYLY TTEE for the benefit of CHRISTIANA PARKER WYLY TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: SAM WYLY TTEE for the benefit of LAURIE L. WYLY REVOCABLE TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: SAM WYLY TTEE for the benefit of LISA WYLY REVOCABLE TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: SAM WYLY TTEE for the benefit of KELLY WYLY ELLIOTT TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: MAVERICK ENTREPRENEURS FUND, LTD. By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. EXHIBIT A SAM WYLY GROUP COLLAR TRANSACTION - MICHAELS STORES INC. - ------------------------------------------------------------------------------- COUNTERPARTY NUMBER OF PAYMENT INSTRUCTIONS SHARES/OPTIONS - ------------------------------------------------------------------------------- TALLULAH, LTD. 485,000 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Tallulah, Ltd. Further Credit #: 837- 20011 - ------------------------------------------------------------------------------- Sam Wyly, Trustee for the benefit of: - ------------------------------------------------------------------------------- ANDREW DAVID SPARROW WYLY TRUST 45,000 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Andrew David Sparrow Wyly Trust Further Credit #: 837- 20000 - ------------------------------------------------------------------------------- CHRISTIANA PARKER 45,000 Chemical Bank, NY WYLY TRUST ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Christiana Parker Wyly Trust Further Credit #: 837- 20002 - ------------------------------------------------------------------------------- EXHIBIT A (CONT'D) SAM WYLY GROUP COLLAR TRANSACTION - MICHAELS STORES INC. - ------------------------------------------------------------------------------- COUNTERPARTY NUMBER OF PAYMENT INSTRUCTIONS SHARES/OPTIONS - ------------------------------------------------------------------------------- LAURIE L. WYLY 65,000 Chemical Bank, NY REVOCABLE TRUST ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Laurie L. Wyly Revocable Trust Further Credit #: 837- 20006 - ------------------------------------------------------------------------------- LISA WYLY 65,000 Chemical Bank, NY REVOCABLE TRUST ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Lisa Wyly Revocable Trust Further Credit #: 837- 20007 - ------------------------------------------------------------------------------- KELLY WYLY 65,000 Chemical Bank, NY ELLIOTT TRUST ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Kelly Wyly Elliott Trust Further Credit #: 837- 20009 - ------------------------------------------------------------------------------- EXHIBIT A (CONT'D) SAM WYLY GROUP COLLAR TRANSACTION - MICHAELS STORES INC. - ------------------------------------------------------------------------------- COUNTERPARTY NUMBER OF PAYMENT INSTRUCTIONS SHARES/OPTIONS - ------------------------------------------------------------------------------- MAVERICK ENTREPRENEURS FUND LTD. 200,000 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Maverick Entrepreneurs Fund, Ltd. Further Credit #: 837- 20012 - ------------------------------------------------------------------------------- EX-3.3 6 EXHIBIT 3.3 - ------------------------------------------------------------------------------- February 23, 1995 OPTION TRANSACTION The Name of each counterparty (each, a "Counterparty", and collectively, the "Counterparties") hereto shall be as set forth in Exhibit A which is incorporated herein by reference. 8800 North Central Expressway Suite 1300 Dallas, Texas 75206 - ------------------------------------------------------------------------------- Master Number: LBF Reference Number: Gentlemen: The purpose of this letter agreement (this "Confirmation") is to confirm the terms and conditions of the Transaction entered into between us on the Trade Date specified below (the "Option Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the ISDA Master Agreement specified below. The definitions and provisions contained in the 1991 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc. (formerly known as the International Swap Dealers Association, Inc. ("ISDA")) are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. Exhibit A is incorporated herein by reference. 1. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement, including the Pledge Agreement (the "Agreement"), to be negotiated between Lehman Brothers Finance S.A. ("LBF") and the Counterparties. All provisions contained in the Agreement govern this Confirmation except as expressly modified below. In addition, this Confirmation shall itself evidence a complete and binding agreement between you and us as to the terms and conditions of the Option Transaction to which this Confirmation relates. 2. The terms of the Option Transaction to which this Confirmation relates are as follows: GENERAL TERMS: Agent: Lehman Brothers Inc. is confirming as agent for both Buyer and Seller Trade Date: February 23, 1995 Option Style: American Option Option Type: Put Option Seller: LBF Buyer: Counterparty Underlying Shares: Common Shares of Michaels Stores Inc. Underlying Currency: USD Quotation Exchange: Nasdaq NMS Number of Options: As set forth in Exhibit A which is incorporated herein by reference. Share Entitlement per Option: 1 Underlying Share Strike Price: USD 28.5574 Premium: USD 0. Buyer and Seller agree that the Premium for this Option Transaction has been paid in full by virtue of Buyer's and Seller's execution of the Related Option Transaction. Related Option Transaction: The European Call Option Transaction entered into between Buyer and Seller on the Trade Date (LBF Reference No.: ) Exchange Business Day: A day that is (or, but for the occurrence of a Market Disruption Event, would have been) a trading day on the relevant Market Disruption Exchange(s) other than a day on which trading on any Market Disruption Exchange(s) is scheduled to close prior to its regular weekday closing time. Calculation Agent: Lehman Brothers Inc., whose determinations and calculations shall be binding in the absence of manifest error. EXERCISE: Exercise Period: Any Exchange Business Day from, and including, the Trade Date to, and including, the tenth Exchange Business Day immediately prior to the Expiration Date Expiration Date: February 23, 1998 Exercise Date: The Exchange Business Day during the Exercise Period on which that Option is or is deemed to be exercised. Notice of Exercise and Written Confirmation: Applicable. If the notice of exercise is delivered after 1:00 p.m. (local time in New York) on an Exchange Business Day, then that notice will be deemed delivered on the next following Exchange Business Day, if any, in the Exercise Period. Automatic Exercise: If, on the Expiration Date, the Option is in-the-money, then the Option shall be deemed automatically exercised unless the Buyer notifies the Seller to the contrary. Multiple Exercise: Inapplicable Seller's telephone or Vuk Bulajic facsimile number and Tel #: 212-526-0905 contact details for Fax #: 212-528-7337 purposes of giving cc: Jim Staricco notice: Tel #: 4122-789-0789 Fax #: 4122-789-1929 VALUATION: Valuation Date: Each Exchange Business Day during the Valuation Period on which a Market Disruption Event has not occurred. 2 Valuation Period: The Exchange Business Days from, and including, the Exercise Date to, and including the ninth Exchange Business Day immediately following the Exercise Date; provided, however, that if the Option Transaction is exercised pursuant to the Automatic Exercise provision set forth above, then the Valuation Period will be the ten (10) Exchange Business Days immediately prior to, and including, the Expiration Date. Final Price: The arithmetic average of the closing prices of the Underlying Shares on each Valuation Date. If a Market Disruption Event occurs on one or more of the Exchange Business Days during the Valuation Period, then the Final Price will equal the average of the closing prices of the Underlying Shares on the Exchange Business Days during the Valuation Period on which a Market Disruption Event has not occurred or, if there is only one such Exchange Business Day, the closing price of the Underlying Shares on such day. If a Market Disruption Event occurs on all Exchange Business Days during the Valuation Period, then the Calculation Agent will determine the Final Price of the Underlying Shares on the last Exchange Business Day of the Valuation Period, regardless of whether a Market Disruption Event has occurred on such day. Market Disruption Event: The occurrence or existence during the Market Disruption Period that ends at the close of the Market Disruption Exchange(s) on the Valuation Date of any of the following events, in the determination of the Calculation Agent: The suspension of or material limitation imposed on trading in (1) the Underlying Shares or (2) any options contracts on the Underlying Shares. Market Disruption Period: One-half hour Market Disruption Exchange(s): The Quotation Exchange SETTLEMENT: Method of Settlement: Cash Settlement Settlement Currency: The Underlying Currency Cash Settlement Amount: An amount, as calculated by the Calculation Agent, equal to the Number of Options MULTIPLIED by the Strike Price Differential MULTIPLIED by the Share Entitlement per Option Strike Price Differential: An amount equal to the greater of (i) the excess of the Strike Price over the Final Price, and (ii) zero. Cash Settlement Payment Date: Five (5) Exchange Business Days after the final Valuation Date. Dividends: If, at any time during the period from and including the Trade Date to but excluding the Cash Settlement Payment Date, an ex-dividend occurs with respect to the Underlying Shares, then the Strike Price shall be reduced by the corresponding amount. 3 OTHER PROVISIONS: Counterparty Representation: Counterparty represents that (i) it is not entering into the Option Transaction on behalf of or for the accounts of any other person or entity, and will not transfer or assign its obligations under the Option Transaction or any portion of such obligations to any other person or entity except in compliance with applicable laws and the terms of the Option Transaction; (ii) it is authorized to enter into the Option Transaction and such action does not violate any laws of its jurisdiction of organization or residence or the terms of any agreement to which it is a party; and (iii) it has reached its own conclusions about the Option Transaction, and any legal, regulatory, tax, accounting or economic consequences arising from the Option Transaction, and has concluded that the Option Transaction is suitable in light of its own investment objectives, financial capabilities and expertise. Counterparty represents that (i) it has held the Underlying Shares since at least February 1, 1992; (ii) it acquired the Underlying Shares in private transactions from Michaels Stores Inc.; (iii) the amount of Underlying Shares sold by it and by all persons whose sales are required to be taken into consideration pursuant to paragraph (e) of Rule 144 under the Securities Act of 1933 during the preceding three months is zero; and (iv) it, and any person whose sales are required to be taken into consideration pursuant to paragraph (e) of Rule 144 under the Securities Act of 1933, will not sell additional securities of the same class through any other means during (a) the three month period commencing on the Trade Date, or (b) the three month period immediately prior to the Expiration Date, in each case, without the prior written consent of LBF. Notwithstanding the above, Counterparty or any person whose securities are required to be taken into consideration by it pursuant to paragraph (e) of Rule 144 under the Securities Act of 1933 may, at any other time during the term of this Option Transaction, sell additional securities of the same class upon providing LBF with written notice two (2) Exchange Business Days immediately prior to the date of such sale. NEITHER LBF NOR ANY OF ITS AFFILIATES HAS ADVISED COUNTERPARTY WITH RESPECT TO ANY LEGAL, REGULATORY, TAX, ACCOUNTING OR ECONOMIC CONSEQUENCES ARISING FROM THIS OPTION TRANSACTION, AND NEITHER LBF NOR ANY OF ITS AFFILIATES IS ACTING AS AGENT OR ADVISOR FOR COUNTERPARTY IN CONNECTION WITH THIS OPTION TRANSACTION. 4 Settlement Provision: a) Seller's obligations to Buyer under this Option Transaction, if any, shall not accrue until Buyer's obligations under the Pledge Agreement are fully satisfied. b) All payments under this Option Transaction will be made without any deduction or withholding for or on account of any withholding tax, stamp tax, or any other tax, duties, fees or commissions required by any applicable law. c) Buyer shall have no right to unwind or exercise this Option Transaction, in whole or in part, prior to the repayment by Buyer of all amounts due Seller under the Loan Agreement between Buyer and Seller, dated the date hereof. Adjustments: The Calculation Agent will make adjustments to this Option Transaction in case of the occurrence of certain events as follows: (i) If a stock dividend or other stock distribution is declared with respect to the Underlying Shares, then (a) the Number of Options shall be increased by the same number of shares issued MULTIPLIED by the Share Entitlement per Option, and (b) the Strike Price shall be proportionately reduced as soon as such event becomes effective. (ii) If a spin-off has occurred with respect to the Underlying Shares, then (a) any property distributed or apportioned with respect to the Underlying Shares, to the extent of such distribution or apportionment, shall be included in any valuation of the Underlying Shares, and (b) the Strike Price shall not be adjusted. Governing Law: New York Transfer: Neither party may transfer any Option, in whole or in part, without the prior written consent of the non-transferring party, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, LBF may assign this Option Transaction to any affiliated entity whose obligations in respect of such assignment are guaranteed by the guarantor of LBF's obligations; PROVIDED, HOWEVER, that (i) the transferring party will notify the other party of any such assignment and (ii) such assignment shall not be permitted hereunder if, as a result of the assignment, a payment hereunder becomes subject to any deduction or withholding for or on account of any tax which would not have arisen had such assignment not been effected. Guarantee: Lehman Brothers Holdings Inc. shall unconditionally guarantee to Counterparty the due and punctual payment of all amounts payable by LBF under this Option Transaction as such payments become due and payable. ACCOUNT DETAILS: LBF's payment instructions: Chemical Bank, New York ABA Number: 021000128 Favour: Lehman Brothers Finance S.A. Account Number: 066-196566 5 LBF's delivery instructions: Citibank, N.A. New York, USA Account Bear Stearns Securities Corporation ABA Number 021000089 For the account of Lehman Brothers Counterparty's payment instructions: As set forth in Exhibit A which is incorporated herein by reference. 6 Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: BRUSH CREEK, LTD. By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF CHARLES J. WYLY III TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF JENNIFER LYNN WYLY TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF EMILY ANN WYLY TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF MARTHA CAROLINE WYLY TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. EXHIBIT A CHARLES WYLY GROUP COLLAR TRANSACTION - MICHAELS STORES INC.
COUNTERPARTY NUMBER OF PAYMENT - ------------ SHARES/OPTIONS INSTRUCTIONS -------------- ------------- BRUSH CREEK, LTD. 420,000 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers, Inc. A/C #: 140-094-221 Further Credit to: Bush Creek, Ltd. Further Credit #: 837-20010 Charles Wyly Jr. Trustee for the benefit of: CHARLES J. WYLY III TRUST 95,031 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Charles J. Wyly Jr. TTEE FBO Charles J. Wyly III Further Credit #: 837-20001 JENNIFER LYNN WYLY TRUST 96,070 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Charles J. Wyly Jr. TTEE FBO Jennifer Lynn Wyly Further Credit #: 837-20005 EXHIBIT A (Cont.) EMILY ANN WYLY TRUST 95,031 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to Charles J. Wyly Jr. TTEE FBO Emily Ann Wyly Further Credit #: 837-20003 MARTHA CAROLINE WYLY TRUST 95,031 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers, Inc. A/C #: 140-094-221 Further Credit to Charles J. Wyly Jr. TTEE FBO Martha C. Wyly Trust Further Credit #: 837-20008
EX-3.4 7 EXHIBIT 3.4 - ------------------------------------------------------------------------------- February 23, 1995 OPTION TRANSACTION The Name of each counterparty (each, a "Counterparty", and collectively, the "Counterparties") hereto shall be as set forth in Exhibit A which is incorporated herein by reference. 8800 North Central Expressway Suite 1300 Dallas, Texas 75206 - ------------------------------------------------------------------------------- Master Number: LBF Reference Number: Gentlemen: The purpose of this letter agreement (this "Confirmation") is to confirm the terms and conditions of the Transaction entered into between us on the Trade Date specified below (the "Option Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the ISDA Master Agreement specified below. The definitions and provisions contained in the 1991 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc. (formerly known as the International Swap Dealers Association, Inc. ("ISDA")) are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. Exhibit A is incorporated herein by reference. 1. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement, including the Pledge Agreement (the "Agreement"), to be negotiated between Lehman Brothers Finance S.A. ("LBF") and the Counterparties. All provisions contained in the Agreement govern this Confirmation except as expressly modified below. In addition, this Confirmation shall itself evidence a complete and binding agreement between you and us as to the terms and conditions of the Option Transaction to which this Confirmation relates. 2. The terms of the Option Transaction to which this Confirmation relates are as follows: GENERAL TERMS: GENERAL TERMS: Agent: Lehman Brothers Inc. is confirming as agent for both Buyer and Seller Trade Date: February 23, 1995 Option Style: European Option Option Type: Call Option Seller: Counterparty Buyer: LBF Underlying Shares: Common Shares of Michaels Stores Inc. Underlying Currency: USD Quotation Exchange: Nasdaq NMS Number of Options: As set forth in Exhibit A which is incorporated herein by reference. Share Entitlement per Option: 1 Underlying Share Strike Price: USD 48.2302 Premium: USD 0. Buyer and Seller agree that the Premium for this Option Transaction has been paid in full by virtue of Buyer's and Seller's execution of the Related Option Transaction. Related Option Transaction: The American Put Option Transaction entered into between Buyer and Seller on the Trade Date (LBF Reference No.: ) Exchange Business Day: A day that is (or, but for the occurrence of a Market Disruption Event, would have been) a trading day on the relevant Market Disruption Exchange(s) other than a day on which trading on any Market Disruption Exchange(s) is scheduled to close prior to its regular weekday closing time. Calculation Agent: Lehman Brothers Inc., whose determinations and calculations shall be binding in the absence of manifest error. EXERCISE: Exercise Period: The Expiration Date Expiration Date: February 23, 1998 Exercise Date: The Exchange Business Day during the Exercise Period on which that Option is or is deemed to be exercised. Automatic Exercise: If, on the Expiration Date, the Option is in- the-money, then the Option shall be deemed automatically exercised unless the Buyer notifies the Seller to the contrary. Multiple Exercise: Inapplicable Seller's telephone or Shari Robertson facsimile number and Tel #: 214-891-8341 contact details for Fax #: 214-891-8311 purposes of giving notice: VALUATION: Valuation Date: Each Exchange Business Day during the Valuation Period on which a Market Disruption Event has not occurred. Valuation Period: The ten (10) Exchange Business Days immediately prior to, and including, the Exercise Date. Final Price: The arithmetic average of the closing prices of the Underlying Shares on each Valuation Date. If a Market Disruption Event occurs on one or more of the Exchange Business Days during the Valuation Period, then the Final Price will equal the average of the closing prices of the Underlying Shares on the Exchange Business Days during the Valuation Period on which a Market Disruption Event has not occurred or, if there is only one such Exchange Business Day, the closing price of the Underlying Shares on such day. If a Market Disruption Event occurs on all Exchange Business Days during the Valuation Period, then the Calculation Agent will determine the Final Price of the Underlying Shares on the last Exchange Business Day of the Valuation Period, regardless of whether a Market Disruption Event has occurred on such day. 2 Market Disruption Event: The occurrence or existence during the Market Disruption Period that ends at the close of the Market Disruption Exchange(s) on the Valuation Date of any of the following events, in the determination of the Calculation Agent: The suspension of or material limitation imposed on trading in (1) the Underlying Shares or (2) any options contracts on the Underlying Shares. Market Disruption Period: One-half hour Market Disruption Exchange(s): The Quotation Exchange SETTLEMENT: Method of Settlement: Cash Settlement Settlement Currency: The Underlying Currency Cash Settlement Amount: An amount, as calculated by the Calculation Agent, equal to the Number of Options MULTIPLIED by the Strike Price Differential MULTIPLIED by the Share Entitlement per Option. Strike Price Differential: An amount equal to the greater of (i) the excess of the Final Price over the Strike Price and (ii) zero. Cash Settlement Payment Date: Five (5) Exchange Business Days after the final Valuation Date. Dividends: If, at any time during the period from and including the Trade Date to but excluding the Cash Settlement Payment Date, an ex-dividend date occurs with respect to the Underlying Shares, then the Strike Price shall be reduced by the corresponding amount. COLLATERAL: On the Trade Date, Counterparty shall pledge to LBF the Underlying Shares as Collateral for this Option Transaction (the "Upfront Collateral"). Such Upfront Collateral shall be pledged to LBF until the Cash Settlement Payment Date and Counterparty's performance of its obligations under this Option Transaction shall be secured by the Upfront Collateral. 3 OTHER PROVISIONS: Counterparty Representation: Counterparty represents that (i) it is not entering into the Option Transaction on behalf of or for the accounts of any other person or entity, and will not transfer or assign its obligations under the Option Transaction or any portion of such obligations to any other person or entity except in compliance with applicable laws and the terms of the Option Transaction; (ii) it is authorized to enter into the Option Transaction and such action does not violate any laws of its jurisdiction of organization or residence or the terms of any agreement to which it is a party; and (iii) it has reached its own conclusions about the Option Transaction, and any legal, regulatory, tax, accounting or economic consequences arising from the Option Transaction, and has concluded that the Option Transaction is suitable in light of its own investment objectives, financial capabilities and expertise. Counterparty represents that (i) it has held the Underlying Shares since at least February 1, 1992; (ii) it acquired the Underlying Shares in private transactions from Michaels Stores Inc.; (iii) the amount of Underlying Shares sold by it and by all persons whose sales are required to be taken into consideration pursuant to paragraph (e) of Rule 144 under the Securities Act of 1933 during the preceding three months is zero; and (iv) it, and any person whose sales are required to be taken into consideration pursuant to paragraph (e) of Rule 144 under the Securities Act of 1933, will not sell additional securities of the same class through any other means during (a) the three month period commencing on the Trade Date, or (b) the three month period immediately prior to the Expiration Date, in each case, without the prior written consent of LBF. Notwithstanding the above, Counterparty or any person whose securities are required to be taken into consideration by it pursuant to paragraph (e) of Rule 144 under the Securities Act of 1933 may, at any other time during the term of this Option Transaction, sell additional securities of the same class upon providing LBF with written notice two (2) Exchange Business Days immediately prior to the date of such sale. NEITHER LBF NOR ANY OF ITS AFFILIATES HAS ADVISED COUNTERPARTY WITH RESPECT TO ANY LEGAL, REGULATORY, TAX, ACCOUNTING OR ECONOMIC CONSEQUENCES ARISING FROM THIS OPTION TRANSACTION, AND NEITHER LBF NOR ANY OF ITS AFFILIATES IS ACTING AS AGENT OR ADVISOR FOR COUNTERPARTY IN CONNECTION WITH THIS OPTION TRANSACTION. Settlement Provision: a) All payments under this Option Transaction will be made without any deduction or withholding for or on account of any withholding tax, stamp tax, or any other tax, duties, fees or commissions required by any applicable law. b) Seller's obligations to Buyer hereunder are secured under the terms of the Pledge Agreement. 4 Adjustments: The Calculation Agent will make adjustments to this Option Transaction in case of the occurrence of certain events as follows: (i) If a stock dividend or other stock distribution is declared with respect to the Underlying Shares, then (a) the Number of Options shall be increased by the same number of shares issued MULTIPLIED by the Share Entitlement per Option, and (b) the Strike Price shall be proportionately reduced as soon as such event becomes effective. (ii) If a spin-off has occurred with respect to the Underlying Shares, then (a) any property distributed or apportioned with respect to the Underlying Shares, to the extent of such distribution or apportionment, shall be included in any valuation of the Underlying Shares, and (b) the Strike Price shall not be adjusted. Governing Law: New York Transfer: Neither party may transfer any Option, in whole or in part, without the prior written consent of the non-transferring party, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, LBF may assign this Option Transaction to any affiliated entity whose obligations in respect of such assignment are guaranteed by the guarantor of LBF's obligations; PROVIDED, HOWEVER, that (i) the transferring party will notify the other party of any such assignment and (ii) such assignment shall not be permitted hereunder if, as a result of the assignment, a payment hereunder becomes subject to any deduction or withholding for or on account of any tax which would not have arisen had such assignment not been effected. Guarantee: Lehman Brothers Holdings Inc. shall unconditionally guarantee to Counterparty the due and punctual payment of all amounts payable by LBF under this Option Transaction as such payments become due and payable. ACCOUNT DETAILS: LBF's payment instructions: Chemical Bank, New York ABA Number: 021000128 Favour: Lehman Brothers Finance S.A. Account Number: 066-196566 5 LBF's delivery instructions: Citibank, N.A. New York, USA Account Bear Stearns Securities Corporation ABA Number 021000089 For the account of Lehman Brothers Counterparty's payment instructions: As set forth in Exhibit A which is incorporated herein by reference. 6 Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: BRUSH CREEK, LTD. By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF CHARLES J. WYLY III TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF JENNIFER LYNN WYLY TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF EMILY ANN WYLY TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter substantially similar to this letter, which letter sets forth the material terms of the Option Transaction to which this Confirmation relates and indicates your agreement to those terms. Yours sincerely, LEHMAN BROTHERS FINANCE S.A. By: ---------------------- Name: Title: By: ---------------------- Name: Title: Confirmed as of the date first above written: CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF MARTHA CAROLINE WYLY TRUST By: ---------------------- Name: Title: Execution time will be furnished upon Counterparty's written request. EXHIBIT A CHARLES WYLY GROUP COLLAR TRANSACTION - MICHAELS STORES INC.
COUNTERPARTY NUMBER OF PAYMENT - ------------ SHARES/OPTIONS INSTRUCTIONS -------------- ------------- BRUSH CREEK, LTD. 420,000 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers, Inc. A/C #: 140-094-221 Further Credit to: Bush Creek, Ltd. Further Credit #: 837-20010 Charles Wyly Jr. Trustee for the benefit of: CHARLES J. WYLY III TRUST 95,031 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Charles J. Wyly Jr. TTEE FBO Charles J. Wyly III Further Credit #: 837-20001 JENNIFER LYNN WYLY TRUST 96,070 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Charles J. Wyly Jr. TTEE FBO Jennifer Lynn Wyly Further Credit #: 837-20005 EXHIBIT A (Cont.) EMILY ANN WYLY TRUST 95,031 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to Charles J. Wyly Jr. TTEE FBO Emily Ann Wyly Further Credit #: 837-20003 MARTHA CAROLINE WYLY TRUST 95,031 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers, Inc. A/C #: 140-094-221 Further Credit to Charles J. Wyly Jr. TTEE FBO Martha C. Wyly Trust Further Credit #: 837-20008
EX-4.1 8 EXHIBIT 4.1 PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of February 23, 1995, between each of the counterparties set forth in Exhibit A hereto (each, a "Pledgor"), and LEHMAN BROTHERS FINANCE S.A. ("Pledgee"). Pledgor and Pledgee have entered into a Loan Agreement of even date herewith (together with all Schedules, Exhibits and Annexes thereto, the "Loan Agreement"), pursuant to which Pledgor has certain payment obligations to Pledgee. Pledgor and Pledgee also have entered into a Transaction and an ISDA Master Agreement of even date herewith (together with all Schedules, Exhibits and Annexes thereto, the "Master Agreement"), pursuant to which Pledgor may have certain payment obligations to Pledgee. Pledgor is required to deliver collateral as security for its obligations under the Loan Agreement, the Master Agreement (together, the "Agreement") and the Transaction in accordance with the provisions of this Pledge Agreement. This Pledge Agreement supplements, forms part of, and is subject to, the Agreement, is part of the Master Agreement Schedule and is a "Credit Support Document" under the Master Agreement with respect to Pledgor. Accordingly, the parties agree as follows: 1. CERTAIN DEFINITIONS. Unless otherwise defined in this Pledge Agreement, capitalized terms used herein shall have the meaning assigned to them in the Agreement or the Confirmation. In addition, as used in this Pledge Agreement, the following terms will have the following meanings: "Collateral" means, with respect to each Pledgor, (i) that Number of Shares/Options of Michaels Stores Inc. common stock (the "Underlying Shares") as set forth in Exhibit A hereto, which is incorporated herein by reference, and (ii) that certain Put Option Transaction entered into on February 23, 1995, between Pledgor as Buyer and Pledgee as Seller with respect to the Underlying Shares. "New York Business Day" means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in New York City. "Relevant System" means (i) The Depository Trust Company in New York, New York, (ii) the Euroclear System, operated by Morgan Guaranty Trust Company, New York, Brussels branch, (iii) CEDEL S.A., Luxembourg or (iv) such other clearing organization or book-entry system as is specified in Schedule A to this Pledge Agreement (which Schedule may be added to by Pledgee at any time without the consent of Pledgor). "Upfront Collateral" means the amount specified as such in the relevant Confirmation. 2. PLEDGE. To margin, guarantee and secure all obligations due or that may become due from Pledgor to Pledgee or its affiliates under the Agreement, the Transaction or otherwise ("Obligations"), Pledgor hereby pledges, assigns, transfers and grants to Pledgee a first lien on, and a security interest in, the Collateral. 3. FORM OF COLLATERAL. (a) With respect to any of the Collateral available in definitive, certificated form, Pledgor shall deliver (as instructed by Pledgee) to Pledgee or to Lehman Brothers Inc. ("Lehman"), Lehman Government Securities Inc. or such other entity as Pledgee shall designate, as agent for Pledgee, the certificates for such Collateral in suitable form for transfer or accompanied by duly executed instruments of transfer or appropriate undated powers of assignment thereof duly executed in blank. All deliveries of certificated securities shall be made to Pledgee at the Cage, One Battery Park Plaza, 2nd Floor, New York, New York 10004 USA or such other location as Pledgee shall designate. (b) With respect to any Collateral consisting of securities or interests in securities held in accounts in a Relevant System: (i) Pledgor shall furnish to Pledgee a list of such Collateral by title (or series), and, if relevant, quantity, unpaid principal amount and maturity date and shall transfer or cause to be transferred such Collateral from its (or its representative's) account at that Relevant System to an account at that Relevant System of Lehman or such other entity as Pledgee shall designate, acting as agent for the Pledgee, which account shall be designated as "Lehman-Customer Collateral Account." (ii) Pledgee shall cause such Collateral to be held in the "Lehman- Customer Collateral Account" and shall cause Lehman or such other designated person to clearly identify on its books and records the securities or interests in securities pledged by Pledgor that are held in such account. (iii) In connection with any transfer of such Collateral pursuant to this Pledge Agreement, (1) the party making (or whose agent is making) the transfer shall cause the other party to receive, by facsimile transmission, courier or certified mail, a copy of the debit statement issued by that Relevant System relating to such transfer and (2) the party receiving (or whose agent is receiving) the transfer shall cause the other party to receive, by facsimile transmission, courier or certified mail, a copy of the credit statement issued by that Relevant System relating to such transfer. (c) With respect to all types of Collateral, (i) Pledgor shall take all actions necessary to create a first priority lien and perfected security interest in such Collateral in favor of Pledgee and (ii) all actions required or authorized to be taken by Pledgee under this Pledge Agreement may be taken by any affiliate of Pledgee. 4. DISTRIBUTIONS, ETC. (a) If, while this Pledge Agreement is in effect, Pledgor shall become entitled to receive or shall receive: (i) any principal payment in respect of the Collateral, or (ii) any debenture, other debt instrument, stock certificate, option, right, other security or other property including cash, as an addition to, in substitution of, or in exchange for any of the Collateral, whether or not in connection with any reclassification, recapitalization, increase or reduction of capital, reorganization, merger, consolidation, liquidation or dissolution of the issuer of the Collateral, Pledgor agrees to accept the same as Pledgee's agent and to hold the same in trust on behalf of Pledgee and to deliver the same forthwith to Pledgee in the exact form received and in compliance with the terms of Section 3, as additional Collateral for the Obligations. (b) Except as provided in subsection (d) below, Pledgor shall be entitled to receive (and to the extent the same come into possession of Pledgee or its agents, Pledgee shall promptly remit to the order of Pledgor) any dividends or interest paid in cash in respect of the Collateral consisting of securities. Pledgee shall have no duty, however, to collect such payments. (c) If on any date on which such dividends or such interest would otherwise be payable to Pledgor, any Event of Default or Potential Event of Default exists under the Agreement in respect of Pledgor or any default by Pledgor exists under this Pledge Agreement, such dividends or such interest shall be delivered to the Pledgee (or, if in the possession of Pledgee, retained by Pledgee) in compliance with the terms of Section 3 as additional Collateral. 5. RIGHTS OF PLEDGEE. (a) Pledgee shall not be liable for failure to collect or realize upon the Obligations or any Collateral, security or guarantee therefor, or any part thereof, or for any delay in so doing, nor shall it be under any obligation to take any action whatsoever with regard thereto. Any or all of the Collateral held by Pledgee hereunder may, without notice, be registered in the name of Pledgee or its nominee. Pledgee or its nominee may thereafter, without notice, exercise any and all rights of conversion, exchange, subscription or any other rights, privileges or options with respect to such Collateral as if it were the absolute owner thereof, including, without limitation, the right to vote on any bankruptcy plan of reorganization or debt restructuring, the right to exchange at its discretion any and all of such Collateral upon the merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof or upon the exercise by any such issuer or Pledgee of any right, privilege or option pertaining to any of such Collateral, and in connection therewith to deposit and deliver any and all of such Collateral with any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine, all without liability except to account for property actually received by it, but Pledgee shall have no duty to exercise any of the aforesaid rights, privileges or options and shall not be responsible for any failure to do so or delay in so doing. (b) Pledgor hereby agrees and acknowledges that Pledgee shall have the right, without obtaining further consent of Pledgor, to sell, repledge, rehypothecate, reassign, as well as enter into repurchase transactions (collectively, "Repurchase Transactions") with respect to any of the Collateral, or direct Lehman, Lehman Government Securities, Inc. or such other entity as Pledgee designates, as its agent, to enter into any such Repurchase Transactions using the Collateral during any period in which this Pledge Agreement remains in effect. Notwithstanding the foregoing, Pledgee's right to enter into Repurchase Transactions with Collateral under this Section 5 shall in no way relieve Pledgee of its obligation to redeliver such Collateral to Pledgor under the terms and in the timely manner provided for in this Pledge Agreement. 6. REMEDIES. (a) In the event that (i) any portion of the Obligations has become due and payable and has not been paid, (ii) an Event of Default has occurred under the Agreement with respect to Pledgor or (iii) Pledgor has failed to perform an obligation under the Pledge Agreement, then (I) Pledgee may forthwith collect the Collateral, or any part thereof, or may sell, assign, exercise, give options to purchase, contract to sell or otherwise dispose of and deliver the Collateral, or any part thereof, in one or more parcels at public or private sale or sales, at any exchange, broker's board or at any of Pledgee's offices or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk, without advertisement or demand upon Pledgor, both of which are hereby waived, except Pledgee shall provide Pledgor with notice on the day of any such sale (which may be a telex, telegram, telecopy or other similar facsimile transmission and each of which Pledgor hereby agrees is reasonable notice within the meaning of Section 9-504(3) of the Uniform Commercial Code as in effect in New York) of Pledgee's intention to make any such sale, with the right to Pledgee upon any such sale or sales, public or private, to purchase the whole or any part of such Collateral so sold, free of any right or equity of redemption in Pledgor, which right or equity is hereby expressly waived or released; Pledgor recognizes that Pledgee may be unable to effect a public sale of any or all the Collateral and may be compelled to resort to one or more private sales thereof, and Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to Pledgee than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner; and (II) in the case of Collateral consisting of securities, Pledgor shall irrevocably instruct, and hereby irrevocably instructs, Pledgee to transfer such Collateral to Lehman Brothers Inc., and shall irrevocably instruct, and hereby irrevocably instructs, Lehman Brothers Inc. to liquidate the Collateral for the account of Pledgor in the manner set forth in Section 6(b)(I) above, and to pay to Pledgee the proceeds of such liquidation to be applied in the manner set forth in Section 6(c) below, all in accordance with the letter agreement the form of which is attached hereto as Exhibit 1. (b) In the event that (i) any portion of the Obligations has become due and payable and has not been paid, (ii) an Event of Default has occurred under the Agreement with respect to Pledgor or (iii) Pledgor has failed to perform an obligation under the Pledge Agreement, then Pledgee may apply the net proceeds of any Collateral as follows: (i) first, to pay all costs and expenses, (including attorney's fees and expenses), incurred by or on behalf of Pledgee in or incidental to the care or safekeeping of the Collateral or enforcement of its rights with respect to the Collateral or in any way relating to the rights of Pledgee under this Pledge Agreement; (ii) second, to pay interest in respect of any of the Obligations; (iii) third, to pay the Obligations; and (iv) fourth, only after the amounts required for (i), (ii) and (iii) of this paragraph (b) shall have been fully paid and after the payment by Pledgee of all other amounts required by any provision of law, to pay the surplus, if any, to Pledgor. In addition to the rights and remedies granted to it in this Pledge Agreement and in any other instrument or agreement securing, evidencing or relating to any of the Obligations, Pledgee shall have all rights and remedies of a secured party under the Uniform Commercial Code of the State of New York and any other applicable law. Pledgor shall be liable for the deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay all amounts to which Pledgee is entitled and the fees of any attorneys employed by Pledgee to realize upon such Collateral and collect such deficiency. 7. REPRESENTATIONS AND WARRANTIES OF PLEDGOR. To induce Pledgee to enter into the Loan Agreement with Pledgor, including this Pledge Agreement, Pledgor represents to and agrees with Pledgee that: (a) Pledgor has and will receive an economic benefit from the Transactions the Obligations under which are secured by the pledge of Collateral hereunder, in an amount at least equal to the amount secured by the Collateral; (b) Pledgor is and will be the legal and beneficial owner of, and have good and marketable title to, the Collateral; (c) the Collateral (or any proceeds) is not and will not be subject to any pledge, lien, mortgage, hypothecation, security interest, charge, option, or any agreement purporting to grant such an encumbrance in the Collateral or property or assets of Pledgor which would include any Collateral, or any other encumbrance whatsoever (collectively, "Liens"), except the lien and security interest in favor of Pledgee created by this Pledge Agreement; and (d) the pledge, assignment and delivery of the Collateral pursuant to this Pledge Agreement will create a valid first lien on and a perfected first priority security interest in the Collateral as such Collateral is delivered to Pledgee, and the proceeds thereof, free and clear of all Liens. The representations made herein shall be made and deemed to be repeated at the times at which the representations of Pledgor in Article III of the Loan Agreement and Section 3 of the Master Agreement are made and deemed to be repeated and at each time Collateral is required by this Pledge Agreement to be delivered by Pledgor. 8. AGREEMENTS OF PLEDGOR. Pledgor covenants and agrees that: (a) without the prior written consent of Pledgee, it will not sell, assign, transfer, exchange, or otherwise dispose of or grant any option with respect to, the Collateral, nor will it create, incur or permit to exist any Lien on the Collateral or any interest therein, or any proceeds thereof, except for the lien and security interest provided for by this Pledge Agreement; and (b) so long as any Collateral is pledged pursuant to this Pledge Agreement it will defend Pledgee's right, title and security interest in and to the Collateral and the proceeds thereof against the claims and demands of all persons whomever. 9. SPECIFIC PERFORMANCE. If Pledgee shall determine to exercise its right to sell any or all of the Collateral pursuant to Section 6, Pledgor agrees to do or cause to be done all such acts and things as may be reasonably necessary to make such sale or sales of any portion or all of the Collateral valid and binding and in compliance with any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at Pledgor's expense; provided, however, that Pledgor shall not be required to take such actions as shall enable the Collateral to be registered for trading on any exchange on which it is not then traded. Pledgor further acknowledges and agrees that a failure to comply with its obligations under this Section 9 will cause substantial damage to Pledgee. 10. FURTHER ASSURANCE. Pledgor agrees that at any time and from time to time upon the written request of Pledgee, Pledgor will execute and deliver such further documents (including without limitation Uniform Commercial Code Financing Statements) and do such further acts and things as Pledgee may reasonably request in order to effect the purposes of this Pledge Agreement. 11. SEVERABILITY. In case any one or more of the provisions contained in this Pledge Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Pledge Agreement shall not as a result in any way be affected or impaired. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid, legal and enforceable provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 12. WAIVER; CUMULATIVE REMEDIES. A failure or delay in exercising any right, power or privilege in respect of this Pledge Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. The rights and remedies provided in this Pledge Agreement are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 13. TRANSFER. Neither this Pledge Agreement nor any interest or obligation in or under this Pledge Agreement may be transferred by any party except in conformity with the provisions of Section 7.03 of the Loan Agreement and Section 7 of the Master Agreement. 14. SUCCESSORS; AMENDMENTS. (a) This Pledge Agreement and all obligations of Pledgor hereunder shall be binding upon the successors and assigns of Pledgor and shall, together with the rights and remedies of Pledgee hereunder, inure to the benefit of Pledgee and its respective successors and assigns. (b) No amendment, modification or waiver in respect of this Pledge Agreement will be effective unless in writing and executed by each of the parties or confirmed by an exchange of telexes. 15. GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) This Pledge Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to choice of law doctrine. (b) With respect to any suit, action or proceedings relating to this Pledge Agreement ("Proceedings") each party irrevocably (i) submits for itself and its property to the nonexclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that any such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have jurisdiction over such party. (c) Each of the parties irrevocably appoints the Process Agent (if any) specified in the Agreement to receive for it and on its behalf, service of process in any Proceedings. If for any reason any party's Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in this Pledge Agreement. Nothing in this Pledge Agreement will affect the right of either party to serve process in any other manner permitted by law. (d) Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 16. NOTICES. Any notice hereunder will be sufficiently given if given in any manner and to the address set forth below: (a) if in writing and delivered in person or by courier, on the date it is delivered; (b) if sent by telex, on the date the recipient's answerback is received; (c) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form, which date shall be presumed to be the date sent if sent on a Local Business Day or, if not, the first Local Business Day following such transmission; (d) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (e) if sent by electronic messaging system, on the date that electronic message is received, which date shall be presumed to be the date sent if sent on a Local Business Day or, if not, the first Local Business Day following such transmission, if to Pledgee, to Lehman Brothers Finance S.A., Attention: Financial Controller, 13, Route de Florissant, P.O. Box 280, 1211 Geneva 12, Switzerland (Telex No. 428345; Answerback: SLBCH); Telephone: 4122-789-0789; Telefax: 4122-789-1929; and if to Pledgor, to [ ], Attention: Shari Robertson, 8800 North Central Expressway, Suite 1300, Dallas, Texas 75206 Telephone: 214-891-8341, Telefax: 214-891-8311 or at such other address as any party may notify to the others in writing. IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed and delivered on the day and year first above written. LEHMAN BROTHERS FINANCE S.A. TALLULAH,LTD. By: By: ------------------------- ------------------------- Title: Title: ---------------------- ---------------------- By: ------------------------- Title: ---------------------- IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed and delivered on the day and year first above written. SAM WYLY TTEE FOR THE BENEFIT OF ANDREW DAVID SPARROW LEHMAN BROTHERS FINANCE S.A. WYLY TRUST By: By: ------------------------- ------------------------- Title: Title: ---------------------- ---------------------- By: ------------------------- Title: ---------------------- IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed and delivered on the day and year first above written. SAM WYLY TTEE FOR THE BENEFIT OF CHRISTIANA PARKER LEHMAN BROTHERS FINANCE S.A. WYLY TRUST By: By: ------------------------- ------------------------- Title: Title: ---------------------- ---------------------- By: ------------------------- Title: ---------------------- IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed and delivered on the day and year first above written. SAM WYLY TTEE FOR THE BENEFIT OF LAURIE L. WYLY REVOCABLE LEHMAN BROTHERS FINANCE S.A. TRUST By: By: ------------------------- ------------------------- Title: Title: ---------------------- ---------------------- By: ------------------------- Title: ---------------------- IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed and delivered on the day and year first above written. SAM WYLY TTEE FOR THE BENEFIT OF LISA WYLY REVOCABLE LEHMAN BROTHERS FINANCE S.A. TRUST By: By: ------------------------- ------------------------- Title: Title: ---------------------- ---------------------- By: ------------------------- Title: ---------------------- IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed and delivered on the day and year first above written. SAM WYLY TTEE FOR THE BENEFIT OF KELLY WYLY ELLIOTT LEHMAN BROTHERS FINANCE S.A. TRUST By: By: ------------------------- ------------------------- Title: Title: ---------------------- ---------------------- By: ------------------------- Title: ---------------------- IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed and delivered on the day and year first above written. LEHMAN BROTHERS FINANCE S.A. MAVERICK ENTREPRENEURS FUND, LTD. By: By: ------------------------- ------------------------- Title: Title: ---------------------- ---------------------- By: ------------------------- Title: ---------------------- SCHEDULE A 1. ADDITIONAL RELEVANT SYSTEMS 2. SOURCES FOR VALUING COLLATERAL IN THE FORM OF SECURITIES EXHIBIT 1 TALLULAH,LTD. Lehman Brothers Inc. 3 World Financial Center New York, New York 10285-1200 Lehman Brothers Finance S.A. 13, Route de Florissant P.O. Box 280 1211 Geneva 12 Switzerland Gentlemen: Reference is made to that certain Loan Agreement and Master Agreement (together, the "Agreement") between Lehman Brothers Finance S.A. ("LBF") and the undersigned dated as of February , 1995, and to that certain Pledge Agreement between LBF and the undersigned dated as of February , 1995. Capitalized terms used in this letter agreement shall have the meanings assigned to them in the Agreement or Pledge Agreement, as the case may be. Pursuant to Section 6 of the Pledge Agreement, the undersigned hereby irrevocably instructs, if there occurs any Event of Default or Potential Event of Default under the Master Agreement with respect to Pledgor or any Credit Support Provider or Specified Entity of Pledgor, LBF to transfer to Lehman Brothers Inc. ("LBI") any Collateral not then held by LBI, and LBI to liquidate all Collateral in the form of securities and to pay to LBF the proceeds of such liquidation to be held or applied in accordance with the Pledge Agreement. By causing its authorized signatories to sign in the space provided below, LBF agrees to turn over the Collateral to LBI for the purpose of such liquidation and to release its pledge of the Collateral transferred to LBI upon payment to it by LBI of the liquidation proceeds of such Collateral. The instructions herein shall be irrevocable so long as the Master Agreement is in effect, or any Collateral is held to secure the undersigned's obligations to LBF, or there are any Transactions outstanding between LBF and the undersigned. The parties agree that this letter agreement shall be governed by and construed in accordance with the internal laws of the State of New York. Agreed to and accepted Very truly yours, this ___ day of ___________, 1995 TALLULAH, LTD. LEHMAN BROTHERS FINANCE S.A. By: By: ------------------------ ------------------------ Title: Title: --------------------- --------------------- Date: LEHMAN BROTHERS INC. ---------------------- By: ------------------------ Title: --------------------- EXHIBIT 1 ANDREW DAVID SPARROW WYLY TRUST Lehman Brothers Inc. 3 World Financial Center New York, New York 10285-1200 Lehman Brothers Finance S.A. 13, Route de Florissant P.O. Box 280 1211 Geneva 12 Switzerland Gentlemen: Reference is made to that certain Loan Agreement and Master Agreement (together, the "Agreement") between Lehman Brothers Finance S.A. ("LBF") and the undersigned dated as of February , 1995, and to that certain Pledge Agreement between LBF and the undersigned dated as of February , 1995. Capitalized terms used in this letter agreement shall have the meanings assigned to them in the Agreement or Pledge Agreement, as the case may be. Pursuant to Section 6 of the Pledge Agreement, the undersigned hereby irrevocably instructs, if there occurs any Event of Default or Potential Event of Default under the Master Agreement with respect to Pledgor or any Credit Support Provider or Specified Entity of Pledgor, LBF to transfer to Lehman Brothers Inc. ("LBI") any Collateral not then held by LBI, and LBI to liquidate all Collateral in the form of securities and to pay to LBF the proceeds of such liquidation to be held or applied in accordance with the Pledge Agreement. By causing its authorized signatories to sign in the space provided below, LBF agrees to turn over the Collateral to LBI for the purpose of such liquidation and to release its pledge of the Collateral transferred to LBI upon payment to it by LBI of the liquidation proceeds of such Collateral. The instructions herein shall be irrevocable so long as the Master Agreement is in effect, or any Collateral is held to secure the undersigned's obligations to LBF, or there are any Transactions outstanding between LBF and the undersigned. The parties agree that this letter agreement shall be governed by and construed in accordance with the internal laws of the State of New York. Agreed to and accepted Very truly yours, this ___ day of ___________, 1995 SAM WYLY TTEE FOR THE BENEFIT OF ANDREW DAVID SPARROW WYLY TRUST LEHMAN BROTHERS FINANCE S.A. By: By: ------------------------ ------------------------ Title: Title: --------------------- --------------------- Date: LEHMAN BROTHERS INC. ---------------------- By: ------------------------ Title: --------------------- EXHIBIT 1 CHRISTIANA PARKER WYLY TRUST Lehman Brothers Inc. 3 World Financial Center New York, New York 10285-1200 Lehman Brothers Finance S.A. 13, Route de Florissant P.O. Box 280 1211 Geneva 12 Switzerland Gentlemen: Reference is made to that certain Loan Agreement and Master Agreement (together, the "Agreement") between Lehman Brothers Finance S.A. ("LBF") and the undersigned dated as of February , 1995, and to that certain Pledge Agreement between LBF and the undersigned dated as of February , 1995. Capitalized terms used in this letter agreement shall have the meanings assigned to them in the Agreement or Pledge Agreement, as the case may be. Pursuant to Section 6 of the Pledge Agreement, the undersigned hereby irrevocably instructs, if there occurs any Event of Default or Potential Event of Default under the Master Agreement with respect to Pledgor or any Credit Support Provider or Specified Entity of Pledgor, LBF to transfer to Lehman Brothers Inc. ("LBI") any Collateral not then held by LBI, and LBI to liquidate all Collateral in the form of securities and to pay to LBF the proceeds of such liquidation to be held or applied in accordance with the Pledge Agreement. By causing its authorized signatories to sign in the space provided below, LBF agrees to turn over the Collateral to LBI for the purpose of such liquidation and to release its pledge of the Collateral transferred to LBI upon payment to it by LBI of the liquidation proceeds of such Collateral. The instructions herein shall be irrevocable so long as the Master Agreement is in effect, or any Collateral is held to secure the undersigned's obligations to LBF, or there are any Transactions outstanding between LBF and the undersigned. The parties agree that this letter agreement shall be governed by and construed in accordance with the internal laws of the State of New York. Agreed to and accepted Very truly yours, this ___ day of ___________, 1995 SAM WYLY TTEE FOR THE BENEFIT OF CHRISTIANA PARKER WYLY TRUST LEHMAN BROTHERS FINANCE S.A. By: By: ------------------------ ------------------------ Title: Title: --------------------- --------------------- Date: LEHMAN BROTHERS INC. ---------------------- By: ------------------------ Title: --------------------- EXHIBIT 1 LAURIE L. WYLY REVOCABLE TRUST Lehman Brothers Inc. 3 World Financial Center New York, New York 10285-1200 Lehman Brothers Finance S.A. 13, Route de Florissant P.O. Box 280 1211 Geneva 12 Switzerland Gentlemen: Reference is made to that certain Loan Agreement and Master Agreement (together, the "Agreement") between Lehman Brothers Finance S.A. ("LBF") and the undersigned dated as of February , 1995, and to that certain Pledge Agreement between LBF and the undersigned dated as of February , 1995. Capitalized terms used in this letter agreement shall have the meanings assigned to them in the Agreement or Pledge Agreement, as the case may be. Pursuant to Section 6 of the Pledge Agreement, the undersigned hereby irrevocably instructs, if there occurs any Event of Default or Potential Event of Default under the Master Agreement with respect to Pledgor or any Credit Support Provider or Specified Entity of Pledgor, LBF to transfer to Lehman Brothers Inc. ("LBI") any Collateral not then held by LBI, and LBI to liquidate all Collateral in the form of securities and to pay to LBF the proceeds of such liquidation to be held or applied in accordance with the Pledge Agreement. By causing its authorized signatories to sign in the space provided below, LBF agrees to turn over the Collateral to LBI for the purpose of such liquidation and to release its pledge of the Collateral transferred to LBI upon payment to it by LBI of the liquidation proceeds of such Collateral. The instructions herein shall be irrevocable so long as the Master Agreement is in effect, or any Collateral is held to secure the undersigned's obligations to LBF, or there are any Transactions outstanding between LBF and the undersigned. The parties agree that this letter agreement shall be governed by and construed in accordance with the internal laws of the State of New York. Agreed to and accepted Very truly yours, this ___ day of ___________, 1995 SAM WYLY TTEE FOR THE BENEFIT OF LAURIE L. WYLY REVOCABLE TRUST LEHMAN BROTHERS FINANCE S.A. By: By: ------------------------ ------------------------ Title: Title: --------------------- --------------------- Date: LEHMAN BROTHERS INC. ---------------------- By: ------------------------ Title: --------------------- EXHIBIT 1 LISA WYLY REVOCABLE TRUST Lehman Brothers Inc. 3 World Financial Center New York, New York 10285-1200 Lehman Brothers Finance S.A. 13, Route de Florissant P.O. Box 280 1211 Geneva 12 Switzerland Gentlemen: Reference is made to that certain Loan Agreement and Master Agreement (together, the "Agreement") between Lehman Brothers Finance S.A. ("LBF") and the undersigned dated as of February , 1995, and to that certain Pledge Agreement between LBF and the undersigned dated as of February , 1995. Capitalized terms used in this letter agreement shall have the meanings assigned to them in the Agreement or Pledge Agreement, as the case may be. Pursuant to Section 6 of the Pledge Agreement, the undersigned hereby irrevocably instructs, if there occurs any Event of Default or Potential Event of Default under the Master Agreement with respect to Pledgor or any Credit Support Provider or Specified Entity of Pledgor, LBF to transfer to Lehman Brothers Inc. ("LBI") any Collateral not then held by LBI, and LBI to liquidate all Collateral in the form of securities and to pay to LBF the proceeds of such liquidation to be held or applied in accordance with the Pledge Agreement. By causing its authorized signatories to sign in the space provided below, LBF agrees to turn over the Collateral to LBI for the purpose of such liquidation and to release its pledge of the Collateral transferred to LBI upon payment to it by LBI of the liquidation proceeds of such Collateral. The instructions herein shall be irrevocable so long as the Master Agreement is in effect, or any Collateral is held to secure the undersigned's obligations to LBF, or there are any Transactions outstanding between LBF and the undersigned. The parties agree that this letter agreement shall be governed by and construed in accordance with the internal laws of the State of New York. Agreed to and accepted Very truly yours, this ___ day of ___________, 1995 SAM WYLY TTEE FOR THE BENEFIT OF LISA WYLY REVOCABLE TRUST LEHMAN BROTHERS FINANCE S.A. By: By: ------------------------ ------------------------ Title: Title: --------------------- --------------------- Date: LEHMAN BROTHERS INC. ---------------------- By: ------------------------ Title: --------------------- EXHIBIT 1 KELLY WYLY ELLIOTT TRUST Lehman Brothers Inc. 3 World Financial Center New York, New York 10285-1200 Lehman Brothers Finance S.A. 13, Route de Florissant P.O. Box 280 1211 Geneva 12 Switzerland Gentlemen: Reference is made to that certain Loan Agreement and Master Agreement (together, the "Agreement") between Lehman Brothers Finance S.A. ("LBF") and the undersigned dated as of February , 1995, and to that certain Pledge Agreement between LBF and the undersigned dated as of February , 1995. Capitalized terms used in this letter agreement shall have the meanings assigned to them in the Agreement or Pledge Agreement, as the case may be. Pursuant to Section 6 of the Pledge Agreement, the undersigned hereby irrevocably instructs, if there occurs any Event of Default or Potential Event of Default under the Master Agreement with respect to Pledgor or any Credit Support Provider or Specified Entity of Pledgor, LBF to transfer to Lehman Brothers Inc. ("LBI") any Collateral not then held by LBI, and LBI to liquidate all Collateral in the form of securities and to pay to LBF the proceeds of such liquidation to be held or applied in accordance with the Pledge Agreement. By causing its authorized signatories to sign in the space provided below, LBF agrees to turn over the Collateral to LBI for the purpose of such liquidation and to release its pledge of the Collateral transferred to LBI upon payment to it by LBI of the liquidation proceeds of such Collateral. The instructions herein shall be irrevocable so long as the Master Agreement is in effect, or any Collateral is held to secure the undersigned's obligations to LBF, or there are any Transactions outstanding between LBF and the undersigned. The parties agree that this letter agreement shall be governed by and construed in accordance with the internal laws of the State of New York. Agreed to and accepted Very truly yours, this ___ day of ___________, 1995 SAM WYLY TTEE FOR THE BENEFIT OF KELLY WYLY ELLIOTT TRUST LEHMAN BROTHERS FINANCE S.A. By: By: ------------------------ ------------------------ Title: Title: --------------------- --------------------- Date: LEHMAN BROTHERS INC. ---------------------- By: ------------------------ Title: --------------------- EXHIBIT 1 MAVERICK ENTREPRENEURS FUND, LTD. Lehman Brothers Inc. 3 World Financial Center New York, New York 10285-1200 Lehman Brothers Finance S.A. 13, Route de Florissant P.O. Box 280 1211 Geneva 12 Switzerland Gentlemen: Reference is made to that certain Loan Agreement and Master Agreement (together, the "Agreement") between Lehman Brothers Finance S.A. ("LBF") and the undersigned dated as of February , 1995, and to that certain Pledge Agreement between LBF and the undersigned dated as of February , 1995. Capitalized terms used in this letter agreement shall have the meanings assigned to them in the Agreement or Pledge Agreement, as the case may be. Pursuant to Section 6 of the Pledge Agreement, the undersigned hereby irrevocably instructs, if there occurs any Event of Default or Potential Event of Default under the Master Agreement with respect to Pledgor or any Credit Support Provider or Specified Entity of Pledgor, LBF to transfer to Lehman Brothers Inc. ("LBI") any Collateral not then held by LBI, and LBI to liquidate all Collateral in the form of securities and to pay to LBF the proceeds of such liquidation to be held or applied in accordance with the Pledge Agreement. By causing its authorized signatories to sign in the space provided below, LBF agrees to turn over the Collateral to LBI for the purpose of such liquidation and to release its pledge of the Collateral transferred to LBI upon payment to it by LBI of the liquidation proceeds of such Collateral. The instructions herein shall be irrevocable so long as the Master Agreement is in effect, or any Collateral is held to secure the undersigned's obligations to LBF, or there are any Transactions outstanding between LBF and the undersigned. The parties agree that this letter agreement shall be governed by and construed in accordance with the internal laws of the State of New York. Agreed to and accepted Very truly yours, this ___ day of ___________, 1995 MAVERICK ENTREPRENEURS FUND, LTD. LEHMAN BROTHERS FINANCE S.A. By: By: ------------------------ ------------------------ Title: Title: --------------------- --------------------- Date: LEHMAN BROTHERS INC. ---------------------- By: ------------------------ Title: --------------------- EXHIBIT A SAM WYLY GROUP COLLAR TRANSACTION - MICHAELS STORES INC. - ------------------------------------------------------------------------------- COUNTERPARTY NUMBER OF PAYMENT INSTRUCTIONS SHARES/OPTIONS - ------------------------------------------------------------------------------- TALLULAH, LTD. 485,000 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Tallulah, Ltd. Further Credit #: 837- 20011 - ------------------------------------------------------------------------------- Sam Wyly, trustee for the benefit of: - ------------------------------------------------------------------------------- ANDREW DAVID SPARROW WYLY TRUST 45,000 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Andrew David Sparrow Wyly Trust Further Credit #: 837- 20000 - ------------------------------------------------------------------------------- CHRISTIANA PARKER 45,000 Chemical Bank, NY WYLY TRUST ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Christiana Parker Wyly Trust Further Credit #: 837- 20002 - ------------------------------------------------------------------------------- EXHIBIT A (CONT'D) SAM WYLY GROUP COLLAR TRANSACTION - MICHAELS STORES INC. - ------------------------------------------------------------------------------- COUNTERPARTY NUMBER OF PAYMENT INSTRUCTIONS SHARES/OPTIONS - ------------------------------------------------------------------------------- LAURIE L. WYLY 65,000 Chemical Bank, NY REVOCABLE TRUST ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Laurie L. Wyly Revocable Trust Further Credit #: 837- 20006 - ------------------------------------------------------------------------------- LISA WYLY 65,000 Chemical Bank, NY REVOCABLE TRUST ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Lisa Wyly Revocable Trust Further Credit #: 837- 20007 - ------------------------------------------------------------------------------- KELLY WYLY 65,000 Chemical Bank, NY ELLIOTT TRUST ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Sam Wyly TTEE FBO Kelly Wyly Elliott Trust Further Credit #: 837- 20009 - ------------------------------------------------------------------------------- EXHIBIT A (CONT'D) SAM WYLY GROUP COLLAR TRANSACTION - MICHAELS STORES INC. - ------------------------------------------------------------------------------- COUNTERPARTY NUMBER OF PAYMENT INSTRUCTIONS SHARES/OPTIONS - ------------------------------------------------------------------------------- MAVERICK ENTREPRENEURS FUND LTD. 200,000 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Maverick Entrepreneurs Fund, Ltd. Further Credit #: 837- 20012 - ------------------------------------------------------------------------------- EX-4.2 9 EXHIBIT 4.2 PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of February 23, 1995, between each of the counterparties set forth in Exhibit A hereto (each, a "Pledgor"), and LEHMAN BROTHERS FINANCE S.A. ("Pledgee"). Pledgor and Pledgee have entered into a Loan Agreement of even date herewith (together with all Schedules, Exhibits and Annexes thereto, the "Loan Agreement"), pursuant to which Pledgor has certain payment obligations to Pledgee. Pledgor and Pledgee also have entered into a Transaction and an ISDA Master Agreement of even date herewith (together with all Schedules, Exhibits and Annexes thereto, the "Master Agreement"), pursuant to which Pledgor may have certain payment obligations to Pledgee. Pledgor is required to deliver collateral as security for its obligations under the Loan Agreement, the Master Agreement (together, the "Agreement") and the Transaction in accordance with the provisions of this Pledge Agreement. This Pledge Agreement supplements, forms part of, and is subject to, the Agreement, is part of the Master Agreement Schedule and is a "Credit Support Document" under the Master Agreement with respect to Pledgor. Accordingly, the parties agree as follows: 1. CERTAIN DEFINITIONS. Unless otherwise defined in this Pledge Agreement, capitalized terms used herein shall have the meaning assigned to them in the Agreement or the Confirmation. In addition, as used in this Pledge Agreement, the following terms will have the following meanings: "Collateral" means, with respect to each Pledgor, (i) that Number of Shares/Options of Michaels Stores Inc. common stock (the "Underlying Shares") as set forth in Exhibit A hereto, which is incorporated herein by reference, and (ii) that certain Put Option Transaction entered into on February 23, 1995, between Pledgor as Buyer and Pledgee as Seller with respect to the Underlying Shares. "New York Business Day" means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in New York City. "Relevant System" means (i) The Depository Trust Company in New York, New York, (ii) the Euroclear System, operated by Morgan Guaranty Trust Company, New York, Brussels branch, (iii) CEDEL S.A., Luxembourg or (iv) such other clearing organization or book-entry system as is specified in Schedule A to this Pledge Agreement (which Schedule may be added to by Pledgee at any time without the consent of Pledgor). "Upfront Collateral" means the amount specified as such in the relevant Confirmation. 2. PLEDGE. To margin, guarantee and secure all obligations due or that may become due from Pledgor to Pledgee or its affiliates under the Agreement, the Transaction or otherwise ("Obligations"), Pledgor hereby pledges, assigns, transfers and grants to Pledgee a first lien on, and a security interest in, the Collateral. 3. FORM OF COLLATERAL. (a) With respect to any of the Collateral available in definitive, certificated form, Pledgor shall deliver (as instructed by Pledgee) to Pledgee or to Lehman Brothers Inc. ("Lehman"), Lehman Government Securities Inc. or such other entity as Pledgee shall designate, as agent for Pledgee, the certificates for such Collateral in suitable form for transfer or accompanied by duly executed instruments of transfer or appropriate undated powers of assignment thereof duly executed in blank. All deliveries of certificated securities shall be made to Pledgee at the Cage, One Battery Park Plaza, 2nd Floor, New York, New York 10004 USA or such other location as Pledgee shall designate. (b) With respect to any Collateral consisting of securities or interests in securities held in accounts in a Relevant System: (i) Pledgor shall furnish to Pledgee a list of such Collateral by title (or series), and, if relevant, quantity, unpaid principal amount and maturity date and shall transfer or cause to be transferred such Collateral from its (or its representative's) account at that Relevant System to an account at that Relevant System of Lehman or such other entity as Pledgee shall designate, acting as agent for the Pledgee, which account shall be designated as "Lehman-Customer Collateral Account." (ii) Pledgee shall cause such Collateral to be held in the "Lehman- Customer Collateral Account" and shall cause Lehman or such other designated person to clearly identify on its books and records the securities or interests in securities pledged by Pledgor that are held in such account. (iii) In connection with any transfer of such Collateral pursuant to this Pledge Agreement, (1) the party making (or whose agent is making) the transfer shall cause the other party to receive, by facsimile transmission, courier or certified mail, a copy of the debit statement issued by that Relevant System relating to such transfer and (2) the party receiving (or whose agent is receiving) the transfer shall cause the other party to receive, by facsimile transmission, courier or certified mail, a copy of the credit statement issued by that Relevant System relating to such transfer. (c) With respect to all types of Collateral, (i) Pledgor shall take all actions necessary to create a first priority lien and perfected security interest in such Collateral in favor of Pledgee and (ii) all actions required or authorized to be taken by Pledgee under this Pledge Agreement may be taken by any affiliate of Pledgee. 4. DISTRIBUTIONS, ETC. (a) If, while this Pledge Agreement is in effect, Pledgor shall become entitled to receive or shall receive: (i) any principal payment in respect of the Collateral, or (ii) any debenture, other debt instrument, stock certificate, option, right, other security or other property including cash, as an addition to, in substitution of, or in exchange for any of the Collateral, whether or not in connection with any reclassification, recapitalization, increase or reduction of capital, reorganization, merger, consolidation, liquidation or dissolution of the issuer of the Collateral, Pledgor agrees to accept the same as Pledgee's agent and to hold the same in trust on behalf of Pledgee and to deliver the same forthwith to Pledgee in the exact form received and in compliance with the terms of Section 3, as additional Collateral for the Obligations. (b) Except as provided in subsection (d) below, Pledgor shall be entitled to receive (and to the extent the same come into possession of Pledgee or its agents, Pledgee shall promptly remit to the order of Pledgor) any dividends or interest paid in cash in respect of the Collateral consisting of securities. Pledgee shall have no duty, however, to collect such payments. (c) If on any date on which such dividends or such interest would otherwise be payable to Pledgor, any Event of Default or Potential Event of Default exists under the Agreement in respect of Pledgor or any default by Pledgor exists under this Pledge Agreement, such dividends or such interest shall be delivered to the Pledgee (or, if in the possession of Pledgee, retained by Pledgee) in compliance with the terms of Section 3 as additional Collateral. 5. RIGHTS OF PLEDGEE. (a) Pledgee shall not be liable for failure to collect or realize upon the Obligations or any Collateral, security or guarantee therefor, or any part thereof, or for any delay in so doing, nor shall it be under any obligation to take any action whatsoever with regard thereto. Any or all of the Collateral held by Pledgee hereunder may, without notice, be registered in the name of Pledgee or its nominee. Pledgee or its nominee may thereafter, without notice, exercise any and all rights of conversion, exchange, subscription or any other rights, privileges or options with respect to such Collateral as if it were the absolute owner thereof, including, without limitation, the right to vote on any bankruptcy plan of reorganization or debt restructuring, the right to exchange at its discretion any and all of such Collateral upon the merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof or upon the exercise by any such issuer or Pledgee of any right, privilege or option pertaining to any of such Collateral, and in connection therewith to deposit and deliver any and all of such Collateral with any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine, all without liability except to account for property actually received by it, but Pledgee shall have no duty to exercise any of the aforesaid rights, privileges or options and shall not be responsible for any failure to do so or delay in so doing. (b) Pledgor hereby agrees and acknowledges that Pledgee shall have the right, without obtaining further consent of Pledgor, to sell, repledge, rehypothecate, reassign, as well as enter into repurchase transactions (collectively, "Repurchase Transactions") with respect to any of the Collateral, or direct Lehman, Lehman Government Securities, Inc. or such other entity as Pledgee designates, as its agent, to enter into any such Repurchase Transactions using the Collateral during any period in which this Pledge Agreement remains in effect. Notwithstanding the foregoing, Pledgee's right to enter into Repurchase Transactions with Collateral under this Section 5 shall in no way relieve Pledgee of its obligation to redeliver such Collateral to Pledgor under the terms and in the timely manner provided for in this Pledge Agreement. 6. REMEDIES. (a) In the event that (i) any portion of the Obligations has become due and payable and has not been paid, (ii) an Event of Default has occurred under the Agreement with respect to Pledgor or (iii) Pledgor has failed to perform an obligation under the Pledge Agreement, then (I) Pledgee may forthwith collect the Collateral, or any part thereof, or may sell, assign, exercise, give options to purchase, contract to sell or otherwise dispose of and deliver the Collateral, or any part thereof, in one or more parcels at public or private sale or sales, at any exchange, broker's board or at any of Pledgee's offices or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk, without advertisement or demand upon Pledgor, both of which are hereby waived, except Pledgee shall provide Pledgor with notice on the day of any such sale (which may be a telex, telegram, telecopy or other similar facsimile transmission and each of which Pledgor hereby agrees is reasonable notice within the meaning of Section 9-504(3) of the Uniform Commercial Code as in effect in New York) of Pledgee's intention to make any such sale, with the right to Pledgee upon any such sale or sales, public or private, to purchase the whole or any part of such Collateral so sold, free of any right or equity of redemption in Pledgor, which right or equity is hereby expressly waived or released; Pledgor recognizes that Pledgee may be unable to effect a public sale of any or all the Collateral and may be compelled to resort to one or more private sales thereof, and Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to Pledgee than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner; and (II) in the case of Collateral consisting of securities, Pledgor shall irrevocably instruct, and hereby irrevocably instructs, Pledgee to transfer such Collateral to Lehman Brothers Inc., and shall irrevocably instruct, and hereby irrevocably instructs, Lehman Brothers Inc. to liquidate the Collateral for the account of Pledgor in the manner set forth in Section 6(b)(I) above, and to pay to Pledgee the proceeds of such liquidation to be applied in the manner set forth in Section 6(c) below, all in accordance with the letter agreement the form of which is attached hereto as Exhibit 1. (b) In the event that (i) any portion of the Obligations has become due and payable and has not been paid, (ii) an Event of Default has occurred under the Agreement with respect to Pledgor or (iii) Pledgor has failed to perform an obligation under the Pledge Agreement, then Pledgee may apply the net proceeds of any Collateral as follows: (i) first, to pay all costs and expenses, (including attorney's fees and expenses), incurred by or on behalf of Pledgee in or incidental to the care or safekeeping of the Collateral or enforcement of its rights with respect to the Collateral or in any way relating to the rights of Pledgee under this Pledge Agreement; (ii) second, to pay interest in respect of any of the Obligations; (iii) third, to pay the Obligations; and (iv) fourth, only after the amounts required for (i), (ii) and (iii) of this paragraph (b) shall have been fully paid and after the payment by Pledgee of all other amounts required by any provision of law, to pay the surplus, if any, to Pledgor. In addition to the rights and remedies granted to it in this Pledge Agreement and in any other instrument or agreement securing, evidencing or relating to any of the Obligations, Pledgee shall have all rights and remedies of a secured party under the Uniform Commercial Code of the State of New York and any other applicable law. Pledgor shall be liable for the deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay all amounts to which Pledgee is entitled and the fees of any attorneys employed by Pledgee to realize upon such Collateral and collect such deficiency. 7. REPRESENTATIONS AND WARRANTIES OF PLEDGOR. To induce Pledgee to enter into the Loan Agreement with Pledgor, including this Pledge Agreement, Pledgor represents to and agrees with Pledgee that: (a) Pledgor has and will receive an economic benefit from the Transactions the Obligations under which are secured by the pledge of Collateral hereunder, in an amount at least equal to the amount secured by the Collateral; (b) Pledgor is and will be the legal and beneficial owner of, and have good and marketable title to, the Collateral; (c) the Collateral (or any proceeds) is not and will not be subject to any pledge, lien, mortgage, hypothecation, security interest, charge, option, or any agreement purporting to grant such an encumbrance in the Collateral or property or assets of Pledgor which would include any Collateral, or any other encumbrance whatsoever (collectively, "Liens"), except the lien and security interest in favor of Pledgee created by this Pledge Agreement; and (d) the pledge, assignment and delivery of the Collateral pursuant to this Pledge Agreement will create a valid first lien on and a perfected first priority security interest in the Collateral as such Collateral is delivered to Pledgee, and the proceeds thereof, free and clear of all Liens. The representations made herein shall be made and deemed to be repeated at the times at which the representations of Pledgor in Article III of the Loan Agreement and Section 3 of the Master Agreement are made and deemed to be repeated and at each time Collateral is required by this Pledge Agreement to be delivered by Pledgor. 8. AGREEMENTS OF PLEDGOR. Pledgor covenants and agrees that: (a) without the prior written consent of Pledgee, it will not sell, assign, transfer, exchange, or otherwise dispose of or grant any option with respect to, the Collateral, nor will it create, incur or permit to exist any Lien on the Collateral or any interest therein, or any proceeds thereof, except for the lien and security interest provided for by this Pledge Agreement; and (b) so long as any Collateral is pledged pursuant to this Pledge Agreement it will defend Pledgee's right, title and security interest in and to the Collateral and the proceeds thereof against the claims and demands of all persons whomever. 9. SPECIFIC PERFORMANCE. If Pledgee shall determine to exercise its right to sell any or all of the Collateral pursuant to Section 6, Pledgor agrees to do or cause to be done all such acts and things as may be reasonably necessary to make such sale or sales of any portion or all of the Collateral valid and binding and in compliance with any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at Pledgor's expense; provided, however, that Pledgor shall not be required to take such actions as shall enable the Collateral to be registered for trading on any exchange on which it is not then traded. Pledgor further acknowledges and agrees that a failure to comply with its obligations under this Section 9 will cause substantial damage to Pledgee. 10. FURTHER ASSURANCE. Pledgor agrees that at any time and from time to time upon the written request of Pledgee, Pledgor will execute and deliver such further documents (including without limitation Uniform Commercial Code Financing Statements) and do such further acts and things as Pledgee may reasonably request in order to effect the purposes of this Pledge Agreement. 11. SEVERABILITY. In case any one or more of the provisions contained in this Pledge Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Pledge Agreement shall not as a result in any way be affected or impaired. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid, legal and enforceable provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 12. WAIVER; CUMULATIVE REMEDIES. A failure or delay in exercising any right, power or privilege in respect of this Pledge Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. The rights and remedies provided in this Pledge Agreement are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 13. TRANSFER. Neither this Pledge Agreement nor any interest or obligation in or under this Pledge Agreement may be transferred by any party except in conformity with the provisions of Section 7.03 of the Loan Agreement and Section 7 of the Master Agreement. 14. SUCCESSORS; AMENDMENTS. (a) This Pledge Agreement and all obligations of Pledgor hereunder shall be binding upon the successors and assigns of Pledgor and shall, together with the rights and remedies of Pledgee hereunder, inure to the benefit of Pledgee and its respective successors and assigns. (b) No amendment, modification or waiver in respect of this Pledge Agreement will be effective unless in writing and executed by each of the parties or confirmed by an exchange of telexes. 15. GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) This Pledge Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to choice of law doctrine. (b) With respect to any suit, action or proceedings relating to this Pledge Agreement ("Proceedings") each party irrevocably (i) submits for itself and its property to the nonexclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that any such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have jurisdiction over such party. (c) Each of the parties irrevocably appoints the Process Agent (if any) specified in the Agreement to receive for it and on its behalf, service of process in any Proceedings. If for any reason any party's Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in this Pledge Agreement. Nothing in this Pledge Agreement will affect the right of either party to serve process in any other manner permitted by law. (d) Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 16. NOTICES. Any notice hereunder will be sufficiently given if given in any manner and to the address set forth below: (a) if in writing and delivered in person or by courier, on the date it is delivered; (b) if sent by telex, on the date the recipient's answerback is received; (c) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form, which date shall be presumed to be the date sent if sent on a Local Business Day or, if not, the first Local Business Day following such transmission; (d) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (e) if sent by electronic messaging system, on the date that electronic message is received, which date shall be presumed to be the date sent if sent on a Local Business Day or, if not, the first Local Business Day following such transmission, if to Pledgee, to Lehman Brothers Finance S.A., Attention: Financial Controller, 13, Route de Florissant, P.O. Box 280, 1211 Geneva 12, Switzerland (Telex No. 428345; Answerback: SLBCH); Telephone: 4122-789-0789; Telefax: 4122-789-1929; and if to Pledgor, to [ ], Attention: Shari Robertson, 8800 North Central Expressway, Suite 1300, Dallas, Texas 75206 Telephone: 214-891-8341, Telefax: 214-891-8311 or at such other address as any party may notify to the others in writing. IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed and delivered on the day and year first above written. LEHMAN BROTHERS FINANCE S.A. BRUSH CREEK, LTD. By: By: ------------------------- ------------------------- Title: Title: ---------------------- ---------------------- By: ------------------------- Title: ---------------------- IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed and delivered on the day and year first above written. CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF CHARLES J. WYLY LEHMAN BROTHERS FINANCE S.A. III TRUST By: By: ------------------------- ------------------------- Title: Title: ---------------------- ---------------------- By: ------------------------- Title: ---------------------- IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed and delivered on the day and year first above written. CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF JENNIFER LYNN LEHMAN BROTHERS FINANCE S.A. WYLY TRUST By: By: ------------------------- ------------------------- Title: Title: ---------------------- ---------------------- By: ------------------------- Title: ---------------------- IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed and delivered on the day and year first above written. CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF EMILY ANN WYLY LEHMAN BROTHERS FINANCE S.A. TRUST By: By: ------------------------- ------------------------- Title: Title: ---------------------- ---------------------- By: ------------------------- Title: ---------------------- IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed and delivered on the day and year first above written. CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF MARTHA C. WYLY LEHMAN BROTHERS FINANCE S.A. TRUST By: By: ------------------------- ------------------------- Title: Title: ---------------------- ---------------------- By: ------------------------- Title: ---------------------- SCHEDULE A 1. ADDITIONAL RELEVANT SYSTEMS 2. SOURCES FOR VALUING COLLATERAL IN THE FORM OF SECURITIES EXHIBIT 1 BRUSH CREEK, LTD. Lehman Brothers Inc. 3 World Financial Center New York, New York 10285-1200 Lehman Brothers Finance S.A. 13, Route de Florissant P.O. Box 280 1211 Geneva 12 Switzerland Gentlemen: Reference is made to that certain Loan Agreement and Master Agreement (together, the "Agreement") between Lehman Brothers Finance S.A. ("LBF") and the undersigned dated as of February , 1995, and to that certain Pledge Agreement between LBF and the undersigned dated as of February , 1995. Capitalized terms used in this letter agreement shall have the meanings assigned to them in the Agreement or Pledge Agreement, as the case may be. Pursuant to Section 6 of the Pledge Agreement, the undersigned hereby irrevocably instructs, if there occurs any Event of Default or Potential Event of Default under the Master Agreement with respect to Pledgor or any Credit Support Provider or Specified Entity of Pledgor, LBF to transfer to Lehman Brothers Inc. ("LBI") any Collateral not then held by LBI, and LBI to liquidate all Collateral in the form of securities and to pay to LBF the proceeds of such liquidation to be held or applied in accordance with the Pledge Agreement. By causing its authorized signatories to sign in the space provided below, LBF agrees to turn over the Collateral to LBI for the purpose of such liquidation and to release its pledge of the Collateral transferred to LBI upon payment to it by LBI of the liquidation proceeds of such Collateral. The instructions herein shall be irrevocable so long as the Master Agreement is in effect, or any Collateral is held to secure the undersigned's obligations to LBF, or there are any Transactions outstanding between LBF and the undersigned. The parties agree that this letter agreement shall be governed by and construed in accordance with the internal laws of the State of New York. Agreed to and accepted Very truly yours, this ___ day of ___________, 1995 BRUSH CREEK, LTD. LEHMAN BROTHERS FINANCE S.A. By: By: ------------------------ ------------------------ Title: Title: --------------------- --------------------- Date: LEHMAN BROTHERS INC. ---------------------- By: ------------------------ Title: --------------------- EXHIBIT 1 CHARLES J. WYLY III TRUST Lehman Brothers Inc. 3 World Financial Center New York, New York 10285-1200 Lehman Brothers Finance S.A. 13, Route de Florissant P.O. Box 280 1211 Geneva 12 Switzerland Gentlemen: Reference is made to that certain Loan Agreement and Master Agreement (together, the "Agreement") between Lehman Brothers Finance S.A. ("LBF") and the undersigned dated as of February , 1995, and to that certain Pledge Agreement between LBF and the undersigned dated as of February , 1995. Capitalized terms used in this letter agreement shall have the meanings assigned to them in the Agreement or Pledge Agreement, as the case may be. Pursuant to Section 6 of the Pledge Agreement, the undersigned hereby irrevocably instructs, if there occurs any Event of Default or Potential Event of Default under the Master Agreement with respect to Pledgor or any Credit Support Provider or Specified Entity of Pledgor, LBF to transfer to Lehman Brothers Inc. ("LBI") any Collateral not then held by LBI, and LBI to liquidate all Collateral in the form of securities and to pay to LBF the proceeds of such liquidation to be held or applied in accordance with the Pledge Agreement. By causing its authorized signatories to sign in the space provided below, LBF agrees to turn over the Collateral to LBI for the purpose of such liquidation and to release its pledge of the Collateral transferred to LBI upon payment to it by LBI of the liquidation proceeds of such Collateral. The instructions herein shall be irrevocable so long as the Master Agreement is in effect, or any Collateral is held to secure the undersigned's obligations to LBF, or there are any Transactions outstanding between LBF and the undersigned. The parties agree that this letter agreement shall be governed by and construed in accordance with the internal laws of the State of New York. Agreed to and accepted Very truly yours, this ___ day of ___________, 1995 CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF CHARLES J. WYLY III TRUST LEHMAN BROTHERS FINANCE S.A. By: By: ------------------------ ------------------------ Title: Title: --------------------- --------------------- Date: LEHMAN BROTHERS INC. ---------------------- By: ------------------------ Title: --------------------- EXHIBIT 1 JENNIFER LYNN WYLY TRUST Lehman Brothers Inc. 3 World Financial Center New York, New York 10285-1200 Lehman Brothers Finance S.A. 13, Route de Florissant P.O. Box 280 1211 Geneva 12 Switzerland Gentlemen: Reference is made to that certain Loan Agreement and Master Agreement (together, the "Agreement") between Lehman Brothers Finance S.A. ("LBF") and the undersigned dated as of February , 1995, and to that certain Pledge Agreement between LBF and the undersigned dated as of February , 1995. Capitalized terms used in this letter agreement shall have the meanings assigned to them in the Agreement or Pledge Agreement, as the case may be. Pursuant to Section 6 of the Pledge Agreement, the undersigned hereby irrevocably instructs, if there occurs any Event of Default or Potential Event of Default under the Master Agreement with respect to Pledgor or any Credit Support Provider or Specified Entity of Pledgor, LBF to transfer to Lehman Brothers Inc. ("LBI") any Collateral not then held by LBI, and LBI to liquidate all Collateral in the form of securities and to pay to LBF the proceeds of such liquidation to be held or applied in accordance with the Pledge Agreement. By causing its authorized signatories to sign in the space provided below, LBF agrees to turn over the Collateral to LBI for the purpose of such liquidation and to release its pledge of the Collateral transferred to LBI upon payment to it by LBI of the liquidation proceeds of such Collateral. The instructions herein shall be irrevocable so long as the Master Agreement is in effect, or any Collateral is held to secure the undersigned's obligations to LBF, or there are any Transactions outstanding between LBF and the undersigned. The parties agree that this letter agreement shall be governed by and construed in accordance with the internal laws of the State of New York. Agreed to and accepted Very truly yours, this ___ day of ___________, 1995 CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF JENNIFER LYNN WYLY TRUST LEHMAN BROTHERS FINANCE S.A. By: By: ------------------------ ------------------------ Title: Title: --------------------- --------------------- Date: LEHMAN BROTHERS INC. ---------------------- By: ------------------------ Title: --------------------- EXHIBIT 1 EMILY ANN WYLY TRUST Lehman Brothers Inc. 3 World Financial Center New York, New York 10285-1200 Lehman Brothers Finance S.A. 13, Route de Florissant P.O. Box 280 1211 Geneva 12 Switzerland Gentlemen: Reference is made to that certain Loan Agreement and Master Agreement (together, the "Agreement") between Lehman Brothers Finance S.A. ("LBF") and the undersigned dated as of February , 1995, and to that certain Pledge Agreement between LBF and the undersigned dated as of February , 1995. Capitalized terms used in this letter agreement shall have the meanings assigned to them in the Agreement or Pledge Agreement, as the case may be. Pursuant to Section 6 of the Pledge Agreement, the undersigned hereby irrevocably instructs, if there occurs any Event of Default or Potential Event of Default under the Master Agreement with respect to Pledgor or any Credit Support Provider or Specified Entity of Pledgor, LBF to transfer to Lehman Brothers Inc. ("LBI") any Collateral not then held by LBI, and LBI to liquidate all Collateral in the form of securities and to pay to LBF the proceeds of such liquidation to be held or applied in accordance with the Pledge Agreement. By causing its authorized signatories to sign in the space provided below, LBF agrees to turn over the Collateral to LBI for the purpose of such liquidation and to release its pledge of the Collateral transferred to LBI upon payment to it by LBI of the liquidation proceeds of such Collateral. The instructions herein shall be irrevocable so long as the Master Agreement is in effect, or any Collateral is held to secure the undersigned's obligations to LBF, or there are any Transactions outstanding between LBF and the undersigned. The parties agree that this letter agreement shall be governed by and construed in accordance with the internal laws of the State of New York. Agreed to and accepted Very truly yours, this ___ day of ___________, 1995 CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF EMILY ANN WYLY TRUST LEHMAN BROTHERS FINANCE S.A. By: By: ------------------------ ------------------------ Title: Title: --------------------- --------------------- Date: LEHMAN BROTHERS INC. ---------------------- By: ------------------------ Title: --------------------- EXHIBIT 1 MARTHA C. WYLY TRUST Lehman Brothers Inc. 3 World Financial Center New York, New York 10285-1200 Lehman Brothers Finance S.A. 13, Route de Florissant P.O. Box 280 1211 Geneva 12 Switzerland Gentlemen: Reference is made to that certain Loan Agreement and Master Agreement (together, the "Agreement") between Lehman Brothers Finance S.A. ("LBF") and the undersigned dated as of February , 1995, and to that certain Pledge Agreement between LBF and the undersigned dated as of February , 1995. Capitalized terms used in this letter agreement shall have the meanings assigned to them in the Agreement or Pledge Agreement, as the case may be. Pursuant to Section 6 of the Pledge Agreement, the undersigned hereby irrevocably instructs, if there occurs any Event of Default or Potential Event of Default under the Master Agreement with respect to Pledgor or any Credit Support Provider or Specified Entity of Pledgor, LBF to transfer to Lehman Brothers Inc. ("LBI") any Collateral not then held by LBI, and LBI to liquidate all Collateral in the form of securities and to pay to LBF the proceeds of such liquidation to be held or applied in accordance with the Pledge Agreement. By causing its authorized signatories to sign in the space provided below, LBF agrees to turn over the Collateral to LBI for the purpose of such liquidation and to release its pledge of the Collateral transferred to LBI upon payment to it by LBI of the liquidation proceeds of such Collateral. The instructions herein shall be irrevocable so long as the Master Agreement is in effect, or any Collateral is held to secure the undersigned's obligations to LBF, or there are any Transactions outstanding between LBF and the undersigned. The parties agree that this letter agreement shall be governed by and construed in accordance with the internal laws of the State of New York. Agreed to and accepted Very truly yours, this ___ day of ___________, 1995 CHARLES J. WYLY JR. TTEE FOR THE BENEFIT OF MARTHA C. WYLY TRUST LEHMAN BROTHERS FINANCE S.A. By: By: ------------------------ ------------------------ Title: Title: --------------------- --------------------- Date: LEHMAN BROTHERS INC. ---------------------- By: ------------------------ Title: --------------------- EXHIBIT A CHARLES WYLY GROUP COLLAR TRANSACTION - MICHAELS STORES INC.
COUNTERPARTY NUMBER OF PAYMENT - ------------ SHARES/OPTIONS INSTRUCTIONS -------------- ------------- BRUSH CREEK, LTD. 420,000 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers, Inc. A/C #: 140-094-221 Further Credit to: Bush Creek, Ltd. Further Credit #: 837-20010 Charles Wyly Jr. Trustee for the benefit of: CHARLES J. WYLY III TRUST 95,031 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Charles J. Wyly Jr. TTEE FBO Charles J. Wyly III Further Credit #: 837-20001 JENNIFER LYNN WYLY TRUST 96,070 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to: Charles J. Wyly Jr. TTEE FBO Jennifer Lynn Wyly Further Credit #: 837-20005 EXHIBIT A (Cont.) EMILY ANN WYLY TRUST 95,031 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers Inc. A/C #: 140-094-221 Further Credit to Charles J. Wyly Jr. TTEE FBO Emily Ann Wyly Further Credit #: 837-20003 MARTHA CAROLINE WYLY TRUST 95,031 Chemical Bank, NY ABA #: 021000128 A/C: Lehman Brothers, Inc. A/C #: 140-094-221 Further Credit to Charles J. Wyly Jr. TTEE FBO Martha C. Wyly Trust Further Credit #: 837-20008
EX-5.1 10 EXHIBIT 5.1 GUARANTEE OF LEHMAN BROTHERS HOLDINGS INC. ------------------------------------------ LEHMAN BROTHERS FINANCE S.A. ("Party A") and _____ ("Party B") have entered into a Master Agreement dated as of __________, 19__, pursuant to which Party A and Party B have entered and/or anticipate entering into one or more transactions (each a "Transaction"), the Confirmation of each of which supplements, forms part of, and will be read and construed as one with, the Master Agreement (collectively referred to as the "Agreement"). This Guarantee is a Credit Support Document as contemplated in the Agreement. For value received, and in consideration of the financial accommodation accorded to Party A by Party B under the Agreement, LEHMAN BROTHERS HOLDINGS INC., a corporation organized and existing under the laws of the State of Delaware ("Guarantor"), hereby agrees to the following: (a) Guarantor hereby unconditionally guarantees to Party B the due and punctual payment of all amounts payable by Party A under each Transaction when and as Party A's obligations thereunder shall become due and payable in accordance with the terms of the Agreement. In case of the failure of Party A to pay punctually any such amounts, Guarantor hereby agrees, upon written demand by Party B, to pay or cause to be paid any such amounts punctually when and as the same shall become due and payable. (b) Guarantor hereby agrees that its obligations under the Guarantee constitute a guarantee of payment when due and not of collection. (c) Guarantor hereby agrees that its obligations under the Guarantee shall be unconditional, irrespective of the validity, regularity or enforceability of the Agreement against Party A (other than as a result of the unenforceability thereof against Party B), the absence of any action to enforce Party A's obligations under the Agreement, any waiver or consent by Party B with respect to any provisions thereof, the entry by Party A and Party B into additional Transactions under the Agreement or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor; PROVIDED, HOWEVER, that Guarantor shall be entitled to exercise any right that Party A could have exercised under the Agreement to cure any default in respect of its obligations under the Agreement or to setoff, counterclaim or withhold payment in respect of any Event of Default or Potential Event of Default in respect of Party B or any Affiliate, but only to the extent such right is provided to Party A under the Agreement. The Guarantor acknowledges that Party A and Party B may from time to time enter into one or more Transactions pursuant to the Agreement and agrees that the obligations of the Guarantor under this Guarantee will upon the execution of any such Transaction by Party A and Party B extend to all such Transactions without the taking of further action by the Guarantor. (d) Guarantor shall be subrogated to all rights of Party B against Party A in respect of any amounts paid by Guarantor pursuant to the provisions of this Guarantee; PROVIDED, HOWEVER, that Guarantor shall not be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by Party A under the Agreement, shall have been paid in full. (e) Guarantor further agrees that this Guarantee shall continue to be effective or be reinstated, as the case may be, if at any time, payment, or any part thereof, of any obligation or interest thereon is rescinded or must otherwise be restored by Party B upon an Event of Default as set forth in Section 5(a)(vii) of the Agreement affecting Party A or Guarantor. (f) Guarantor hereby waives (i) promptness, diligence, presentment, demand of payment, protest, order and, except as set forth in paragraph (a) hereof, notice of any kind in connection with the Agreement and this Guarantee, or (ii) any requirement that Party B exhaust any right to take any action against Party A or any other person prior to or contemporaneously with proceeding to exercise any right against Guarantor under this Guarantee. In the event that Guarantor is required by any applicable law, rule or regulation to make any deduction or withholding for or on account of any Tax (as defined in Section 14 of the Agreement, except that the reference therein to the "Agreement" shall be deemed to mean the "Guarantee" for purposes of this Guarantee) from any payment to be made under this Guarantee. Guarantor shall be subject to the provisions of Section 2(d) of the Agreement to the same extent as "X" (as defined therein); PROVIDED, HOWEVER, that Guarantor shall be required to treat as an "Indemnifiable Tax" (as defined under Section 14 of the Agreement, except that the reference therein to the "Agreement" shall be deemed to mean the "Guarantee" for purposes of this Guarantee) for such purpose any Tax that is not an "Indemnifiable Tax" if such Tax would have constituted an "Indemnifiable Tax" had the payment in respect of which the Tax is imposed been made by Party A rather than Guarantor. Guarantor makes the same representations to and agreements with Party B as those made by Party A pursuant to Sections 3 and 4 of the Agreement, at the times set forth therein, except that references therein to "the party" will be deemed to be references to "the Guarantor" and references therein to "the Agreement" will be deemed to be references to "the Guarantee." This Guarantee shall continue in force and effect to guarantee the obligations of Lehman Brothers Capital GmbH ("Capital") or any other fully guaranteed subsidiary of Guarantor in the event Party A assigns its rights under any Transaction to Capital or such other fully guaranteed subsidiary. This Guarantee shall be governed by and construed in accordance with the laws of the State of New York, without reference to choice of law doctrine. All capitalized terms not defined in this Guarantee are defined in the Agreement. Any notice hereunder will be sufficiently given if given in accordance with the provisions for notices under the Agreement and will be effective as set forth therein. All notices hereunder shall be delivered to Lehman Brothers Holdings Inc., Attention: Treasurer, at 200 Vesey Street, 28th Floor, New York, New York 10285 (Telex No: 175636 Answerback: SLB) with a copy to Lehman Brothers Finance S.A., Attention: Financial Controller at 13, Route de Florissant, P.O. Box 280, 1211 Geneva 12, Switzerland (Telex No: 428345 Answerback: LBF CH). IT WITNESS WHEREOF, Guarantor has caused this Guarantee to be executed in its corporate name by its duly authorized officer as of the date of the Agreement. LEHMAN BROTHERS HOLDINGS INC. By: ________________________ Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----